A significant majority of U.S. home sellers continue to sell their properties for a profit, but various factors are driving an increase in the number of sellers who are losing money on these transactions, according to Redfin.
San Francisco is a prime example. Per Redfin data, approximately one in eight homes (12.3%) sold in the City by the Bay from May through July were purchased for less than the seller’s original purchase price. That’s the highest share in the country and up from only 5% last year. It’s also four times the national rate of 3% during the May-through-July period.
Other cities with higher-than-average rates of homes sold for a loss include Detroit (6.9%), Chicago (6.5%), New York (5.9%) and Cleveland (5.8%).
“Some condos in the Bay Area are now worth less than their owners bought them for in 2018 and 2019, in part because commuting from Oakland and other outlying areas into downtown San Francisco isn’t really a thing anymore,” said Redfin agent Andrea Chopp.
“There are buyers out there, but they’re a lot more cautious and picky than they were when mortgage rates were low. The Bay Area housing market was unsustainable before, so this correction is probably healthy, but the unfortunate thing is prices remain unaffordable for a lot of people — especially with rates now above 7%.”
Some of these condos (and other homes sold at a loss in the Bay Area) are worth significantly less than when the sellers bought them. In San Francisco, the typical homeowner who sold their home at a loss did so for a median of $100,000 less than what they paid for it. That’s tied with New York for the largest loss of any U.S. city in sheer dollar terms. Nationally, the typical homeowner who sold for less than their original purchase price lost $35,538.
In the specific case of the Bay Area, some homes are selling for a loss simply because, as the most expensive geographic market in the U.S., values simply had a lot of room to decline. San Francisco and surrounding areas, which have a heavily tech-oriented labor force, have been rocked by layoffs in that sector. Home prices in the Bay Area have also faced downward pressure from an outflow of workers, with remote work allowing many to seek out more affordable places to live.
Interestingly, while the shift to remote work has raised the number of homes sold at a loss in some areas, the return to on-site work is driving the same change in other places. In Boise, Idaho, for example, it’s not common for homeowners to sell at a loss, but Redfin agent Shauna Pendleton noted that she has some clients who will have to take a $100,000 loss on their sale.
These clients are transplants from places like Seattle, where employer remote-work practices allowed them to live in less pricey Boise. With many employers mandating employees return to the office, however, these people are having to sell their homes after occupying them for only a year.