San Francisco’s median home prices dropped by 1% to $1.78 million between 2021 and 2022 in the first annual decline the city has seen in a decade, according to new data from Compass.
The last time the city saw an annual decrease in home sales prices was between 2011 and 2012 as the city was reeling from the impact of the Great Recession.
Condo prices, which were hit hard by the pandemic, still have not recovered to 2019 levels: The median condo sales price for 2022 sat at $1.2 million, a 2% decline from the year prior. Over the same period, the broader Bay Area saw a 3.2% increase in home prices.
These fluctuations ranged by location, however. In the district that includes Bernal Heights, Potrero Hill and Inner Mission, median home prices increased by 5.5% last year to $1.83 million, whereas the district that includes Pacific Heights and the Marina saw an 11.4% decline to $4.86 million.
The latter district contains many of the city’s most expensive luxury homes, which had far fewer buyers last year: Sales in the luxury home segment fell 52% in the fourth quarter.
That's stark reversal from earlier on in the pandemic, said Patrick Carlisle, a Compass market analyst who authored the report.
“Back then, it was these affluent buyers that led the market. They had the money, they were stuck in shelter-in-place and they very quickly started to buy big new homes and estates,” Carlisle said. “Now we have a complete flip, and the decline in luxury home sales is outpacing the decline in the more affordable market segments.”
These buyers typically have more of their money tied up in stock, and Carlisle said the slowdown is a result of volatility leading to more cautious spending habits. Public markets broadly declined last year, with the S&P stock index down 19.4% and the tech-heavy Nasdaq index dropping 33.5% over the course of 2022.
Fewer luxury homes trading hands also puts downward pressure on overall home prices. Looking specifically at the fourth quarter, median home sales prices in San Francisco declined by 13.5% to $1.57 million and condo sale prices dropped by 12.5% to $1.18 million. Quarterly sales volume dropped by 42% over the same period.
Those reductions were the most pronounced of any county in the Bay Area. On the other end of the spectrum was Sonoma County, where median home prices increased by 5% year-over-year last quarter.
Other signs of a cooldown, including the average number of days that properties spend on the market and the percentage of homes selling under list price, are also stacking up.
Starting last spring, federal interest rate hikes threw cold water on the pandemic home-buying frenzy. As a result of the interest rate increases, the average 30-year mortgage rate more than doubled from 3.11% to 6.42% at the end of the year.
But don't be surprised if the market ramps up in the coming months, said Carlisle: Low unemployment and easing inflation could lure more buyers.
“If that’s coupled with the home price declines we’ve been seeing, buying a home starts to look more appealing and quite frankly more doable for a lot of people,” Carlisle said.