Market News & Insights

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Updates on the San Francisco housing market and other real estate insights

Unlocking Your Dream Home: The Power of Partnership with a Buyer's Agent

Since the recent verdict in the Sitzer/Burnett case against the NAR and other brokerage defendants and the emergence of copycat lawsuits in several states, the role and value of the buyer's agent have come under immense scrutiny. While the case focused on the arrangement of a seller paying a commission on the sale of their home to both the listing agent and the agent who represents their home buyer, many have begun to consider what the verdict ultimately means for a buyer's agent.

Zillow and Redfin provide easy access to listed properties, so what is the point of working with a buyer's agent when you can source properties and see a schedule of open houses to tour the homes? What do agents actually do that buyers can't do for themselves?

What does a buyer's agent do?

A buyer's agent identifies potential properties, arranges tours, and shows homes to their clients. Once a buyer finds a property they want, their agent reads and explains the disclosures and prepares the offer. But the real work of representing a buyer starts after an offer is accepted. One of the most important jobs of the buyer's agent is to ensure that the deal closes by working closely with the listing agent, lender, and other professionals until the close of escrow. During a recent transaction, I spoke to the listing agent daily, The Department of Building Inspection, over twenty home insurance agents, and three electricians, all to finalize a home purchase for my clients. It worked...we closed!

Access

Through professional tools like the MLS (multiple listing service), agents can access properties not shown on consumer sites like Redfin, Zillow, and Realtor.com. "Coming Soon" listings appear on the MLS but not other sites. By being aware of these properties, buyers will be ready to act quickly when the property comes to market or may make a preemptive offer. The MLS also contains listing notes about the property that may influence a buyer's consideration of the home or their offer.

Zenlist is another tool I use with my clients. This tool for consumers is associated with the MLS and gives clients access to what agents see.

Join me on Zenlist!  https://zenlist.com/a/sydney.mcdowell

Market Knowledge & Expertise

One piece of advice I received when I started my career in real estate is to tour homes constantly and consistently. "You can't sell it if you don't see it." When a client is looking for a specific home, I tour all possible listings so they don't have to. Even if I'm not representing a specific buyer, I see properties on our weekly Broker's Tour and review the MLS daily. Touring is time intensive and can quickly become a drag for clients, not to mention that many properties are shown in the middle of a work day or on weekends. While going to weekend open houses can be fun at first, it quickly loses its luster. A buyer's agent will preview potential properties and rule them in or out to consolidate the buyer's home search. 

Touring Properties

My job is to see it so you don’t have to. I see properties on a daily basis and am very familiar with San Francisco neighborhoods and homes on the market.

Frequent touring helps realtors develop relationships with other agents and understand the current local market. It also provides valuable insider information and helps determine seller expectations to prepare a competitive offer. 

When you’ve found a home you want to buy, you’ll want to know more about its history. Property disclosures contain details about a property's condition and other facts about the home that may impact its value. Your agent will request the disclosures if you're interested in a specific property. Disclosures are lengthy and may contain inspection reports, permit histories, financial statements, and other documents related to the home. Sifting through and understanding each document is a necessary yet often overwhelming task. A buyer's agent is accustomed to reading these documents and will review them with you to help guide your offer decision.

Relationships:

Working Together

I value my relationships in the real estate community

As in many professions, real estate depends on developing and maintaining strong professional relationships with a network of people, including other agents, lenders, and home insurance agents. 

Working with a respected agent in the real estate community may be what ultimately helps a buyer find and close escrow on their home. Many agents work with sellers who prefer to sell their homes off-market. A good agent will know about off-market properties that may fit the needs of their buyer clients. Listing agents consider who their counterpart in a deal will be, and if a comparable offer is between two agents, the more respected and collaborative of the two buyer's agents may prevail. 

Through their relationships with lenders, agents can often expedite the initial steps of the pre-approval process and equip their buyers with everything they need to make a strong offer on a desirable property expected to receive multiple offers.

