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"Why Lower-Priced Homes in San Francisco Are Appreciating While Higher-Priced Homes Are Declining"
"Why Lower-Priced Homes in San Francisco Are Appreciating While Higher-Priced Homes Are Declining"
The real estate market in San Francisco has been experiencing some interesting trends in recent years. While home values in the metropolitan area, which includes Oakland and Berkeley, have been declining since the Federal Reserve started raising interest rates, the region's cheapest third of homes have stayed stubbornly high. On the other hand, prices for the most expensive third of homes have been dropping faster and more dramatically.
This trend is not unique to San Francisco. Across the country, higher-priced homes are staying about the same price or falling in value, while lower-priced homes are still seeing appreciation, according to data from real estate lister Redfin. This phenomenon can be explained, in part, by the fact that wealthier people have the resources to be choosier about the housing market they enter into. With mortgage rates rising, many have chosen to opt out of buying expensive homes.
“We’re just not selling as many expensive homes,” said Domonic Purviance, a real estate expert at the Federal Reserve Bank of Atlanta.
Families that aren’t wealthy and able to view a home as just another investment, on the other hand, have been less likely to opt out. And that means that home prices in the mid-to-lower tier of values have stayed elevated, especially in supply-strapped, expensive metros like San Francisco.
San Francisco remains a huge outlier, even considering its home prices were quite high to begin with. Likely because the city has seen so much out-migration in the last several years, especially of families looking to buy homes in roomier, more affordable metros elsewhere in the Bay. The city’s population fell to its lowest level in over a decade last year, according to the California Department of Finance.
The pandemic’s relaxed rules on remote work allowed workers and young families to spread out away from dense city centers and into more suburban regions that, in a pre-pandemic world, would have been far more inconvenient. This trend has been referred to as the “doughnut effect.”
Interestingly, this trend can be seen at the city level in the Bay Area as well. Of the top 10 largest Bay Area cities, in cities where typical homes were more expensive in 2019, like Sunnyvale and the city of San Francisco, overall home values have tended to grow more slowly. In cities with lower starting home values, like Vallejo and Concord, they have shot up.
The current state of the San Francisco housing market may be good news for those looking for more affordable homes in the area, but it's not so great for those hoping to sell their high-end properties. Regardless, it's clear that the pandemic has brought significant changes to the real estate market, and it remains to be seen how long these trends will continue
Neilson, Susie. “Why Prices on One Category of S.F. Homes Are Dropping Dramatically — and Fast.” San Francisco Chronicle, 27 Mar. 2023, www.sfchronicle.com/bayarea/article/cheap-san-francisco-homes-17850480.php.
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