There have been several articles recently that indicate the San Francisco housing market is a heading to doom: there is a bubble, it will burst and prices will tumble. Is that true? My crystal ball has been broken for a long time.
Here’s what I know. The housing market in the Bay Area has been red hot for the last three years. The market continues to be strong, although we are starting to see some variation in strength by neighborhood, by segment and by property.
- For luxury homes in most neighborhoods in San Francisco, homes are taking longer to sell and some sellers are reducing their prices before they receive offers. Often, after these price reductions, the homes sometimes sell for more than their original list prices.
- Properties purchased by first time buyers—condos listed in most neighborhoods and smaller homes listed in less expensive neighborhoods are still seeing fierce competition. Bidding wars continue with multiple offers, some without buyer inspection and financing contingencies that result in sale prices astoundingly over the list price.
- And we have a slow down in the market for one bedroom loft properties in SOMA, where prices have flattened, on average, and it takes longer to sell each loft.
- In every neighborhood in every segment, we have seen some homes sell for less than one would expect. Sometimes this happens when all buyers are focused on another nearby home and the bidding is less intense on a home.
- Most new construction luxury condominium projects are selling quickly, some in the first few day of release.
In the past 25 plus years, we seen cycles where the market rises for three to five years. During these times we see rapid price appreciation, then a leveling off, and sometimes a downturn. The most recent downturn, still fresh in many people’s minds was from 2008 to 2012. And then the market in San Francisco, the peninsula and Marin took off.
Why? We’ve had incredible job growth in the Bay Area and our economy is strong. According to a California Association of Realtors economist, between 2010 and 2015, 234,000 new jobs were created, but only an additional 30,000 new homes and condos added to the market. Demand is still greater than supply.
So what does this mean for you or your clients? If one is in the market to buy and plans to live in the market for a long time, buying a home is good. Interest rates are still low and for the first time in my tenure selling residential real estate in SF, buying (v. renting) is a better choice because rents are so high. For most, if you are living and working in the Bay Area, owning a home is a great choice.
Is it a good time to sell? Yes, we still have very low inventory, and interest rates are low. Many homes still have multiple bidders because demand for most homes and condos is still strong. Selling a properly priced home in San Francisco and the Bay Area is a very profitable transaction for most sellers (including some who have purchased in the last year or two).
Bottom line: we are moving towards more balance, although the lack of inventory still makes it easier for sellers and tougher for buyers.