While we have yet to determine the NAR lawsuit's impact, we anticipate changes to a decades-old process of buying and selling a home, including how agents are compensated. A potential outcome often mentioned is that buyers may choose to represent themselves when purchasing a home. Representing yourself in a real estate transaction as a buyer will be more challenging than expected and may expose you to issues impacting your home-buying success. Find a trusted and knowledgeable agent who is engaged in the real estate community and will work hard for you. 

Market Reflections

Navigating 2023's Challenges, Anticipating 2024's Opportunities

As the year comes to an end, we like to look retrospectively at the market. The major topic of the year was higher interest rates. This caused a limited supply and fewer transactions. In 2023, we saw 25% fewer transactions than in 2022 and 43% fewer than in 2021. One would think that with interest rates soaring from 3% to 7.5%, home prices would have fallen significantly. Due to the lack of inventory, prices were kept artificially higher and only fell about 10% from the peak of the market. We all know that the market does not stay down long in SF, and warning is never given to when the market is going to heat up. For that reason, buyers were out looking for the last "good deal" before interest rates drop and prices rise. We predict the first half of 2024 to be slow, but when interest rates start to come down, inventory will increase, and San Francisco's market will return to the markets of old.

Prices Continue Horizontal Trend for Both Single-Family Homes and Condos 

 In San Francisco, home prices haven’t been largely affected by rising mortgage rates after the initial period of price correction that occurred from May 2022 to July 2022. Since July 2022, the median single-family home and condo prices have hovered around $1.5 million and $1.2 million, respectively. Month over month, in November, the median single-family home price fell 9%, while condo prices rose 1%; but, year over year, the median prices were the same as last November for both single-family homes and condos. We expect prices to remain fairly stable in the winter months, but as interest rates decline and more sellers come to the market, prices will almost certainly rise by mid 2024. More homes must come to the market in the spring and summer to get anything close to a healthy market.

High mortgage rates soften both supply and demand, so ideally, as rates fall, far more sellers will come to the market. Rising demand can only do so much for the market if there isn’t supply to meet it. Unlike 2023, 2024 inventory has a much better chance of following more typical seasonal patterns.

The Story of Summer

June 2023 Update:

The story of the summer, and what has been the story of the year, is "lack of inventory".  Although prices are down from the peak of last year when buyers were rushing to buy before interest rates skyrocketed, they have not fallen as far as people would expect.  In some cases, they are maintaining close to last year's prices.  These stronger than expected prices are directly related to lack of inventory.  Demand has been stronger than expected and supply is limited.  Normally with increased interest rates, local employment layoffs and economic uncertainty, prices fall significantly, but due to lack of supply, prices have been artificially higher than they probably should be, or one would expect.  We don't foresee an influx of inventory coming this year for the simple reason that homeowners are hesitant to sell their home and buy a new home when they are locked into a historically low interest rate.  Rates are not coming back to where they were anytime soon, or possibly ever, meaning our market is heading back to being a seller's market for the foreseeable future. 

Low inventory Continues to cause prices to be "artificially higher" 

Increasing demand and low inventory are once again driving home price appreciation that San Francisco has experienced in recent months. Last year, single-family home prices peaked in April, and condo prices peaked in May, as buyers rushed to lock in a lower mortgage rate, but this was followed by a return to the longer-term trend of decline. San Francisco was one of a handful of markets that didn’t benefit strongly from the pandemic homebuying boom, seeing more people migrate out of the city than in. Once people were ready to come back, the Fed announced rate hikes at the end of 2021 that would swiftly affect rates in 2022. The average 30-year mortgage rate rose 2% in the first four months of 2022, crossing 5% for the first time since 2011. That 2% jump caused the monthly cost of financing to increase 27%, so buyers rightly rushed to the market. As rates rose higher, the market cooled and home prices fell in large part to accommodate the higher cost of a mortgage. Both supply and demand were lower than normal in the second half of 2022. However, in 2023, demand started to rise again despite elevated mortgage rates, but it wasn’t met with the typical number of new listings because people either bought at a hyper-low rate in 2021 or refinanced at a low rate.

