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Empty Offices Are Dragging Down San Francisco Home Prices

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when asked about Recent Axios Articles Patrick Carlyle, a Bay Area market analyst at real estate firm Compass, has declared a widespread “collapse” in home prices nationwide, and put up scary quotes.

“That’s bullshit,” said Carlisle. “The collapse he’s been around since 2008, with home prices dropping by up to 60% in some Bay Area counties.”

What is not bullshit?The San Francisco housing market get colder more quickly than other regions After reaching a high fever during a pandemic.When low demand for office space We’re pushing home prices down even further.

Ted Egan, the city’s chief economist, alluded to this fact At the November 16 presentation About the massive financial hit San Francisco faces with its empty offices. The pain doesn’t stop at the office building, he said.

“If something happens in the office sector, it affects almost every aspect of the city’s economy,” says Egan. “Office demand is driving housing demand, and San Francisco house prices, when put in context, are virtually growing much slower than anywhere else in the United States.”

empty condo

Signs of that ripple effect are already showing up in real estate data.

In the Market Street corridor, where housing demand is intertwined with downtown office work, prices for two-bedroom condos are down about 16% year-over-year, Carlisle said. That’s more than double his 7% decline seen in housing in the city.

“This area has been a big hub for condominium development for the last 30 years, in part because it’s basically the only place in San Francisco where skyscrapers can be built,” says Carlyle. “House prices are probably hit harder than almost anywhere else in the country. “

The living room of the model apartment at 181 Fremont Residences in San Francisco has bay views. | | Michael McCaw/San Francisco Chronicle via Getty Images

San Francisco is also unique among big cities in that average rents are still lower than they were before the pandemic.Office workers were slow to come back in person compared to peer city.

Additionally, a recession could hit tech-centric companies The San Francisco Bay Area is tougher than anywhere else. The reason is that technology companies, which have relied on cheap capital flows for a decade, are sensitive to rising interest rates.

Redfin Chief Economist Daryl Fairweather said: “Now that the technology sector is weakened, so is the water flowing into that hose.”

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“Sustainable Growth”

Fairweather said the end of the tech boom should force city leaders to focus on livability as a driver of housing value and demand.Combined with the potential increase in housing supply, Through streamlined policies, It could mean “more sustainable growth”.

“Remote work makes what’s happening now more of a long-term trend than a short-term trend,” Fairweather said. “Without remote work, the downturn in the tech sector would still have hit the real estate market, but it would have picked up as soon as the industry recovered.”

Mark McHale, a real estate broker at Vanguard Properties, said rising interest rates are keeping buyers away and homes staying on the market longer.

McHale added that tech layoffs have depleted the pool of first-time buyers who typically buy condos closer to downtown. With a few exceptions, McHale said sales in the category “slowed down to near zero.”

Still, McHale believes the cyclical pattern is just that.he keeps hope Recent interest rate decline continue, and the housing market should begin to recover in February next year.

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