In 19 months, prices in San Francisco dropped nearly as much as in the first 19 months of Housing Bust 1. Overall Bay Area is well behind. We’re keeping score.
By Wolf Richter for WOLF STREET.
The median price of single-family houses In San Francisco dropped to $1.45 million in December, down by 29.6%, or by $610,000 from the nutty peak in March 2022, and below the Decembers in 2022, 2021, 2020, 2018, and 2017, which was six years ago, folks, and same as December 2019, according to data by the California Association of Realtors (blue line in the chart).
The three-month moving average (3MMA), which irons out some of those ups and downs, dropped to $1.54 million in December, down by 24.4% from the peak, and the lowest for any December since 2018, so that was five years ago (red line in the chart).
January is when the median price drops a whole bunch, and February usually comes in close to January. The two lowest months in the chart since 2018 were January and February 2023. So you can kind of see where this is going in January and February 2024:
Housing market downturns are erratic and slow-moving. They’re not like cryptos that can collapse overnight. Housing market downturns can take years to play out.
In terms of Housing Bust 1 in San Francisco, the three-month moving average of the median price had peaked in May 2007 and then headed lower. In March 2012, after nearly five years of QE and 0%, the 3MMA bottomed out, having dropped 30% from the peak.
In terms of the entire SF Bay Area during Housing Bust 1, the 3MMA of the median price plunged by 58% from peak to trough, but it was front-loaded with a massive drop over the first two years, and then, despite QE and 0%, wobbled along these low levels till early 2012.
So we’re keeping score, comparing San Francisco’s Housing Bust 1 and Housing Bust 2 in one chart, in terms of the percentage drop from the peak (“Month 0”) of the 3MMA of the median price.
For Housing Bust 2, the 3MMA of the median price peaked in May 2022, that’s month zero; December 2023 is month 19. For Housing Bust 1, May 2007 is month zero.
Over the first 19 months of Housing Bust 2 in San Francisco, the 3MMA of the median price has dropped 24.4%. During the first 19 months of Housing Bust 1, the 3MMA dropped 25.8%. The drops are very close in magnitude, but the trajectories are different:
In the entire San Francisco Bay Area, the median price of single-family houses dropped to $1.18 million in December, down by 21.2% from the peak in April 2022.
The 3MMA dropped to $1.23 million, down by 15.4% from the peak. We’ll get to the remaining big counties of the Bay Area – the counties of San Mateo, Santa Clara, Contra Costa, and Alameda – in a moment.
Note the huge plunge of the 3MMA last year in late 2022. That was wild. The entire plunge from May 2022 through February 2023 was wild, after the wild spike in the two years before. So compared to that wild drop in December 2022, the 3MMA in December 2023 was up by 4.2%. But it was down by 2% from December 2021.
These are really crazy price movements since March 2020:
During Housing Bust 1 in the Bay Area, the 3MMA of the median price plunged by 58.5% over the first 19 months. Prices just kept plunging without any kind of uptick. That was very fast and furious for housing downturns.
Housing Bust 2 started out just as fast, but then the 3MMA recovered some before re-descending.
San Mateo County (Silicon Valley): The median price in December dropped to $1.80 million, down by 25% from the peak in April 2022, and down by 7.5% from two years ago, December 2021, but up by 7.5% from December 2022, due to the huge drop toward the end of 2022.
The 3MMA in December dropped by 17.5% from the peak to $1.90 million, down by 9.1% from December 2021 but up by 6.5% from December 2022, again due to the huge drop toward the end of that year.
Santa Clara County (Silicon Valley): The median price in December dropped to $1.73 million, down by 12% from the peak in May 2022, and down by 1% below two years ago, in December 2021, but up by 16.7% from December 2022, due to the huge drops toward the end of 2022.
The 3MMA in December dropped by 10% from the peak to $1.75 million, and was the highest 3MMA for Decembers.
Alameda County: The median price in December dropped to $1.17 million, down by 22% from the peak in May 2022, and down by 2% from December 2021, but was up by 10.3% from December 2022 given the huge plunge late that year.
The 3MMA in December dropped by 18% from the peak to $1.21 million, down by 3% from December 2021 but up by 4.4% from December 2022, again due to the huge drop toward the end of that year.
Contra Costa County: The median price in December dropped to $800,000, down by 24% from the peak in April 2022, and down by 4% from December 2021, but was up by 4.4% from December 2022, again given the huge plunge that month.
The 3MMA in December dropped by 18% from the peak to $828,000 million, down by 5% from December 2021 and down by 2% from December 2022, despite the huge drop toward the end of that year.
“Housing Crisis” – that’s the term being used to describe the problem in San Francisco and in the Bay Area overall of housing being so expensive that normal people with good incomes cannot afford to buy a house. And rents are too expensive too. Pressured by these housing costs, companies are having to offer enormous salaries to recruit people into this area, which makes employment costs very expensive. There are all kinds of taxpayer-funded initiatives – from federal, state, and local governments – to lower the burden of those housing costs, but they’re expensive for taxpayers!
But here is finally a market-based solution. Bringing down these oppressive housing costs that had spiked from already ridiculous levels in 2019 to super-ridiculous levels by mid-2022 is a good thing. It’s good for the local economy, it’s good for people looking to buy, it’s good for businesses and employment, it’s good for all kinds of reasons. For the market to bring down these oppressive housing costs and getting to some reasonable prices – reasonable in the Bay Area may still be high compared to other parts of the US – shouldn’t be lamented; it should cause a massive sigh of relief.
Enjoy reading WOLF STREET and want to support it? You can donate. I appreciate it immensely. Click on the beer and iced-tea mug to find out how:
Would you like to be notified via email when WOLF STREET publishes a new article? Sign up here.
ENB Top News
ENB
Energy Dashboard
ENB Podcast
ENB Substack
