The 2ndQ ended 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, we are not seeing the same run-up. This year, it's been 4% for houses and less than 1% for condos, indicating a move towards "normalization" in our market.
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 20% 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%. The summer is a great time for buyers with reduced competition. If you have been waiting to buy, the time has arrived. Interest rates are still at historic lows. 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. We find ourselves in a shifting market, not as exuberant but still quite active. The way that we protect ourselves is to 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 under 3 months of inventory, which is generally considered a Seller's market. We are still pricing low and selling high, with almost 70% of SF going for over the asking price; how much over depends on the product and location. 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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