Curious about the San Francisco housing market? A recent New York Times article by Ronda Kaysen, Buying or Selling a Home? Welcome to the Year of Disappointment, highlights ongoing challenges faced by both buyers and sellers in the 2023 housing market. (Not a NYT subscriber? Here's a gift link, on the house.)
While it offers a broad perspective on national housing, the article is also a pretty accurate take on what we are seeing locally in the San Francisco Bay Area real estate market. After a period of skyrocketing prices, bidding wars and rapid sales, the market has entered a standoff that has left both sides frustrated. We'll use our perspective as top real estate agents in San Francisco to dig into the reasons behind this stalemate and its implications for SF Bay Area home buyers and sellers.
As the NYT article notes, the real estate frenzy has slowed considerably since the red-hot days of spring 2022, but the market remains difficult for both buyers and sellers. Home search activity has increased since the start of the year, as is typical during the spring, yet buyers are facing an environment where sellers are unwilling to lower their prices or even put their homes on the market.
Of the homes that ARE available, some are overpriced, others are undesirably located or just quirky, or they’re in need of significant work—even with national listing prices up 6.3 percent in March from a year earlier. It’s a slightly different story in San Francisco real estate, with home prices DOWN 11 percent in March, but it’s not like homes here are suddenly cheap. And the homes for sale that do “check the boxes” get all of the attention and bidding wars like nothing has changed. (Not sure how much to invest in your home before listing to get the best response from buyers? Read our Case Study: Sell Your San Francisco Home As-Is or Fix Up Before Listing?)
With mortgage rates around 5-6 percent, buying a home is increasingly expensive. (Note, however, that jumbo loan interest rates are typically much lower than what you hear in the news.) Meanwhile, selling is not very appealing if your existing mortgage rate is closer to 3 percent.
Economic uncertainty—including inflation, the prospect of financial instability, and the war in Ukraine—adds to the anxiety of buying or selling a home in 2023.
The article goes on to note that the usual spring momentum in the housing market is absent this year. Lawrence Yun, Chief Economist for the National Association of Realtors, expects that the market will see "better than frozen conditions" during the second quarter—meaning some activity but not a lot—provided interest rates don't fall "measurably" and inspire a new rush in the market.
Despite the lack of momentum, there remains a strong appetite to buy a home in San Francisco and elsewhere. Buyers have adjusted to the new normal of interest rates. Many of our home buyer clients get further discounts on their interest rate via relationship pricing and/or opting for the popular 5-, 7-, and 10-year fixed rate ARM programs. (Read about the Home Loan Preapproval Process in San Francisco.)
Home showings have increased by 20 percent nationwide since the start of the year, according to open house app-maker ShowingTime. Google searches for "houses/homes for sale" are up 20 percent from the beginning of the year. Mortgage applications also rose 19 percent the week ending March 24 versus the previous four weeks, according to data from Redfin.
This tracks with our experience. There are plenty of motivated buyers in the San Francisco housing market, just not enough motivated sellers!
So, the housing market is at an impasse, with neither buyers nor sellers feeling satisfied with the current state of affairs. The standoff between buyers who want a home that makes sense and sellers who are reluctant to list their homes for sale makes things a little dreary. Some are in “wait and see” mode, while others are gradually adjusting to the new economic environment and considering their options.
Some real estate insiders interviewed by the NYT believe that the housing market has reached its bottom, and prices will start to rise again. Potential sellers who have held off on listing their homes may decide they can't wait any longer, and buyers may further grow accustomed to higher interest rates and come around to the idea of paying more.
The article reports that sale prices in some regions are already showing signs of increase. However, even without a price hike, buying a house today is more expensive than it was a year ago due to higher mortgage rates, and considerably more expensive than before home prices skyrocketed during the early part of the pandemic.
The only relief for buyers would be a drop in interest rates, but that’s not likely in the near future. Bob Walters, the chief executive of Rocket Mortgage, told the NYT that he predicts mortgage rates will remain stable or maybe slip a little in the months ahead, barring an unwelcome inflation report.
The 2023 San Francisco real estate market has presented challenges for both buyers and sellers, just as this great New York Times article outlined for the national market. With low housing inventory, high demand, and ongoing economic uncertainties, navigating the home buying and selling process can be a daunting task. However, life goes on. Folks can't (and shouldn't!) stay put forever, waiting for the perfect mortgage rate or an unlikely market crash.
If you're looking to buy or sell a home in San Francisco (or both!), we are here to help make the process as efficient, effective and rewarding as possible. This is not our first rodeo facing a turbulent market!
If you have a question, please don't hesitate to reach out. We are always happy to discuss your personal situation and help you understand your options in the SF Bay Area real estate market. Opportunities are out there! Let’s collaborate and reach them. Contact Danielle Lazier Real Estate today.
