Inventories and interest rates are up, sales are down, and prices are either flat or falling. So we’re calling it: welcome to the top of the San Francisco housing market!
For sale signs are popping up left and right, and as one seasoned agent recently commented, “we’re going to wake up one morning and it’s going to be like it snowed ‘For Sale’ signs the night before.” In addition, thousands of new condominium units are either coming on the market, currently under construction, or have recently been funded.
Long-term rates continue to climb, but more importantly, short-term rates have climbed even more: one-year ARMs are at a three year high and are closing in on the 30-year fixed rate. This is extremely significant in a market where buyers have turned to short-term ARMs for affordability reasons rather than financial wherewithal.
The difference in monthly payments between a one-year ARM at 4% versus a one-year ARM at 5% is over 14% (that’s an extra $400 per month on a $600k loan). In other words, and from a cash flow perspective, prices would need to fall at least 14% in order to maintain the same level of affordability in the marketplace.
Year-over-year sales have declined for the seventh month in a row, and the median sales price has flattened over the past quarter. And while many agents are still quick to point out the year-over-year positive appreciation in prices, that number is meaningless if you purchased a home during the past couple of months over which the median sales price has actually fallen.
We’re not predicting, we’re just observing and calling a spade a spade (or a duck a duck). Welcome to the top of the market.
Bay Area prices slow as mortgage rates rise [Chronicle]
San Francisco Housing Inventory: Up, Up, And Away! [SocketSite]
Bay Area Inventories Up, Agent’s Spirits Down [SocketSite]
Median San Francisco Bay Area Home Prices Down $20k [SocketSite]