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March 5, 2018

San Francisco Market Moves Toward Slowdown

The word among real estate professionals is that our exuberant market is most likely heading for a slowdown in 2018.

The signs are there: Interest rates are ticking up, with many forecasts predicting that we’ll be looking at four- to five-percent rates as the norm in the near future. And the stock market’s reaction to those rising rates has been significant. The California Association of Realtors expects only a five percent price increase this year—nothing like our recent history.

With those signs comes a domino effect where buyer and seller behavior are concerned. The higher rates naturally lead to a situation where buyers are less willing to pay current prices. (It certainly feels like buyers are starting to reach their financial limits.)

Sellers start worrying about missing the top of the market. With that incentive, they decide to sell sooner rather than later, boosting inventory and easing housing demand. With fewer buyers for each property, pricing begins to level off. Overbidding becomes far less dramatic, and listing agents begin advising sellers to price their homes closer to the targeted sale price (instead of half a million below that).

I’ve been selling residential real estate in San Francisco since 2002, and I have to admit that I’m seeing signs of a slowdown on a day-to-day basis. Some properties are sitting on the market longer than I would have expected, for example. But I personally believe that a more level market is healthier for buyers and sellers.

I’m not anticipating prices necessarily falling. But I do believe we’ll be seeing far less extreme overbidding, frenetic contingency-waiving contracts and maybe some homes—particularly in the $2M+ range—spending more time on the market.

My advice at the moment is to do business if you can. Need to move? Plan on putting your house on the market this Spring. (Now is the time to get the prep work going.) Want to buy a home? Assess what’s realistically in your price range, and decide whether that will work for you.

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