San Francisco’s housing market, once a beacon of skyrocketing prices and fierce demand, is now facing a steep decline. Home prices in the city have dropped significantly, reaching levels not seen since before the COVID-19 pandemic. Experts are linking this downturn to widespread layoffs in the technology sector, a cornerstone of the city’s economy.
The decline signals a dramatic shift in one of the nation’s most competitive real estate markets, raising questions about the city’s economic future and its ability to rebound.
A Sharp Decline in Home Prices
San Francisco’s home prices have seen a dramatic decline over the past year. Data reveals that:
- Condominium and co-op prices have fallen by 14.7% from their peak in May 2022, now averaging $986,000. This represents a valuation last observed in 2015.
- Single-family homes have experienced a similar downturn, with prices dropping 15.4% from their peak in 2022 to an average of $1.39 million, returning to 2019 levels.
The city’s luxury housing market has also been affected. The Millennium Tower, once a symbol of high-end living but now infamous for its structural problems, has seen condo prices plummet by 44%. In September 2024, a unit sold for $615,000, down from its $1.1 million value a decade ago.
Tech Layoffs and Economic Ripple Effects
The downturn in San Francisco’s housing market aligns closely with widespread layoffs in the technology sector, which forms the backbone of the city’s economy. Over the past two years:
- The “Information” sector has shed nearly 20% of its workforce.
- The “Professional, Scientific, and Technical Services” sector has seen a 7% decline in employment since mid-2022.
- In 2023 alone, San Francisco reported over 10,200 permanent layoffs across various industries, with the tech sector bearing the brunt.
The layoffs have had a cascading effect on the local economy. Many tech workers, who once drove demand for high-end real estate, are leaving the city in search of more affordable living options elsewhere. This exodus has reduced demand for both rental properties and home purchases, contributing to the decline in property values.
A Market Once Defined by High Demand
San Francisco’s housing market has long been characterized by its sky-high prices and limited inventory. Even modest homes often sold for well over $1 million, and bidding wars were the norm. The COVID-19 pandemic initially fueled demand for larger homes as remote work became widespread. However, as tech companies adjusted to hybrid or permanent remote work models, many workers opted to relocate to more affordable cities.
The result is a cooling housing market in San Francisco, with fewer buyers and increased inventory putting downward pressure on prices.
National Trends and San Francisco’s Unique Challenges
While San Francisco’s housing market faces unique challenges, it is not alone in experiencing declining home prices. Other major cities, particularly those heavily reliant on tech and finance, have also reported similar trends. However, San Francisco’s steep decline stands out, reflecting the city’s heavy reliance on the technology sector and its relatively high cost of living.
The broader U.S. housing market is showing signs of stabilization. According to the National Association of Realtors (NAR), home prices nationwide are expected to increase modestly by 2% in 2025, with the median home price projected to reach approximately $410,700. Factors such as stable mortgage rates and continued job growth could support this rebound.
San Francisco’s market, however, remains uncertain. Local real estate agents report that buyers are increasingly hesitant, while sellers are struggling to achieve valuations seen just a few years ago.
Opportunities and Challenges Ahead
For potential homebuyers, San Francisco’s declining prices present opportunities to enter a market that was previously out of reach for many. Lower prices, combined with slightly improved mortgage rates, could entice buyers who were sidelined during the market’s peak.
However, for sellers, the current environment presents significant challenges. Many homeowners who purchased properties during the height of the market may find themselves underwater, owing more on their mortgages than their homes are now worth.
Real estate developers are also facing tough decisions. Projects that were planned during the city’s housing boom are now being re-evaluated in light of reduced demand and uncertain economic conditions.
What’s Next for San Francisco?
As the city grapples with the fallout from tech layoffs and a struggling housing market, the road to recovery remains unclear. Policymakers and local officials are under pressure to address the underlying economic challenges, including diversifying the city’s economy and making housing more affordable.
San Francisco’s housing market has always been a bellwether for broader economic trends. Its current downturn reflects not only the challenges facing the tech industry but also the broader economic uncertainties affecting cities across the United States.
San Francisco’s housing market downturn is a stark reminder of the city’s economic vulnerabilities. Once defined by unrelenting demand and soaring prices, the market is now struggling to find its footing amid widespread layoffs and shifting work dynamics in the tech industry.
While some see opportunities in the current market, the challenges for homeowners, developers, and the local economy are significant. How San Francisco navigates this period of economic uncertainty will shape the city’s future and its role as a hub for innovation and opportunity.
Sources:
- New York Post: San Francisco house prices plunge amid widespread tech layoffs
- National Association of Realtors: U.S. Housing Market Trends
- SFGate: San Francisco home prices drop to pre-pandemic levels
