San Francisco Real Estate Market February 2023 Report

Early 2023 Data Suggests Buyers Are Beginning to Jump Back In

December is typically the month that sees the year’s lowest level of deal-making activity – i.e.
listings accepting offers (going into contract) – which leads to January usually posting the lowest
monthly number of closed sales. (Sales typically close 3 to 6 weeks after going into contract.) In
the 11-county, greater Bay Area, accepted-offer activity in December 2022 and closed sales
volume in January 2023 generally hit their lowest monthly points in 14 to 15 years. (SF hit lower
pointsin listings going into contract in January 2019 and, after the pandemic hit, in April 2020.)

Typically, after the long holiday slowdown, the market just begins to wake up in mid-January
before accelerating into spring. That being said, inflation has dropped substantially since June and
interest rates since November, home prices are well down from last spring, stock markets are up
8% (S&P) to 15% (Nasdaq) YTD as of 2/3/23 (albeit with continuing volatility), and despite
escalating layoffs in high tech, early indications in 2023 point to rebounding buyer demand. Open
house traffic has jumped, more buyers are requesting listing disclosure packages, and there have
been increasing reports of multiple offers and (often unexpected) overbidding of asking price.
Based on this preliminary data (much of it still anecdotal*), it appears that buyer demand severely
repressed by economic conditions in the 2nd half of 2022 has begun to bounce back.

A similar rebound began in mid-late summer 2022 for similar reasons – a significant drop in
mortgage rates and a large rise in stock markets – which then quickly faded when positive
economic developments went into reverse. Market activity then slowed further through the rest
of 2022. There are currently considerable hopes for a more lasting economic recovery in 2023.

quickly than sellers, creating an immediate imbalance between supply and demand. Too few new
listings compared to the quantity of motivated buyers sparked often ferocious bidding wars,
leading to considerable home prices gains virtually every spring. It is too early to conclude, after
the general price declines and steep drops in market activity seen in the 2nd half of 2022, that a
sustained recovery in market conditions is now underway, and if it is, how quickly it will develop
and its impact on prices in 2023. Many economic conditions remain challenging – with critical
indicators still much weaker on a year-over-year basis – and forecasts by economists and analysts
vary widely. Hopefully, economic conditions will continue to improve, providing the foundation
for the recovery in real estate. In the meantime, preliminary indicators are surprisingly positive,
and the CEO of Compass recently stated his belief that Q4 2022 saw the bottom of the market.

The “spring market,” which can begin as early as February in the Bay Area, is typically the biggest
selling season of the year, especially for luxury homes, and more data regarding new listings
coming on market, listings going into contract, sales volumes, speed of sale, overbidding and
sales prices will soon become available.*

* Most “hard” data in real estate is based on closed, recorded sales, a lagging indicator which
generally reflects deal-making activity in the previous month, when offers were negotiated.
January sales, the basis for many analyses in this report, mostly reflect the December 2022
market when new listing activity and buyer demand were typically at their lowest ebb in years.
February and March listing and sales data will begin to better reflect early 2023 conditions.

Statistics are generalities, essentially summaries of widely disparate data generated by dozens, hundreds or thousands of
unique, individual sales occurring within different time periods. They are best seen not as precise measurements, but as broad,
comparative indicators, with reasonable margins of error. Anomalous fluctuations in statistics are not uncommon, especially in
smaller, expensive market segments. Last period data should be considered estimates that may change with late-reported
data. Different analytics programs sometimes define statistics – such as “active listings,” “days on market,” and “months supply
of inventory” – differently: what is most meaningful are not specific calculations but the trends they illustrate. Most listing and
sales data derives from the local or regional multi-listing service (MLS) of the area specified in the analysis, but not all listings
or sales are reported to MLS and these won’t be reflected in the data. “Homes” signifies real-property, single-household
housing units: houses, condos, co-ops, townhouses, duets and TICs (but not mobile homes), as applicable to each market.
City/town names refer specifically to the named cities and towns, unless otherwise delineated. Multi-county metro areas will
be specified as such. Data from sources deemed reliable, but may contain errors and subject to revision. All numbers to be
considered approximate.

Many aspects of value cannot be adequately reflected in median and average statistics: curb appeal, age, condition, amenities,
views, lot size, quality of outdoor space, “bonus” rooms, additional parking, quality of location within the neighborhood, and
so on. How any of these statistics apply to any particular home is unknown without a specific comparative market analysis.

Median Sales Price is that price at which half the properties sold for more and half for less. It may be affected by seasonality,
“unusual” events, or changes in inventory and buying trends, as well as by changes in fair market value. The median sales price
for an area will often conceal an enormous variety of sales prices in the underlying individual sales.

Dollar per Square Foot is based upon the home’s interior living space and does not include garages, unfinished attics and
basements, rooms built without permit, patios, decks or yards (though all those can add value to a home). These figures are
usually derived from appraisals or tax records, but are sometimes unreliable (especially for older homes) or unreported
altogether. The calculation can only be made on those home sales that reported square footage.