2023 Real Estate Predictions: What to Expect in the SF Bay Area

Predicting San Francisco Bay Area Real Estate in 2023

Every holiday season, as we slow down (do we?) and begin to ease our way into the New Year, I tend to wonder about what is coming next. Some years, it’s quite a surprise. Here’s looking at you 2020!

But more often, it’s a mix of the “yeah, that makes sense” and “wow, that was an interesting turn of events” mixed in with a bit of “meh.” 

And yet, I persevere and make predictions on my blog and wherever else people will listen to me about what will happen in the world of San Francisco Bay Area real estate. For our steadfast readers and fabulous clients, we've put together our 2023 predictions and trends for San Francisco real estate and beyond. We hope you find this information helpful as you plan your next steps in the world of home ownership!

Obligatory Disclaimer: This blog is food for thought, not meant to be a precise roadmap for your personal real estate decisions next year. As we saw in 2020, everything can change on a dime. Alas, we lack a crystal ball to predict the future—as do the erudite economists linked below, for that matter. Plain and simple, the best time to make a change in living arrangements is always when it’s right for you. Your situation, goals and finances are priority one. There is an adage in real estate. When is the best time to buy a home? 10 years ago. When is the second best time? Today. That’s been true for the past decades of my tenure, as long as the time is right for you. If you’d like to discuss further, we’re here to help. Click here to contact our team of top San Francisco real estate agents.

Okay, on to the 2023 San Francisco real estate predictions! What will happen in the San Francisco Bay Area housing market next year?

Mortgage Interest Rates in 2023 🠋

What will happen to mortgage interest rates for San Francisco Bay Area homebuyers in 2023?

• Average rates fell by about 50 basis points (half a percent) in November. Chances are that they’ll keep falling in 2023, but not by much according to several mortgage industry sources.
  • The latest quarterly forecast from Freddie Mac has 30-year fixed rates dropping from an average of 6.8% in the Q4 2022 to 6.2% in Q4 2023.
  • The Mortgage Bankers Association forecast is more rosy, predicting a 30-year fixed rate of 5.2% by the end of next year.
  • NAR Chief Economist Laurence Yun says, “The new normal for mortgage rates looks to be near 7% for the 30-year fixed rate. A better rate of 6% will be available to those willing to go with a five-year ARM.”
• Fifteen-year fixed rates will likely continue to average about 70 to 75 basis points below 30-year rates, or roughly three-quarters of a percent.
• In short, there’s a good chance mortgage rates will be lower in a year. However, the days of super low, sub-3% rates, which spurred a record-breaking real estate market in 2021/early 2022, are not likely to come back anytime soon.
• Keep in mind that mortgage rates are volatile. While rates may be lower a year from now, there’s no guarantee it will be a straight line down. In fact, economic volatility is one reason why mortgage rates are as high as they are.
• One metric to watch is the spread on 30-year fixed mortgage rates versus the 10-year treasury note yield. The 10-year “T-note” is seen as closely correlated with mortgage rates, with yields historically about 1 to 2% lower than average 30-year fixed conventional mortgage. Today, that spread is closer to 3%. So, if lenders feel volatility waning in 2023, we could see mortgage rates close the distance to a more typical spread—which as of writing would put 30-year loan rates around 5.5%. Here’s a good article on mortgage-treasury spread if you want to know more.

SF Bay Area Home Prices in 2023 🠊/🠉

What will happen to San Francisco Bay Area home values and listing sale prices in 2023?

• We predict that San Francisco home prices will be a mixed bag in 2023. Yes, we know this is a bit of a cop out. 
• San Francisco real estate sale prices shot up in 2021 and into early 2022, particularly among single-family homes. Then, contemporaneously with the rise of mortgage rates and the fall of tech stocks, SF home prices fell dramatically in the summer and fall. With SF real estate prices up and then down roughly 20% in essentially a matter of weeks, this erasure of home value exfoliated the market. (Seen in this chart of average price per square foot for SF single-family homes.) At this point, we appear to be in a more stable place in terms of market value. In other words, our prediction is that, for the most part, we have seen the price adjustment already.
• There will be upward pressure on home value for the primo listings that “check all of the boxes” for buyers (floor plan, location, condition, parking, outdoor space, etc.), since low inventory will continue to be an issue here in San Francisco. We continue to have strong demand for property like this. Our last few buyers and sellers of 2022 all had multiple offers to contend with. 
• For properties that have some quirk to them, or are in a less desirable location, prices will stay flat or even see continued downward pressure, depending on other factors like the local job market, the stock market and interest rates.

Home Selling Strategy in 2023 🠊

How will strategies change for San Francisco Bay Area home sellers in 2023?

• The formula for the most successful home sales in San Francisco will stay the same.
• It’s been the same for decades and I don’t see anything changing. For sellers, this means price low and stage.
• Presentation is critical to sell a home in the SF Bay Area. See what a difference staging can make on our Before/After Real Estate Case Study blog. (Or read all our Case Studies here!)

Home and Design Trends in 2023 🠉

What will be the hot new trends for homes and interior design in 2023?

• Hipstoric homes: Combining vintage and modern styles, “hipstoric” is a design ethos which honors the old in the process of updating your space to more current tastes. This is not exactly a new phenomenon in the SF Bay Area, where homebuyers have long treasured the region’s turn-of-the-century housing stock while renovating layouts and upgrading amenities to fit more modern lifestyles. But you know a trend has arrived when it has a catchy buzzword attached. In other words, if hipstoric homes are cool, consider the SF Bay Area Miles Davis!
  
• Warm colors: Enter the “magentaverse.” Pantone’s color for 2023 is Viva Magenta, an unabashedly bold yet sophisticated shade of red. But Pantone is not the only color trendsetter. There’s Krylon’s Spanish Moss, Canyon Ridge by Better Homes & Gardens, and a half-dozen more selections in this list of Every 2023 Color of the Year So Far. Among the variety, a trend toward interesting reds and greens stands out, inviting warmth and optimism into your home.
• Natural materials: Chasing the trends can feel like you are always playing catch-up. That’s why we love timeless architectural styles, decor and finishes. From Victorian facades to hardwood floors, these time-tested styles are more likely to look good ten years on, and natural materials are having a heyday right now. Even style mavens like Jonathan Adler are getting in on the action, citing pine wood, stone and plants as a design trend to watch in 2023.

What Won’t Change in 2023 Real Estate?

There’s another big thing that won’t change in 2023.

Whether the market is up, down or sideways, buying or selling a home will remain an extremely important and personal endeavor. As a homebuyer or seller, or both as is often the case, the stakes are astronomically high. Is it crazy to think you deserve the absolute best representation to patiently guide and protect you through the process? To provide expert advisory information on the market and your personal situation? To leave no stone unturned in getting you the absolute best price and terms at the end of the day?

You deserve the best San Francisco Realtors by your side. When the time comes for you to buy or sell, or if you have a question about your property or personal situation, please feel free to reach out to our team. We are here to help. Contact Danielle Lazier Vivre Real Estate Agents.

By the way, you can keep up with us and all the latest on SF Bay Area real estate, events, and culture by signing up for the Vivre real estate newsletter. It’s free, never spammy, and always custom-curated with new ideas and interesting articles. Subscribe below, and let’s keep in touch!