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.
