San Francisco House Prices Up 7% to $1.735M, Condos Down 1% to $1.135M

Key Takeaway

• San Francisco single-family home prices rose 7% year-over-year to $1.735 million, while condo prices fell 1% to $1.135 million.
• Year-to-date home sales volume in San Francisco increased by 12%, with luxury properties over $5 million significantly outperforming the market.
• Across the Bay Area, single-family home prices rose in all nine counties, with Santa Clara, San Mateo, and Sonoma hitting new price highs.

Diverging Trends in San Francisco Real Estate

The San Francisco real estate market is experiencing a notable divergence between single-family home prices and condominium prices. According to the San Francisco Business Times, the typical price for a single-family home in the city rose by 7 percent year-over-year in May, reaching $1.735 million. In contrast, the median price for condos fell by 1 percent to $1.135 million. This trend highlights a growing preference for single-family homes over condos, a shift that has been ongoing for several years. Compass's chief market analyst, Patrick Carlisle, noted that condo prices have shown much lower appreciation compared to houses, with some condo markets seeing little to no appreciation since 2018.

The Numbers Behind the Market Shift

The data underscores a broader trend in San Francisco's real estate market. Year-to-date home sales volume has increased by 12 percent from the previous year, and the average days on the market have hit their lowest in 12 months. Notably, 82 percent of house sales and 44 percent of condo sales sold for over the asking price last month. This disparity in market performance between single-family homes and condos is further accentuated by the luxury property segment, where sales of homes priced at $5 million or more have significantly outpaced the overall market. High-profile listings, such as the "Full House" Victorian for $6.5 million and a $38 million property at 2990 Broadway, exemplify the robust demand for luxury homes.

Broader Bay Area Market Dynamics

The trend of rising single-family home prices is not confined to San Francisco alone but extends across the entire Bay Area. All nine counties in the region saw an increase in typical single-family home prices last month. Santa Clara, San Mateo, and Sonoma counties even hit new price highs. Despite these gains, most counties are still below their spring 2022 peaks. The region also experienced an 8 percent increase in new listings and a 7.5 percent rise in home sales year-over-year. These figures suggest a resilient and dynamic real estate market, driven by strong demand and limited supply.

Office Sublease Market Shows Signs of Recovery

In a related development, the San Francisco office sublease market is showing signs of recovery for the first time in four years. According to Cushman & Wakefield, the inventory of offices available for sublease is expected to drop to 7.8 million square feet by the end of the second quarter, down from 8 million square feet in the previous period. This decline is attributed to small chunks of sublease space converting to direct available leases and a surge in sublease deals, particularly from the fast-growing artificial intelligence sector. Notable sublease transactions include Adyen's 150,000 square feet at 505 Brannan Street and Scale AI's 180,000 square feet from Airbnb at 650 Townsend Street.

My Perspective on the Market Trends

The contrasting trends in San Francisco's real estate market—rising single-family home prices and declining condo prices—reflect broader shifts in consumer preferences and market dynamics. The preference for single-family homes could be driven by the desire for more space and privacy, especially in a post-pandemic world. Meanwhile, the recovery in the office sublease market suggests a cautious optimism among businesses, particularly in the tech sector, which continues to seek flexible leasing options. This dual narrative of residential and commercial real estate highlights the complexity and resilience of San Francisco's market, offering opportunities and challenges for investors and stakeholders alike.

Street Views

• Patrick Carlisle, Compass (Bullish on San Francisco single-family homes):

  "San Francisco’s year-to-date home sales volume was up 12 percent from a year ago, and average days on the market were the lowest in 12 months."

• Patrick Carlisle, Compass (Neutral on San Francisco condos):

  "Condo median sales prices have generally reflected much lower appreciation over the past six years than houses. Some condo markets have seen little or no appreciation since 2018."

• Patrick Carlisle, Compass (Bullish on luxury properties in San Francisco):

  "Home sales of luxury properties of $5 million or more spectacularly outpaced the overall market."