Home buyers in San Francisco are sitting out the market this fall, waiting for lower interest rates, back-to-the office pressures and even election results to tell them when to move.
This year’s fall market is an improvement on last year’s doldrums, according to some of the city’s top agents, but anxiety and lack of inventory have limited its upside. This September saw slightly more listings go into contract than last year but the numbers were around the same as 2022 and nowhere near the market peak of 2021, according to Compass data.
Compass agent Nina Hatvany said more people are returning from remote-work friendly destinations like Mount Shasta, Mercer Island, Palm Desert or Lake Tahoe. She credits the return in part to a major push for in-office work, but also said the employees find their pandemic-era places “a little bit boring” now that the city has come back to life.
That’s not the same as making a long-term commitment to the city, she said, and many are still hedging their bets by renting.
“Whether it’s Pacific Heights or Clement Street or 24th Street, the neighborhoods really are buzzing and lots of fun events are happening. Yet people are saying, ’Let’s make sure the turnaround has happened.’ And I’m sure the election will help if we see a more moderate slate winning across the board,” she said.
Macroeconomic factors
Compass Chief Market Analyst Patrick Carlisle said the issue of election uncertainty comes up every four years, but even with data going back to 1990 he has never seen any evidence that it plays a large role in market dynamics, sales volume or prices — both locally and nationally.
It’s always possible the election is having an impact this time around, he said, but hard data showing that won’t be available until December.
“Perhaps anxiety is reaching new highs in 2024, but presidential elections have caused great uncertainty (and anxiety) for most of the elections over the last 30-plus years,” he said via email. “Generally speaking, real estate markets are driven by larger and more definitive macroeconomic trends that typically pre-date election years, or by sudden economic, political or environmental events of enormous impact, such as dramatic changes in inflation and interest rates, the 1989 earthquake, the pandemic and 2008 markets crash.”
Compass agent Neal Ward agreed that election years don’t tend to have the same impact as macroeconomic trends. He has heard some buyers say the city needs to turn a corner politically, but most are much more interested in interest rates and the stock market — and the latter has “definitely been humming away, there’s no question.”
But even with money to spend, buyers aren’t finding much out there, with sellers holding out for a market comeback or a bigger drop in interest rates that will let them move on without having to mourn the loss of their 3 percent rates or 2021 valuations. New listings in the city shot up in September, as they routinely do, but were lower than any September in the last four years, according to Compass, bucking a Bay Area-wide trend of more inventory this fall.
Slim inventory
At this point, the vast majority of the fall inventory has hit the market, and there isn’t much to see, Hatvany said, especially not turnkey homes in the prime neighborhoods that buyers want most. There are always new properties that come on in November and December if there’s an owner with an urgent need to sell, she said, but “those tend not to be the choicest properties.”
Compass agent Ruth Krishnan said she wouldn’t put a new listing on the market during an election week, but the first two weeks of November are still fair game before the holiday season really takes over and sales die off for the year.
Krishnan noted that in the market right now, buyers are stymied by the “paradox of choice” that always comes around about this time: they may see something they like, but will always be wondering if something better is going to come along later.
This year there’s added anxiety over new changes to buyer agent commissions. For now, the majority of agents are writing commissions for their buyers into their offers and the majority of sellers are paying it, said Krishnan, who is on the buy side 60 percent of the time. But that may change.
“I think that buyers’ agents have to get comfortable saying, ‘Hey, we’re going to attempt to negotiate this for you 100 percent of the time but in the event that we can’t, then you need to be ready to pay this,’” she said.
Waiting for spring
Fall is never the hot time for appreciation, Krishnan added, but some buyers are deciding to make moves now because they think competition will pick up come spring. Median prices were up 2 percent in the third quarter for single-families and 4 percent for condos, year over year, according to Compass.
Ward said if sellers see the market is doing better and interest rates drop, they might be enticed to list their homes, which could make for an especially robust spring as buyers who didn’t see or get what they wanted this year finally make their move.
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Hatvany said with the possibility of more inventory, plus lower interest rates and perhaps a new political scene, next spring could prove to be competitive.
“One thing we know for certain is that people do seem to move in lockstep,” she said. “Just as now would be a great opportunity to buy and few buyers are willing to do that, if it gets to be a better market in the spring, then there will suddenly start to be competition and it won’t be such a good time to buy anymore.”