In my last post, I wrote that San Francisco’s residential market, fueled by the booming economics of local AI companies, was bucking the trend of most Bay Area counties by showing clear signs of strength while other counties stayed flat or faltered.  Recent data suggests that this trend could be accelerating.

In Contract, Pendings, Sales Volume All Up

First, let’s recall that the music stopped in Spring, 2022, when the Fed started aggressively raising the Fed funds rate to cool economic activity and accelerating inflation after having kept interest rates near zero during the Covid Pandemic.

The resulting rise in mortgage rates correlates precisely with a massive slowdown in the Bay Area residential market  as we entered 2022 (chart below).

With that background in mind, many of our statistics are now at or approaching levels they had reached before that 2022 slowdown.  The number of homes (including condos, etc.) in contract,  pending ratio, and sales volume are all at the highest levels we’ve seen in over three years.

Meanwhile, the supply side of the equation remains constrained (first chart below).  While we haven’t seen massive increases in prices yet, I think it’s fair to say that there is and will continue to be upward pressure, especially if mortgage interest rates continue to moderate and the stock market continues to surge.  And while lower interest rates might “unlock” sellers who have been reluctant to lose their pre-2022  interest rates on their existing homes, if anything, some additional supply might help overcome the “buyer fatigue” that’s caused many buyers to drop out of the market altogether because they’re tired of being beaten out of deals.  The net result: increased pressure on prices.

Fewer Sellers, Period. 

In addition to feeling locked into low interest rates on their existing homes, there are plenty of other reasons sellers are staying put.  The chart below really captures this long-term trend:  holding periods have more than doubled over the last 25 years in California.  Until something causes this to change, chances are that supply will remain constrained for the foreseeable future, especially for houses.

Prices Moving Up for Houses.  Will Condos Follow?

There’s a strong seasonal component to the residential market, so short-term fluctuations are a given.  That said, the following chart shows a continuing upward trend in house sales prices in 2025, with shorter term indicators perhaps signaling an upward acceleration in prices.  The median house price  for SF in October hit $1.85 million, “its highest value since mid-2022.”

Condos are an interesting story.  By 2022,  condos outside of the non-downtown highrise areas had recovered to their pandemic highs.  Not so for condos within those highrise areas (chart below).  But condos in both areas again fell precipitously as interest rates increased in Spring 2022, and they’ve been bouncing along at 2023 levels ever since.  Word from our agents who are active in selling condos in Downtown/SOMA/Civic Center is that they are beginning to see movement where previously there was none: condos that have been languishing on the market forever are finally getting sold.  So far, I’m not seeing a definitive case for that in the data, but data looks backwards so maybe we’ll see it more clearly in the months to come.

Luxury Home Sales: The Sky’s the Limit

Meanwhile, luxury home sales both in San Francisco and in the broader Bay Area, are booming.  The first chart shows an astonishing correlation between the current boom in the stock market and luxury home sales.  The second focuses in on San Francisco specifically.  Thank you very much Open AI, Nvidia, and so on.

For those who want more granular info on prices by segment, take a look at the final chart, which slices and dices in various ways.  The clearest and most unsurprising takeaways are that there’s lots of competition in the $1 to $5 million range and that houses are still attracting strong overbidding.

And on a Personal Note

First, let me wish all my regular readers a very happy holiday season.  The market typically winds down come Thanksgiving, so this is probably my last post for the year.  Second, next year will be one of some exciting changes for me and RealDataSF.  Inquiring minds want to know….  Give me a buzz.  Drop me a line.

As always, your comments, questions, and referrals are much appreciated!