If there’s any place on the planet that’s known for its luxury housing, it’s San Francisco.
But despite flourishing since the market started improving after the recession of 2008, the luxury market in San Fran is beginning to cool off.
The spring of 2015 saw a craze of activity in this particular real estate market in San Francisco, but all price points have eased off from this raging activity.
In fact, it was the more well-to-do neighborhoods in San Francisco that guided the market rebound from the 2008 economic recession, and experienced the highest rates of appreciation since 2011.
According to the latest S&P Case-Shiller Index for the San Francisco Metro Area, top-tier priced homes in the Bay area rose 11 percent over the past 12 months.
After this rapid inflation in luxury home prices, things have started to change, as many buyers have been looking beyond the city limits of San Francisco for more affordable choices in housing.
Perhaps home prices in San Francisco have increased too far and too fast over the recent past, so much so that they’re no longer being supported by income. Home prices set a record in 2015, and are now over 60 percent higher than the post-economic recession low of 2012.
Perhaps the stock market’s activity had something to do with this cooling off period. The wealthy tend to be more active in the buying and selling of stocks, and with the volatility in the market later in 2015 and into 2016 – particularly among tech stocks – many affluent homeowners may have been more apt to selling before the market potentially takes a downturn.
So far this year, the NASDAQ, Dow Jones and S&P 500 are all down, and continue to drop amid major tech-stock sell-offs.
And the global economic unrest that’s been wreaking havoc is likely also playing a key role in wealthy buyers’ motivation to make a purchase. It simply isn’t the same atmosphere that it was even as recently as a year earlier.
Buyers are simply becoming more cautious and hesitant to make a move when it involves heavy capital.
Demand still remains rather strong for properties priced in the $1 million range, but those in the much higher price brackets really need to pull out all the stops to offer the right features and finishes in order to command sky-high price points.
And an increasing number of luxury condos are being constructed, boosting supply for buyers on the look-out. With less demand for housing in this pricier segment, market activity obviously dulls. Buyers have a lot more options and power at the negotiating table. They’ve got more time to play with, and don’t have to be overly concerned about the competition among other buyers.
Of course, this isn’t a “crash” by any stretch of the word. Many high-end homes are still being snatched up really quickly, with great motivation to write up a solid offer and close the deal. If the goods are there, buyers will pounce.
But these scenarios aren’t as rampant as they were months prior. It’s for this reason that sellers and their agents need to price their properties as accurately as possible in order to remain strong on the competitive forefront.
While sellers aren’t necessarily relishing in this luxury housing segment slowdown in San Francisco, it’s good news for many others. There are plenty of buyers out there who welcome a cool-off in prices, which would obviously make it a lot easier to enter this type of home in the city.
How long this environment lasts remains to be seen. One thing is for certain: a reversion back to a hot luxury market won’t happen overnight.
