2017 Market Trends

Where is the market headed in 2017? My trusty Magic 8 Ball says "ask again later."  The beginning of the year is always tricky to know how the market will perform. How much of an impact the new administration's policies will have on our local market is unclear.  What I do know is that, in general, single family homes continue to appreciate in value in San Francisco. Largely due to the fact that not many new ones are not being created.  Condo prices have softened in some areas, but good properties are still selling easily and over asking. Having lived in San Francisco since before the starting year on this chart (!) I can say that this city has its fair share of peaks and valleys. When looked at this way we tend to have more up years than down ones.

Unless something very unforeseen happens, my outlook for 2017 is still bullish.

A few interesting points regarding the above graphs: The year of highest percentage appreciation in the past 25 years was 2000, the height of the dotcom bubble. (However, by dollar appreciation, as opposed to percentage change, recent years have seen by far the greatest increase in prices.) When the dotcom bubble popped, SF condo prices were much more negatively affected than house prices: Young, high-tech workers play a bigger role in the condo market. And in 2016, the condo median sales price plateaued (and declined a little in some neighborhoods) while houses continued to appreciate, albeit at a much slower rate than the previous 4 years. We ascribe this plateauing in condo appreciation to, firstly, a big increase in new condo construction (more supply) and, secondly, to some cooling of the high-tech hiring boom (somewhat less demand).


Bay Area Median Price Changes From Top of Bubble to Crash & Recovery

These next two charts illustrate BAY AREA median house prices and price trends since the market peaked in each county prior to the 2008 crash, to the bottom of the market during the 2009-2011 recession, to 2016, after 5 years of recovery. We also threw in a separate section for San Francisco condos, since they are such a large part of the city market.

OAKLAND had a gigantic subprime bubble, a huge 60% crash, and then
 a sensational recovery highly pressurized by being just across the bridge from
 SF (and much more affordable). The
Oakland median house price is up a staggering 182% since 2011, partly because 
it crashed so low. However, because its subprime bubble was so big, it is only
12% above its inflated 2007 price. Alameda
 County as a whole has experienced much the same market. Other comparatively lower-priced 
Bay Area markets, such as northern Contra Costa, Solano, Napa and Sonoma, more
distant from the high-tech boom, saw similar dynamics, but are still somewhat below
 their 2007 peaks despite substantial recoveries.

SAN FRANCISCO, more expensive and affluent, had a much
 smaller bubble and much smaller crash with far fewer distressed property sales. The high-tech 
boom then supercharged its recovery: Its median house price is up 90% from the
bottom hit in 2011 (much less than Oakland), but is 48% higher than its 2007
peak, the biggest increase over the 10 years of any of the markets measured. Silicon Valley has similar statistics, and
other high-price markets like Marin and the Lamorinda/Diablo Valley area of
 Contra Costa County, saw comparable, if somewhat less dramatic, dynamics.


These analyses were made in good faith with data from sources
deemed reliable, but may contain errors and are subject to revision. It is not
our intent to convince you of a particular position, but to attempt to provide
straightforward data and analysis, so you can make your own informed decisions.
Median and average statistics are enormous generalities: There are hundreds of
different markets in the Bay Area, each with its own unique dynamics. Median
prices can be and often are affected by other factors besides changes in fair
market value, and longer term trends are much more meaningful than short-term. It is impossible to know how median
prices apply to any particular home without a specific comparative market

© 2017 Paragon Real Estate Group