Why 80% of SF Homes Lost Value This Year and What Happens in 2026
San Francisco’s housing market rarely experiences broad value declines, but the past year was one of the sharpest resets in recent memory. According to a report from the San Francisco Chronicle using data from Zillow, more than 80 percent of homes in the San Francisco metro area saw their estimated value decrease year over year. Historically, this level of value loss has only occurred twice in the last two decades: immediately after the 2008 recession and again in 2023 during the steep rise in interest rates.
Even with the drop, most properties in the region remain significantly above their pre-pandemic or pre-2018 values. The question is why the decline was so widespread and whether 2026 will look different. Below is a clear explanation of the drivers behind this year’s downturn and the early indicators for the year ahead.
Why SF Home Values Declined
Higher interest rates reduced purchasing power
The most important factor was the rapid rise in mortgage rates. According to the Freddie Mac Primary Mortgage Market Survey, 30-year mortgage rates rose from roughly 3 percent in early 2022 to above 7 percent throughout 2023 and into 2024. This reduced purchasing power by more than one third for many buyers, especially those relying on jumbo loans, which are common in the Bay Area. A large portion of would-be buyers simply paused their search, which lowered competition and softened prices.
Urban condo demand weakened
Demand for high-density housing remained far below pre-2020 levels. The market for condos in SoMa, Mission Bay, South Beach, and the Civic Center area was particularly weak. Reports from Redfin and Compass both showed that condo price declines outpaced single-family homes across the city. Elevated HOA fees, concerns about downtown activity, and remote work preferences pushed more buyers toward neighborhoods with larger homes and more space.
A slower tech labor market
Hiring in the Bay Area tech sector cooled significantly during 2023 and early 2024. Companies such as Google, Meta, Amazon, and Salesforce put in place hiring freezes and layoffs. With fewer new workers relocating and more uncertainty around compensation, demand for higher-end units cooled.
Inventory increased in key neighborhoods
Inventory rose in parts of the city where demand was already soft, including downtown and the condo-heavy districts. According to Redfin, San Francisco experienced more active listings year over year, which created downward pressure on pricing when paired with reduced demand.
Affordability pressures were amplified
The national housing slowdown hit coastal markets harder, and San Francisco’s already high-priced market was especially sensitive to rising rates. Zillow’s monthly Market Pulse reports highlighted coastal metros, including San Francisco, as the most negatively impacted by affordability constraints due to the size of required down payments and loan amounts.
Neighborhoods Most and Least Affected
The largest drops occurred in neighborhoods that rely heavily on condo sales, especially Mission Bay, SoMa, South Beach, Lower Nob Hill, and the Van Ness corridor. Many of these areas experienced year-over-year price declines in the ten to fifteen percent range, according to Zillow and Compass data.
Value declines in single-family neighborhoods were noticeably smaller. Areas such as Noe Valley, Bernal Heights, Glen Park, the Inner Sunset, the Richmond District, and West Portal remained comparatively resilient. Limited inventory, family-friendly layouts, and stronger school zones supported demand in these districts.
What to Expect in 2026
The broader consensus among real estate economists, brokerages and mortgage analysts is that 2026 is likely to be a period of gradual recovery rather than further contraction.
Mortgage rates may ease modestly
Forecasts from Fannie Mae, the Mortgage Bankers Association and major banks project that mortgage rates could move into the mid-to-low six percent range by late 2026. This is still well above the pandemic-era lows but enough to improve affordability and bring more buyers back into the market. A decline of even half a percentage point can shift demand noticeably in expensive metros.
Tech hiring is slowly strengthening
AI companies such as OpenAI, Anthropic, Nvidia and Scale AI expanded significantly during 2024 and 2025. Broader tech hiring also appears more stable than during the downturn in 2023. Stronger employment conditions typically translate into more relocations and more high-income households searching for property.
Single-family homes will likely outperform condos
The single-family market is expected to strengthen first. Limited supply, especially in the west side and southern neighborhoods, should keep prices relatively firm. Condos may recover more slowly, particularly in downtown, where lifestyle perceptions and HOA fee increases continue to affect demand. However, improving office occupancy and a more balanced hybrid work culture could gradually lift buyer interest.
2025 may represent the bottom of the cycle
Late-2024 and 2025 data from Zillow, Redfin, and Compass showed improving days-on-market metrics and more competitive bidding for well-priced listings. Most analysts now describe the Bay Area as closer to a trough than a peak. If interest rates continue their downward trend, 2026 is positioned to be the first year of modest, broad-based stabilization.
The Long-Term Outlook
Even with volatility, San Francisco’s long-term fundamentals remain strong. The city has limited buildable land, restrictive zoning in many neighborhoods and high construction costs. These constraints have historically kept supply scarce. Combined with long-term job growth and a strong base of high-income industries, the region tends to recover steadily once financing conditions normalize. Looking beyond 2026, most forecasts point to gradual appreciation rather than rapid swings.