San Francisco is a unique region in California’s housing landscape. Here, jobs and home values were recovered quickly following the 2008 recession due to the presence of the high-paying tech industry.

All the same, the high competition stemming from high prices and limited inventory have shut out many residents, causing a housing crisis for renters and homebuyers alike. Further, the region’s enviable jobs recovery from the 2008 recession did not shield San Francisco residents from the impacts of the 2020 recession, with job losses continuing in 2022.

San Francisco’s infamously high home prices began to fall back in June 2022, the result of rising interest rates which immediately reduced buyer purchasing power. Further, the remote work trend caused an increasing number of San Francisco residents to flee the metro area for less expensive, nearby suburbs, reducing homebuyer competition in the city. The housing market will begin a more consistent recovery in the years following the presently undeclared 2022 recession here in San Francisco and across the state. In the meantime, expect price declines to continue here until bottoming in 2025. The exception will be high-tier homes, which are always the first to rise following a recession, expected to bottom here in San Francisco in 2024.

View the charts below for current activity and forecasts for San Francisco’s housing market.

Updated November 9, 2022. Original copy posted March 2013.

Volatile home sales volume

Chart update 11/09/22

2021202020192004: Peak Year
San Francisco County home sales volume7,3005,2005,4008,100

*first tuesday’s forecast is based on monthly sales volume trends, as experienced so far this year, and economic conditions affecting the market.

Home sales volume in San Francisco County is volatile, but has tended to run a step ahead of the rest of the state in terms of trends. San Francisco home sales volume peaked in 2004 — a year before the statewide peak — before receding in 2005-2006. Home sales volume bumped along at a relatively level-to-down annual pace in 2012-2016, but fell significantly in 2017, a signal of the statewide downturn in sales taking place in 2018. But this decrease reversed course in 2018, with year-end totals up 12% from 2017. 2019 home sales volume ended the year with 2% fewer sales than in 2018 and 2020 sales volume ended the year down a slight 4% from the year prior.

In 2021, annual home sales volume was a volatile 40% above a year earlier. While this annual increase is steep, the rising trend has slowed, and as of August 2022, year-to-date (YTD) home sales volume is 13% below a year earlier.

San Francisco, with its heavy concentration of high-paying tech jobs and depressingly low housing inventory, is almost an economy unto itself. Decreased economic expectations and still-high home prices in the region have caused homebuyer enthusiasm to wane sharply in 2022. As we make our way into the next economic recession, still undeclared as of Q3 2022, look for home sales to fall back.

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Inventory rises from historic lows

Chart update 11/09/22

Sep 2022Sep 2021Annual change
San Francisco County for-sale inventory8,7008,400+4%

Multiple listing service (MLS) inventory has risen from the historic low reached at the end of 2021. After two years of decline, for-sale inventory in San Francisco averaged a slight 4% above a year earlier as of September 2022 — and climbing. The winter months typically see the lowest inventory of homes for sale, peaking around mid-year.

Looking forward, expect inventory to continue to climb in 2023-2024. The significant interest rate increases of 2022 have slashed buyer purchasing power, making it nigh on impossible for mortgaged homebuyers to compete. Along with high inflation, the signs are pointing to a rapidly approaching downturn in the housing market — of which homebuyers and sellers are well aware. Today’s seller’s market has fully tipped, with prices to follow heading into 2023 as inventory grows and homebuyers choose to wait out the declining market.

Turnover rates jump during pandemic

Chart update 11/09/22

202120202019
San Francisco County homeowner turnover rate7.7%6.6%5.9%

San Francisco County renter turnover rate

26.8%19.1%
18.9%

San Francisco’s renter turnover rate rose significantly in 2021 to nearly 27%, meaning over one-in-four San Francisco renter households moved in 2021 alone. The homeowner turnover rate (producing sales and relocating buyers) also jumped sharply in 2021 to 7.7%. This high turnover rate is reflected in the leap in sales volume also experienced in 2021.

Renter and homeowner turnover rates indicate both the willingness and corresponding ability of renters and homeowners to move. With the loss of jobs and income during the Financial Crisis and 2008 Great Recession, turnover rates in San Francisco fell. However, both renter and homeowner turnover rates recovered more quickly in San Francisco than elsewhere in the state due to the region’s swift jobs recovery and high concentration of employers.

Following the 2008 recession, renters in particular regained a higher level of mobility, as the young professional class inhabiting San Francisco is often more inclined to rent than own. However, the significantly high rents in San Francisco are now swiftly pushing renters out of the city and into the nearby counties of Alameda and Contra Costa. Those with rent-controlled apartments strive to stay put which kills turnover and new construction.

Looking forward, turnover rates will fall back in 2022-2023 in reaction to the brakes being rapidly placed on the economy heading into 2023. Already, prices and sales volume have plummeted in this region, which is hyper-sensitive to changes in the stock market.

Homeownership trends up from bottom

Chart update 11/09/22

Q3 2022
Q2 2022Q2 2021
San Francisco County homeownership54.3%55.9%52.9%

The homeownership rate in the Bay Area tends to vary more wildly than other parts of the state. However, the general trend from the end of the Millennium Boom until 2015 had been down. Since 2020, the homeownership rate in San Francisco has trended up, though it remains volatile from quarter-to-quarter. As of Q3 2022, the homeownership rate is 54.3%, slightly below the statewide average of 55.7%.

Overall, the homeownership rate in San Francisco has not suffered quite as much as the rest of the state during this protracted recovery due to the job support delivered by its successful tech industry. All the same, due to the high cost of housing and the allure of city living, renting is often preferred in San Francisco.

