Much of the San Francisco market struggled in Q4 as mortgage rates climbed as high as 8% mid-quarter. Citywide median price for single family homes dropped from $1.650M in October to $1.45M in December, demonstrating the negative effect that rising rates have on buyer confidence and overall sales.
While mortgage rates rose through October and November, December brought good news on inflation and the U.S. job market, causing lenders to begin easing rates in anticipation of a reversal of Fed policy. Rates on a 30 year fixed mortgage fell from a high of about 8% to just above 6% at the end of December. They have crept back up since then on news that the Fed will not aggressively cut rates in 2024, as we all hoped. Given the trends, would-be buyers should anticipate a more robust market in 2024 with modest decreases in mortgage rates over the course of the year. It is unlikely that inventory will markedly increase unless a more dramatic lowering of interest rates occurs.
Overall, San Francisco is still "on sale," but will not remain that way forever. Especially given that inventory has plummeted over the last few months, falling from 4.3 months of supply in September to just 1.8 months in December. Anyone considering a purchase in SF would be wise to jump in the market soon. As we say in the business - "You marry your home but you only date your interest rate!" If you can get in now, it is very likely you'll be able to refinance into a lower rate in the next few years and lower your housing costs. Some creative buyers are structuring 2/1 buydowns with sellers in order to ease the pain of the current rate environment. My advice - get creative and get in, as long as you can afford the payments!
Lowering mortgage rates and limited inventory and competition will make the upcoming spring market great for sellers. For those who are itching to trade up to a larger home, 2024 will be a great opportunity to do so. Purchasing a larger home at current discounts will better leverage you going into a market recovery. As always, I'm happy to talk through your specific situation and can help you to maximize your ROI on your old home and negotiate to get you into your new one.
For more specific data on your neighborhood, or for a market evaluation of your home, please don't hesitate to reach out - I am here to help you!
Median Price - SF Single Family Homes, through December 2023
Months Supply of Inventory - SF 1-4 Units, through December 2023
