If you've been reading national housing headlines lately, you might think we're all supposed to brace for the same downturn at the same time. The problem with that view is that it treats the U.S. housing market like a monolith, when in reality different markets move on entirely different rhythms. Nowhere is this more true than in San Francisco, where the cycle has already played out in fast-forward while most of the country is still working off their pandemic boom hangover.
San Francisco peaked in May 2022 when mortgage rates spiked from 3% to 7% and the tech bubble deflated. Since then, blue-chip properties in prime neighborhoods have come down 10-15% from their highs. Adjust for inflation, and the real decline is steeper still. Here's what most people miss. While San Francisco spent the past three years working through this correction, national home prices actually set new all-time highs by mid-2024. Why is this the case?
The Bay Area operates on a different engine than the rest of the country. Most markets respond to demographics, wage growth, and mortgage rates. San Francisco moves on innovation cycles, venture capital flows, and IPO windows. When the NASDAQ peaked in late 2021 and the IPO market froze in 2022, the Bay Area felt it immediately. The rest of the country needed another year or two to catch up.
That timing difference is everything. San Francisco is already 3+ years into its adjustment and most likely hit its bottom in 2023. Meanwhile, overheated Sunbelt markets are only now starting to feel real pressure as builder inventory piles up and demographic tailwinds fade.
This front-running characteristic isn't new. San Francisco crashed early in the dot-com bust and led the way down in the 2008 financial crisis. But here's the part that matters for anyone trying to make decisions right now: the Bay Area also tends to lead on the way back up. First in, first out.
Markets that correct early and violently often stabilize and turn, while slower-moving regions are still grinding lower. You can already see it in the data. After a sharp drop through 2022 and into 2023, Case-Shiller numbers for San Francisco have been bouncing along a bottom, down only about 1.5% year-over-year by mid-2025. That's not a V-shaped recovery, but it's also not a market in freefall.
The practical reality is that both narratives can be true at once. Yes, the national housing market may well be entering a meaningful correction in 2026 and 2027 as overbuilt regions work through excess inventory and unemployment ticks higher. In our view, San Francisco has bottomed and is quietly working its way out of the doldrums. Different markets around the nation are in different phases of the same broad cycle, just offset by a couple of years.
For anyone watching from the sidelines or trying to time their next move, this matters more than almost any other single insight. If you're waiting for San Francisco to crash alongside the national headlines, you're probably waiting for something that happened 2 years ago. The worst of the repricing is likely behind us, even as other parts of the country face their own reckonings ahead.
The Bay Area's position as a leading indicator means it compresses downturn phases, experiences them more violently, and exits them earlier. That's been true for decades, and there's no reason to think this cycle will be different.
So while the headlines scream about housing busts and recession risks, pay attention to what's actually happening on the ground in San Francisco. It might just be showing you the future while everyone else is still processing the past.
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The opinions within are our own and do not constitute financial advice. Always do your own research and consult professionals regarding your specific situation.
