I get a lot of questions about what to expect with the housing market in the near future. It’s no wonder because there are all kinds of news articles out there suggesting there could be a market crash or correction coming. It’s difficult for anyone to predict. It’s hardly a secret that interest rates are rising. In fact, the Fed has already raised rates, and they could go up another two-percent this year.
You may be hearing the rate is above five-percent. It’s true that nationwide, the average for a 30-year, fixed-rate mortgage in April 2022 was higher than five-percent. According to Freddie Mac, it was the highest in about eleven years. To put it in perspective, though, that number referred to the national average. Conventional loans will be higher. In reality, the actual effective rates that many people have been able to get recently in the San Francisco area have been lower.
I recently talked to several lenders, and I can tell you it’s still possible for people with good credit to get a 30-year, fixed rate jumbo mortgage for around four-percent. You could even get a rate in the high three-percent mark if you check around. A good real estate agent can help lead you in the right direction. You’ll want to talk to lenders, see who can give you the best mortgage, and get pre-approved. Keep in mind, that there are some “relationship” discounts with certain banks, and even some “established deals” you may qualify for if you’re an employee of a certain company.
However, with mortgage rates going up, we are starting to see a smaller number of eligible buyers and we’re seeing mortgage applications decline, nationwide. That’s especially true with refinancing applications, which are down more than 70-percent, year-over-year, according to some of the latest real estate data. Nationwide, we’ve seen rising homeownership costs drive people to consider places with a more affordable cost of living.
San Francisco single-family homes
I can tell you, though, that the single-family home market in San Francisco is still hot. The latest data from the San Francisco Association of REALTORS covers April 2022 and it compares that month to April 2021. Keep in mind, that most of this data actually comes from homes that were, say, put on the market in February, perhaps an offer acceptance date was set for March, and then the home actually closed in April.
In April 2021, the median sales price in San Francisco for a single-family home was $2,050,000, which was up nearly 14-percent, year-over-year. The average sales price was up about 3.5-percent. To further prove we’re in an extreme sellers’ market, the months’ supply of inventory decreased more than 44-percent in just one year. New listings dropped almost 39-percent. Pending sales were down slightly and sold listings were also down. Of course, active listings this past April were also down nearly 45-percent.
It’s probably not surprising that homes aren’t staying on the market long in San Francisco. As of this past April, it was just 15 days, on average. Most homes are selling over the list price. In April 2022, single-family homes were selling, on average, at 23-percent OVER the asking price. It was less than 14-percent over the asking price a year ago. Down more than 32-percent, the affordability ratio further proves just how unaffordable single-family homes in San Francisco have become.
I can still say, though, that I’m still seeing single-family homes in San Francisco get multiple offers. They’re still selling at prices significantly over the asking price. Sometimes they’re selling at significantly more than what even comparable sales data suggests the home is worth. Even with an increasing interest rate, we still have fewer homes on the market. So, even if there are fewer buyers willing to lock in at higher rates, we’ll have a hot market as long as there are more buyers than homes. While rates around five-percent may sound high right now, that’s still well below what we saw from 1980 up to 2008 when the financial bubble burst.
San Francisco condo/TIC/coop
As far as condos in San Francisco, I’m hearing things are starting to slow down a bit. We’re starting to see them stay on the market a little bit longer and some price drops. We’ll have to wait until that data is released. In the meantime, April 2022 data shows new condo/TIC/coop listings in San Francisco were down about 26-percent, year-over-year. Pending sales were down nearly 30-percent, and sold listings were down about 20-percent.
In the condo market, the median sales price for April 2020 was $1,360,000 and the average sales price was more than $1,461,000. Both were up, year-over-year. It was good news for sellers, as it took 45 days, on average, for a condo to sell in San Francisco in April 2021, but just 29 days in April 2022. Condos this April sold, on average, about seven-percent over asking. Months’ supply decreased about 27-percent, putting us just barely in a seller’s market.
Overall, I don’t see the housing market in the process of correcting itself significantly. However, we are seeing some signs that competition for homes, nationwide, may be starting to cool, at least just a bit. Remember, though, inventory is low. We’ll keep close tabs on any changes in the market and how that could affect homebuyers and sellers in the coming months, and over the course of 2022.