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San Francisco's decline in annual starts has leveled off, but annual new-home closings have continued to slide.

Both annual starts and annual new-home closings are at their lowest levels since 2012. San Francisco's average monthly new-home sales rate is higher year over year and higher than pre-pandemic 2019.

Despite these favorable comparisons, when considering both sales rate and volume as a percentage of the metro's historical baseline average, San Francisco is one of about a dozen large markets across the United States that are slightly underperforming their historical new-home sales activity, according to the new Zonda Market Ranking.

Strengths

Job growth is forecast to strengthen this year and remain healthy in 2025. San Francisco is now the No. 1 artificial intelligence (AI) city in the world, with eight of the top 20 Al companies. Some believe office vacancies will peak in 2024, then Al could usher in a new era of economic vitality.

Weaknesses

The number of active new-home projects has been declining since spring 2023. It is one of three large U.S. markets where the active project count has decreased the most year over year. In addition, it is one of several markets nationwide that is particularly limited by land and lot availability.

Supply

Quarterly housing starts decreased 5.3% from a year ago, while the number of available vacant developed lots sits at 2,711, down 15.8% from the same quarter last year. Regarding supply/demand balance, the market area is 7.77% undersupplied.

Sales

New-home sales in the San Francisco-Oakland-Berkeley metropolitan area increased 6.2% year over year to an annualized rate of 2,674 units in December. Existing-home closings for the 12 months ending in November posted a year-over-year decline of 26.4% to an annualized rate of 33,969 units.

Prices

The average list price for a new detached home in the metro area increased 19.7% from 2023 to $1,248,070 in January, while the average list price for a new attached home increased 4.9% over the same period to $1,180,240. The new-home affordability ratio for a detached home reached 28.6% in November.

Economy

Total nonfarm employment in the statistical area increased 1.3% year over year to 2,527,200 payrolls in November, with approximately 3,400 more jobs compared with the previous month. The local unemployment rate increased to 3.8% in November compared with 3.7% in October. November's jobless rate was higher than it was the prior year when it stood at 2.9%. Zonda forecasts the region's unemployment rate will finish the year at 2.8%.

Community

The current population of the metro area is approximately 4,684,420 people and is projected to increase by 0.5% this year. There are approximately 1,743,860 households in the region, which is up 1% year over year. Forecasts show that current household formation is expected to increase by an annual growth rate of 3.2% for 2028. Incomes rose by 9.3% from the previous year to $150,741.

Did you know you can access free housing data with Zonda's Market Snapshots? Reports include new-home supply and valuation, resale listings, jobs, market forecasts, and more. Get your complimentary market snapshot for your local CBSA today.