San Francisco Real Estate Market Recap
The 2023 market started strong after an acute decline in market activity occurring in the second half of 2022. The first quarter of 2023 saw open house traffic, number of offers, overbidding and absorption, all with major improvement. The biggest wildcard remained interest rates and exactly how high the Fed would take measures to counteract rising inflation. Peaking in October, the high cost of money caused a real thorn for both buyers and sellers for the year. This proved to be a very challenging and difficult market to predict and the final numbers showed exactly how these factors can impact the real estate market. My advice throughout the year was to stay focused on the equity. If you needed the equity from the home and could put the money to better use in another part of your life, then it was okay to sell. If not, there was no need to dangle your toes in the 2023 market. With a high number of unsold homes, it seems a lot of people were punished for “testing the market”. My clients were able to avoid the pitfalls of a depressed market with my experience through the Great Recession. A lot of those tools came back into play last year. In the last two months of 2023, the average, weekly, 30-year mortgage interest rate dropped from 7.79% to 6.61%. With the fallen inflation this past year, the Fed is widely expected to begin dropping its benchmark rate, most likely in multiple steps, in 2024. The consensus forecast among analysts is for further declines in mortgage interest rates. A reminder that when rates go up, they go up fast! And when rates come down, they come down very, very, slowly. Don’t expect any big changes this year. I would like to see rates get under 6% by then end of 2024 with rates in the mid 5’s in early 2025. After its end-of-year rally, the S&P index was up 25% and the NASDAQ up 45% in 2023 (though the financial markets have bounded around quite a bit in early 2024). This plays a major role in Bay Area household wealth and if the trend continues up, will allow a lot of anxious home buyers and sellers have the confidence to start making moves again. On an annual basis, the 2023 median homes sale price was down 13% from 2022, while on a quarterly basis, the Q4 price was down less than 1 percent year-over-year, Total sales volume plunged, while many perspective sellers, the motivation to move was reduced by the mortgage lock-in effect. With interest rates falling, media coverage turning more positive, AI companies expanding in downtown, and economic conditions and consumer confidence rebounding, the direction is trending positive for San Francisco real estate.
Let’s see what 2024 has in store for us.
Note: As often seen in recent years, the complex economic, political, and social factors affecting interest rates, inflation, consumer confidence, and housing, and financial markets can change quickly in unexpected ways. Forecast and predictions are best guesses based on the interpretations of recent economic data and trends.
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