San Francisco’s luxury housing market is bouncing back, overcoming challenges from tech stock slumps and interest-rate hikes. Buyers and sellers are once again active, adapting to current interest rates despite uncertainty about future rate cuts. Some are benefiting from the AI boom, fueling market optimism.
Market Recovery and Buyer Confidence
Despite tech layoffs and stock market fluctuations last year, San Francisco’s job market remains stable, and consumer confidence in luxury real estate is rising. In March, pending home sales reached their highest level since May 2022, with an 8.3% increase compared to the previous year, according to a Compass market report. Single-family home sales surged by 9.9% year over year, while condo sales were down 20.2%.
Impact of Federal Reserve Signals
The market experienced a noticeable shift in December when the Federal Reserve indicated potential rate cuts in 2024. Recently, the Fed announced it would maintain steady rates due to inflation. Luxury buyers, often less affected by interest rates, have been buoyed by stock market gains. "The more affluent have so much of their household wealth in the stock market," noted Patrick Carlisle, Compass’ chief market analyst in the San Francisco Bay Area. "When they see the soaring values we have—with the stock markets hitting new highs in March—they feel wealthier than they did six months ago. That boosts their optimism about the future."
Strong Sales in High-End Market
Sales of higher-priced homes remain robust at the top of the luxury market. A significant factor affecting San Francisco’s luxury market is the lack of supply. As of April 1, listings were flat compared to the previous year, with about 27% being single-family homes. Many sellers are holding onto their properties due to low 2.5% interest rates, creating a competitive environment for buyers.
Bidding Wars and Price Increases
The combination of stagnant listings and resurgent demand has led to bidding wars this spring. In March, the percentage of single-family homes sold above asking price increased by 6.4 percentage points compared to the previous year. Properties priced correctly are receiving multiple offers, reflecting the heightened demand.
Rising Home Prices and Faster Sales
The three-month rolling median sale price for single-family homes rose by 8.19% in March compared to the previous year, while the median sale price for condos increased by 3.5%. Overall, properties are selling faster than they did last year, driven by buyers eager to secure deals. In March, the average days on market for condos dropped by 20% year over year, and for single-family houses, it decreased by 15.6%.
San Francisco’s luxury housing market is on the rise, with increasing buyer confidence and strong sales, particularly in higher-end properties. Despite challenges, the market shows resilience and a promising outlook for the future.
Source: The Wall Street Journal
