With the recent softening of the strong U.S. labor market briefly sending stock markets tumbling, watchers of the Federal Reserve are more than ever expecting an interest rate cut of between one quarter and one half percentage point when the Fed meets in September.
Mortgage rates have already declined to their lowest point in more than a year, notes Compass in its August real estate market report. “Lower interest rates, of course, have considerable effect on the cost of homeownership for those financing their purchase, and a sustained decline would almost certainly spark increased market activity — not only of buyers, but potentially of sellers who held off listing their homes in the past 2 years due to the ‘mortgage lock-in’ effect,” writes Compass. The report adds that a lot depends “on the scale of any decline in rates — as well as possible changes in other economic conditions — through the end of the year.”
Compass gives $1,680,000 as the median house sales price for San Francisco homes in the first half of 2024. Interesting point for condominium buyers and sellers: The median condo sales price for a unit outside of the downtown area was more than $300,000 higher than a unit located downtown, a pricing gap that has widened considerably since they were quite close in 2015.
Redfin pretty much agrees with Compass, putting the median sales price for single-family homes in the city at $1,628,250 as of June, and noting that overall home prices had risen 1.2 percent over the past year. Redfin also says 390 homes sold this past June, down from 429 a year ago. So if interest rates in general and mortgage rates in particular do begin a real decline this fall, more homes could reach the market over the next year.
Newsom the cleanup guy
Last week, California Gov. Gavin Newsom put on jeans and a t-shirt and helped clean up multiple homeless encampments in Los Angeles County, which has about 75,000 homeless people. It was a bit of a direct in-your-face to Los Angeles officials who have pushed back aggressively on his executive order to state agencies to clean up encampments on state property, while providing for storage of up to 60 days of the former encampment residents’ personal belongings.
While some mayors, such as San Francisco’s London Breed, welcomed the move (which came in the wake of the U.S. Supreme Court’s City of Grants Pass v. Johnson decision allowing local action against encampments), Los Angeles Mayor Karen Bass has claimed the action would criminalize homeless people.
While in Los Angeles, Newsom held a press conference at a recently cleared encampment and said he would begin to take away state funding from cities and counties that he says are not doing enough to move people from encampments to shelter. “I want to see results. I don’t want to read about them. I don’t want to see the data. I want to see it,” Newsom said, according to the Associated Press.
California has about one-third of the United States’ total population of homeless people, despite spending $40 billion on affordable housing and an additional $27 billion on homelessness.
Office space update
Good news on the office front, as long as you’re looking to take up some office space in downtown San Francisco. Asking rents continued their decline in the second quarter of 2024, dropping $0.39 per square foot (PSF) since the previous quarter to $69.60 PSF, according to a report from Newmark Group, Inc. Overall, net absorption for the second quarter 2024 was negative 286,964 square feet, the 10th consecutive quarter of negative absorption, but, notes Newmark, it was the “lowest amount of negative absorption across those ten quarters.”
So, yay?
On the more promising side, it noted that leasing of large blocks of office space “continues to be encouraging,” with the first time since the pandemic hit that there have been three leases of more than 100,000 square feet in consecutive quarters.
So yes, yay.
Hundreds of affordable units in SOMA
On Aug. 8, city officials hailed the grand opening of 921 Howard, an 18-story 100 percent affordable housing development. Located in SOMA, the property is one of eight affordable housing projects completed or due for completion from mid-2023 through the end of this year, noted the office of Mayor London Breed; an additional eight are expected to reach completion in the following two years. Breed called 921 Howard “proof that we can make great things happen when we work together to remove the barriers that get in the way of affordable housing production and focus on delivering housing at different income levels.”
The 921 Howard project features 203 new homes for what’s called the “missing middle” market, households earning between 75–120 percent of the Area Median Income. District 8 Supervisor Matt Dorsey, whose district includes 921 Howard, said the project, “which is providing more than 200 affordable housing units for moderate-income San Franciscans, is a prime example of how we can address the critical ‘missing middle’ housing gap in our city. Projects like 921 Howard are essential to ensure that San Francisco remains a vibrant, diverse and equitable city for all its residents.”
