Dip in Mortgage Rates Sparks Optimism in San Francisco Real Estate Market

In the tail-end of 2023, the San Francisco real estate market got a welcome reprieve. Mortgage rates tumbled from a relatively steep 7.79% to a more manageable 6.61% over just two months. This shift, coupled with a decrease in inflation rates, sets the stage for the Federal Reserve to potentially lower its benchmark rates in 2024, with experts predicting further cuts in mortgage interest rates. (Most analysts predict three cuts by the Fed, with the first coming anywhere between March and May.) Nothing is set in stone, but this positive direction is good news for anyone looking to buy or sell property in the San Francisco housing market in 2024.

30-Year Fixed Conforming Mortgage Rates, 2020-Present

mortgage rates from 2020 to 2024 affecting the san francisco real estate market
Source: Mortgage News Daily

Financial Markets Rally, Benefiting SF Bay Area Homebuyers

In so many ways, it all comes down to interest rates (and the sentiment around them). As confidence rose around future rate cuts by the Fed, the end of 2023 saw a significant rally in financial markets, with the S&P Index and Nasdaq jumping 25% and 45%, respectively. Though there was a slight dip as we entered 2024, the overall growth last year has been a boon for Bay Area household wealth, an encouraging development for prospective homebuyers and investors in San Francisco’s real estate market.

Silver Lining in Sight

During a challenging year, the median house sales price in 2023 dipped by 13% from 2022. Considering the blistering pace of rising mortgage rates since early 2022, this could have been much worse. By the end of last year, the quarterly comparison showed a much smaller decrease of only 1% from Q4 2022 to Q4 2023. This resilience in pricing hints at a stabilizing SF real estate market that’s beginning to regain its footing.

San Francisco Single-Family Home Prices – Rolling 12-Month Average

sf house prices
Click the image for an interactive chart. Source: Infosparks/SFARMLS

Overcoming Challenges: A Look Back at 2023

Last year was no walk in the park for San Francisco real estate. Elevated interest rates, financial market uncertainties, and a low supply of new listings made things tough. However, the narrative is shifting. With interest rates on the decline, a more positive media outlook, and a rebound in economic conditions and consumer confidence, there’s a renewed sense of optimism for what’s ahead in San Francisco’s housing market.

Real estate moves slowly. San Francisco home buyers and sellers are making big, measured decisions, and a home purchase takes time. It wasn’t until late 2023 that changes in economic indicators began to ripple through the market psyche, coinciding with the holiday season slowdown. With the homebuying process spanning 30 to 60 days from loan qualification to closing, we’re on the cusp of seeing how these positive shifts impact early 2024’s sales figures. The future looks bright for those interested in San Francisco real estate, signaling a potential uplift in the market as we move further into the year.

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