(Writing this from Prague, possibly one of the most beautiful cities in Europe.) Our mid-year report is out and it reflects nothing less than a sizzling seller’s market for single family homes, one that has re-ignited after something of a two-year lull — if that’s the word for a market that’s “only” been increasing by 6 to 7 percent per year.
Year to date, median prices for single family homes have increased by 14.5% over 2017. The median price is now $1.62 million (see next two charts).
Meanwhile, condos prices have also accelerated albeit at a slower pace. After a flat year in 2016 and a 5% increase in 2017, the median price has increased 6.2% year-to-date and now stands at $1.221 million (see chart above and below).
And these increases come against a backdrop of rising interest rates (though still at historic lows), not to mention recent tax law changes that limit the benefits of home ownership tax deductions.
Why such increases? Well, the booming local and national economy certainly suggests that the “demand” side of the supply/demand equation remains healthy. Meanwhile, the “supply” side remains at historically low levels — for reasons that, as I’ve written about previously, indicate a secular shift in the market, particularly for single family homes.
I could throw more charts at you, but they all point to the same thing: no relief in sight for increasing home prices in the immediate future. Will the party (for sellers) ultimately come to an end? Of course it will, but it’s hard to see it happening any time soon based on current trends. For buyers that are squeamish about entering the market, my counsel remains the same: if your time horizon is a minimum of 5 to 7 years, you should be OK. San Francisco, is a global city and, having seen it go through a number of recessions, I remain bullish on its long-term future. But if you think you might need to sell in less than that time period, be careful: you could get caught during a downturn.
And finally: some of you may have read the news that Paragon is going to be acquired by Compass Real Estate. The merged company will easily be the dominant residential real estate brokerage in San Francisco, and one of the leaders throughout the Bay Area. To be honest, since the announcement was made while I’ve been out of town, I haven’t had the opportunity to learn all the details yet. I’ll get back to you when I’ve learned more.
As always, your comments, questions, and referrals are much appreciated!