A continuing rise in mortgage rates along with declining interest from homebuyers led the median San Francisco home price to drop 7% year-over-year to $1.38 million in August, according to a report from real estate company Redfin.
The San Francisco metro—along with neighboring Oakland where prices dropped 1.4%—were the only two metro areas that saw median sales prices decline during the last four weeks. By contrast, nationwide median home prices rose 6% over the same time period.
"Home prices in San Francisco are quickly approaching 2019 levels as they contract in reaction to higher mortgage rates," said Taylor Marr, Redfin’s deputy chief economist. "Tech jobs fueled the boom in SF, making it unaffordable, and the exodus of tech workers is also driving a bust right now."
The federal government’s efforts to fight inflation have pushed 30-year mortgage rates to 5.89%, the highest since November 2009. In August, fewer homes sold above their listing price than at any time since February 2021 and the typical home went for 0.3% below its final list price.
Laila Salma, a real estate agent with Salma & Company, said the drop in home values is notable but placed the decline in context of a larger cooldown in the city’s residential real estate market.
An August market report from real estate brokerage Compass noted other signs of a real estate cooldown, including a rise in the number of days a typical listing spends on the market, the number of overall listings and the number of price reductions for properties (up 117% year over year). Home sales were down 32% in August from the same period last year.
Salma said San Francisco’s housing market typically slows in the summer before picking up again in the fall, but she’s noticed a current lack of buyer urgency with her clients.
"Overall, values are down and have been for the last few months. Many buyers are caught up in the headlines but there is some great opportunity out there if you feel comfortable acting," Salma said.
She also pointed to the seasonality in San Francisco’s home buying market, which typically slows in the summer before picking up again in the fall. But she’s picked up on a real lack of urgency among buyers who are waiting for the best deals they can get before pulling the trigger.
Patrick Carlisle, chief Bay Area market analyst for Compass, wrote that this year’s fall home buying season will be one to watch as a sign of how buyers and sellers are navigating the slowdown.
"As of early September, interest rates have increased again and stock markets declined once more," wrote Carlisle. "The next major indicator of buyer and seller psychology and market dynamics will be what occurs during the autumn selling season."