The collective worth of San Francisco homes diminished by $60 billion since the last summer. The typical San Francisco home seller in the last year, who took a loss, sold their home for about $100,000 less than what they paid for it.

San Francisco home sellers are four times likelier than the average U.S. home seller to sell at a loss due to significant drops in home prices.

A report from Redfin indicates that San Francisco is one of many cities where homeowners are experiencing losses when selling. Detroit, Chicago, New York, and Cleveland were all higher than the national rate of homeowners selling for a loss.

Outpaced Home Price Drops in the San Francisco Metro

During the three months ending July 31, homeowners sold approximately one in every eight (12.3%) homes in San Francisco for a lower price than the original purchase.

This higher proportion surpasses rates in any other major U.S. metro and is four times the national rate of 3%. San Francisco’s notable surge in homes selling at a loss is almost double the next worst metro Detroit, which came at 6.9%. Chicago (6.5%), New York (5.9%), and Cleveland (5.8%) round out the list of metro areas where the highest share of homeowners lost money on home sales.

Although homes are not liquid assets, they comprise a significant part of the average American’s net worth. San Francisco homeowners who incurred losses sold their properties at a median price of $100,000 lower than their purchase price, matching New York Metro for the highest loss among major U.S. metros.

The slowdown has taken a toll on San Francisco condo owners the most, with the median condo value plummeting by $122,500 compared to last year. Single-family homes in the area haven’t fared much better, experiencing a decline of $81,250, marking the highest drop among the 100 largest U.S. cities.

While housing markets nationwide feel the impact of elevated mortgage rates, the Bay Area’s substantial decline is exacerbated by tech sector layoffs and the remote work trend prompting relocations to more budget-friendly locales. 2022 saw California, Illinois, and New York top the list of states losing population.

While San Francisco is at the forefront of property value decline, numerous other cities have also witnessed significant price plunges. Sixteen cities saw single-family home prices slashed by over $10,000, while nine others experienced more moderate decreases. Additionally, seven cities observed that single-family home prices remained the same, which offers little relief for homeowners who made purchases a year ago.

Condo prices in 37 cities are causing concern among property owners. Besides San Francisco, Henderson, NV; Oakland, CA; and New York City, NY condos faced daily depreciation of $110, $118, and $219, respectively, since September 2022, accumulating losses totaling $40,000, $43,000, and $80,000 in the mentioned areas.

Point2, a Yardi Systems Inc. division covering real estate trends, corroborates the Redfin Report. Point2 analysis revealed that condo owners in 36 cities and single-family homeowners in 25 markets are experiencing significant price corrections. Single-family homeowners have witnessed a daily decline in value of up to $223 in these cities since purchasing their homes last year.

Meanwhile, condo owners have faced even more significant losses, with the average San Francisco condo owner experiencing a daily loss of $336, accumulating to approximately $122,500, a figure alarmingly close to the city’s median income of nearly $182,000.

Across 15 major U.S. cities, condo owners and single-family homeowners have observed declines in home value.

The substantial year-over-year decreases in some cities pose a significant risk of negative equity for homeowners who bought their homes during the peak of last year’s pandemic. The 15 large U.S. markets with year-on-year price drops for both single-family homes & condos include:

Memphis, TN

New Orleans, LA

Detroit, MI

Oakland, CA

San Francisco, CA

San Antonio, TX

Colorado Springs, CO

North Las Vegas, NV

Henderson, NV

Austin, TX

Honolulu, HI

Nashville, TN

Jacksonville, FL

Chandler, AZ

St. Paul, MN

Riley Adams, CPA and founder of WealthUp, says, “If you’re in the unfortunate situation of having to sell your primary residence for a loss and you think the tax code will cut you a break, you’ll be sadly disappointed. Current tax law doesn’t provide for the ability to deduct any loss on the sale of your home against your income taxes. You’ll be stuck bearing not only a capital loss from selling for less than you bought your primary residence for but not given any tax benefit for doing so.

“If you’ve got a rental property, it’s likely you’ve claimed accelerated depreciation to lower the rental income you need to pay taxes on each year. This allows you to lower your income in the present year but also requires you to pay this back when you sell the property at a future date. The tax code requires this depreciation to be repaid and included as your income in the year of sale. This depreciation recapture results in higher ordinary income in the year of sale.”

Majority of U.S. Home Sellers Reap Profits Despite Price Falls

Sellers faced minimal chances of selling at a loss in cities such as San Diego, Boston, Providence, RI, Kansas City, MO, and Fort Lauderdale, FL.

In these metropolitan areas, only about 1% of homes were sold for less than the seller’s initial purchase price. Rhode Island and Florida have been on the list of best states for real estate investors.

Most U.S. home sellers continue to experience financial gains despite declining home prices from their highest points.

Across the country, 97% of home sellers managed to sell their properties for a profit during the three months ending July 31. On average, these homes sold for 78.4% ($203,232) more than the original purchase price.

Historically, homes in the San Francisco metro area infrequently sold at a loss compared to the national average, but this trend shifted during the pandemic. Despite this change, due to San Francisco’s high home prices, most property sales that do turn a profit result in significant gains. The typical home in the metro sold for $625,500 more than the seller bought it for, marking a 71% increase. While this ranks second in dollar gain among significant metros, it falls below the national median percentage gain of 78%.

Many sellers purchased their homes long ago at lower prices, allowing for profits despite recent declines in home values. The disparity between average gains and losses highlights the divided landscape of the real estate market, with high-priced markets seeing substantial profits in successful sales. In contrast, others witness a concerning increase in property value declines. This evolving trend, especially amid economic shifts, remote work trends, and housing market adjustments, emphasizes the need for strategic planning and awareness for prospective buyers and sellers navigating the current real estate climate.

This article was produced by Media Decision and syndicated by Wealth of Geeks.