San Francisco Market Predictions: What We Expect to See in 2025

As we move into 2025, San Francisco's real estate market is poised and primed for a shift, driven by renewed optimism in the city and the market. Here’s what you need to know about the key factors shaping the city's landscape and what we anticipate in the new year. Having sold real estate in San Francisco since 2007, I’ve seen many market cycles (the dot com boom & bust, the 2008 financial crisis, and everything in between - and I’m confident that the opportunities ahead are as promising as ever.

1. A Renewed Energy: San Francisco’s Resurgence

San Francisco has faced its share of challenges, but the "doom loop" narrative that has dominated headlines is finally fading. With the election of Daniel Lurie as the new mayor, there is renewed hope for revitalization. Lurie plans to tackle critical issues such as homelessness, public safety, and economic recovery, with a strong emphasis on fostering collaboration between public and private sectors.  He certainly has a full plate!

2. AI’s Growing Influence on San Francisco’s Landscape

Artificial intelligence continues to be a transformative force in San Francisco, driving innovation and economic activity. With tech companies expanding their AI divisions, the demand for office spaces and residential properties is expected to increase. The synergy between the tech sector’s growth and the city’s recovery presents unique opportunities for investors and residents alike.  I am already starting to see clients & friends who have left the city during the COVID years for markets like Tahoe, make their way back - largely due to careers in tech.

3. The Biggest Opportunity in 2025: Condos

San Francisco’s condo market has struggled in recent years, with many units selling below their original purchase prices. This shift was influenced by a pandemic-driven preference for single-family homes and the rise of remote work, prompting some residents to leave the city.

However, condos in safe, walkable neighborhoods are poised for a comeback. Demand is particularly strong in areas like Pacific Heights, Presidio Heights, and other northern neighborhoods known for their charm and community vibe.

• Current prices offer incredible value, with many condos selling for less than their original purchase price, often below 2017 acquisition levels.
• Almost no new condo construction is underway or planned, as current economics make development unfeasible. This means that when the market rebounds, there will be very little new supply to meet increased demand.
• Rising construction costs for new buildings have made well-maintained older condos a particularly appealing option.
• Condos have been significantly impacted by higher interest rates, with the high cost of ownership making renting more attractive for potential buyers in recent years. However, this dynamic is expected to shift as rates decline.

4. Highest-Demand Properties: Single-Family Homes

While condos offer significant potential, single-family homes in premier neighborhoods continue to attract intense competition and are often selling with multiple offers in competitive overbid situations.  Core neighborhoods like Noe Valley, Cole Valley, Pacific Heights, Presidio Heights, and Bernal remain highly sought-after, as Buyers choosing to stay in the city want to be in these great pockets. These properties are expected to maintain their allure, even in a shifting market.

5. Mortgage Rates: A Mixed Bag

Interest rates remain a critical factor in the real estate equation. While we’ve seen some easing in rates, they’re not as low as many would like and it will be some time before rates fall significantly.  Here's what leading institutions predict:

• Wells Fargo: Rates are expected to stabilize, with modest decreases possible in the latter half of 2025.
• Fannie Mae: Forecasts suggest rates hovering around 6% but with potential for dips as economic conditions evolve.
• Mortgage Bankers Association: Optimistic about rates declining below 6% by late 2025.
• National Association of Realtors (NAR): Predicts steady but slightly reduced rates as inflationary pressures ease.
• Goldman Sachs: Foresees rates remaining in the mid-6% range, with long-term stability likely.

For buyers and investors, these rates, while not ideal, still represent a window of opportunity compared to previous years. Buyers who are ready to make moves to be in the home they want will accept lower rates for now and plan to refinance when the time comes.

Your Trusted Real Estate Resource

San Francisco’s real estate market is entering a period of optimism. With a new mayor, the ongoing impact of AI, and unique opportunities in the condo market, 2025 is shaping up to be a pivotal year. Whether you’re looking to buy, sell, or invest, I’m here to help you navigate the city’s evolving market and achieve your real estate goals.