With the number of homes on the market in San Francisco nearing a two-decade high, a move which shouldn’t have caught any plugged-in readers by surprise, and the asking price for a third of said homes having been reduced at least once, the average price per square foot of all the homes on the market in the city has dropped 5 percent over the past month to a little over $1,000 per square foot.

And as such, the “expectation gap” between the average asking price per square foot of the homes which are on the market and the average price per square foot of the homes which are in contract, which has been averaging around $940 per square foot, is now back under 10 percent having jumped to 15 percent last month.

43 thoughts on “Asking Prices Drop in San Francisco, Expectation Gap as Well”
        1. Jerome Powell doesn’t have a clue. He also thought he could normalize interest rates before the market told him no. Too bad they will lose control of the long end. Rates are going back up, which will be another major headwind to the crippled SF market.

          1. Wishful thinking, unfortunately. Instead of having the housing bubbles burst because interest rates go up, it is more likely that there will be little to no growth in the next 5-10 years.

        2. Have you thought about how this would work? This isn’t a national housing market crisis like last time. It is a de-urbanization shift. How would they just rescue just SF and urban housing markets using Fed policy.

          1. You make my point. Even if the Fed would like to support the non-urban-core markets and let prices fall in urban job centers, they can’t. Lowering prevailing rates to support bakeries in Peoria helps keep borrowing costs down for homebuyers everywhere.

            I think prices will fall further, but we’ve seen bolder “We’re aiming for 2%+ inflation come hell or high water” than ever before.

            We won’t get broad inflation until wages start to go up and we won’t get that until we get to low unemployment again. Rates will stay low and this will continue to prop residential real estate up everywhere.

            I agree there is a city-to-suburb demand movement. I’m writing from Marin, where I recently bought a fixer.

          2. I think this low inflation low rates conundrum will have to come to terms sooner rather than later. Some banks are making an absolute killing in this low rate environment. When the pie gets too big others will want in.

          3. With the stock market and most of the county’s housing market doing well, there is the technical question of how the Fed could target the drops in SF/NYC and the like. Maybe some Jumbo loan intervention/expand the conforming loan limit.

            But this seems extremely unlikely because of the politics. With what’s happening to blue collar workers/service industry and large parts of the lower end economy, can you imagine targeting a bailout for $1M+ homes on the coasts? I think that would be political suicide for either party.

      1. Every newspaper article on real estate interviews mostly r/e brokers who somehow give quite a different version of what’s going on.

      1. I’m afraid that you are getting screwed. The government is committed to asset inflation. Cash is no longer a safe asset.

  1. Yet you all want to buy. You just hope prices will drop enough to get into your price range. If you really believed San Francisco was a black hole you would already be in Texas or Florida and not reading socketsite.

    1. Exactly. Cities aren’t going anywhere. The distance between SF and #2 as a tech hub may get smaller, but SF will remain #1.

      For all of the negative stuff (mostly homeless/drugs which is localized to a few neighborhoods) there are a lot of positives, too that are being overlooked: transportation upgrades (Slow Streets, Central Subway, Van Ness BRT), lots of condo infill replacing parking lots, tons of park make-overs and street beautification.

      It’s so easy to spot the negatives, but the positives are usually taken for granted. It will be a 10% dip and back to “even” in Spring 2022 IMO.

      1. It isn’t about the negatives, it’s about the exploitative nature of why so many new people have come to SF in recent years. People didn’t come for the restaurants during the gold rush, they came to get rich. Of course SF will always be popular, but this current influx of residents was about making fast money, and physically being is SF seems no longer necessary. So those who didn’t really want to be here are leaving. There is ebb and flow.

      2. Spring of 2021, I say… IF there is a new president, treatment for covid and/or vaccination. I know that is a lot of *ifs* but not at all unrealistic. And all those folks that left cities we be saying ‘I miss theatre/restaurants/museums/clubs/jazz/etc’. You would be crazy NOT to buy now.

        1. …yeah a Biden, sorry, Harris presidency is going to print more money than you can even comprehend, that should do wonders for overpriced real estate, wishful thinking. Stupid, but wishful.

          1. We’ve printed more money than we have ever had in the past three odd years, so please spare us that nonsense.

          1. If either Biden or Trump wins and a vaccine comes this winter employment will skyrocket. It’s likely either candidate will enjoy a burgeoning economy. But the Democrats will certainly spend on infrastructure as well. Why would these things be bad for San Francisco real estate?

    2. The comment section of SS is hardly representative of the market at large. The undeniable fact, supported by reams of stats, is demand for housing in the urban core of SF has tanked; and even all time low interest rates cannot save this bubble from bursting. Nice try though…

      1. Absolutely correct. Sorry Livermore, if everyone wanted to buy the data would show. I don’t get why people think values always go up and to the right. We have seen a top, if not THE top, that will take decades before people want to buy. Toss is California “governance” and the risk of owning anything in CA will outweight the rewards. City/State deficits as far as the eye can see, and no change in sight. Keep dreaming though.

        1. Decades? Oh Cmon. You’re suffering from recency bias. Cue the same exact quotes in 2001 or 2009. Budget deficits have happened before.

          The data shows, six months in, Single Family Homes are flat in price and condos are down 5% (disproportionately impacting SOMA). That shows softening in prices, yes, but fairly small.

          1. Despite being misrepresented as such, that’s not what the data shows (unless you’re conflating changes in the median sale price with changes in value, which you shouldn’t).

            And while a shift in sales has propped the “median sale price” up, even for condos, actual values have, in fact, dropped on an apples-to-apples and price per square foot basis for both condos and single-family homes.

