Fall Real Estate Outlook

As a student of real estate my entire life, 2024 holds special interest for me as we are currently going through a market in transition. 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 buyers, sellers and agents are out of town, thus delaying the buying or selling decisions 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 $1,625,625, up 4.9% year over year. This number started turning positive last year. The sales volume is up about 14.6%, months of inventory is at 1.8 months, meaning that it will take almost two months to sell all the listings currently on the market, a fairly low number. 

In many ways, this is still a confusing market with many economists disagreeing on where this market will go. On one side, you have the pessimist who says that our prices have gone straight up for 12 years in a row, and we have to go further down before prices will go up. With inflation of the last few years, tech companies announcing layoffs, interest rates still much higher than before, and a stock market that just survived a major correction in August, we are looking at further price declines.

On the other side, you have experts arguing that our economy is still doing well. Unemployment is down, people have adjusted from the pandemic, inflationary pressures are under control, mortgage interest rates have gone down, and the feds have signaled that they will cut the rates in September. This is an election year, so the Democrats will do whatever they can to boost the economy to increase their chances of winning in November.

Both sides have legitimate reasons for their beliefs. Nobody has said that double digit appreciation is around the corner yet.

So, this brings the question of what will happen in the fall? I think it will be more of the same as the real estate market does not stop. There will always be people who want to buy and people who want to sell. Because the prices have dropped a little from the peak, and many sellers have low mortgage rates either because they purchased the property a while ago or they refinanced it, they are reluctant to sell and thus this will keep the single-family housing listing inventory low. Prices are dependent on the supply and demand balance, so this helps to boost prices. I believe that with the anticipated interest rate decrease, the floor has been set for this next cycle.

The larger area of concern is the investment market where interest rates are still high and insurance is difficult to get; plus, the property most likely is under rent control, limiting revenue growth. Many listings are lingering on the market searching for the correct price point in today’s market and I believe that there are buying opportunities in this segment of the market.

What does this mean for the consumer? The best advice is to work with a top-notch 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, there have been reports of properties staying on the market longer with price adjustments. With the upcoming interest rate decrease though, that should turn the market more toward your favor. There are still quite a number of buyers out there. If your property is 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 high, but you are buying at a lower interest rate than last year. When the rates come down farther, you can always refinance the loan and come out further ahead. I urge buyers to consider all factors before purchasing.

For people who are looking to trade up, this market is presenting an interesting opportunity to reposition your real estate portfolio for the long term as competition for properties is less than before.

This will be an interesting fall selling season and should give us a taste of how the market will be going into 2025.

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 johnlee@isellsf.com.