From Selma Hepp, Chief Economist Pacific Union International - 10/15/2016
The third quarter in San Francisco continued along the same path seen in the previous couple of quarters, with normalizing market conditions striking a better balance between buyers and sellers. Sales activity in August and September was on par with the same period one year ago. July sales fell notably from last year, but this trend was consistent across the entire Bay Area and reflected a drop from the peak activity seen last July.
Home price appreciation came to a halt this summer, and some segments of the market saw lower median sales prices than last summer. Normalizing prices are a function of buyers' affordability ceilings, as well as a buildup of inventory. Nevertheless, while increasing supply conditions provided a breather, inventory is still tenaciously low and continues to present a challenge for the San Francisco housing market. A lack of affordable homes is a considerable issue for the city, as young adults are attracted to urban amenities. The inventory of homes priced above $1 million has been growing, but supply still remains markedly below the level that is considered normal or representative of a balanced market.
Looking Forward: San Francisco saw incredibly strong housing market conditions over the past few years, and this year's normalization trends may be interpreted with concern. But housing demand in San Francisco remains robust, and the tech industry continues to fuel investment in the region. Uncertainty surrounding the upcoming presidential election and its impact on global financial markets has led to some trepidation in the market, yet demand from traditional buyers should persist.
Sales data in the charts includes single-family homes in San Francisco County.
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