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2-4 Unit Buildings Market Report | Q2 2024

September 19, 2024
Allison Chapleau
5 min read
The San Francisco multi-family real estate market experienced mixed results in the second quarter of 2024. While sales of 2-4 unit buildings increased by 33% from the first quarter, they were down 8% year-over-year and still trailed behind historical averages. This quarter also saw the highest absorption rate—the percentage of listings going under contract—in two years, indicating robust demand. Despite these gains, the median sales price remained at $1,750,000. The average building sold typically measured 2800 square feet, was 113 years old, and took around 25 days to receive an offer.



Market Dynamics

Sales Volume Trends (2017 - Present)

Sales data for San Francisco's 2-4 unit buildings typically reflects offers accepted 3 to 6 weeks prior, indicating a lag in reporting closed sales. The market experiences notable seasonal fluctuations in both supply and demand. In Q2 2024, sales increased significantly quarter-over-quarter, but when compared year-over-year with Q2 2023, the performance dipped slightly and continued to perform significantly below the long-term average.




Price Dynamics

Median Sales Prices by Quarter

Over the long term, the median sales prices for 2-4 unit residential buildings in San Francisco have shown significant variations. Influenced by offers typically accepted 3 to 6 weeks prior, the market demonstrates sensitivity to seasonal supply and demand variations. In Q2 2024, the median sales price decreased by 3% year-over-year and continues to be substantially lower than the prices seen before the mid-2022 interest rate spikes. Note that prices for 2024 reflect only the first half of the year and are considered preliminary, pending full-year data, which will provide a more complete picture.




Current Market Conditions

Property Performance Insights

In the second quarter of 2024, 2-unit buildings typically sold faster than 3-4 unit properties, reflecting more robust market dynamics for smaller multi-unit buildings. The average days-on-market for properties before an offer was accepted reached its lowest point in two years, and the absorption rate climbed to its highest in the same period, indicating a quick-moving market with strong buyer demand.

Table showing median sales price, size, sq.ft. value for 2-4 Unit Residential Building Values by San Francisco Realtor District

Economic Influences

Interest Rates Impact, Employment and Demographics

The spike in interest rates in mid-2022 has had a lasting impact on market values, continuing to influence the economic landscape into 2024. San Francisco's employment levels are still down about 7.5% from pre-pandemic figures, especially among workers aged 25 to 44, primarily due to increased remote work and decreased high-tech jobs. Nonetheless, hiring in AI sectors shows signs of growth, which may influence future market dynamics.

Rental Market Overview

Average Asking Rent Trends (1994 - Present)

San Francisco rents experienced a significant dip in 2020 due to the pandemic but began to rebound in 2021. Over 2022 and 2023, rent levels fluctuated, showing signs of instability. In 2024 (year-to-date), rents have increased but are still slightly lower than the previous year. While current rental prices have recovered well above their lowest point during the pandemic, they remain noticeably below the early 2020 levels.

Line graph showing average asking rent, 1994-2024 for San Francisco residential rents



Conclusion

The San Francisco 2-4 unit building market shows signs of gradual recovery and adaptation to the new economic conditions marked by interest rate changes and demographic shifts. Despite the challenges, the market's resilience points to potential growth as it continues to stabilize and adjust to reality after the pandemic.

Data Sources and Reliability

All data is sourced from the NorCal MLS Alliance and is deemed reliable, though it may contain errors and is subject to revision. All numbers should be viewed as approximate, with updates and adjustments expected as more data becomes available.




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