We ended 2016 with a record high for overall average sales price and a hefty increase in the median sales price. However, other market indicators, i.e. rising inventory, falling number of closed sales, longer days on market, and price reductions demonstrate that the market has entered a transitional phase, hopefully signifying a soft landing from over-exuberance. Even with some market segments performing well, houses increased by 4% and less than 1% for condos, indicating a move towards "normalization" in our market; a pause as the recent upward trajectory leveled and stabilized.
Anyone who reads real estate news, blogs or newsletters knows that there are 2 particularly vehement camps with diametrically opposed positions: one never stops insisting that the market is great, while the other never stops shouting that the market is crashing. Both marshal and exaggerate selected statistics and ignore others.
The truth is that there are cycles in real estate and no market can go up 15% a year forever. On the other hand, we do not currently see local or macro-economic conditions suggesting an imminent crash. While it is true that economic, political or even environmental crises of various magnitudes can erupt suddenly (Chinese stock market, oil prices, Brexit, Presidential election), the impact of these crises can vary enormously.
BUYERS. In many ways this slowing market is a nice breather after the wildly overheated selling seasons of the last 4 years. With listing inventory up, buyers are finding they can take their time. Some homes are being passed over altogether; the number of listings that expired without selling rose by over 50%. If you have been waiting to buy, the time has arrived. Interest rates are inching up. Be prepared to compete with tech innovators, finance or tech executives, global families seeking safe harbor investments, or empty nesters returning to the City. Your lender relationship and being ready to act immediately are crucial. Buy for the long term: 5+ years. San Francisco was effected by the Great Recession for 3 years, so it seems that 5 years is a safe time frame to hold a property until its value returns, if and when the next adjustment occurs.
SELLERS. We are still pricing slightly under expected selling price, in the hopes of attracting more than 1 offer. Generally speaking, the market for more affordable homes is stronger than for luxury properties; demand for houses exceeds condos. Areas with a high concentration of new construction also have a weaker demand (SOMA, South Beach). San Francisco remains a strong attraction for technology companies who recruit and hire employees with the desire and resources to live in the City. Along with the traditional needs of existing residents, 2nd home buyers, and investors, ongoing demand is fueled. Ours is a global market, especially for those homes that have been recently renovated and in move-in-condition.
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