The Pacific Heights had another challenging quarter with both the condo & median markets continuing to decline. The condominium market saw only 28 sales (~60 per quarter in a regular market) & median single-family homes were down nearly $2,000,000 per sale.

This might be the biggest dip in demand for the most historically desirable districts in San Francisco, ever. The only other demand swing I have seen of similar magnitude was for the condominium market in downtown SF during the early days of the pandemic.

While buyers may seem out of the market, any given property can sell quickly if presented well. There are buyers out there, and they are all looking to capitalize on the current market conditions. Seller expectations will need to drop in order to achieve a successful sale.

The Condominium Market

It's safe to say, no one wanted a condominium in Q4. with barely 1/8 of the year’s sales landing in the 4th quarter, buyer demand drastically fell off after continual rate hikes and unrealistic seller expectations. Ironically, the average sale price for a unit remained steady, actually, it slightly increased.

Given the condominium market is the first to feel the effects of rate hikes, you often see buyer demand fall off a cliff. That was highly evident in Pacific Heights. Buildings with higher HOA fees saw almost zero demand in Q4.

With so many listings being pulled in Q4, expect to see the majority come back this Spring with a new price & tapered seller expectation. Once sellers can meet the market pricing, expect to see a flurry of sales.

The Median Market

The median price for a single-family home in Pacific Heights dropped below $5M for the first time in recent memory, as rate hikes coupled with low desirability for a city property continued to trend.

Given the uniqueness of most single-family homes in the neighborhood, it's not uncommon to see massive average price swings from quarter to quarter. Low inventory and low sales volume create these swings, but a $2,000,000 (or 1/3) dip is no drop in the bucket

Buyer demand will likely increase when SF desirability as whole increases, which will require some non-real estate level intervention; cleaner, safer streets, workers returning to the office, a clear direction for SF's major commercial vacancies, etc.

The Luxury Market

The luxury market faired quite well in Q4 according to closed sales data. However, the unspoken trend here is the number of listings that failed to actually attract a buyer and record a data point.

Days on market eclipsing 220 (aka 7+ months) to sell is a clear indicator of the difficulty owners are having to attract a buyer. While luxury properties obviously take longer to sell to the smaller subset of prospective buyers, 220 days is astronomical. in 2021 for example, there were 8 sales north of $10,000,000 in Pac Heights, at an average of just 37 days per sale.

While I expect the lure and prestige of this market pocket to remain strong intact, it's anybody’s guess as to when desirability will rebound.

Projecting Ahead To Next Month/Quarter

Although Q4 seems doom & gloom, the relative lack of sales data across all market segments makes it hard to project a similarly poor-performing quarter. All previously listed properties will more than likely still be seeking a sale, and with rates already trending downward, I wouldn't be surprised if there was a surge of transactions in Q1.

Sellers will need to meet the market price with their expectations. Now that buyers have stomached the rate increases for the better part of 2 quarters, coupled with the shift to rates trending down, expect to see a flurry of market activity for people trying to time 'the bottom.'

If you've been on the fence, now is the time to jump. There might not be a more opportunistic time as buyers currently hold all the cards in any given negotiation.

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