Six months ago, a friend came to me with a question: Have San Francisco housing prices ever actually gone down? Not just month-to-month wobbles, but a real, tangible depreciation over a long run?
The answer is yes, like the 15 percent dip in median prices between 2008 and 2011. But her tone was one of near incredulity. Like me and most of my peers, she’s a millennial who has never owned a home and assumes she never will.
That’s because, in our lifetimes, we’ve had precious few opportunities to believe otherwise. Even when SF’s skyrocketing home market dips back down toward Earth, it never seems to come within our reach.
Just before the pandemic hit, economists at the SF-based Apartment List estimated that while 45 percent of millennials nationwide owned a home, in SF it was just 25 percent. For SF Gen Xers, it was 55 percent, and for baby boomers, 80 percent.
Two years later, SF millennial homeownership had ticked up to 33 percent, but the national rate had risen as well, to 52 percent. The city’s overall homeownership rate usually ranges from 30 to 40 percent. (The boomer generation was born between 1946 and 1964, Gen X between 1965 and 1980, and millennials 1981 and 1996.)
Earlier this year, the same economists estimated that the number of millennials likely to be lifelong renters doubled over the course of a decade. This is important because in the United States, owning a home or other property is a key route to accruing wealth. (It’s also why historic rules to prevent non-whites from buying homes have had profound economic consequences.)
Housing has long been out of reach for the youngest generations. Now that SF home prices are declining for the first time in some current residents’ lives, for many potential buyers it’s not making an iota of difference.
“A tough go”
Like Mark Twain, ever-rising home prices in San Francisco have been reported dead before, but this always proved an exaggeration.
From 2001 through 2022, Multiple Listing Service data reveals that the median sale price of SF homes increased every year except for 2004, 2008, 2009, and 2011. The mortgage crisis took a bite out of home prices, but compared to the rest of the country SF bounced back fast and has been on the rise ever since — even during the pandemic.
In the last six months, however, something like relief has begun to appear. The median single-family home price in SF is down 20 percent from this time last year. It’s the highest drop in the Bay Area, where every county is showing declines.
There’s a big caveat: These declines are coming off record highs. As we reported recently, the rhetoric of SF as a lawless hellhole hasn’t matched the appetite to buy property and live here. (SF condo prices, for example, have sunk just below where they were before the runaway ascent to those records in 2020.)
While dips have come and gone in the past, this one is a little longer than usual. Yet, like a sick joke, other factors are locking millennials out of the SF market: inflation, general economic anxiety, mortgage rate hikes, which reduce access even as they lower prices, and barely a trickle of new housing to boost supply.
“They’ve had a really tough go,” Steven Thomas, a California real-estate agent and economist, says of would-be SF home buyers in their 20s, 30s, and 40s. “I’m not very encouraged with where things are at for millennials.”
They can pick their poison, he adds: Purchase now at these high rates, or wait for rates to come down and risk rising prices again. What’s worse, Thomas observes, supply is drying up again, as many who bought homes at rock-bottom mortgage rates years ago are reluctant to sell their old place and buy a new one with a higher mortgage. They are ”hunkering down” instead, according to Thomas.
Millennial dreams
“I understand materially why people cling to their property values, but for millennials and [Gen Z], access isn’t getting any better,” SF tenant organizer Shanti Singh tells The Frisc, noting that this is a familiar story for many of the younger renters she works with.
San Franciscans of Singh’s age and younger, who entered adulthood in the midst of the Great Recession housing crash and then slingshotted straight into an affordability crisis, feel like the system is rigged — ”almost a Ponzi scheme,” as she puts it.
“The new millennial dream is a housing crash,” as a popular meme puts it. A crash also could also bring down the economy, generally — as with the Great Recession — and take jobs and buying power with it. But the popularity of such sentiments reflects the nihilism many feel about housing and the economy in general.
When one TikToker declared in June that “the housing market is never going to crash,” he wasn’t reassuring people — he was lamenting. Others prefer sour grapes, alleging that owning a home is a scam and selling out to corporate interests.
@averagejoegam3 Housing market will NEVER Crash #greenscreen #fyp #trending #housingmarket #capitalism #usa #millennial #genz #genx #debate
♬ original sound – Average Joe
If a housing crash isn’t the answer to the prayers of wannabe SF homeowners, what is? Thomas mentions the coming “silver tsunami” of boomers moving into assisted care or, well, dying, which would push many homes onto the market for the first time in decades. (Remember, some 80 percent of San Francisco boomers are homeowners.)
The prospect of waiting for the old folks to croak so we can grab their homes, like ne’er-do-well heirs in a Victorian novel, seems grim. Perhaps the under-40s could hope for better macroeconomic conditions as recession fears fade. “Job growth is positive, and that can help,” National Association of Realtors economist Nadia Evangelou tells The Frisc.
But with SF’s high prices, not just any job paves the way to homeownership. “Buying power just isn’t what it was when boomers were your age,” Evangelou says.
Smaller homes could be an answer to the cost problem, says Paul Zeger of SF-based real-estate agency Polaris Pacific, but they’re still mainly affordable to young people with high-paying jobs or family means. “Right now, people are scared to jump in because [mortgage] rates are so high,” Zeger adds, but “I don’t want to say bad things about the Fed because you might write them,” he jokes.
‘Buying power just isn’t what it was when boomers were your age.’ — National Association of Realtors economist Nadia Evangelou
“If you’re middle-income, or middle-aged or younger, renting is [often] just cheaper in San Francisco anyway,” economist Larry Kotlikoff tells The Frisc. (Like all professional bearers of bad news, he prefers a tone usually reserved for the phrase “They’re in a better place.”) “Are you really losing anything by renting instead? Well, you’re losing the discipline of saving to pay off a mortgage, but that can come from elsewhere.”
We object: Surely renters are losing out on the equity of investing in a home? As mentioned, this is traditionally how the American everyperson paves a path to financial security. “Well, maybe start looking at Fresno, or Sacramento then,” notes Kotlikoff.
This conversation was giving a new meaning to the term “housing depression.” The chance of homeownership here or nearby in the nation’s fourth-largest metro area is permanently out of reach for the nation’s largest generation. That’s what the smart money keeps telling us.
When pressed, though, everyone I talked with acknowledged one policy that might provide a glimmer of hope down the line. “More supply,” according to Evangelou.
“Look at the Richmond [District],” says Zeger. “There’s 50,000 houses there built in the 1950s, and that kept the price of housing reasonable [on the west side] because you could take a train out there and buy a home and it was pretty affordable, for a time,” Zeger points out. (The Planning Department estimates the housing stock in the Richmond is closer to 30,000 — but the point stands.)
This answer will push many to despair anyway, either because they do not believe SF and neighboring towns have the political will to build enough homes, or because many millennials hoping for more access are themselves building supply skeptics.
Those suspicious of market-rate housing often say it won’t provide the needed affordable housing — the only kind worth building. In a sense, more supply is also their goal, it’s just priced differently and funded through different means: massive public spending.
In other words, younger generations who want to stay in SF and grab a piece of the pie that our society encourages can only hope that, through market mechanisms or a drastic shift toward public funding, the city figures out how to build a bigger pie.
Adam Brinklow is a staff writer for The Frisc, covering housing and development. He’s lived and worked in San Francisco for over 15 years.