After more than a decade of increases, the median house price in the high-tech capital has fallen, a situation caused by the increase in interest rates and the uncertainty in the financial markets that kept buyers away.
According to a report published yesterday by Compass for the first time in over a decade, the median house price in San Francisco fell by 1% and reached 1.78 million Dollars.
The real estate market, which is at the heart of high-tech activity in the US, reached peak prices in the second quarter of last year, after a decade of increases and a special incentive during COVID19- this according to Patrick Carlisle, chief market analyst at Comps, San Francisco Bay Area.
At the record recorded in the second quarter, the median house price crossed the $2 million mark.
At the same time, the increase in the rate of inflation and interest rates, combined with uncertainty in the financial markets, significantly cooled the market during the second half of that same year.
During the fourth quarter, about 57% of the houses were sold above the price asked for, this compared to 81% in the corresponding period in 2021. This figure reached 87% in the fourth quarter, when the market was at its peak.
The deceleration is particularly noticeable in the luxury sector, which is defined as houses in the price of at least 3 million Dollars and condo apartments at a price higher than 2 million dollars.
“When the boom of the epidemic period began, the affluent buyers purchased expensive houses in a trend that significantly fueled demand” Carlisle noted. “Affluent buyers are now moving away from the market to a greater extent than the general market, a complete reversal of the trend compared to the one that started the boom recorded during the pandemic,” he explained.
During the fourth quarter of the year, only 77 private houses in the city were sold for a price of 3 million Dollars or more, a figure lower than half compared to 160 sales in the corresponding quarter a year earlier.
During the second quarter, 166 luxury houses were sold – according to the report. “A larger share of the wealth of luxury property buyers is in the financial markets,” Carlyle explained. “With all the volatility in these markets, they stayed away from the market and are waiting until the economic conditions clear up. Make no mistake, very expensive houses are still being sold here, but the volume of transactions has dropped compared to last year,” he concluded.
The price drops are not unique to San Francisco but due to the fact that residential real estate prices in the city are among the highest in the US, they are more noticeable than in other parts of the US. According to data published earlier this month by the CoreLogic platform, house prices in the US fell during November, following the increase in mortgage interest rates that continued to cool demand. Compared to last November, prices climbed by 8.6%, the smallest increase in the past two years, but on a monthly basis, prices fell by -0.2%. According to CoreLogic forecasts, in December prices fell by 0.1% compared to November, when a 2.8% drop is expected on an annual basis.