San Francisco Real Estate
May 2026 Report
Positive Momentum Meets Economic Crosswinds
As we roll into May 2026, the housing market has (finally) turned in some positive momentum and
the economy in general is showing some positive reversals of recent trends. Equities markets have
surged to new highs. The long-sluggish labor market has shown some green shoots of
improvement. Unemployment and initial jobless claims remain relatively low and in the latest data,
hiring and job creation seem to have improved.
In this year’s housing cycle, we’re focused more on the hiring rate in the economy rather than the
usual unemployment numbers. Since relocation-for-work is one of the big drivers of housing
demand, a very low hiring rate in 2026 continues to be the biggest drag on housing demand after
affordability. If companies are not hiring quickly, there are fewer people moving for work.
In March, the hiring rate data was as low now as the bottom or the pandemic shutdown. But in
April the data rebounded to 3.5%. Continued growth in hiring will be important if home sales are
going to grow meaningfully for the rest of 2026.
The negative news in this spring’s economy is around inflation. Energy costs, tariffs, and
government spending are all contributing to rising prices. The war-driven uncertainty has driven
energy prices sharply higher and the Inflation impacts are only just hitting the economy now.
Unfortunately, higher inflation and stronger employment is not the economic setup that tends to
push interest rates lower. So don’t look to the Fed for interest rate relief any time soon.
An interesting question is whether a booming stock market is enough to move the needle on the
housing market. We can see the AI boom directly in San Francisco home prices and rents, but it
remains to be seen whether middle America feels a wealth boom from equities or a cash crunch
from inflation, and how that impacts home buying activity through the summer.
This analysis and data were compiled by our friend Mike Simonsen at Compass.
