Another month, another shift in the San Francisco market. Single-family home inventory is still low, and the few that come up are selling quickly with strong overbids. Condos are also selling, but theyโre taking a bit more time to move.
For buyers, especially those focused on houses, competition is intense. Overbids are becoming more common again. For sellers, pricing it right continues to matter. Homes that hit the sweet spot in price and presentation are moving quickly, while others are sitting longer than expected.
Quick Take:
- Single-family homes continue to hold their value, while condo values continue to trend downward over time.
- Single-family homes are selling for the highest percentage of their original price that weโve seen since the Fed started hiking interest rates.
- Inventory continues to be a huge issue for the San Francisco area, as both single-family home and condo inventories downtrend over time.
The disconnect between condos and single-family homes
Throughout recent years, weโve seen single-family homes maintain their values fairly well in San Francisco, with the median sale price of a single-family home in the area increasing by 6.63% over the course of the past four years. However, when we turn to the condo market, these homes have not been holding their value nearly as well, with the median sale price for a condo in San Francisco decreasing by 12.52% over the course of the past 4 years. This really highlights that buyers are much more interested in standalone homes, rather than shared buildings!
Single-family homes are selling for the highest percentage of their original price that weโve seen in years!
As you might expect in an area like San Francisco, when there is a hot commodity, like detached single-family homes, buyers have to pay a premium, which is exactly what theyโre doing right now! The average home in San Francisco is selling for 114.7% of its original asking price. This is a level that we havenโt seen since June of 2022, when the real estate market started its downtrend after the Fed began raising rates! When you couple this with the fact that inventory looks like it will continue to be an issue, we might have ourselves a recipe for a red-hot market this year!
Inventory remains one of the largest issues in the San Francisco residential real estate market
Unfortunately, the inventory issue that San Francisco is facing is nothing new. Weโve been observing the fact that inventories have been down-trending in the area for quite some time. This past month, we saw the growth in sold listings outstrip the growth in new listings once again, resulting in even lower inventory levels. This is a serious issue thatโs likely a symptom of the much larger issue – housing affordability. As we all know, housing affordability has been a huge topic of discussion for years at this point. Oftentimes, those who own their homes and have a low interest rate locked in are very hesitant to move, as that likely means taking on a larger loan at a higher interest rate, making their cost of housing considerably more expensive!
Sellers dominate the single-family home market, while buyers have leverage in the condo market
When determining whether a market is a buyersโ market or a sellersโ market, we look to the Months of Supply Inventory (MSI) metric. The state of California has historically averaged around three months of MSI, so any area with at or around three months of MSI is considered a balanced market. Any market that has lower than three months of MSI is considered a sellersโ market, whereas markets with more than three months of MSI are considered buyersโ markets.
Right now, thereโs just 1.5 months’ worth of single-family home inventory on the market, making it a seller-dominant market. However, on the flip side, the condo market has 3.7 months worth of inventory on the market, meaning that there are some deals to be had out there for buyers that are looking for a condo!
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