Main Content

An Overview of the San Francisco Real Estate Market

San Francisco real estate

Did you know that, according to Redin, the median sale price for properties in San Francisco has dropped over 10% year-over-year? While that’s not great news for homeowners, it is great news for property owners looking to purchase property to rent out to others in the Bay Area.

Is that you? Are you a landlord or property owner in San Francisco? If so, being well-prepared and informed about the San Francisco real estate market is important.

With its popularity as a tech hub and wealth of attractions, San Francisco offers a vibrant atmosphere that attracts tenants from all over the world—but the competition can be fierce and rental prices are on the rise due to high demand.

In this quick real estate guide, we’ll provide an overview of the current state of affairs in SF real estate so that you can make an educated decision when selecting your ideal tenant (or even your next investment property).

Is San Francisco Real Estate Hot Right Now?

Alright, alright. Before diving into the San Francisco rental market, what does the real estate market look like?

Well, it’s safe to say that San Francisco’s real estate market has been through many ups and downs over the past few years. The pandemic reshaped the market, and mortgage rates have continued to climb. Since the beginning of 2022 alone, Compass reports that mortgage rates have risen from just over 3% to nearly 6.5%.

The demand for homes in San Francisco has also dropped, and therefore, so did the prices for various types of properties. For example, the Redfin housing market report linked above estimates that the median sale price of a home in San Francisco is around $1.4 million (as per the latest reports from March 2023).

And unfortunately for homeowners or property owners, the median house sales price dropped by 18% between Q1 2022 to Q1 2023.

Despite the high prices, San Francisco’s real estate market remains one of the most attractive markets for investors. It simply looks like this is just the way the market’s trending across most of California, including hotspots in Northern California and Southern California.

However, there remains a slight hesitation within the market. Due to the high prices, it has become increasingly difficult for first-time homebuyers to enter the market. Additionally, the pandemic has also played a role in discouraging some prospective buyers. While we’re “out” of the pandemic, the effects on the housing market are still clearly being felt.

But overall, San Francisco’s housing market is still showing signs of growth and remains a hot spot for real estate investment.

San Francisco Real Estate Trends

Now, what does all of this mean for you as a landlord or property investor? It helps to break down each San Francisco real estate trend one by one to understand how it’s all affecting the apartment rental and general housing markets (if you’re planning on buying more properties soon).

A Decline in Home Value Appreciation

Whether you purchase and rent homes or condos, one thing’s for sure: there’s been a steady decline in home appreciation in San Franciso during the past couple of years.

For example, Compass’s report shows that year-over-year condo prices were down from Q1 2022 to Q1 2023. How much? At least 7%. While it doesn’t look like the dip we saw in 2013 through the beginning of 2014, we haven’t yet seen the condo market rebound like it was back at the beginning of 2021.

Landlords in San Francisco may benefit from a decline in condo prices as it may open up opportunities to purchase more properties to rent while prices are more affordable. This could allow you to expand your rental portfolios and potentially increase your income from rental properties.

Mortgage Rates Still High

As mentioned, mortgage rates have doubled since the beginning of 2022, pricing a lot of first-time homebuyers out of the housing market. While this is unfortunate for many, more residents need to continue renting in the Bay Area. With more potential renters searching for properties, landlords have a greater chance to attract tenants and increase their rental income.

As a landlord, it’s essential to understand the needs and wants of prospective tenants and ensure that your properties meet those needs. We’ll dive into this in just a bit. However, be smart about how you’re marketing to potential tenants and what you’re offering.

What’s important to know, though? The bottom line is that, with an increase in demand for rental properties and a reduction in competition for available homes to purchase, the market favors landlords.

However, it’s crucial to maintain your rental properties’ upkeep and provide quality services to your tenants. Doing so can establish a positive reputation and attract more renters over time. It’s always best to think long-term, even in a market like this.

Expensive Rental Market

Simply put, apartments in San Francisco are expensive to rent.

San Francisco is consistently ranked as one of the most expensive rental markets in the United States, with rent prices increasing nearly 3% in the past year alone, per a recent Nerdwallet report. Again, this is unfortunate for renters. However, this rise in rental prices presents a unique opportunity for landlords to capitalize on a hot rental market.

For landlords, the high competition in the San Francisco rental market means you have the potential to earn substantial rental income. By keeping your properties well-maintained and equipped with modern amenities, you can set yourself apart in a crowded market and attract higher-paying tenants.

One suggestion for landlords to take advantage of the hot rental market is to offer lease terms that appeal to renters. For example, offering flexible lease lengths is something to consider. You might also offer incentives such as waived application fees or complimentary cleaning services. All of this can help attract renters.

The bottom line? By remaining aware of market trends and adjusting rental prices accordingly, you can position yourself for continued success in the competitive rental market.

Tips for Navigating the San Francisco Apartment Market

The San Francisco apartment market is hot and competitive, with rent prices on the rise. According to Zumper’s recent report, the average rent for a one-bedroom apartment in San Francisco is $2,995, and $3,995 for a two-bedroom apartment. This has caused renters to increase their spending and landlords and investors to maximize their profits.

Whether investing in a San Francisco luxury apartment or scaled-back condos, here’s what to know about navigating the ever-changing San Francisco real estate market.

Know the Market

It’s essential to have a solid understanding of the San Francisco rental market. This includes understanding the following:

  • Demand
  • Demographics
  • Trends

For example, did you know that, in general, Gen Z currently makes up the largest renting demographic? At least 74% of Gen Z are renting their homes. Learn about the existing market conditions, the average rent prices, the typical tenant profile, and the economic drivers of rental demand. Use this to purchase and price properties accordingly.

Stay Competitive

To maximize your rental income, your property must be priced competitively. Analyze your rental rates. Then consider them relative to other landlords in the area. Be sure to keep your rent price in line with current market trends.

Marketing and Advertising

Reach potential tenants by marketing your property effectively. Using listing platforms like Zillow and Craigslist or marketing through social media channels like Facebook and Twitter can be effective. High-quality photos and descriptions of the property are important to attract potential renters.

Property Management

Hiring a property management company can be a good investment, especially if you have more than one property. Property managers can handle tasks such as the following:

  • Advertising
  • Tenant screening
  • Leasing
  • Rent collection
  • Repairs

This gives you more time to handle strategic decisions that can boost your bottom line. This is especially true if you need help with leasing services, as they are often the most time-consuming.

Lease Agreement

This is a tip you want to follow regardless of the real estate market! Draft a solid lease agreement that protects your property and your assets. A comprehensive lease agreement must include the rental terms, late payment policies, and landlord and tenant obligations.

Our top tip? Always keep track of the changing dynamics of the San Francisco rental market to keep up-to-date with the latest trends.

Get Help With SF Apartment Rentals

Do you invest in real estate in San Francisco? Are you a landlord in need of help attracting and managing high-quality tenants? Ray and the team at TARGA Residential Brokerage can help.

With over 18 years of real estate experience, Ray Amouzandeh and his team specialize in finding the right tenant for your property at the optimum rent. They represent many of the best apartments, condominiums, and single-family homes in the city and provide unparalleled customer service.

Ray’s detail-oriented approach and solid reputation make TARGA the go-to destination for landlords seeking long or short-term tenants in the San Francisco real estate market. By working with TARGA Residential Brokerage, landlords can take advantage of the opportunities in SF’s competitive rental market and optimize their property’s earning potential.

Contact Ray and his team today to get started.