San Francisco Bay Area Real Estate: What’s New in 2025

Excerpts from the Podcast:  

Jenni:  Welcome to the Modern Family Finance Podcast, where we talk about all things money, career and life. I’m Jenni, your host, and a San Francisco Bay Area financial planner serving women and LGBT professionals. I’m especially excited about today’s guest because we share a lot in common, not just professionally, but personally as well. 

Dan Risman-Jones of Ascend Realty is based right here in San Francisco. Dan and I not only help people navigate life’s big financial decisions, but we also share similar journeys as LGBTQ parents with young kids.

I first met Dan through his husband, Steven, who is also a real estate agent and his business partner. Steven is Taiwanese American like myself and we met when I was living in Taiwan.

Dan’s deep knowledge of the San Francisco Bay Area housing markets makes him an amazing resource. Ascend Realty works across the San Francisco Bay Area, Silicon Valley, and LA. Dan focuses on SF, Alameda County, Marin, and San Mateo.

Jenni:  We both live in the same San Francisco neighborhood, the Outer Sunset. So what is your favorite thing about living in San Francisco? 

Dan: I’ve lived in Oakland, Noe Valley, the Castro, the Mission and now over in the Sunset relatively recently. Moving to the Sunset  coincided with getting an energetic dog that needs to go out on runs. So daily runs to Stern Grove, Fort Funston, Golden Gate Park, and the Great Highway are what I love about living out here.

Jenni:  Me too. I just came from a run from the Great Highway. It’s awesome.

What’s happening with the 2025 market trends in the Bay Area? (02:55)

Jenni: What are the biggest trends you are seeing in the Bay Area real estate market now as we head into 2025?

Dan: So I don’t have a crystal ball. Looking back at 2024, it was really a year of recovery and establishing a stable marketplace. Looking ahead into 2025, it’s probably going to be the first year since the beginning of COVID that we actually see “a normal San Francisco Bay Area market.”

In the beginning of COVID, single family home prices just kept going up. Everyone wanted to have backyards, big spaces, and their own private areas. With inflation and the increase of interest rates, single family home prices actually kept going up because a lot of homeowners wanted to hold onto their property. So inventory decreased.

Dan: The opposite happened for condominiums. A lot of people want to get out of condominiums. Investors were trying to get out of condominiums that were on the rental market. So the prices went down and the interest rates going up just caused condo prices to keep going down.

So you had these two markets that almost always run together with this big gap between them. In 2024 we saw single family home prices start to drop and market correct, approximately around 10% over the course of the year. We then saw condominium prices start to go up approximately 10%. So that gap has decreased dramatically last year. By the end of the year, the market was pretty stable.

Dan: Now I think we’re going to see a pretty normal market going into 2025 where condos and single family homes start moving together once again, after five years of having divorced from each other.

Are we in a buyer’s or seller’s market? (05:35) 

Jenni: If someone is in the market to buy or sell, would you call this a buyers or seller’s market?

Dan: In the Bay area, it’s almost always a seller’s market. It’s a relative term. It’s becoming more competitive for homebuyers. In 2024 things did slow down and as a buyer it was less competitive and you had more opportunity. Going into 2025, I’m already seeing a lot more competition out there, as there is increased buyer demand. I think this market is tightening up and it’s going to be more of a seller’s market.  

Jenni:  How would you advise clients who are either thinking to buy or sell next year?

Dan: It really depends on what are you trying to get out of it, whether it’s an investment property or your personal residence. Almost always you need to make the move when it makes sense for you. My partner and I moved from the Mission to the Sunset last year. It was not the ideal time for us to sell our home. We probably sold our house for $100k to $200k less than what it may have been at the top of the market. We still did quite well on it because we owned it for quite a while. We had invested in it and remodeled it.

But we sold it when it made sense for us and our family. The timing allowed us to move to be closer to schools and what we needed in our life. So first and foremost, you buy or sell, especially a primary residence based on what’s happening in your day to day life.

But going into this year for 2025, I think it will be a stable market. There is going to be some competition, but probably not the crazy competition of 2018 when you saw 10 offers on a property or 2021 when you saw 15-20 offers on single family homes.

As for selling, I think we are in an appreciating marketplace. I think it’s a much better time to sell in 2025 than probably in 2024, 2023, or potentially even parts of 2022.

What should sellers do to get top dollar for their home? (08:26)

Jenni: In the months leading up to putting your home on the market, how can you best prepare to sell?

Dan: The most important thing is to make your home turnkey for a new home owner especially since we’re not in a super competitive marketplace. Here in the Bay Area, we work with a lot of high net worth individuals who work long hours. A lot of homeowners in San Francisco do not want to take on projects. So even small things from a homeowner standard point of view that are very easy to take care of can be a deal breaker for them.

Some examples are changing countertop, replacing a backsplash, painting, refinishing floors, and changing light fixtures. These are all pretty small items especially if you have an agent helping you do it. But for a home buyer, that can be the difference between buying or not an offer on that property. So making your home turnkey is really important.

Secondly for me it’s design. I love colors. It bothers me when a space is recently remodeled and it’s just all white. I think that’s become an outdated trend with the “Apple store” look where everything had to be clean, white, and pristine. Now people want color. They want pops of design in their kitchens and in their baths. So spending a little bit of extra money to make that home stand out and memorable is important if you’re going to go that extra mile of prepping your home for sale.

