The S&P 500/Case-Shiller San Francisco Home Price Index suggests that the local market peaked in May 2022, which is lower than the global real estate boom.
Prices may fall more if local economic conditions deteriorate, but it appears that prices are beginning to level off.
While homes are selling for less, the Bay Area remains a seller's market due to limited inventory. Buyers are more picky as a result of rising mortgage rates and a changing work environment, which can make home affordability difficult.
The Bay Area job market is still strong, but venture capital funding is at multi-year lows, and a wave of tech sector layoffs occurred earlier in 2023. Furthermore, mortgage default rates continue to be low.
Condominiums and co-ops are often less expensive than single-family homes with lower listing prices. According to real estate agency Compass, 87% of the active listings in San Francisco for June 1, 2023 that are selling for less than $1 million are condos, co-ops, or tenancies in common.
Single-family houses and condos continue to sell over list price as the total number of listings drops and sellers benefit from a scarcity of inventory. Buyers might, however, expect lower pricing than in 2022.
The Bay Area real estate market is influenced by a number of factors, including:
- Population decline. According to the United States Census Bureau, the expected area population has decreased by around 250,000 between April 2020 and July 2022. Due to pandemic-related job losses, expensive rents, and migration, according to the Census Bureau. San Francisco County experienced the greatest post-pandemic drop, at 7.5%.
- Mortgage rates are rising. Homeownership is becoming more expensive as 30-year mortgage rates reach generational highs. As a result, prospective purchasers may have to wait for property prices to fall in order to get an affordable monthly payment.
- Inflation. Households have less purchasing power since inflation keeps prices for numerous monthly expenses such as energy, groceries, and transportation costs high.
- Rents are exorbitant. Rents in the Bay Area are among the highest in the country. Studio and one-bedroom rents are up to 5% lower than in 2022, but two-bedroom rents are up to 5% higher. Higher rents can stimulate homeownership while simultaneously making it more difficult to save for a down payment.
Is Now a Good Time to Buy a Home in the San Francisco Bay Area?
If Bay Area housing market forecasts are correct, prices should continue to fall from this cycle's highs. They may, however, remain stubbornly high as the majority of homebuyers continue to spend above list prices.
According to NorCal Alliance MLS statistics, 44% of houses in San Francisco closed above list price in November 2022. While this is still a high percentage, it is down from 73% in April 2022. Because inventory is still very low, people looking for a home may consider submitting a competitive bid if the property meets their criteria and budget.
Waiting can aid purchasers in general as the market becomes more impartial. Look at properties in different counties if feasible to find less competitive listings.
Those looking to purchase a luxury property for more than $1 million will benefit the most from the discounts, while waiting until 2023 may be a wiser financial move for this real estate sector if prices continue to fall.
Is Now a Good Time to Sell a House in the San Francisco Bay Area?
It's still one of the finest times in the Bay Area to sell a home, with many properties selling above asking price and property values remaining above pre-pandemic levels. Because inventory is relatively restricted, sellers have pricing power despite slower—but stable—buyer demand.
However, sellers may consider advertising their property sooner rather than later if they want to sell their home swiftly. Buyers are increasing to demand property inspections and submit lesser bids, forcing properties to sit on the market for extended periods of time.
