Maria Benjamin, the deputy director at the San Francisco Mayor’s Office of Housing and Community Development, breaks down the home prices.

Demystifying Data

Demystifying Data is a recurring series examining the numbers and statistics that buzz around the Bay Area. The Bay City News Foundation brings context and expert input to the data in our everyday lives. We will bring your questions to those who know best to understand the big picture behind complex figures. Check back weekly for new numbers, broken down by the experts.

The median home sold for $1.5 million in San Francisco.

The National Association of Realtors reported that the median price of homes sold in San Francisco was $1.5 million, according to the most up-to-date data available as of May. The median listing price was $1.3 million, with most homes selling for 7% above listing price.

The median selling price of homes dropped from $1.6 million in April, with the average home selling after only 40 days on the market.

This week, the Bay City News Foundation hosted Maria Benjamin, the deputy director at the San Francisco Mayor’s Office of Housing and Community Development. Benjamin broke down what the skyrocketing market means to sellers and buyers, how it will affect San Francisco and what the costs mean for residents of all income levels.

Benjamin’s answers may have been edited for brevity and clarity. Benjamin was interviewed prior to the release of the median selling prices in May.

Maria Benjamin, the deputy director at the San Francisco Mayor’s Office of Housing and Community Development, talked to Bay City News about housing prices in San Francisco. (Maria Benjamin)

Q: Half of the homes in San Francisco are selling for more than $1.6 million. San Francisco and the Bay Area have been known for a long time to have high costs of housing, but why does the price climb so high?

A: The ‘why?’ is capitalism. The ‘why?’ is where we are with our housing, making it a commodity, but I won’t go there. I won’t go there.

Our median sales price, what it was in April, was not much more than it was last year or the year before and the year before. So, we have not really experienced a big jump.

This isn’t a big jump for us like it was for San Jose. San Jose’s went up by almost 20% in a year. That’s a big deal for them. Over the last five years, they’ve gone up almost 50% in sales price. And ours over the last five years has gone up about 20%.

The $1.6 million doesn’t prohibit homebuyers from buying in San Francisco, especially low- and moderate-income homebuyers, as much as the interest rates going up. That’s a bigger deal for low- and middle-income families than the median sales price is.

With down payment assistance, we can help those families. With the interest rates being what they were before, we were still helping families purchase median homes in San Francisco with very large down payment assistance. But it was doable.

Now, [homebuyers] are having a hard time being able to get financing because the interest rates have gone up. We’re at like 6% [for the federal mortgage lending rate] now, and a year ago we were at 3%. That decreases their purchase power.

So for a family of four that’s making about $200,000 a year, they could purchase a $1.5 million home with our down payment assistance. But with the interest rate going up, their purchase power goes down.

We were giving between $375,000 and $500,000 in down payment assistance so that they’re financing $1 million. With the interest rate before, that was doable. With the interest rate now, that same family can only finance $750,000. Even with our $500,000, their ability to purchase is diminished.

Now, median home price means half the houses in San Francisco are more than $1.6 million and half of them are less than $1.6 million. So, there are certain neighborhoods where you can still purchase under $1 million. The consequence of that is that more people will purchase, and those neighborhoods will continue to be gentrified. And then we’ll have other issues on our hands.

I mean the $1.6 million is crazy. I think the whole thing is crazy. But that’s what they’re having to do in this high-cost market.

Q: With these price tags on homes and the interest rates increasing, driving the purchasing power of many down, do you see the quantity of sales in the market slowing?

A: I don’t want to make market predictions. But my gut tells me we’re seeing just glimpses of how it will slow down the market. There will be fewer buyers. And when there’s fewer buyers, if you really want to sell your property, what are you going to do? You’re going to lower the price. That would be my prediction.

If interest rates continue to rise, then we’re going to slow our sales and the prices will come down, or at least remain stagnant. That’s what my hope is: that we won’t see another 2% increase [in home prices] next year.

Q: With these kinds of prices, does the housing market favor investors over families and those already in San Francisco?

A: Investors have liquid assets, you know. It’s not just investors, but it’s also upper-income people. And that’s where I talked about gentrification.

People with more resources will be able to purchase, and those that have fewer resources will not. If you’re an investor who has a whole lot of money, you’re able to purchase in this market and then be able to rent out the home you’re purchasing.

But market rents are stagnant now. They dipped down during the pandemic before and now they’re creeping back up. But investors aren’t going to see the return in rent that they once did, not right away at least. As the economy and things start coming back from the pandemic, perhaps we’ll see rent increase and we’ll see more people purchasing. But we’re in this endemic phase and so it’s very slow right now. It’s very slow.

Q: You mentioned that how much middle-class residents might be able to afford even with down payment assistance has decreased significantly with the interest rates. What does the future for middle-class and working-class residents of San Francisco look like given this market? Are there any other programs that can make a significant difference if the interest rates remain high?

A: I’m always hopeful. The city has these significant programs that are providing a heck of a lot of down payment assistance, more than any other jurisdiction that I know of in the country. As long as there is the desire to purchase homes in San Francisco and live in San Francisco, and as long as the city is invested in home ownership in the way that we are, there will be the ability to purchase.

We’ll ride out this market just like investors ride out the market and just like mortgage companies and realtors. Everybody is riding things out. We’re looking to see where it will go.

I’m not discouraged. I don’t think, ‘Oh man, this is the end of it. No one else will be able to ever buy a home anymore.’ I believe that as long as we are investing in homeownership and believe that homeownership is one of the ways to stabilize our communities, then I think it’s not the end of the road. It’s just a bumpy ride.

Now, I haven’t talked about the below market rate home ownership program that the city offers as well. That program, through our inclusionary ordinance in the planning code, says that when a new developer is building a home ownership or rental building, a certain percentage of those units in that building need to be affordable and below market rate. The program has been around since the 90s, so there are units all over the city that are under $500,000.

We will continue that program. It’s robust. There are still developers that are still building today. As long as those cranes are in the air, there will be affordable homeownership opportunities through that program.

Q: You mentioned that San Jose has seen a drastic increase in housing prices. Do you think that San Francisco’s housing market foreshadows further housing booms elsewhere in the Bay Area, like San Jose? Will other cities also start to see their prices going up toward that $1.6 million mark?

A: Don’t you think they have already? Oakland is very, very expensive now. The whole Bay Area is not what it used to be.

My own children can’t afford to live in the Bay Area. They are very successful and married well and got great educations and jobs. But it’s a struggle for them to purchase in the neighborhood that they grew up in. And it was a struggle for me to purchase in the neighborhood I grew up in. I grew up in Oakland. I couldn’t afford to buy a home near Lake Merritt today. I don’t want to blame San Francisco’s market, but this whole Bay Area market is nuts. And it’s been that way for decades.

Q: What else should Bay City News Foundation readers know about your work at the San Francisco Mayor’s Office of Housing and Community Development?

A: I’m really very proud of San Francisco’s programs to address market conditions. We are leaders in the nation with our down payment assistance. We really are assisting people to purchase homes in this high-cost market.

On average, we assist about 200 homeowners a year, whether it’s purchasing a below market rate unit or through the down payment assistance programs. It’s paying off. The local jurisdictions have to keep up with the market as it changes, or else their own bus drivers and their educators are not going to be able to live in the city.