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By Giulia Carbonaro
Senior Reporter
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Bay Area home prices are keeping steady despite inventory reaching levels unseen in years, according to the latest data, but the growing number of active listings suggests that the region, including San Francisco, could face significant price drops this year.
Active listings in the San Francisco metropolitan area jumped by 40 percent in May compared to a year earlier, adding much needed inventory to the city after it faced a crippling supply shortage during the pandemic homebuying frenzy. But buyers waiting on the sidelines of the market are staying put, as demand dwindles in the face of elevated mortgage rates and sky-high prices.
Why It Matters
The U.S. housing market, which has become increasingly less affordable for homebuyers since the pandemic, is at a breaking point: inventory is rising all across the country, while demand is kept low by historically high prices and elevated mortgage rates.
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But slowly, many markets are turning in favor of buyers, as growing numbers of active listings are sitting idle on the market. Should prices finally fall in San Francisco, one of the most expensive markets in the entire country, this would mark a significant victory for aspiring homebuyers.
What To Know
Last month, there were 7,080 homes for sale in the San Francisco-Oakland-Fremont metro area, 40 percent more than a year earlier—the most of any month on record based on Realtor.com data going back to 2016. Active listings were also up 30 percent from May 2019, before the pandemic.
In the entire state of California, inventory jumped by an even higher 51 percent year-over-year in May, the second-highest May since 2016, behind May 2019.
"Active listings typically increase this time of the year as the period from April to August is considered the spring home buying season," Oscar Wei, deputy chief economist at the California Association of Realtors (CAR), told Newsweek.
"Homes are being bought during this time frame as many buyers want to settle down before schools start. As such, active listings usually increase month-over-month from March to April and from April to May," Wei said.
"Traditionally, a double-digit increase in active listings in the Bay Area at the start of the spring home buying season is normal. This year, active listings of existing single-family homes increased 25 percent from March to April. The growth pace in active listings is slowing down, however, and the level of supply could reach a plateau sometime in June."
While pent-up demand in the state should be enough to find a buyer for each of these homes for sale, this is not what is happening in San Francisco and across California. Pent-up demand still exists, but many buyers just cannot afford to make an offer at the current price levels, especially considering that mortgage rates are still hovering around the 7 percent mark and home insurance premiums are rising across the state.
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Pending sales in the West, a region that includes California, fell by 8.9 percent in April from March, according to data from the National Association of Realtors (NAR), reporting a collapse in demand at what is traditionally the busiest time of the year for the housing market.
In San Francisco, according to Redfin's latest data, home sales were down by 5.4 percent in April compared to a year earlier. And yet, the median sale price of a home in the City By the Bay in the same month was 3.6 percent higher than a year earlier, at $1,450,500.
"While active listings have been increasing in the past couple of months, sales (non-seasonally adjusted) have also been rising due to seasonal demand," Wei said. "Economic uncertainty and elevated interest rates, however, have been holding housing demand back in the past few weeks. Despite a slowdown in home sales, prices continue to grow but the growth pace has been decelerating, partly due to more inventory in the market."
According to real estate analyst Nick Gerli, CEO and founder of Reventure App, inventory is rising and prices are falling in the San Francisco metro area because of "a historic downturn in homebuyer demand," he said.
"Housing inventory in San Francisco is exploding," he wrote on X.
"Starting 3 years ago, the buyers exited the Bay Area Housing Market, and have not come back." Gerli added. "The typical value of a house in San Francisco is $1.18 million as of April 2025 according to Zillow. The only other large metro that's more expensive is nearby San Jose."
"Those valuations don't work at 7% mortgage rates. And according to Redfin, roughly 75% of buyers in the Bay Area use a mortgage to facilitate the transaction. Thus the frozen market, with declining prices, and skyrocketing inventory."
Put simply, Gerli said, "people can't afford to buy in San Francisco's market given the sky-high prices."
What People Are Saying
Real estate analyst Wolf Richter, in a recent report: "The problem is demand in California. It has essentially collapsed. New listings aren't that high. But because the inventory of homes for sale doesn't sell, and new listings are added to it, the total piled up."
Real estate analyst Lance Lambert, in a recent report: "More California housing markets are climbing out of that inventory deficit. And if the current trajectory holds, California could soon be out of its Pandemic Housing Boom era inventory hole."
Nick Gerli, CEO and founder of Reventure App, on X: "Watch out for potentially sizable price drops in the second half of 2025 in northern California."
Allison Fortini Crawford, a San Francisco and Marin County Realtor with Sotheby's International Realty, told the San Francisco Chronicle: "Buyers are out there. But they are very picky. They are nervous and hesitant because we do have the stock market on a yo-yo."
What Happens Next
What normally happens when inventory rises and sales don't follow suit in a market is a growing downward pressure on prices. But prices are not budging yet in San Francisco.
This is in part because housing inventory, while higher than it has been in a while, remains low overall for the city. According to Gerli, only 0.7 percent of all the owned houses are on the market in the San Francisco metro right now—a low figure compared to other U.S. cities "indicating that while prices are falling, the market could still be viewed as 'tight' in some pockets."
But in a market like San Francisco, "even small upward deviations in that [relative inventory, which indicates how many homes for sale are listed compared to normal] can cause a quick correction in prices," Gerli said.
Gerli's Reventure App expects a 4.7 percent drop in home values in San Francisco in the coming 12 months. "And it could decline further if the current inventory trends hold," he said.
According to Wei, home prices in San Francisco should begin to come down from the record high set in April as we enter the second half of the year.
"Seasonality will play a role in the price moderation, but an increase in housing supply will also relieve some upward price pressure," he said. "In the Bay Area, a price drop of 5 percent from April to December is possible, but we still expect a mild single-digit year-over-year increase for the year as a whole for the state and for the region."
Update 6/11/25, 12:37 p.m. ET: This article was updated with comment from Oscar Wei.
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