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January 15, 2018

Here Are My SF Real Estate Predictions for 2018

Magic 8 Ball

I recently hauled out my crystal ball to take a shot at predicting what will be happening in the San Francisco real estate market in 2018.

One thing’s for sure: I’m ready to help lots of new buyer and seller clients, so don’t hesitate to get in touch if you’d like to work together this year. In the meantime, here’s what I think you can expect over the next 12 months:

Single-family house prices will increase by four- to six percent. The average price of a house in the fourth quarter of 2017 ($1,890,280) represented a 4.3% increase over Q4 2016 ($1,812,417)—not a huge jump. But houses are still king here, and single-family home owners can expect continued appreciation.

Condo and TIC prices will soften. The new tax bill will do its part to kick homeownership incentives to the curb. Price-sensitive buyers for whom mortgage interest and property tax deductions would’ve made a big difference won’t be throwing money at sellers, especially when factoring in HOA dues. This decline will be most evident for condos and TICs up to $1.5M.

The tech job market will continue to prop up local real estate. The strong tech job market will continue into 2018, so there will be plenty of house-hunting tech employees circulating with large down payments (and aiming to keep their loans under the $750,000 ceiling for that mortgage interest deduction).

Single-family homes under $1M will be limited to a handful of neighborhoods. With few exceptions, the majority of houses in this price range sold in seven neighborhoods this year—Silver Terrace, Visitacion Valley, Bayview, Crocker Amazon, Excelsior, Portola and Oceanview.

The gap between list and sale price will narrow. With some buyers backing off in 2018, sellers and their agents may not be seeing overbids for hundreds of thousands of dollars over the asking price. Expect list prices to be closer to the value of their properties. I’m confident about this one, it just may take a few months for the selling pattern to change. (It’s already happened for condos.)

Buyers will still go insane anytime a fixer hits the market. Contractors and buyers looking to renovate and owner occupy will continue going head to head in 2018. The year ended with tales of cosmetic fixers in the Sunset selling with 42 offers, and contractor-developers ponying up almost $2M for small Noe Valley homes. I don’t see this changing.

The luxury market will be busy and strong. San Francisco continues to attract affluent home buyers, many of whom can handily afford to spend $2M or more on properties of their choice (with a quarter of those buyers paying in cash). Look for international and tech buyers to make a prominent showing in 2018 luxury sales.

New construction in top-tier neighborhoods will command an average of $1400+/square foot. Mid-rise buildings were averaging $1200/sq foot last year, and high-rises were clocking in at $1300/sq foot. But in neighborhoods like the Mission and Pacific Heights, for example, averages were higher. (See The Pacific and anything along Valencia between 16th and 23rd Streets). Let’s face it, the buyer demographic for new construction is typically young professionals and sometimes empty nesters, and both groups place a high value on being able to close the door and not have to deal with maintenance issues.

Give me a shout at | 415.823.4656 if you’d like to discuss working together this year!

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