Like the gold rush that put San Francisco on the map, the city’s real estate market has often experienced boom and bust cycles. From the tech bubble of the early 2000s to the housing crisis of 2008, there have been times when San Francisco real estate prices seemed unstoppable, followed by periods of decline. In the last few years, the San Francisco market has sagged under the weight of rising interest rates, a shift towards remote work during the pandemic, and general economic uncertainty.
The latest data from the San Francisco Association of Realtors provides a snapshot of how the city’s median sales prices for single-family homes and condominiums have shifted over the past three years, giving us insight into whether property values are truly dropping—and what lies ahead for homeowners and prospective buyers.
The median sales prices show mixed signals. Single-family homes dipped slightly between 2022 and 2023 but have since rebounded. Condos, on the other hand, experienced a sharp drop but are now showing signs of recovery. The question remains: Are real estate prices in San Francisco falling, or are they simply normalizing after years of pandemic-driven fluctuations? Let’s explore.
Single-Family Home Prices: A Slight Dip, Followed by Stabilization
Between 2022 and 2023, the median sales price for single-family homes declined by 4.2%, from $1,650,000 to $1,580,000. However, by 2024, the market rebounded with prices rising by 2.8%, bringing the median sales price to $1,625,000. This trajectory suggests that while there was a slight correction in 2023, prices are stabilizing as of 2024.
The decline in San Francisco real estate prices in 2023 can likely be attributed to several macroeconomic factors:
- Rising Interest Rates: The Federal Reserve’s interest rate hikes in 2022 and early 2023 cooled borrowing activity, making it more challenging for buyers to afford high-priced homes.
- Economic Uncertainty: Layoffs in the tech sector and concerns about economic slowdown likely dampened buyer confidence.
- Inventory Levels: A slight increase in inventory during this period also put downward pressure on prices, as sellers had to adjust expectations.
The 2.8% increase in 2024 suggests that the market is finding equilibrium. Buyers who had held back are re-entering the market, potentially driven by stabilized mortgage rates and improved economic outlooks. The rebound indicates that single-family homes remain a resilient investment in San Francisco, despite recent turbulence.
Condos: A Market Rebound After a Sharp Decline
The story is different in the condominium market, which saw a 10.3% decline in median prices from $1,170,000 in 2022 to $1,050,000 in 2023. This drop reflects a steeper correction than that seen in the single-family segment, likely due to several unique challenges facing condos.
- Shifting Buyer Preferences: During the pandemic, buyers prioritized larger living spaces, driving demand for single-family homes over condos.
- Work-from-Home Trends: As remote work reduced the need to live near downtown areas, many potential condo buyers shifted their focus to suburban markets.
- Over-supply of Condos: In certain areas, a rise in new condominium developments led to increased competition among sellers, further driving down prices.
However, the 9.5% increase in 2024, with median prices rising to $1,150,000, signals a recovery. As the pandemic’s effects recede and demand for urban living returns, buyers are once again considering condos as viable options. Additionally, condos remain an attractive entry point for first-time buyers and investors looking for rental properties in a high-demand market.
What’s Driving These Trends?
Several key factors influence the current state of San Francisco’s real estate prices:
1. Interest Rates and Mortgage Affordability
The fluctuation in interest rates has been a defining factor over the past two years. Higher borrowing costs in 2022 and 2023 limited affordability, contributing to the drop in prices across both market segments. Now that interest rates are stabilizing, buyer activity is picking up, which helps support the recovery in prices.
2. Economic Recovery and the Tech Industry
San Francisco’s economy is heavily tied to the tech sector, which experienced turbulence with layoffs and hiring slowdowns in 2022 and 2023. The stabilization seen in 2024 aligns with renewed hiring efforts and the gradual recovery of the tech industry, restoring confidence among buyers. The remarkable emergence of AI has also led to increased investment and growth in the tech industry, which is expected to create more jobs and further stimulate real estate demand.
3. Inventory Levels and Market Dynamics
While inventory levels increased slightly in 2023, creating a more balanced market, demand remains relatively strong. San Francisco remains a desirable location for both domestic and international buyers, which ensures that prices don’t fall too drastically, even during corrections.
4. Return to Urban Living
The shift back to in-office work, with the revival of cultural and social life in the city, has renewed interest in urban properties, particularly condos. This trend helps explain the sharp rebound in condo prices in 2024.
Are Prices Dropping or Normalizing?
Given the data, it’s clear that San Francisco real estate prices are not experiencing a sustained decline, but rather a period of normalization. The sharp corrections in 2023 were likely temporary responses to higher interest rates, economic uncertainty, and shifting buyer behavior. Now, the market appears to be stabilizing, with both single-family homes and condos recovering from their previous lows.
The 2.8% increase in single-family home prices suggests that this segment is regaining strength. Similarly, the 9.5% rebound in condo prices reflects renewed demand and growing buyer confidence. While the market may not see the rapid price growth of previous years, the current trends point toward steady, sustainable growth.
What Should Buyers and Sellers Expect Moving Forward?
Looking ahead, buyers and sellers should expect a more balanced market in San Francisco. Here’s what each group should keep in mind:
- For Buyers: Now may be an opportune time to purchase, especially for those interested in condos. While prices are starting to recover, they remain below 2022 levels, providing a window of opportunity. Stabilized interest rates also make borrowing more predictable.
- For Sellers: Sellers should temper expectations for rapid price growth; this is not a market like 2021. However, they can take comfort in the fact that demand remains strong. Properly priced properties are likely to sell, particularly as more buyers return to the market.
Conclusion: San Francisco Real Estate Remains a Strong Market
While San Francisco’s real estate market has seen fluctuations over the past three years, the data suggests that prices are stabilizing rather than plummeting. Both single-family homes and condos experienced corrections in 2023 but are now on a path to recovery. With a favorable economic outlook, steady demand, and stabilized interest rates, San Francisco remains a desirable and resilient market for buyers and investors alike.
For those looking to enter the market or make a move, now may be the time to act—before prices climb further. Of course, some microeconomic trends and variables may impact certain neighborhoods, so if you’re interested in a specific area, contact me for a customized analysis and personalized advice.
