The Spring Market Continues to Recover
The specifics for San Francisco will be covered in great detail within this report. But looking at the
overall Bay Area, buyer demand has continued to rebound from its late-2022 nadir. Though mortgage
applications are still well down year over year, many buyers have accepted higher interest rates as the
new normal and decided to move forward – and, in the last 2 months, rates have been trending
downward. A significant minority of buyers are paying all-cash. Open houses are seeing increased
traffic, more listings are selling, and selling more quickly with multiple offers. Median sales prices
have generally been ticking back up in 2023, though still down across the Bay Area from the market
peak last spring. San Francisco was more negatively affected by the pandemic – with lower rates of
appreciation during the pandemic boom – and due to its specific economic circumstances has typically
seen somewhat larger price declines since the market shifted in mid-2022.
Even with the increase in demand, sales activity remains far below last spring due to a number of
economic and supply constraints. While increasing from mid-winter lows – with some very big sales
occurring – luxury home sales volumes have generally seen larger declines as compared to the peak of
the pandemic boom, when luxury sales often hit spectacular new highs.
The number of new listings has also dropped from historic norms. This is mostly ascribed to the
"mortgage lock-in effect," i.e. owners with very low, long-term, fixed-rate mortgages are reluctant to
sell to then buy at much higher prevailing rates. This decline in new listings has major ramifications for
supply and demand dynamics, and increases pressure on prices even in a reduced activity
environment.
Some uncertainty clearly continues with inflation, interest rates, stock markets, bank crises, high-tech
layoffs, and now, as of early May, federal debt-limit negotiations. But, so far, the 2023 housing market
has mostly been moving in a positive direction.
