San Francisco properties are surging in price even though the market is facing difficulties in homebuyer demand.
Homes worth between $1.5 and $5 million grew 0.66 percent in prices in November, according to the November San Francisco Residential Listing Data report.
Meanwhile, homes worth between $5 million and $15 million climbed by 3 percent in prices, bringing the average price from $7.77 million to $8 million.
The time of the year may play a role in the slightly increasing prices.
Title and escrow expert Alan Chang said lower inventory tends to drive valuations up slightly if demand remains flat or high.
"The holiday season always skews transactions from November through December/January as most families are not looking to move during this season, which drives lack of available inventory," Chang told Newsweek.
However, in recent years, large San Francisco homes have dropped in value by millions as the tech hub city faces wider distress in the housing market.
"San Francisco's current housing affordability problem is certainly not unique, but it does feel more prominent than similar situations due to the average home cost when compared to other markets experiencing these same conditions," Alex Beene, a financial literacy instructor for the University of Tennessee at Martin, told Newsweek.
"Demand is down for a number of reasons, some of which stem from higher housing costs and escalated interest rates and others from what is seen as a welfare decline of the city that has constantly seen criminal activity plague its headlines over the past few years."
High mortgage rates are pricing Americans out of home ownership across the country, and San Francisco, which boasts some of the highest prices in the nation, experienced a drop in demand since the pandemic.
Currently, the average San Francisco home is $1.26 million, up just 0.1 percent year over year, according to Zillow.
Many sellers in the city who bought their homes at high prices don't want to take a loss on the property and can afford to wait since they are in high-income careers, Beene said.
"They're in no rush to sell, and that creates a scenario where prices can stay stubbornly high despite a downturn in demand," Beene said.
Kevin Thompson, a finance expert and the founder and CEO of 9i Capital Group, echoed this statement. While the demand may have decreased, the supply of homes in San Francisco remains stagnant.
"Limited space and strict zoning regulations hinder new construction, particularly in high-end markets," Thompson told Newsweek.
"Additionally, the scarcity of available land throughout the city means that adding substantial new supply is unlikely, which keeps upward pressure on prices.
San Francisco's housing market differs significantly from the Southeast, where the initial pandemic boom is leveling off and high-income regions on the West Coast continue to be at elevated levels.
"Buyers should prepare for steady to rising prices in high-income regions like San Francisco and the West Coast," Thompson said.
"On the flip side, areas in the Southeast may continue to experience declining home values. This environment is part of the 'new normal' where mortgage interest rates of 6 to 7 percent are expected to persist in a stable economy."