1 In 8 Home Sellers In San Francisco Is Losing Money With An Average Loss Of $100,000.

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Fueled by the tech boom and the allure of Silicon Valley, the Bay Area has
earned a reputation as a hotspot for real estate. However, that doesn't
mean every homeowner is making money.

According to a new report from real estate brokerage Redfin, roughly one
of every eight homes, or 12.3%, sold in San Francisco in the three months
ending July 31 were purchased for less than what the seller had originally
paid.

To put that in perspective, the rate is higher than any other major U.S.
city and is four times the national average. Redfin said that around 3% of
homeowners in the U.S. took a loss when selling their homes.

Among the home sellers in San Francisco who lost money on their
transactions, the median loss was $100,000.

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Looking at other markets, Detroit came next after San Francisco, with 6.9%
of homes sold during the three months ending July 31 being purchased for
less than what the seller originally paid. It was followed by Chicago, New
York City, and Cleveland, where 6.5%, 5.9% and 5.8% of home sellers took a
loss, respectively.

When it comes to the average size of loss in dollar terms, New York City
matched San Francisco. The typical homeowner in the Big Apple who took a
loss also sold their home for $100,000 less than their original purchase
price.

A ‘Healthy' Correction?
It's obvious why San Francisco home sellers had a higher chance of losing
money — home prices in the region were falling. Redfin noted that by April
2023, the median home sale price in San Francisco was down 13.3% year over
year.

Redfin said that because the Bay Area had the highest real estate prices
in the country, its housing costs "had a lot of room to come down." The
brokerage also cited layoffs in the tech sector and the rise of the remote
work trend as reasons behind the region's fast-falling home prices.

High mortgage rates have also put the brakes on the housing market.
According to the Federal Home Loan Mortgage Corporation, commonly known as
Freddie Mac, the average 30-year fixed-rate mortgage rate in the U.S. is
now at 7.12%.

"The Bay Area housing market was unsustainable before, so this correction
is probably healthy," said local Redfin real estate agent Andrea Chopp.
"But the unfortunate thing is prices remain unaffordable for a lot of
people — especially with rates now above 7%."

Indeed, even though some San Francisco home sellers experienced losses,
many more profited as home prices in the region have risen substantially
over the long haul. Redfin found that in the three months ending July 31,
the typical home sold in San Francisco resulted in a capital gain of
$625,500, or 70.5%.

Housing Affordability In America
Still-elevated home prices, coupled with steep mortgage rates, present a
challenging environment for home buyers, extending beyond just San
Francisco.

According to The State of the Nation's Housing 2023 report from Harvard
University’s Joint Center for Housing Studies, the annual income needed to
afford payments on a median-priced home in the U.S. is now $117,100, up
nearly $20,000 from last year.

And that means millions of households are now priced out of the market.

“The number of renter households able to afford these higher payments
shrunk by 32%, from 7.5 million to 5.1 million, a loss of 2.4 million
potential homebuyers," the Harvard researchers said.

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https://finance.yahoo.com/news/1-8-home-sellers-san-163039502.html