Welcome to my newsletter where I give you an insider's take on real estate, with a special emphasis on where I sell — San Francisco, where atmospheric rivers last month gave way to many gorgeous, sunny days surrounding Thanksgiving. Have you seen these sunrises?? When SF is like this, there's just no place else I want to be.
There have been so many changes and ups and downs this year, that it has been hard for me to take a position on this market and analyze it for you. But here we are at the end of the busy fall market, and in the midst of the quiet last month of the year... The elections are over, the Fed has made a couple of back-to-back downward moves, inflation is holding steady between 2-3%, the economy and employment remain strong, and the stock market has recently hit all-time highs. I have to say, I'm pretty bullish on SF real estate in 2025. I'll explain why.
Buyers are getting used to the rates. When I bought my first building in SF in 1998 I had a 7% mortgage (and a 10% down payment!) - I never questioned the rates. Now it seems there might finally be enough distance from those 2-3% mortgage interest rates for buyers to settle into the 5-6% mortgage (the current mortgage rates with relationship pricing). My favorite mortgage banker said it best: "I've been doing this for 32 years and I had never before seen rates in the 2-3% range. Rates in the 4-5% range are more healthy, and we're almost there." Home prices have adjusted accordingly. New commission rules were kind of a nothing burger, with Buyer's Agents' commissions still for the most part being paid through escrow, though now mostly directly by the seller. The earth didn't shatter. I think we're starting to live the new normal.
The city is positioned to be cleaner and safer. On paper crime is down. But if you walk around parts of downtown, the Mission — especially near BART —, and pockets of other neighborhoods it's kind of a mess. People are folded over in drug stupors. There are people living in tents. Your car or garage might have been broken into. You might have been yelled at, chased, or confronted by someone having a mental health crisis. SF's new mayor elect, Daniel Lurie, has promised to tackle the mental health, homelessness and drug crisis as part of a focus on small businesses and revitalizing downtown. Lurie will be helped by a more moderate board of supervisors (notably the incumbent supervisor who oversees the Tenderloin neighborhood was ousted). These new supes ran on getting the entrenched "progressives" out, and say they are focused on common sense reforms and safe/clean streets. Some of the props that passed and also the ones that failed here underscore voters' seriousness about making the streets cleaner and safer, supporting small businesses, and helping to fully staff our police force and 911. The voters have spoken and we have some work to do! Just like most amazing cities.
Sellers are coming back to the market. Sellers dipped their toes into the market in the first part of 2024 only to be slapped back by the higher than expected inflation numbers in April, and the ensuing surge in mortgage interest rates. (The same pattern happened at the start of 2023 — we were positioned to have a strong start to the year then the banks failed.) Early this year, the higher than expected inflation numbers led to low and mostly flawed inventory, which led to extreme competition/overbidding for highly desirable homes. Several homes I sold this year went more than $500K over the list price — even the condos I sold did well, going over asking, or breaking price per foot records — overall exceeding expectations. There was intense competition for beautiful homes and homes in highly desirable neighborhoods. Sellers are seeing some of these strong sales, and they are also going into contract on their next homes (see "Buyers are getting used to the rates" paragraph above). I expect to see more and even better inventory in 2025. A common dynamic early in the new year is that buyers are ready to make offers and jump back into the market faster than sellers are ready with new listings. This dynamic often runs all the way through the spring, making these first months of the year sometimes our most heated selling season – with median sales prices often peaking in spring. When summer begins, demand usually softens with vacations and school holidays, just as the number of active listings normally hits its annual high point. I'm guessing we'll see the same pattern starting this January. Fingers crossed we hit no Q1 snags or surprises.
Luxury home sales outperformed the overall market this year. The first two quarters of 2022, just before the Fed started raising rates, still mark the height of the SF market - ever. During this year's active fall market, median home sale prices were up 2.2% year over year. And, sales activity — measured by listings going into contract (aka absorption) — hit its highest point since the spring of 2022. Mortgage interest rates continued to rise in October and November, but stock markets also hit all time highs. The strength of the stock market (and the climbing interest rates) could help explain why 2024 luxury home ($5M+) and condo ($2.5M+) sales were up 40% and 48% respectively year over year, and why this segment well outperformed the middle market. Lots of cash buyers taking profits and trading into new and bigger homes. And when luxury home sales are up, the mainstream market usually follows.
So many of you have recommended me to your friends and family this year, and I really appreciate your trust in me. So far in 2024 I am among the top 25 overall Realtors® in the city. Another milestone: I sent my youngest to college late this summer and started exploring this empty nest life. It's pretty good I must say. The key is to not take up all that new found time working — which is entirely possible for me. So, after parents weekend in New Orleans this November, Alexei and I along with my mom, too — visited Montgomery, Alabama's incredible Legacy Museum and its various sites, in addition to Birmingham and Selma. This is a must-do trip, especially if you will be in the south. I am happy to talk to you about our itinerary anytime!
As always please don't hesitate to reach out with any question or need. I always look forward to hearing from you!
Happy holidays!
Jessica