Home prices in free fall

Chart update 11/09/22

Low-tier annual changeMid-tier annual changeHigh-tier annual change
San Francisco County home pricing index: Aug 2022+4%+6%+5%

San Francisco home prices are characterized by rapid starts and stops, as viewed in the bumps in the chart above — particularly in the mid- and high-tiers. In contrast, pricing in Southern California markets tend to form a smoother line. San Francisco’s low supply situation is partly to blame, creating a volatile home sales market. The city’s preference for low-density zoning restricts builders from meeting the ever-increasing demand for local housing.

As of August 2022, low-tier prices are just 4% higher than a year earlier, and mid- and high-tier prices are 6% and 5% higher. However, as interest rates have now jumped from historic lows and the economy is heading into the 2023 recession, home prices are now plummeting on a monthly basis. Compared to their May 2022 peak, San Francisco home prices have dropped 5% in the low tier, 9% in the mid tier and a whopping 10% in the high tier as of August 2022.

Accurate home price reports run about two months behind current events. Even when caught up, “sticky prices” tend to persist several months beyond the moment when home sales volume begins to slow.

In the coming months, higher interest rates and the dwindling economy will put additional pressure on home prices. Home prices will trend down through the remainder of 2022 and into 2023, the result of an economy caught in an as-yet undeclared recession. Watch for low- and mid-tier prices to hit bottom alongside the rest of the state near 2025. However, high-tier prices will recover sooner when the wealthiest jump back into the housing market here in San Francisco and in other coastal areas of the state, likely around 2024.

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Multi-family construction gains

Chart update 11/09/22

202120202019
San Francisco County single family residential (SFR) starts332643

San Francisco County multi-family starts

2,5002,900
5,100

Very few single family residences (SFRs) are built in San Francisco County each year, and this number has continued to decrease in recent years. Multi-family construction starts, on the other hand, have swung wildly from year-to-year, though the general trend has been up since their bottom in 2010, hitting a wall and reversing course in 2020. Multi-family construction continued to plunge in 2021. The long approval and permitting process in San Francisco holds down construction starts of all types, though legislative changes have continued an attempt to loosen the process and make it easier for builders to meet demand.

As jobs continue to be centered in San Francisco, multi-family construction may feel the benefits. San Francisco’s high-paying tech industry draws a younger population (members of Gen Y and Gen Z), who are most likely to reside in multi-family structures close to the urban amenities San Francisco offers.

However, archaic zoning limiting building height and the density of units in each structure will impair multi-family starts, population mobility and job growth going forward while driving up rents and causing employers to consider other communities.

Jobs recover slowly from 2020 losses

Chart update 11/09/22

Sep 2022Sep 2021annual change
San Francisco County employment1,182,1001,104,500+7.0%

Unlike most of the state, San Francisco’s jobs market was well passed the point for recovery from the 2008 recession when the 2020 recession hit. Homeowners and renters require income (generally from employment) to make mortgage or rent payments. As a result, San Francisco’s housing market has grown more swiftly than the rest of the state due directly to its quick healing and expansion in the jobs market over the past decade.

Jobs have met and exceeded residents’ need for employment, even including San Francisco’s population increase of roughly 70,000 working-age individuals during the recovery from the 2008 Great Recession. By a statewide comparison, California just caught up to pre-recession levels in mid-2014, finally meeting the intervening population increase in 2019.

However, what was gained was quickly lost, and the jobs recovery from the 2020 recession has fallen behind. The economic response to COVID-19 on top of the underlying recession has caused record job losses across the state, and San Francisco is no exception. San Francisco’s job numbers remain 18,700 below the pre-recession peak as of September 2022. Expect to see these persistent job losses pull down prices in 2022 following 2021’s expiration of the foreclosure moratorium and rise in forbearance exits as those who are jobless with a mortgage find their bills come due.

Jobs by real estate industry

Chart update 11/09/22

Sep 2022Sep 2021Annual change

Construction

45,50043,000
+5.8%

Real Estate

20,50021,400
-4.2%

The number of people employed by each of San Francisco’s top employing industries has increased over the prior year. In particular, Professional and Business Services, which includes the technology and support industries, has added the most jobs during this economic recovery.

Employment in the real estate industry remains below pre-recession levels and faces a prolonged recovery ahead. The construction industry suffered greatly during 2020, the result of shelter-in-place orders that have often been more restrictive in the Bay Area compared to the rest of the state. However, the dire need for more residential construction continues. Thus, construction will continue to see growth throughout this decade.

Per capita income has recovered

Chart update 05/10/22

20202019Annual change
San Francisco County per capita income$144,800$133,900+8.2%
California per capita income$70,700$65,300+8.3%

Per capita income in San Francisco is double that of California’s average income, having increased at a significantly quicker pace that most of California in recent years.

However, San Francisco residents spend on average a debilitating 41% of their income on housing expenses. Many more simply cannot afford to live in the city and are forced out to the suburbs, the only place where their paycheck qualifies them for housing.

If you’re looking for indications of where California’s housing market will be in two to three years, take a look at San Francisco County. Here, jobs and income have fully recovered. All the same, home sales volume remains stuck in its bumpy plateau — flat. Sales are likely to fall back due to to too-high home prices relative to incomes and an unstable global economy. For, even though incomes here are higher than virtually anywhere else in the state, rising incomes still don’t keep up with the cost of housing here in San Francisco.