San Francisco Leads in Home Equity Losses Across the Nation
Recent data from Redfin reveals that in the three months ending July 31, 2023, approximately 12.3% of homes sold in San Francisco were purchased for less than what the seller initially paid, marking a significant increase from 5% recorded a year earlier.
This percentage stands higher than any other major metropolitan area in the United States and is four times the national average of 3%. Following San Francisco, Detroit recorded a rate of 6.9%, followed by Chicago (6.5%), New York (5.9%), and Cleveland (5.8%).
In San Francisco, the typical homeowner who sold their property at a loss experienced a decline in value by approximately $100,000, tying with New York for the largest median loss in dollar terms. Nationally, the median loss for homeowners selling below their purchase price amounted to $35,538.
Conversely, homeowners in San Diego, Boston, Providence (RI), Kansas City (MO), and Fort Lauderdale (FL) were least likely to experience losses upon selling their homes, with only about 1% of properties being sold for less than their initial purchase price in each of these metropolitan areas.
San Francisco Homeowners Bear Brunt of Plummeting Home Prices
San Francisco emerges as one of the hardest-hit regions in terms of home equity loss, primarily due to the significant downturn in home prices. The area witnessed one of the earliest declines in prices as a result of the housing market slowdown triggered by soaring mortgage rates last year.
By April 2023, San Francisco experienced a staggering 13.3% year-over-year decrease in median home sale prices, surpassing the national average decline of 4.2%.
Although the decline moderated to 4.3% year-over-year as of July, with prices hovering around $1.4 million, it still contrasted sharply with the national trend, which saw a 1.6% increase.
Notably, the collective value of homes in San Francisco has dwindled by approximately $60 billion since the previous summer, according to a separate analysis by Redfin.
Several factors have contributed to the swift decline in prices in the Bay Area. Firstly, being home to some of the most expensive real estate in the nation, the region had significant room for price adjustments.
Moreover, the tech industry, a significant driver of the local economy, has faced substantial layoffs, further dampening housing demand. Additionally, the allure of living in San Francisco has waned, as remote work arrangements have enabled many individuals to relocate to more affordable regions.
Interestingly, cities such as San Francisco, Detroit, Chicago, and New York, where homeowners are most likely to incur losses, coincide with the top destinations where Redfin.com users are seeking to relocate.
According to Andrea Chopp, a local Redfin Premier real estate agent specializing in Oakland and other East Bay neighborhoods, some condos in the Bay Area are currently valued lower than their purchase prices from 2018 and 2019.
This trend is attributed, in part, to the diminished significance of commuting from outlying areas into downtown San Francisco. Chopp notes that while there are still interested buyers, they approach purchases with greater caution and selectivity, particularly now that mortgage rates have surpassed 7%.
While the correction in the Bay Area housing market may signal a healthier market, the persistently high prices pose affordability challenges for many prospective homeowners.
The Vast Majority of U.S. Home Sellers Still Profit Despite Market Shifts
Despite fluctuations in home prices and the ongoing housing market downturn, a significant majority of home sellers across the United States continue to reap substantial financial gains.
According to recent data, a staggering 97% of home sellers nationwide sold their properties for a profit during the three-month period ending July 31. On average, these sellers fetched 78.4% more than the original purchase price, amounting to a median gain of $203,232 per sale.
Even in notoriously high-priced markets like San Francisco, the majority of homeowners are still capitalizing on considerable profits. In the metro area, the typical home sale yielded a substantial 70.5% increase, translating to a median profit of $625,500.
The prevailing trend of profitable home sales can be attributed, in part, to the persistent shortage of homes for sale, which continues to drive fierce competition among buyers and bolster property values.
Many homeowners who purchased their properties at peak prices opt to hold onto their investments rather than selling at a loss in the current market climate. Moreover, a significant portion of sellers have owned their homes for a considerable duration, allowing them to realize profits regardless of short-term fluctuations in market conditions.
However, exceptions to this trend do occur, particularly in instances where homeowners face unforeseen circumstances prompting a sale. For example, in Boise, Idaho, Redfin Premier agent Shauna Pendleton encounters clients who are reluctantly selling their home after just a year, potentially incurring a loss of $100,000.
The decision is driven by their employer’s requirement to return to office work, necessitating a move back to Seattle. While such instances of loss are less common in Boise, they typically involve higher-priced properties selling for upwards of $750,000.
Hi there, just became alert to your blog through Google, and found that it’s really informative.
I’m going to watch out for brussels. I will be grateful if you
continue this in future. Numerous people will be benefited from your writing.
Cheers! Escape room lista