          2. This is nothing like 2001 or 2009, it is magnitudes larger and more impactful. Maybe you should go back to 1929 for at least a closer comp, and even that is low.

        2. Considering the stock market is *positive* for 2020, I don’t believe your 1929 comparison pencils quite yet. Not even close. “Magnitudes larger” than 2008 also isn’t likely to pencil as that would be at least a 50% drop. I understand the logic to being bearish about COVID + San Francisco, but you’re going way overboard here.

          1. Maybe not “Magnitudes larger”. But the rent drops, inventory rise and people leaving certainly looks larger than either 2001 or 2009.

            But also, look at 2000/2001 to 2009 to 2018. We’ve seen the cycles here be just around a decade. So even if this was a normal cycle we’d be looking at 2022/2023 for a bottom. Back to peak at 2027/2028. And it seems unquestionable that COVID has made what would be a normal cycle worse. And I don’t really think you can start the clock until we have a vaccine and can start the recovery process.

    3. Don’t agree at all. But I did read your book.

      I do think that things will end up in the middle. It seems like opinions are that WFH and de-centralization goes on forever or that everyone is coming back to SF and businesses will do that too. It will take a while to find the balance of WFH but moving more employees to WFH part-time around hubs in other cities is going to continue even as we get to a different stage of coronavirus. Some people will move back but a lot will not.

      I also don’t know why vaccines are talked about like an instant end to covid. We would need to be extremely lucky to get to herd immunity with the first vaccines- especially if the Ministry of Disinformation stays in office but it won’t happen either way without some random luck.

      And… the administration ran up over a trillion dollar deficit before covid started. Package permanent corporate tax cuts with temporary personal cuts that expire in 2025 coincidentally right after trump thought he would be out of office. The fiscal mess will be someone else’s problem. Such an odd situation then this year where in some months, the Fed ends up buying over half of Treasury’s new issuance. Those bonds are essentially gone and any profits and coupon payments from that have to go back to the Treasury.

      1. my prediction is 25% drop in condo prices and a 15% drop in SFRs in SF as a whole by Dec 2021. SOMA and dowton condos to drop 35%.

        RE prices start to rebound in 2023

    4. “If you really believed San Francisco was a black hole you would already be in Texas or Florida and not reading socketsite.”

      What is different about SF is that RE here has always been a spectator sport. The city is majority renter and even among owners some of us got here a long time ago. The group of current residents and current potential buyers are very much not the same. I even pointed out to the reader “tipster” the other day that the current potential buyer pool and current potential seller pool aren’t even the same. Current pricing biases potential buyers toward being high paid tech professionals. But inventory can hit the market from sellers who moved/invested here decades ago before the tech boom drove prices up.

  2. maybe off topic, but can someone explain what is going on with 478 Gates in Bernal Heights:
    Listed in July for $2.495
    Reduced in September to $2.395
    Reduced in October to $1.995
    Price just increased back to $2.495
    Did someone become aware of the expectation gap, adjust expectations accordingly, then go back to their original expectation?

    1. Seller/realtor was likely playing games trying to get a bidding war that did not come to fruition. Or they’re pricing based off of the stock market.

      1. It’s a 1600 sqft house on the less desirable side of Bernal listed as 3 bed / 3 bath— 2 of the bedrooms are totally unusable as actual bedrooms, and 2 of the bathrooms are the size of postage stamps.

        File this one under delusional seller expectations

  3. Anecdotal point: I am an architect that does single family projects, mostly high-end but some mid-market as well, and inquiries are through the roof, at level. We’re getting calls for 100k remodels and 3-4 million dollar projects as well.

    We’re turning away 1-2 projects a week.

    I would think that at some point, the cost of construction will become a factor as the availability of high-quality, more affordable rentals could inform decision-making around housing – whether to buy vs. rent as well as whether to remodel, or not.

    1. Interesting. We are submitting plans for a big renovation of our SF house. Guess we should get them in soon! Are homeowners just deciding to make their primary residences the most comfortable/enjoyable? Our plans long predated the pandemic, but seem pretty common for high end properties.

      1. If people are spending more time at home, then they want it to be comfortable and functional for adults and kids, if applicable.

        Or to work on deferred maintenance.

        On my block it has been non-stop interior and exterior renovation work for 4-6 homes since mid-2019. Projects anywhere from $50K to $400K. Most were for existing homeowners.

  4. What about the thousands of units that are vacant in the east cut not to mention the thousands more under construction?

  5. Still wishing I bought back in 2010-2011. I’ve been in a rent-controlled apartment and saving what I would have been paying in mortgage, so I’m doing fine, though the apartment is not getting any younger. Watching to see whether prices drop again – glad I didn’t buy in 2016-2017 at least.

    1. When you retrospectively wish this thing, why don’t you instead wish something even more lucrative, like that you’d bought Nvidia stock at 1/40th its current price, or Tesla at 1/100th it’s current price?

      1. Or wish that you had the power of Magneto and could construct your own chrome castle in the middle of the Pacific? I mean, if we’re criticizing other people’s musings that is.

    2. You should check the numbers. It looks like many places are selling for 2015 prices now and I don’t think we’ve hit bottom. If you bought at 2010, you would have made 10 years of mortgage payments for just three good years of appreciation (2012-2015). Now of course if you bought in 2010 and sold in 2018 that would be great. But if you could time both the top and the bottom perfectly you should take Jeffrey W Baker’s advice and play the stock market.

      1. There’s SOMA condos, and then there’s everything else. It’s a worst case scenario down in SOMA between offices being closed, then businesses closing due to no foot traffic, then the homeless moving in.

        As a whole, I don’t think condos or SFH’s in SF are back to 2015 yet. In SOMA, I”m sure they are, or lower.

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