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San Francisco’s Rental Market is Rebounding

What to Expect in the Nation’s Hottest Rental Market

San Francisco has long been known as one of the nation’s most exclusive real estate markets, but this pricey and competitive locale is adjusting to 2022’s larger real estate trends. Even though homes are selling for record prices, some real estate experts believe the San Francisco Bay Area’s housing market is leveling out.

Median prices for single-family homes in San Francisco city and county increased 15.9% between April 2021 and 2022, but are flat over the last 60 days. Sales of existing homes were down in all major regions of California in April and San Francisco Bay Area sales fell by 18.1% in March before perking back up in April.

San Francisco’s housing inventory is low but slowly increasing. Currently, the market inventory is at 1.5 months – up from 1.3 months in April 2021. Homes are still selling for more than the asking price because new home buyers are ready to spend more to win bids.

Located on California’s coast, San Francisco is one of the state’s largest cities – just behind Los Angeles, San Diego, and San Jose – and is considered one of the best rental markets in the U.S. despite hefty rent prices.

Like other Bay Area cities, more San Francisco residents rent rather than own because it’s cheaper to do so, making this one of the top rental real estate markets on the West Coast. Nearly 56% of San Francisco residents live in rental homes – which is great news for investors because they can expect good cash flow from San Francisco investment property that results in profitable investments.

There are a lot of things to consider before investing in rental properties in San Francisco. Just because the market is expensive doesn’t mean it’s overpriced. Seasoned investors can find plenty of opportunities.

Some U.S. Markets Are Pricier Than San Francisco

Although the housing market has recently cooled down, home prices in San Francisco are still increasing to mirror the national trend.

Home prices in San Francisco’s real estate market have nearly doubled, in large part because not enough new housing is being built to meet the city’s demand. Unfortunately, San Francisco’s affordability crisis and lack of inventory aren’t unique to the Golden City.

While the San Francisco Bay Area is still expensive, San Diego has dethroned the Bay Area as the “nation’s least affordable metro area” because of the 20% increase in the median sold price of homes in the Southern California city.

Still, San Francisco housing is quite pricey. The median price for a single-family home in the greater San Francisco area was $1.6 million – a 15.9% increase from April 2021 to April 2022.

While this sounds like bad news for real estate investors, it’s actually very promising. The average person can’t afford to purchase a home in San Francisco, so they rent – turning the city into a hot rental market. San Francisco rent isn’t cheap. While it’s up 10% from last year, it’s cheaper than it was three years ago. Work-from-home perks prominent in the Silicon Valley tech sector are likely one reason before.

What Investors Should Know About San Francisco

No question – the San Francisco rental market is hot, and it holds a lot of opportunity for real estate investors looking at buying rental property in California.

• The Golden City ranks 13th out of 98 in development activity.
• Multifamily housing is hot thanks to a burgeoning construction in the pipeline with more than 15,000 units projected to be completed by March 2023.
• Fix and flip purchase price, sell price, and investor profits are all higher than the national average, despite the average flip ROI percentage being lower than the national average.

Even with the market cooling down, homes are still selling at record prices and their values are only growing – giving investors profitable opportunities.

That’s where Lima One comes in. As the nation’s premier lender for real estate investors, we offer some of the industry’s most competitive rental property loans and private lending solutions. Whether you need funding for a single property or a portfolio in San Francisco, Lima One can help with our rental loan program or our private money loans in California.

Our clients have different investment strategies, so we have designed our loan options to allow us to cater to their individualized needs. Contact us today to discuss your next deal, or if you have a deal in hand, accelerate the process by applying now.

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