‘A tale of two cities’: Experts predict what’s next for SF’s housing market

A view of San Francisco towards the Bay Bridge. 

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The Bay Area housing market is one of the most expensive and competitive in the country, but in 2023, the frenzy settled down a bit. As interest rates hit their highest levels in 23 years and tech layoffs rippled through the region, buyers retreated and home prices saw declines. With such constrained housing inventory, it’s unlikely that San Francisco will ever experience a true buyer’s market, but real estate experts say there could be opportunities out there right now that haven’t been seen in years. 

What will happen in 2024 is anyone’s guess, but for those looking to rent, buy or sell in the Bay Area, we know it won’t be boring. We talked to five real estate experts to hear their predictions for the Bay Area housing market this year.

Mortgage rates should decline, hopefully

The biggest boost to the Bay Area housing market — well, the nationwide housing market — would be for interest rates to tick back down. Most experts predict this will happen as inflation continues to cool, which would help both buyers and sellers. “A more favorable market environment with lower borrowing costs, coupled with an increase in available homes for sale, will motivate buyers and sellers to reenter the market next year,” California Association of Realtors President Jennifer Branchini said in the organization’s yearly prediction report. “First-time buyers who were squeezed out by the highly competitive market in the last couple of years will try to attain their American dream next year.”


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FILE: A “for sale” sign outside a home in San Francisco.

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CAR is predicting rates to fall to around 6%, which, while still high, is much better than 2023’s peak of more than 7%. 

Less traditional financing options could become more common

As interest rates rose, affordability shrunk for buyers, making home purchasing out of reach for some.  Others sought out less traditional financing options in order to stay in the market. Most people have heard of a 30-year loan from a bank, but not nearly as many know what seller financing or an assumable mortgage is. There are a lot of benefits to “creative” financing, according to Naomi Lempert Lopez, a real estate agent with Coldwell Banker Realty in San Francisco. “When we didn’t need it, we didn’t consider it,” she said. “We are definitely seeing seller financing and seller [rate] buydowns and that’s going to continue. That’s a favorable trend.”


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Even new luxury developments started offering rate buydowns in 2023 — this helps buyers with the initial monthly payments, giving them some relief until rates go down and they can refinance. Kelley Krock, a Redfin agent focused on the East Bay, said less common financing options are sometimes the key to getting a deal done these days. “The market’s not dead, we just need to approach it differently,” she said. “They’re not new ideas.”

It won’t be a buyer’s market — except for downtown San Francisco 

Both buyers and sellers have had to adjust their expectations as the housing market has shifted, and many transactions will ultimately depend on individual factors. “We’ve gotten so used to a white-hot seller’s market, and we’re not in that anymore,” Lopez said. “Good properties that are well priced and well positioned will sell, but it’s more of a hot market than a white-hot market.”

Houses line the hills in San Francisco near Twin Peaks.

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Competing in today’s market still isn’t easy, but Lopez said there’s more opportunity than there once was. For example, she said that back in the “white-hot” days, buyers needed to waive all contingencies or have an all-cash offer in hand to get the place they really wanted. Now, a buyer may be able to still win a home with a financial or insurance contingency attached to an offer.


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Downtown San Francisco, meanwhile, is absolutely a buyer’s market, Lopez said. Supply is outstripping demand and that’s forcing prices down.

Insurance changes could affect the market 

Several insurance companies pulled out of California in 2023, sending a jolt through homeowners throughout the state. AllState and State Farm cited increasing wildfire risk, but other smaller companies departed for other reasons, leaving current homeowners and new buyers with fewer options. “It can’t be understated how unstable the insurance piece is,” Amanda Jones, a Compass real estate agent, said. She’s been in real estate in San Francisco for 20 years, she said, and has never before seen new buyers forced to call more than 20 insurance companies just to find a policy. 


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For example, some insurance companies updated their guidelines in ways that exclude many homes, like no longer insuring houses with knob and tube wiring, which is common in homes built before 1940. It’s making the process of homebuying all the more complicated and stressful, Jones said, and not just in wildfire prone areas. “It makes certain properties unsellable unless it’s a cash buyer, which is sad,” Jones said. 

SF rents still won’t rebound

There’s good news for those looking to rent in San Francisco, as experts agree that rents are likely to stay relatively flat. SF is no longer the most expensive city in the country and could continue to fall even further on the nation’s priciest cities list. Though the city’s constrained inventory will never let it fall off the list altogether, according to Zumper CEO Anthemos Georgiades. “SF demand is really slow,” he said. “The only reason there isn’t a sensational drop in rates is the lack of supply.” 

He noted it’s a bit of a “tale of two cities,” though, since neighborhoods like the Outer Richmond have risen in price more than 10%, while SoMa prices have drastically declined.


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San Francisco had some of the slowest rent price growth in the nation in 2023, according to Chris Salviati, a housing economist with Apartment List, and he agreed that’s unlikely to change this year. A slow nationwide economy — even if it’s just perceived — and the upcoming uncertainty of an election year can prevent people from moving, Salviati said, whether it’s finding a new rental or taking the leap to home ownership. 

Uncertainty seems likely to define the upcoming year — whether around interest rates, the upcoming election, or the health of the economy — no matter if you’re renting, buying or selling.

This article was originally published by a www.sfgate.com . Read the Original article here. .