Housing markets across much of the U.S. are cooling, with many sellers resorting to the unthinkable: Cutting prices.
San Francisco hasn’t gotten the memo.
Nearly 17% of U.S. home listings in August had a price cut, the highest share for that month since at least 2012, according to a new report from online real estate brokerage Redfin. But that was true of just 12% of homes in the San Francisco metropolitan area, which the firm defines as San Francisco and San Mateo counties — the third-lowest share among major U.S. metros, behind New York and Newark, N.J.
The Bay Area’s housing market is experiencing something of a dual dynamic. While the region’s home values have dipped, many sellers are sticking to their guns. And San Francisco’s artificial intelligence boom, which has already driven up rental prices as tech workers compete for homes, may further complicate buyers’ chances to negotiate a deal.
The hope among many sellers is: Prices could rise, so why not hold out for more?
But in a striking inversion from earlier this decade, that bullishness doesn’t extend past the Peninsula. The San Jose metro area, made up of Santa Clara and San Benito counties, had a price-cut rate slightly above the national figure, reflecting a significant shift for one of the hottest markets in the U.S. (Redfin’s analysis included actively listed single-family homes, condominiums and townhomes, whether or not the price cut occurred in August.)
When sellers in the San Francisco metro area do cut prices, it’s usually not by a huge amount — an average of about 6%, or less than $100,000, Redfin data shows.
San Francisco’s single-family homes, which are typically considered more desirable than condos, appear to be driving the low rate of price cuts in the metro area. While price drop data wasn’t available at the city level, Redfin data indicates two-thirds of San Francisco houses sold above list price in August, by far the highest share of any Bay Area county.
Many sellers are also reluctant to bring their prices down for fear of missing out on a windfall — or selling at a loss. Another Redfin analysis from this summer found that nearly 1 in 5 for-sale homes in the San Francisco metro area were at risk of selling for less than they were purchased, the highest rate of any region in the U.S.
That report indicates that much of the city still hasn’t recovered from the slump in property values that took place during the pandemic — a lull that many sellers are hoping is over.
Still, while sellers may not be cutting prices, it doesn’t appear they’re raising them, either — at least not yet. The typical home values in San Francisco and San Mateo County have each remained roughly flat from last year, data from real estate listing site Zillow shows. In San Francisco’s case, the typical value of $1.24 million is still roughly $100,000 lower than the pre-pandemic figure — and that isn’t even accounting for inflation.
It’s possible the influx of AI wealth could push up home prices, but the data hasn’t yet shown that shift. It’s not unusual for home sellers in the Bay Area to “price to entice” — setting prices artificially low to attract bidding wars — which could be contributing to its low rate of price drops. And economic volatility is leading some tech workers to rent rather than take out a 30-year mortgage.
But there are other signs the San Francisco housing market is heating up. The number of San Francisco home sales surged in September compared to last year, while new listings dipped, said Patrick Carlisle, market analyst for real estate brokerage Compass.