San Francisco real estate prices are declining as interest rates and economic concerns impact buyers.

For real estate in San Francisco and beyond, 2022 presented the price trajectory of a small roller coaster. Long-time real estate investor John Douglas Steuart advises the ups and downs have created a unique opportunity for buyers in the San Francisco market, but it’s still a tough one.

John Steuart on San Francisco Market Basics

San Francisco is noted for being one of the world’s most expensive real estate markets and definitely within the United States. Housing prices are always extraordinary compared to the equivalent price for the same property elsewhere in the country, and competition for select properties is always fierce.

Proximity to Silicon Valley and tech industry adjacent roles in the surrounding communities keep prices up and demand high. Even during periods where a noticeable decline in home purchases occurred, such as during shutdowns at the beginning of the COVD-19 pandemic, San Francisco prices remained comparatively high compared to U.S. averages despite lowering compared to historic Bay Area purchase prices.

A look at 2022 with John Steuart

At the beginning of 2022, the real estate wave of the past two years was still high, and San Francisco real estate was meteoric, with properties fetching top prices and being snapped up immediately.

With interest rates rising and an overall cooling of housing purchases based on inflation concerns and market activity, Bay Area real estate is also facing a correction. In August, Redfin reported home prices in the city were down 11.9%, and the time a house stays on the market climbed by 12 days from 21 days to 33. The overall volume of homes sold in August year-over-year also declined.

Since August, an additional interest rate increase announced by the Federal Reserve will likely place additional stressors on the housing market and create greater market fluctuations.

John Steuart explains that increasing mortgage rates is particularly hard in markets like San Francisco, where buyers are already paying premium prices. The long-term implications of higher rates make it difficult to commit to costly property investments, particularly when greater economic uncertainty impacts the tech industry.