It’s that time of year when I pull out my crystal ball and let you all know what I think will be happening in the San Francisco real estate market this year:
The job and stock markets will fuel our real estate market. The tech industry is booming once again, and the major stock indexes are hitting historical highs. Look for tech workers, second home seekers, and investors to rule the buyer pool.
Sellers will list their homes for less than what they want. Roughly 70% of house and 80% of condo sales closed at more than their asking prices in the last two months of 2014. The list low, sell higher pattern will roll right into 2015.
Hot neighborhoods will get hotter. Planning to sell a home near a tech shuttle stop, popular retail area or within walking distance of downtown rail lines/ Caltrain? Expect lots of buyers to attend your open houses. The steepest buyer competition will be in NoPa; Hayes Valley; Inner Sunset; Mission/Mission Dolores; Cole Valley; SoMa/South Beach; Noe/Eureka Valleys; Glen Park and Bernal Heights in 2015.
The luxury market will stay strong. Twenty percent of all house and 6% of reported condo sales in 2014 were for $2M or more. Thanks to stock options, IPOs and company sales, I’m betting those percentages will get a boost in the year ahead.
Buyers in the sub-$1M range will have limited inventory. Only half of all the condos and houses that go on the market will sell in the $1M or less range, if Q4 2014 numbers are any indication. (Yep, 60% of all houses and 50% of the condos sold in that timeframe topped $1M.)
Lenders will work overtime to help their clients compete. Prevailing in multiple offer situations will substantially depend on tight contract terms, which will mean rapid-fire loan and appraisal approvals and lightning-fast closes.
Interest rates will stay low through the first quarter. The Federal Reserve reportedly won’t raise interest rates before the end of March, so expect buyers and sellers to jump right in after the new year.
Sales will slow down in mid-2015. Buyers won’t be able to afford as much house once the Fed raises interest rates, which most likely will be in Spring or summer. We’ll definitely see a softer market once rates go up.
High rents will turn many renters into home buyers. With rents at historical highs in San Francisco, would-be buyers will sort out ways to get their down payments together so they can afford to own.
New construction will continue to boom. Almost 7,000 units are currently under construction, with a majority in popular neighborhoods like South Beach, SoMa, up-and-coming mid-Market, Potrero, Dogpatch and the Mission. Pricing will continue to be in the $1,000-$1,300/sq foot range for these units.