If you’re considering making any moves in San Francisco in 2025 you’ll want to read on. I have 8 predictions and what makes them particularly interesting are certain trends and how the market’s responding to some big changes – from crypto’s wild ride after the election to shifting thoughts on interest rates, plus a new mayor stepping in with fresh ideas. I’ve also included our commentary and data from our market strategist below.
1. Interest Rates
Here’s the deal with interest rates – they’re likely staying put or might even climb higher. The silver lining? If you’re in SF, you’ll typically score about 1% lower than the national rates on non-conforming loans. The main reason we’re stuck with these higher rates is that bond investors are more worried about inflation than recession right now. With a strong economy and potential growth policies on the horizon, those bond yields (and consequently, mortgage rates) are probably going to stay up there for a while.
2. Luxury Market’s Looking Hot ($5M+)
The luxury market is really firing on all cylinders right now. With the S&P 500 crushing it last year with a 23% gain and tech stocks doing even better, SF’s wealthy buyers are feeling pretty flush. Add to that the Bitcoin boom (up 50% post-election) and SF’s position as the global leader in crypto portfolios, and you’ve got a recipe for some serious luxury market growth. We’re seeing homes over $5M moving fast, and there’s no sign of slowing down.
3. Non Luxury Market’s Taking It Easy (Below $5M)
The sub-luxury market is telling a different story. We’re looking at modest growth, maybe around 5%, but nothing too dramatic. Why? Those higher interest rates are making first-time buyers think twice, and people just aren’t throwing around crazy overbids like they used to. It’s a more measured, thoughtful market at this price point, with buyers being careful about their spending.
4. What’s Up with Inventory
The inventory story is pretty interesting this year. Early spring, expect to see more non luxury homes hitting the market. Then as we move into late spring and fall, we’ll probably see more luxury listings popping up. But here’s the kicker – overall inventory is still historically low. People are hanging onto their homes way longer now (13-15 years compared to 5-7 years before), largely because they’re sitting on those sweet low interest rates from a few years back.
5. Construction Costs
Brace Yourself If you’re thinking about construction, you might want to sit down for this one. Costs are running anywhere from $1,000 to $2,000 per square foot – and that’s if you can even find a contractor who’ll take on your project. Looking ahead, it might get even pricier with potential workforce changes and new tariffs that could jack up building material costs. The smart play? Look for homes that have already been renovated. You’ll likely save money in the long run.
6. Neighborhood Gold Mines
Let’s talk about where the deals are. Bernal Heights is still running about 10% below its peak prices, making it a solid bet. The Richmond District is in the same boat, offering some great value. And don’t sleep on the Sunset District – it’s still priced below its peak and has tons of potential. These neighborhoods all have great amenities, good community vibes, and room for appreciation.
7. Commission Talk
Despite all the national chatter about commission changes, SF is staying pretty steady. Buyers are still asking sellers to cover their agent’s commission, and sellers are still agreeing to it. Why? Because in SF, top agents are working around the clock to deliver results, and people are willing to pay for that level of service. It’s business as usual in the commission department.
8. New Mayor, New Vibe
There’s a lot of optimism around Daniel Lori stepping in as mayor. He’s got some ambitious plans – tackling public safety, promising to end unsheltered homelessness in 6 months, and pushing for cleaner streets. Plus, he’s talking about cutting through the city’s notorious red tape. Whether you voted for him or not, there’s a fresh energy in the air about San Francisco’s future.
One thing is for sure it will be interesting 🙂 As always if you have any questions about your specific situation please reach out. I’d love to connect with you.
The Fed kept its benchmark rate unchanged; interest rates ticked down below 7%; stock markets remain high (though sometimes volatile); consumer confidence turned a bit unsure about the future. A terrible climate-related disaster rocked the state, with human and financial costs and consequences that will take years to quantify. And for better or worse – you can make your own evaluation – national and international politics have been thoroughly destabilized by new and constantly changing developments, with yet uncertain effects on society, the economy and housing markets.
But in local real estate, 2025 began with the usual new year rebound: The numbers of new listings and of listings going into contract have bounced back from their annual low counts in December, and both are almost certain to rise rapidly as we move further into the year. In the Bay Area, we are already on the cusp of spring, which typically sees the most heated market conditions of the year, and, not unusually, the highest median home sales prices.
“Our outlook for the U.S. economy is positive and offers a promising perspective on the housing market in the year ahead. We expect the U.S. labor market to continue to cool in 2025, which will reduce some of the pressures on inflation. And though we forecast mortgage rates to remain higher for longer, we expect the rate lock-in effect to cool off throughout the year as homeowners adjust to the new normal with respect to rates, therefore adding more inventory to the market.” Freddie Mac Research, 1/28/25