Will mortgage rates come down significantly again? (10:29)

Jenni: How do you advise people who are waiting for mortgage rates to come down to start looking for a home?

Dan: Mortgage rates are not likely coming down anytime soon. There may be some slight differentials in the interest rates or there might be a couple drops. But they’re probably not going back to the 3% rates in our lifetime.

Interest rates and prices of homes have an inverse relationship. As interest rates go up, prices have traditionally come down. This happened in 2020 when condominiums would drop $100-$200k within six months of the interest rates going up.

For me personally, I would rather pay a higher monthly mortgage if I have the income to support it than pay $200-$300k more on a property. Long term, it’s much more to your benefit to have that higher interest rate for lower price point.

Right when the interest rates increased, a lot of people left the market. Buyers didn’t want to buy and sellers were not willing to sell for a lower price point.

Now buyers and sellers are coming back to the market and they’re willing to start transacting again because they know that this is the new normal.

Jenni:  I’ve talked to plenty of people who are like they bought a starter home. They were able to lock in that 3% mortgage. They want to upgrade, but they feel totally stuck and want more space. What are their options?

Dan: There may be ways to get around moving if what you need is more space. If you’re in a single family home and you’re able to develop into an unused attic, a basement or a detached garage you could create more space.

I had one client who was feeling cramped in their condominium, but they had their own private yard. They loved their space and they had a good interest rate. So they actually bought a prefabricated storage shed that was beautiful and had solid walls. It was 100 square feet and they just craned it over their house and put it in the backyard. That became their office and that prevented them from needed to move because they now had that extra space that they needed.

So if you are really tied to your home because of the interest rate, you may be able to develop your property into more space.

Jenni:  I love that. It’s also very personal because we’re about to undergo a pretty significant home improvement ourselves to create more living space.

What makes sense from an ROI perspective when it comes to home improvement? (15:44)

Jenni:  Clients ask me all the time, “how much should I put into the house?” Let’s say the house is worth a million dollar house in a Bay Area neighborhood. They can actually afford more now, but they don’t want to take out a mortagage with a higher interest rate. They don’t really want to move. They can’t find anything better without actually spending two million. They want to develop their house, but are unsure if putting $500k into a remodel makes sense. I realize it’s a personal, but how do you think about that?

Dan: First, talk to your trusted realtor. If you don’t have one, feel free to reach out to me. I do that often for my clients who are going through a remodel or a development project. For me personally, I’m their real estate agent for life. If they have questions about refinancing or remodeling, I’ll talk to them what is important for the value of your property if you sell in the future. A $100k remodel of your master bathroom may be nice, but you may not get all that money out.

But if you develop your basement for $400 per square foot, you could later sell it for $1000 per square foot and that’s gold. I definitely go in and talk to my past clients, my friends all the time and give them advice on their remodel.

In regards to the second aspect of that question is, is it worth doing it? There are projects that you do for selling a home. And there are projects that you do for living in the home. If this is a project that allows you to live 5 or 10 years more in that home, it can be worth it. Maybe it doesn’t make financial sense from an ROI, but from a lifestyle standpoint you can get value out of it from the connection with your community, neighbors, school, and it doesn’t have to make perfect financial sense.

Does it make sense to purchase investment homes in the Bay Area? (26:16)

Jenni:  Some folks are interested in real estate as an investment. Perhaps they have had a starter home in the Bay Area and now they have bought a new home and are asking if they should rent out their first place. I think the challenge to make this work is that usually the rental yield relative to the value of the house is quite low compared to other parts of the US. How do you help clients think about real estate as an investment in the Bay Area?

Dan: I’ve gone through that same decision process myself. Like you note, the rent to purchase ratio, how much can you buy a house for versus how much you can rent it for in San Francisco, is very low. Several years ago, San Francisco was the last city on that spectrum having the worst ratio.

On the flip side, there are a lot of cities in the Midwest and South where you can get a lot of rental income relative to the price of the property. So your return on investment, looks really strong.

When I talk to people who are thinking about investing, I use the metaphor of three legs of a stool or three points of a triangle.

Point One: When you’re looking at investing, you have the, like the monthly return on it. So how much, how much rental income are you making? That’s one.

Point Two: The second factor is appreciation. Generally the Bay Area tends to appreciate quite a bit over time. 

Point Three: The security of the asset. Not everyone is investing for money. Sometimes people just need a place to plot money to diversify their assets.

So you have three different points and you can generally get one or maybe two of them, almost never three. San Francisco is not great on the rental income. But we are generally a very secure, strong market if someone needs to diversify their portfolio. This is a great place to invest because we hold our value quite strongly.

Then the second is appreciation. Generally the Bay Area tends to appreciate quite a bit over time. So if you’re looking at it from that standpoint, San Francisco and the Bay Area can be a really great investment option.

If you want to invest in the Bay Area, but you want stronger rental income, you can look at towards the East Bay and the Central Coast. Those areas you may get a lot better monthly rental based on the purchase of purchase price.

Jenni:  Thank you so much for your time today. If folks are interested in reaching out, where can they best find you? 

Dan: Thanks Jenni. You can find weekly updates at instagram.com/sfrealtordad and our office at https://ascendre.com/.