2024 Real Estate Market Predictions In San Francisco

Dramatically Improving Economic Indicators Suggest a Brighter 2024 Housing Market

In the last 2 months of 2023, the average, weekly, 30-year mortgage interest rate dropped from 7.79% to 6.61%.

  • CPI inflation declined in 2023 from 6.3% in January to 3.1% in November. Consensus opinion is that the Fed will begin dropping the benchmark rate, probably in multiple steps, in 2024. Those actions are expected to be reflected in further mortgage interest rate declines.
  • After its end-of-year rally, the S&P Index was up 25% and the Nasdaq up 45% in 2023 (though early 2024 has begun with relatively modest declines).
  • The number of new listings coming on market in 2023 was the lowest in decades, a dominant factor behind sales dropping to their lowest annual total in decades.

The 2023 market was characterized by high interest rates, financial market uncertainty, surprisingly strong demand (considering first two issues), and an extremely low supply of new listings – which maintained upward pressure on prices, even as housing affordability dropped. Purchase activity was repressed due to interest rates and the inadequate supply of homes for sale, while for prospective sellers, the motivation to move was reduced by the mortgage lock-in effect.

With interest rates falling and economic conditions rebounding – which should further boost buyer demand in 2024 – the big question is how much do rates need to fall for homeowners to start selling their homes in normal numbers again?


2024 Real Estate Market Predictions

#1 Higher Prices In The Spring

Spring is going to be our hottest selling season, meaning that prices are going to be higher this spring than they are the rest of the year. This is true nearly every spring in San Francisco. But this year, I think it’s going to be more true than ever as we’re coming off that interest rate drop combined with the stock market also doing really well.

#2 Inventory Still Sparse

Inventory is going to continue to be sparse. I expect it to be higher than last year, but not that high. The sellers we’ve seen selling in the last 12 to 18 months have been selling primarily due to death, divorce, and job changes. What we’re missing are those sellers moving from to bigger homes because they’re really tied to that interest rate.

#3 Lower Interest Rates

Interest rates could come down into the fives. Right now, it’s a little unclear to me whether or not this is a 2024 prediction or 2025 prediction.

#4 Lower Rates Means Higher Inventory At Higher Prices

If they do come down into the fives, we’re going to see more inventory, but it’s going to be at higher prices.

#5 More Homes Sold This Year

Overall, there’s going to be more houses sold this year than last year, but I don’t think it’s going to be a lot more. We’re probably going to see 10 to 15% more transactions. The bottom line is, if you’re thinking about buying a house, it’s probably not going to get any cheaper.

I have a lot of optimism. I’m really excited that loans are a little bit less expensive. I’m also excited that it’s a little bit easier for sellers to make a choice about whether or not they want to make that adjustment to their mortgage by selling and buying something else.
If you have questions let’s talk.
January 13, 2024
Market Updates
previous next