The S&P CoreLogic Case Shiller home prices index is America’s most widely regarded study of home valuations. Its latest edition, which is for December, showed that the increase in housing markets continues to slow. It also showed that one market is falling faster than all others year over year. The market is San Francisco, one of the most expensive housing markets in the country. (Click here to see where young people what to relocate to the most.)
Nationally, home prices rose 5.8%. That is down from nearly 20% early last year. It was also down from 7.6% in November. Craig J. Lazzara, managing director at S&P DJI, commented, “The cooling in home prices that began in June 2022 continued through year end, as December marked the sixth consecutive month of declines for our National Composite Index.”
Home prices in San Francisco dropped 4.2% year over year in December. The only other city among the top 20 metros in the United States that had a drop was Seattle at 1.8%. Prices in several cities continued to surge. Tampa’s rose 13.9% between the two periods, and Miami’s rose 15.9%.
While 4.2% does not seem large, home prices in San Francisco surged for a decade before the pandemic.
San Francisco is the second most expensive city in the United States after neighbor San Jose. The median home price in the city is about $1 million.
Home prices in San Francisco have dropped for at least two reasons. The first is that 6% mortgage rates have put the prices of homes in the city well out of reach of most buyers. The second is worker mobility.
The COVID-19 pandemic work-from-home opportunity led tens of thousands of people to leave expensive homes on the coast to move to inland cities or metros in the south. Many of these had a perceived better quality of life and a lower cost of living. San Francisco has suffered simply because it is so expensive.
San Francisco remains unusually expensive, even if home prices have started to slip. If mortgage rates stay higher, the drop is not over.
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