The average listing price for multifamily investment properties in San Francisco is at its lowest in over 10 years.
At the end of the second quarter of 2024, the average asking price for the 86 properties listed for sale in the city of San Francisco was just over $251,000 per unit. That’s less than half of the peak of over $580,000 per unit in the fourth quarter of 2019.
Older two-star buildings comprise the largest cohort of properties currently for sale. These 66 buildings have an average age of over 100 years and an average size of 18 units. The average listing price is $230,000 per unit, and the average for-sale cap rate is 5.6%.
In contrast, 20 properties rated three stars and above are on the market. These buildings have an average size of 20 units, a listing price of $302,000 and a 5.2% cap rate.
The fall in listing prices is a sign that sellers have reduced their expectations to align more closely with buyer expectations, which moved lower as interest rates began to rise in 2022. In 2023, the average final sale price was 9% below the list price. In 2024, this spread has tightened to just 6.5% for the closed sales this year.
Owners hope that the prospect of a September interest rate reduction will reignite buyer demand. Treasuries have already moved lower in anticipation of a rate cut, which will help raise the possibility of upward movement in apartment pricing.
Moreover, San Francisco’s apartment market is also better placed for recovery in the year ahead. Population growth has shifted from negative to positive, and with growing demand and low levels of new construction, vacancy rates have moved lower. Accordingly, a return to rent growth is forecast for the next few years.
