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by Cynthia Cummins

Cynthia is owner and founder of Kindred SF Homes and a top San Francisco Realtor. Check out RealEstateTherapy.org for refreshing reflections on the meaning of home and for more best real estate advice (since 2013).

Want some REAL real estate news? It’s a Buyer’s Market for residential real estate in San Francisco.

But guess what? Buyers aren’t buying. That’s because, as I like to say at times like these, “Buyers don’t buy in a buyer’s market.”

Talk of recession and inflation is kryptonite to buyers. It stops them cold. Three months ago San Francisco buyers were primed for battle – ready to compete with other buyers, ready to pay 20% over a property’s listing price, ready to forgo all inspections and contingencies.

The instant there are a few drops of “blood in the streets” (as Baron Rothschild, an 18th-century British nobleman supposedly quipped about the best time to buy anything), buyers run for the sanctuary of the rental they’ve been desperate to leave. There may exist an attractive property that meets all their parameters at a price less than the bottom of their shopping range, but because nobody else has made or is making an offer, they interpret that as a sign to stay away. It’s Psychology 101.

Yes, there are totally sound reasons not to buy now – a down payment diminished by the stock market’s recent downturn or uncertainty about future employment. But concern about rising interest rates and subsequently having to now “pay too much” shouldn’t be a reason not to buy.

When you compare what a property sold for in February, March or April with what it would sell for today and you do the math on mortgage interest payments and property taxes (hooked to sales price), you’ll see there’s not an appreciable difference in total monthly outlay.

The following example assumes a 7-year fixed/ARM (which is a good choice right now, considering most people will either sell before the loan adjusts or choose an opportune moment to refinance). And note that interest rates fell in the time it took me to stop procrastinating and write this; although they could just as easily increase again before I post it.

Home listed for $1,750,000.

  • In January 2022 it sells for $2,187,500. On an 80% loan of $1,750,000 the total monthly payment including property taxes and insurance is $9,581.
  • In June 2022 it sells for $1,800,000. On an 80% loan of $1,440,000 the total monthly payment including property taxes and insurance is $9,133.

In other words: Same house but a monthly payment that is $448 LESS than when interest rates were lower.

The numbers are even more compelling at higher price points. (I’m happy to walk you through some of the scenarios if you’re interested. Email me.)

Buying now is a conservative move vs. the risky move of overpaying in a competitive market. At least now buyers can ask for things like – shocker! – loan and appraisal contingencies. And buyers can hit the price on a listing that’s languishing. 

“I was seldom able to see an opportunity until it had ceased to be one.” Mark Twain wrote, neatly summing up the pickle of perception and misperception regarding the value of any commodity. I know firsthand that there are many clear and startling opportunities for buyers in San Francisco right now. I also know it’s just a matter of a few months or a few years before we’re back to the same ol’ seller’s market. Us being doomed to repeat history and all that. Just please don’t say I didn’t give you a headsup…

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Photo Credit: Fernando Jorge

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