San Francisco’s housing market faces turmoil as tech industry layoffs contribute to declining property values.
At a Glance
- Significant price drops in San Francisco’s downtown condo market.
- Tech sector layoffs lead to a 20% workforce reduction.
- Condo and co-op prices have fallen 14.7% since May 2022.
- The Millennium Tower’s unit prices decreased by 44%.
Impact of Tech Layoffs on Housing Prices
San Francisco’s housing market is experiencing a downturn reminiscent of 2015 levels, largely due to tech industry layoffs. In the past two years, tech companies have let go of a significant number of employees, with nearly 100,000 workers affected recently.
The tech sector’s downsizing has notably contributed to housing price declines, with condo and co-op values dropping 14.7% since May 2022, averaging $986,000. Single-family home prices have also decreased by 15.4% from their peak last year, now averaging $1.39 million.
The substantial layoffs mirror broader economic trends, accentuating a notable reorientation of the local economy and impacting housing affordability.
“With layoffs and the effects of remote work especially acute in tech, San Francisco saw one of the largest corrections in house prices once the Fed started hiking interest rates,” Chen Zhao, Redfin’s Head of Economic Research, said.
San Francisco House Prices Drop Back to 2019, Condo Prices to 2015, as Tech Jobs in the City & Silicon Valley Evaporate after Drunken Hiring Binge
Housing Bust 2 reverses part of “Housing Crisis” when people with good incomes couldn't afford to live in SFhttps://t.co/Ww9N0gxfAd pic.twitter.com/6K7QS098L6— Wolf Richter (@wolfofwolfst) December 27, 2024
Factors Contributing to Market Fluctuations
The fluctuations in San Francisco’s housing market are not only due to layoffs. Various factors, such as high mortgage rates, low inventory, and the pandemic-induced shift to remote work, have pressured the market. Historically, recessions allow for increased housing prices, evidenced by past recessions where housing prices have grown in seven out of nine instances.
The Millennium Tower, a notable property in the city, reflects the current price shifts, with units dropping by 44% lately after a previous purchase price of $1.1 million a decade ago. The market’s current status is a direct response to economic pressures and shifting demand, highlighting continued volatility.
Prospects for Recovery
Despite the current downturn, the San Francisco housing market’s inherent competitiveness ensures some measure of resilience. Homes are receiving an average of four offers, selling within a period of approximately 51 days. While mortgage rates are anticipated to decline slightly, significant recovery hinges on potential changes in the tech industry’s structural dynamics and broader economic conditions.
“Things are stabilized and recovered somewhat but not completely. With mortgage rates expected to decline slightly, but remain high, prices are unlikely to recover much more unless remote work patterns really change or San Francisco’s reputation in the press changes dramatically,” Zhao commented.
The adjustment period following the tech industry’s workforce reduction and its consequences on housing prices serves as a cautionary tale, reflecting the interconnected nature of housing markets and technological employment sectors.
