Buyer Outlook

For the period from 2013 to mid 2015, buyers had to compete vigorously to buy a home in San Francisco.  With inventory low, prices rising by double digits and low interest rates, these years presented challenges to eager buyers. 

By fall of 2016, market dynamics had changed markedly, swinging more negotiating power back to buyers as the inventory grew and buyers could afford to be a bit more selective, particularly when buying condominiums.  After three solid years of low rates and improving job prospects (particularly in information technology companies amongst other industries), demand has exceeded supply leading to increasing prices. But with sharp price increases and some new inventory in 2015 and 2016, buyers are realizing that they have more time and more options. 


More buying options

Condo buyers in particular are seeing more inventory on the market and taking their time when looking to buy.  The demand for single family homes remains strong in San Francisco, with lots of competition amongst buyers on well priced homes. 

Low interest rates

Interest rates have been at historic lows, but are beginning to inch upward with small signs that inflation might be coming back. Mortgage payments are affordable by historic standards, but have been rising in late 2016, with the possibility that further rate increases begin to take a toll of buyer affordability.  Many economists believe that the Federal Reserve will begin dialing back on all the stimulus injected since the financial crisis - raising rates incrementally. A stronger economy, less demand for bonds, and tighter monetary policy are widely expected to lead to higher interest rates in 2017. Of course, economists have proven that they can all be wrong. No crystal ball is perfect. 

Prices have risen dramatically for three years

Prices have risen dramatically since the depths of the great recession. By all appearances the time of double digit increases in prices may well be over for now and near term appreciation may return to single digits, closer to the long term norm. 

Bottom Line: Buyers have choices for the first time in a while. this would be particularly true for condo buyers.  If you want to buy in San Francisco, now may be a time when you don't have nearly as much competition if you can afford to do it.

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