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Considering investing in San Francisco real estate? 2025 is the time to act.
This iconic city continues to deliver exceptional returns, even with its premium prices. Let's see why, looking only at reliable data.
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This article gives you valuable insights, but remember, it’s not and will never be investment advice. We pull data from a range of sources to provide you with the most accurate picture possible, yet we can’t guarantee complete accuracy. Markets are difficult to predict. Make sure to do your own research and consult a professional before making any financial moves. Any risks or losses are your own responsibility.
1) Mortgage rates will drop to 5.9% in 2025, creating a key opportunity
Experts at Norada Real Estate predict that 30-year fixed mortgage rates could drop to around 5.9% in 2025, making this an exciting time to consider buying property in San Francisco.
Lower rates mean smaller monthly payments, which can make even pricey homes more affordable.
In a city like San Francisco, known for its competitive real estate market and limited housing supply, this shift could open the door for more buyers.
In conclusion, lower mortgage rates could make high-priced homes more affordable in San Francisco, increasing accessibility in the city's competitive market.
Sources: Norada Real Estate Investissement, California Associations of Realtors
We created this infographic to show how property prices in San Francisco compare to other big cities in California. It shows the median price as well as the price per sqft, making it easy to see which places might offer the best value. We hope you find it helpful.
2) Inventory in San Francisco rose 37.1% - it means better negotiation power for 2025
In October 2024, total inventory in San Francisco increased by 37.1% month-over-month, which is great news for anyone considering buying a home.
Simply put, more homes are hitting the market, giving buyers more options. This rise in inventory not only means less competition and potentially better prices, but it also provides a valuable opportunity to negotiate with sellers.
When supply outweighs demand, sellers are often more willing to discuss prices or other terms.
In conclusion, 2025 presents an ideal opportunity to secure a home in San Francisco at more affordable terms and potentially negotiate favorable deals in a shifting market.
Sources: Kinoko Real Estate, The Front Step, Redfin
3) SF Bay Area home prices will drop by 4.2%, creating a good buying opportunity
As of November 2024, the average home value in the San Francisco Bay Area is approximately $1,144,598.
Projections indicate a potential decline of about 4.2% by September 2025, suggesting a slight decrease in property values.
This temporary softening in the Bay Area market could present a favorable window for prospective buyers to enter before prices resume their upward trend.
Source: Norada Real Estate
- Why is San Francisco a solid choice for real estate investment in 2025?
4) There is the First-Time Homebuyer Tax Credit
The proposed First-Time Homebuyer Tax Credit is a significant development, offering up to $15,000 to support new buyers entering the housing market.
This credit would cover 10% of a home's purchase price, capped at $15,000, providing substantial financial assistance for first-time buyers.
In a city like San Francisco, where housing costs can be daunting, this incentive could help offset a portion of the down payment or other upfront expenses.
With the potential for slightly softer real estate prices in 2025, this tax credit presents a timely opportunity to consider entering the housing market.
Sources: Homebuyer.com, Panetta House
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5) With 8,700 new jobs added and unemployment at just 3.6%, 2025 presents ideal conditions for buying property in San Francisco
Between April and June 2024, San Francisco added 8,700 jobs, dropping the unemployment rate to 3.6%.
This strong job market boosts consumer confidence and purchasing power, making homeownership more accessible. With growing demand, property prices could rise soon.
Buying in 2025 offers a chance to lock in current prices before the market gets more competitive.
Sources: SF Gov, U.S. Bureau Of Labor Statistics, California Associations of Realtors
6) The 2025 "Empty Homes Tax" could create a buyer-friendly market in San Francisco in 2025
The "Empty Homes Tax", starting in April 2025, will target vacant residential units in buildings with three or more units left empty for over 182 days annually.
This policy aims to reduce housing shortages by pushing owners to rent or sell, creating notable shifts in San Francisco’s real estate market.
For buyers, this could mean increased property listings as owners rush to avoid the tax, potentially stabilizing or lowering prices. If you’re planning to live in or rent out the property, this tax doesn’t apply to you, making it an opportune time to negotiate favorable deals with motivated sellers.
Long-term, the tax encourages active use of housing, leading to a healthier, more stable market. Buyers entering in 2025 could benefit from short-term price adjustments and a more balanced market outlook, making it a promising time to invest.
Sources: Pacific Research Institute, Treasurer & Tax Collector
7) With only 2,800 units under construction in Q2 2024 (1.5% vs. 4.0% nationally), San Francisco’s limited supply will drive up prices
Around 2,800 housing units are currently under construction in the city as of Q2 2024.
This represents only 1.5% of the existing housing stock, significantly below the national average of 4.0% for new construction. In other words, San Francisco is seeing far fewer new homes being built compared to other cities.
This limited supply will inevitably cause demand to surpass availability, driving prices higher in the near future.
It is therefore a strategic moment to enter the market before competition intensifies and prices rise further.
