Clients, friends, and colleagues,
It's been quite the week, and I am sure you are wondering how the recent SVB news impacts real estate? More specifically, how does this impact real estate in the Bay Area & San Francisco? The obvious answer is we are way too early to tell and that this is a fluid situation: news is coming out by the minute. I can offer some insight into the state of our market until the news of SVB on Friday - and the market has undoubtedly rebounded from Q4 2022.
After the acute decline in market activity in the 2nd half of 2022, buyer demand rose dramatically. Most market indicators turned positive in 2023: Open house traffic, number of offers, and overbidding & absorption rates all saw improvement.
It is too early for significant effects to show up in home prices: Through February, 3-month-rolling median house sale prices saw year-over-year declines across all Bay Area counties (these percentage declines should be regarded cautiously until substantiated over the longer term):
San Francisco Median Sale Price
February 2023: $1,500,000 (down 14.5% Y.O.Y.)
February 2022: $1,755,000
February 2021: $1,570,000
February 2020: $1,460,000
February 2019: $1,445,000
February 2023: $1,041,000 (down 16.7% Y.O.Y.)
February 2022: $1,249,500
February 2021: $1,125,000
February 2020: $1,175,000
February 2019: $1,100,000
Even with the striking improvement in demand over late 2022, most year-over-year indicators remain depressed. Still, these comparisons are with the severely overheated conditions prevailing at the peak of a 10-year housing market upcycle. March-May is typically the most active listing and sales period and should soon provide more data on supply, demand, and price trends. Over the last 3 years, spring markets were deeply affected, in very different and often surprising ways, by the onset of the pandemic (2020), the pandemic boom (2021), and soaring interest rates (2022).
The biggest wildcard remains interest rates: After dropping considerably in January from a November peak, they climbed again in February and early March, with big impacts on loan application rates. As rates rise, more opportunities exist, and cash holds more value.
If you have any questions about the market, specific property, my top investment choices in the market today, etc., I'm always here to help.