San Francisco Housing Market: The Rise and Fall

CEO Khai Intela
Introduction The San Francisco housing market has experienced a significant downturn in the past 19 months. The median price of single-family houses in the city dropped by 29.6% to $1.45 million in December, compared to...

Introduction

The San Francisco housing market has experienced a significant downturn in the past 19 months. The median price of single-family houses in the city dropped by 29.6% to $1.45 million in December, compared to the peak in March 2022. This decline is comparable to the drop seen during the housing bust in the city. However, the overall Bay Area is still lagging behind. Let's delve deeper into the current state of the market and explore the factors driving these price fluctuations.

The Rollercoaster of Prices

The three-month moving average (3MMA) of the median price in San Francisco reached its lowest point in December, standing at $1.54 million. This represents a 24.4% decrease from the peak. January and February are typically the months with the most significant price drops, indicating that the trend may continue into early 2024. The volatility of the housing market is evident, and downturns tend to play out slowly over time, unlike the sudden collapses seen in other sectors.

Wolf Street Caption: The fluctuation of San Francisco housing prices over the years.

A Tale of Two Housing Busts

To understand the current situation, let's compare the first housing bust in San Francisco (Housing Bust 1) with the ongoing one (Housing Bust 2). In the first 19 months of each bust, the 3MMA of the median price dropped by 25.8% and 24.4%, respectively. Although the magnitudes of the drops are similar, the trajectories differ significantly.

Comparison of Housing Busts Caption: A comparison of the percentage drop in the 3MMA of the median price during Housing Bust 1 and Housing Bust 2.

The Bay Area's Overall Decline

The decline in housing prices is not limited to San Francisco alone but extends to the entire Bay Area. The median price of single-family houses in the region dropped to $1.18 million in December, representing a decrease of 21.2% from the peak in April 2022. The 3MMA also experienced a decline, reaching $1.23 million, which is 15.4% lower than the peak.

Bay Area Price Movements Caption: Price movements in the entire San Francisco Bay Area since March 2020.

County Snapshots

Let's take a closer look at some of the key counties within the Bay Area:

San Mateo County (Silicon Valley)

The median price in December dropped to $1.80 million, down by 25% from the peak in April 2022. However, compared to December 2021, prices are up by 7.5%. The 3MMA in December dropped by 17.5% to $1.90 million.

Santa Clara County (Silicon Valley)

In Santa Clara County, the median price in December decreased to $1.73 million, representing a 12% drop from the peak in May 2022. Prices are up by 16.7% compared to December 2022. The 3MMA for December dropped by 10% to $1.75 million.

Alameda County

The median price in Alameda County declined to $1.17 million in December, down by 22% from the peak in May 2022. However, prices increased by 10.3% compared to December 2022. The 3MMA dropped by 18% to $1.21 million.

Contra Costa County

In Contra Costa County, the median price dropped to $800,000 in December, a 24% decrease from the peak in April 2022. However, prices are up by 4.4% compared to December 2022. The 3MMA dropped by 18% to $828,000.

County Price Movements Caption: Price movements in key counties of the San Francisco Bay Area.

The "Housing Crisis" and a Market-Based Solution

The exorbitant housing costs in San Francisco and the Bay Area have led to a housing crisis, with prices soaring beyond the reach of many residents. Rent is also prohibitively expensive, forcing companies to offer inflated salaries to attract employees. Various taxpayer-funded initiatives aim to alleviate this burden, but they come at a high cost.

However, the current market downturn may offer a market-based solution to the crisis. The decrease in housing costs, though significant, can benefit the local economy, potential homebuyers, businesses, and employment. While prices in the Bay Area may still be relatively high compared to other parts of the US, the downward trend provides a sigh of relief.

Enjoyed reading this article? You can support WOLF STREET by making a donation. To stay updated with new articles, sign up for email notifications.

Note: Original article by Wolf Richter for WOLF STREET.

1