Market Report: December 2023
As we wrap up 2023, I'm thrilled to share some exciting developments in the real estate market. First off, interest rates have started to slowly decline, hovering in the mid-6% range. While not as spectacular as the 2-3% rates of the past, this shift is bringing renewed vigor to the market. Sellers who capitalized on historically low rates are undoubtedly grateful for their foresight, even amid global uncertainties.
“For the third sixth straight week, mortgage rates trended down.... The combination of continued economic strength, lower inflation and lower mortgage rates should likely bring more potential homebuyers into the market.” Freddie Mac (FHLMC)
For this month's market report, given that it's the last month of 2023, I find it fitting to reflect on San Francisco real estate sales and share my projections for what I anticipate in 2024.
Let’s take a look at the numbers
1,787 single family homes sold in San Francisco in 2023
The average sold price per square foot was $990.70
Average days on the market was 29
1,732 Condos
Average sold price per square foot $1,005.12
Average days on market 59
248 TICs
Average sold price per square foot $943.36
Average days on market 45
347 2-4 unit buildings
Average sold price per square $660.07
Average days on market 52
Check out the detailed graphs for a visual journey through 2023.
A look to the future, my predictions for 2024 real estate
Looking ahead to 2024, I have some key predictions:
Interest rates are expected to stay below 7%, encouraging more buyers to reenter the market.
Inventory will remain low, fostering heightened competition among buyers.
Housing prices will continue to rise, extending competition to homes in various neighborhoods.
The condo market is anticipated to experience growth.
Despite lower interest rates, the paradoxical effect of more affordable borrowing and higher home prices is something we find intriguing.
My take on local articles:
A recent SF Chronicle article highlights a surge in requests to lower property taxes. Owners, contending that the value of their properties has decreased, are seeking reassessment. The article sheds light on the complexities of property tax adjustments under Proposition 8 and the upcoming opportunity for property owners in San Francisco to request a review between Jan 2 and March 31, 2024.
Read the SF Chronicle article here: S.F. hit with an avalanche of requests to lower property taxes. Here’s what happens now
Some highlights of the article:
“the board received 6,836 applications from people or companies seeking a lower assessment on their 2023-24 tax bills, according to a Chronicle analysis of appeals board data. That’s over 3.5 times more than the number that came in during the same period last year, when the board received just 1,878 applications for 2022-23 taxes.”
“Most appeals are filed by owners… 80% of the total (appeals) were for single-family homes, condos and apartment buildings. This is not not surprising, because about 81% of the city’s parcels are residential.”
“Under Proposition 13, existing property is fully reassessed, generally at the construction or sales price, when it is built or changes hands. Between transfers, the assessed value goes up by an inflation rate capped at 2% a year, plus the value of additions or major improvements. This adjusted amount is called the factored base year value, or simply the “assessed value.”
“Prop. 13 prevents taxes from soaring along with real estate prices. But if prices fall, and the market value of a property as of Jan. 1 drops below its assessed value, under Proposition 8, assessors should temporarily reduce the assessed value to the market value”
“In San Francisco, property owners can request an informal review of next year’s taxes (for 2024-25) between Jan. 2 and March 31, 2024, which is much earlier than in other counties.”
My perspective:
Owners believe their property values have notably decreased, yet they continue to pay property taxes based on the assessed value at the time of purchase or remodel, leading to their discontent.
This prompts me to consider how the city promptly reassesses properties when improvements are made, boosting their value. However, when property values decline, as may be the case now, San Francisco appears less inclined to initiate reassessments. Some counties automatically reduce property values without requests, while in SF, owners seem to face more hurdles to secure such adjustments.
I've detailed these insights and more in a blog post explaining property taxes in San Francisco—read it here.
Conclusion:
As we look forward to 2024, the San Francisco real estate market appears poised for strength. Buyers are expected to return, inventory will likely remain low, and competition will be fierce. The dynamics of property taxes, as outlined in recent appeals, add an intriguing layer to the real estate landscape. Stay tuned as we navigate the evolving trends in the vibrant San Francisco market.
I'm here to guide you through your real estate journey. Whether you're considering buying, selling, or navigating property taxes, let's connect and make your real estate goals a reality.
