San Francisco Home Prices Could Come Down Further Than Any U.S. Metro Area in the New Year
San Francisco could potentially see the lowest decline in home prices of any U.S. metro area in 2023, according to a housing price forecast from Zillow.
As reported recently in The San Francisco Standard, the real estate data company’s Home Value Forecast has projected that home prices including single family homes, condos and co-ops, are likely to decline by 3.6% by the end of October 2023, compared with the same time this year.
That is the largest drop of the 100 metros listed in the report, bumping down Honolulu (-2.9%) and third place Baton Rouge (-2.9%). Home prices in San Jose, which is the other Bay Area city listed in the forecast, are expected to drop by 1.8% over the same time period.
Zillow’s forecast for San Francisco estimates that home prices there will drop 1.8% by Jan. 2023, which ranks as third on the list. Austin (-2.7%) and Las Vegas (-2%) are expected to see sharper declines over that period.
The forecasts are in line with how the Bay Area housing market reached major highs during the pandemic. Since going up in the spring, market volatility and interest rate spikes have affected home prices.
The scale of that impact, however, has varied by a lot between several Bay Area counties.
San Francisco’s real estate market has been hit harder than most, partly because of demographic shifts during the pandemic, mass layoffs in the tech industry and an empty downtown. According to data from real estate firm Compass, during the last quarter, the median home sales price is at $1.6 million, down around 12%.
Downtown condos, for instance, have experienced huge price drops as remote work became more commonplace as it reduced the desire to be closer to Downtown.
As for luxury home sales, those have slowed locally and nationally as stock market volatility and larger economic uncertainty put a damper on major purchases. Sales in November for homes priced at more than $5 million were down by over 50%, according to Compass.
A home in Pacific Heights recently sold for $19 million, the highest price paid for an apartment in San Francisco in 2022. However, the property was originally listed at $30 million back in January.
Fear of a possible recession—which many economic observers expect in 2023—is also throwing the market off. Experts say the tech-centric Bay Area might be more sensitive to an expected downturn as well.
“Tech was basically providing a hose of money into the land values of the Bay Area, and then with remote work, that hose is spraying more evenly across the country,” said Daryl Fairweather, the chief economist at Redfin.
“Now with the weak tech sector, the water going into that hose is weaker, too,” she said.
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