With the median price of a single-family home in San Francisco now residing in the $1.5 million neighborhood, real estate agents are left to assess the market and figure out their next move.
The current mark is up from $1.36 million last year.
According to Paragon Real Estate Group economist Patrick Carlisle, it’s almost double the price from the same period just five years ago in 2012.
Also of note, the median condo price in San Francisco went up to $1.2 million in May, another all-time record.
According to Carlisle, overbidding, particularly in the western neighborhoods, is a primary driver to rising prices.
“The house market is hotter than the condo market, and the more affordable house market has turned into a feeding frenzy this spring,” he said in a release.
However, the big question on every agent’s mind is: Has the San Francisco market peaked?
The recent spike in San Francisco came after prices had been flat during much of the first quarter of 2017.
Adding to the bumpy market, a construction boom has added thousands of new housing units – condos and apartments – into the market each year. This comes amid slowing employment growth, according to the California Employment Development Department.
According to CEDD statistics, the labor force in San Francisco fell to 559,100 in April to its lowest level since June 2016 and up only 4,500 year-over-year. A key driver for housing demand, employment fell to 543,900 – essentially flat in 2017 and up 7,000 year-over-year.
Moreover, National Association of Realtors Chief Economist Lawrence Yun notes that a housing crisis is developing for non-owners in San Francisco. This is now spreading to other Bay Area communities.
“The median home price in the San Jose–Sunnyvale–Santa Clara metro market was $1.07 million in the first quarter of this year,” he noted. “It was $535,000 five years ago.”
While construction has been booming in condos, home building has been slower.
Paragon’s Carlisle notes that foreign buyers, particularly from China, can have an impact on the market in San Francisco.
“Foreign buyers have played a significant role here in recent years and it is possible (he notes he doesn’t have hard data) that this demand has declined due to political issues here and in China,” he said.
The end result leaves agents to wonder where the tipping point is in the San Francisco housing market.
Any efforts to control rent costs could thwart any efforts to build new homes, making it less-than-profitable. This could deepen the divide and lead to even fewer options for middle class residents.
While building may be the answer, it may not be put into action as a matter of practicality by builders in business to make a profit.