The Local Lowdown: August 2024

Michelle Kim | August 28, 2024

The Local Lowdown

Quick Take:

The median single-family home price fell 2.6% month over month, while condo prices rose 17.3% and reached the highest price level in two years. We expect price contraction for the rest of the year, which is the seasonal norm.
Active listings and new listings declined in San Francisco month over month, bringing inventory to a record low once again. We expect inventory to decline and the overall market to slow further as we make our way through the second half of the year.
Months of Supply Inventory fell for both single-family homes and condos. In July, MSI indicated a sellers’ market for single-family homes and a balanced market for condos.

Note: You can find the charts/graphs for the Local Lowdown at the end of this section.

The median single-family home and condo prices fell but are still near all-time highs

In San Francisco, home prices haven’t been largely affected by rising mortgage rates after the initial period of price correction from May 2022 to July 2022. Since July 2022, the median single-family home and condo prices have hovered around $1.6 million and $1.2 million, respectively. Condo prices reached a two-year high in July, but were still $60,000 below the all-time high reached in April 2022. Year over year, the median price was up 10% for single-family homes and 16% for condos. Prices are more likely to rise if more sellers come to the market. Inventory is so low that rising supply will only increase prices as buyers are better able to find the best match. More homes must come to the market to get anything close to a healthy market. That said, prices typically peak in the summer months, and we don’t expect new all-time highs this year. We do expect some minor price contraction in the coming months. Additionally, inventory is low enough that it will create price support as supply declines in the second half of the year.

High mortgage rates soften both supply and demand, but home buyers and sellers seemed to tolerate rates near 6%. Now that rates are declining again, sales could get a little boost, but the housing market typically begins to slow this time of year.

Inventory hits a record low in July

In July, sales fell 6% for single-family homes, but rose 13% for condos month over month. Total inventory fell 15% as new listings dropped. For single-family homes, inventory declined due to a sharp drop in new listings over the past two months. Condo sales rose in July and far outpaced new listings, which caused inventory to fall.

In 2023, single-family home inventory followed fairly typical seasonal trends, but at a significantly depressed level, while condo inventory has been in decline since May 2022. Low inventory and fewer new listings have slowed the market considerably. Typically, inventory in San Francisco has two peaks, one in May and one in September, and then declines through December or January, but the lack of new listings prevented meaningful inventory growth. New listings have been exceptionally low, so the little inventory growth throughout 2023 was driven by fewer sales. In November and December 2023, new listings dropped significantly without a proportional drop in sales, causing inventory to fall to an all-time low in December, which further highlights how undersupplied the market has been over the past year. It’s looking like 2024 inventory, sales, and new listings will resemble historically seasonal patterns, but at a significantly depressed level, similar to last year. Now that we’re more than halfway through the year, it’s clear that supply will remain tight until spring 2025 at the earliest.

Months of Supply Inventory in July 2024 indicated a sellers’ market for single-family homes and a balanced market for condos

Months of Supply Inventory (MSI) quantifies the supply/demand relationship by measuring how many months it would take for all current homes listed on the market to sell at the current rate of sales. The long-term average MSI is around three months in California, which indicates a balanced market. An MSI lower than three indicates that there are more buyers than sellers on the market (meaning it’s a sellers’ market), while a higher MSI indicates there are more sellers than buyers (meaning it’s a buyers’ market). The San Francisco market tends to favor sellers, at least for single-family homes, which is reflected in its low MSI. However, we’ve seen over the past 12 months that this isn’t always the case. MSI has been volatile, moving between a buyers’ and sellers’ market throughout the year. From January to July, MSI declined significantly. In July, MSI implied that the single-family home market favored sellers, and the condo market was more balanced.