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San Francisco home prices could fall further than any U.S. metro in 2023

View of San Francisco homes from Kite Hill on Nov. 8, 2021 | Camille Cohen

San Francisco could see the steepest decline in home prices of any U.S. metro area in the next year, according to a housing price forecast from Zillow.

The real estate data company’s Home Value Forecast projected that overall home prices in the city, which include single family homes, condos and co-ops, are expected to decline by 3.6% by Oct. 31, 2023, compared with the same date this year.  

That is the sharpest drop of the 100 metros listed in the report, outstripping Honolulu (-2.9%) and third place Baton Rouge (-2.9%). Home prices in San Jose, the other Bay Area city listed in the forecast, are expected to drop by 1.8% over the same period.

In the shorter term, San Francisco fares slightly better. Zillow’s forecast estimates that home prices in the city will drop 1.8% by Jan. 31, 2023, which ranks as third on the list. Austin (-2.7%) and Las Vegas (-2%) are expected to see steeper declines over that period. 

The forecasts fall in line with a broader correction in the Bay Area housing market after it reached feverish highs during the pandemic. Since peaking in the spring, market volatility and interest rate hikes have dampened home prices. 

But the scale of that impact has varied widely between various Bay Area counties. 

San Francisco’s real estate market has been hit harder than most, a fact partly attributed to demographic shifts during the pandemic, mass layoffs in the tech sector and an empty downtown. According to data from real estate firm Compass, over the last three months, the median home sales price is at $1.6 million, down around 12%. 

Downtown condos, a once-popular option for entry-level home buyers, have seen major price drops as remote work became the norm, reducing the need to be close to Downtown.

On the other end of the spectrum, luxury home sales have slowed both locally and nationally as stock market volatility and larger economic uncertainty put a damper on big-ticket purchases. Sales in November for homes over $5 million were down by more than 50%, according to Compass. 

Case in point: A home in Pacific Heights recently sold for $19 million, the highest price paid for an apartment in San Francisco this year. However, the property was initially listed at $30 million in January. 

Fears of a potential recession—which many economic observers expect in 2023—is also throwing a wrench in the market. Experts say the tech-centric Bay Area might be more sensitive to an expected downturn as well. 

“Tech was basically providing a hose of money into the land values of the Bay Area, and then with remote work, that hose is spraying more evenly across the country,” said Daryl Fairweather, the chief economist at Redfin. 

“Now with the weak tech sector, the water going into that hose is weaker, too,” she said. 

Kevin Truong can be reached at