This year, the number of new listings has been significantly lower than usual compared to sales growth. Typically, inventory grows in the first half of the year as new listings significantly outpace sales. At this point, inventory levels can’t make up for low growth in the first five months of 2023, keeping the supply of homes and, in turn, sales depressed for the rest of the year. The limited number of listings is especially challenging in luxury markets where homes sell in the millions of dollars. Homebuyers, understandably, only want the right home for their money.

Median Home Prices San Francisco

Median Price Changes in San Francisco

Thinking About Selling?

May 2023 Update:

Why it might be the right time to list your home.

May has seen our market heat up in terms of more transactions.  Although still far behind last year at this time (about 30% fewer), May has seen many more homes being sold compared to earlier in the year.  In general, inventory still remains low. Compared to last year, the total number of homes on the market currently is down about 14%.  This lack of new inventory keeps prices artificially higher than expected with higher interest rates, job layoffs, and the uncertainty of the debt ceiling.  We see low inventory being the theme throughout the year, making a "bad time to sell", really not that bad.

Home prices are rising...although slowly 

Inventory is once again driving the price appreciation that San Francisco is experiencing in 2023. Last year, home prices peaked in March and April as buyers rushed to lock in a lower mortgage rate. The Fed announced rate hikes at the end of 2021 that would swiftly affect rates in 2022. The average 30-year mortgage rate rose 2% in the first four months of 2022, crossing 5% for the first time since 2011. That 2% jump caused the monthly cost of financing to increase by 27%, so buyers rightly rushed to the market. As rates rose higher, the market cooled and home prices fell largely to accommodate the higher mortgage cost. Both supply and demand were lower than normal in the second half of 2022. However, in 2023, demand started to rise again despite elevated mortgage rates, but it wasn’t met with the typical number of new listings.

This year, the number of new listings has been fairly stagnant each month. Typically, inventory grows in the first half of the year as new listings significantly outpace sales. At this point, inventory growth in the rest of the second quarter can’t make up for the weak growth in the first four months of the year, keeping the supply of homes and, in turn, sales historically low for the rest of the year. As new inventory decreases in the summer, competition among buyers will climb with it peaking in August, raising home prices. While we don’t expect home prices to hit new record highs this year, we can expect prices to rise slowly until the fall. 

Median Price Changes in San Francisco

San Francisco Inventory-Single-Family Homes

We continue to see a lack of inventory despite high demand. If you’ve thought about selling your home, this could be a great time to reconsider.

San Francisco Inventory-Condos

With a peak in inventory occurring in early 2022, this year has seen considerably fewer listings. We continue to see multiple offers, especially in homes that are move-in ready.

Low Inventory Keeping Prices Artificially High

April 2023 Update:

The story this month is still the lack of sales compared to the same time last year. Sales volume is down about 35%-40% from what it was.  This is not a surprise, as this time last year interest rates were significantly lower and the public was racing to buy before they skyrocketed up.  Demand still remains decent, but buyers have more leverage and we are not seeing 10+ offers on a home like we did a year ago.  Prices are down from the peak, but if they were down about 10% city wide at the end of 2022, that depreciation is shrinking and they are only down about 5-7%  We see this as a good time to buy before inventory shrinks more throughout the summer and that limited inventory causes prices to artificially rise.  

Every year, by at least March, we hope to see inventory rise after a high number of new listings come to market, which easily accommodates the increase in sales we also tend to see in the first half of the year.  Although, while a greater number of listings are not selling, the number of new listings declined each month in the first quarter of 2023.  Typically, inventory grows in the first half of the year, peaking in June or July. We don’t expect the inventory growth in the second quarter to make up for the decline in the first quarter, keeping the supply of homes and, in turn, total sales lower for the rest of the year.  If active listings drop further in the second quarter, we could easily see home prices move significantly higher into the summer.