Fall Market Forecast

 As a student of real estate my entire life, 2022 holds special interest for me as this prolonged real estate cycle is changing. Normally in September I write about what we can expect in our fall real estate market because it marks the start of our second selling season of the year in San Francisco. 

 Our two best seasons are in the spring, from February to June, and then in the fall after Labor Day, from September to Thanksgiving. Our summers are normally slow because many people take vacations, which means that buyers, sellers and agents are out of town, thus delaying the buying or selling decision until they get back. There are also many weekend events, such as the SF Marathon and Outside Lands concert during the summer that take the focus off of real estate. 

 Our July median sales price for single-family homes in San Francisco is at $1.9 million, down 3.8% year over year! Though slight, this is the first decrease in the City in more than 10 years. The sales volume is down about 20%, months of inventory is at 2.4 months, meaning that it will take a little more than two months to sell all the listings currently on the market, still a historically low number. 

 In many ways, this is a confusing market with many experts disagreeing on where this market will go. On one side, you have the pessimist who is saying that this is the beginning of a major correction. Our market has gone straight up the last 12 years and this type of appreciation is not sustainable. With inflation back, interest rates going up, the stock market going down, and consumer confidence decreasing, we will be looking at a significant price decline.

 On the other side, you have other experts arguing that our economy is still doing well. Unemployment is down, people are recovering from the pandemic, inflationary pressure appears to be moderating, interest rates have gone up, but it is still near historic lows. Also, since the mortgage crisis, banks have tightened up underwriting. And with the appreciation of the last 12 years, people have more equity in their homes and can sustain a larger price decline. So even if prices do drop, homeowners do not need to sell and will ride the cycle out. This suggests that even if home prices do drop, it won’t be as bad as the last time.

 Both sides have legitimate reasons for their beliefs.

 This brings the question, “What will happen in the fall?” 

I think it will be more of the same; the real estate market does not stop. There will always be people who buy and people who sell. I am aware of more inventory coming on the market in September, which means sales will be up. Prices, I believe, will stay about the same as there is still buyer demand to absorb the inventory. And though the interest rates have crept up, they are still very low.

What does this mean for the consumer? 

The best advice is to work with a real estate professional who is on top of the market to provide you with the insights necessary to fulfill your goals in this changing marketplace.

For sellers, though, the prices have dropped a little. These are still very high prices we are looking at in San Francisco. With buyers still out there, if priced and marketed correctly, you should still be able to sell at a good price. For buyers, I recommend proceeding with caution. Currently prices are still pretty high, but the opportunity to obtain a good interest rate is still there. In the near future, even if prices come down, the interest rates will go up which might neutralize any financial differences. I urge buyers to consider all factors before purchasing.

 For people who are looking to trade up, this market is presenting an opportunity to reposition your real estate portfolio for the long-term as you can lock in on a low interest rate now and pay it back with tomorrow’s inflated dollars!

 This will be an interesting fall selling season and should give us a taste of how the market will be going into 2023!

John M. Lee is a broker with Compass specializing in the Richmond and Sunset districts. If you have any real estate questions, call him at 415-465-0505 or email at johnlee@isellsf.com.