Sources: NAI NorCal, Freedom West
Our team designed this infographic to show how competitive the real estate market in San Francisco is vs. other major cities in California. It shows the percentage of sales above the list price, a key indicator of market competition.
8) San Francisco rents projected to rise 3-4% annually to $3,558–$3,592 by 2025, highlighting the benefits of buying
With rents in San Francisco projected to rise 3-4% annually, reaching $3,558–$3,592 per month by 2025, renting represents a growing financial burden without building equity.
High demand, job growth, and limited housing supply drive this trend, making buying a more attractive option.
Becoming a homeowner in San Francisco in 2025 offers stable mortgage payments and potential appreciation, presenting a strategic opportunity to transition from renting to owning.
Sources: The Luxury Playbook, SF Gov
9) The "Energy Efficient Home Improvement Credit" offers a 30% tax credit up to $3,200 annually, makes it more affordable to own a property
The "Energy Efficient Home Improvement Credit" offers a 30% tax credit for energy-efficient upgrades, with a cap of $3,200 per year.
This incentive significantly reduces the cost of improvements such as better insulation, energy-efficient windows, and modern HVAC systems, making these upgrades more accessible while enhancing property sustainability.
In the San Francisco housing market, where many homes require updates to meet energy efficiency standards or align with eco-conscious preferences, this credit provides a valuable opportunity to offset expenses.
With this credit helping to lower renovation costs, buying a property in 2025 becomes more affordable, asbuyers can take advantage of these incentives to make necessary upgrades without bearing the full financial burden upfront.
This makes 2025 an opportune time to invest in San Francisco real estate.
Sources: Wilke CPA's & Advisors, NerdWallet, Internal Revenue Service
10) Steady population growth strengthens San Francisco housing market (+0.4% projected in 2025)
San Francisco’s steady population growth over the past few years is a promising sign for the housing market.
The metro area saw increases of 0.15% in 2022, 0.3% in 2023, and 0.45% in 2024. These might sound like small numbers, but they show consistent growth, which is significant for a city like San Francisco, where high costs can sometimes deter newcomers.
By 2025, the population is projected to reach 878,112, a 0.4% increase from 2020, further reinforcing the trend.
More people moving in or staying put means demand for housing is likely to remain strong.
Sources: Macrotrends, SFist, Element Homes, The San Francisco Standard, Aterio
This infographic we have made will show you how market values have changed during the last decade in San Francisco vs other major places in California. Here, the percentage increase or decrease in market value will help you see long-term trends.
11) "Shelter inflation" in San Francisco is set to stabilize at 3.3% in 2025, so it will be less expensive to own a house
Shelter inflation refers to the rate at which housing costs, such as rent and home prices, increase over time.
In San Francisco, shelter inflation is expected to drop to around 2% by the end of 2024, before stabilizing at its pre-pandemic average of 3.3% by spring 2025. This slowdown in price growth is likely to make homes more affordable for buyers.
With a stable and predictable housing market, 2025 presents a promising opportunity for those looking to purchase property in San Francisco.
Sources: Financial Post, Federal Reserve Bank of San Francisco
12) With 23.9 million visitors expected in 2025, up from 23.22 million in 2024, San Francisco’s tourism growth underscores a prime opportunity for investment
San Francisco is expected to welcome 23.9 million visitors in 2025, an increase from 23.22 million in 2024, highlighting a robust recovery and growth in tourism.
This influx of visitors is likely to drive increased spending across hotels, restaurants, attractions, and local businesses, providing a significant boost to the city’s economy.
The projected growth in visitor volume indicates a strong and stable market, presenting opportunities for property investment, business expansion, and other economic ventures tied to tourism.
Sources: SF Travel, Travel Weekly
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So, is it a good time to buy in San Francisco? Absolutely, 2025 is the year!
2025 is shaping up to be a golden year for buying property in San Francisco. With a projected drop in 30-year mortgage rates to 5.9%, buying a home becomes more affordable, even in a city known for its high prices.
Inventory has risen by 37.1%, giving buyers more options and better negotiation power. This means less competition and potentially better prices, making it a buyer's market. Additionally, home prices are expected to decrease by 4.2% by September 2025, offering a window of opportunity to buy before prices climb again.
Incentives like the First-Time Homebuyer Tax Credit, offering up to $15,000, and the Energy Efficient Home Improvement Credit, providing a 30% tax credit for upgrades, make buying even more attractive. These financial aids can significantly offset costs, making homeownership more accessible.
San Francisco's strong job market, with 8,700 new jobs added and a low unemployment rate of 3.6%, boosts consumer confidence and purchasing power. The "Empty Homes Tax" could also increase property listings, stabilizing or lowering prices.
With limited new construction and rising rents projected to reach $3,558–$3,592 per month, buying offers a strategic advantage. The city's steady population growth and tourism boom further strengthen the market, making 2025 an ideal time to invest in San Francisco real estate.