Median home sales prices in San Francisco have reached all-time highs, but the market is finally slowing down, according to a new report from Paragon Real Estate Group.
The median price of single-family homes sold in the second quarter was $1.38 million, up 4% compared with the same period in 2015. While this price set a new record, the annual growth rate slowed significantly (it was 20% between Q2 2014 and 2015).
At the same time, the median sales price in the city’s condo market was $1.135 million, up just 1% from the same period in 2015. This also represented a slowdown from a year earlier when the annual growth rate was 18%.
Paragon Real Estate Group
The decline in the rate of price growth can be attributed to mounting fears surrounding the global economy, as well as drier IPO activity in the Bay Area, which caused foreign investors and tech buyers to pull back from the market, said Patrick Carlisle, Paragon’s chief market analyst.
As a result, the city’s luxury market — defined by Paragon as homes that sell for $2.5 million or more — has softened more than affordable segments against a backdrop of the growing imbalance between supply and demand.
In the second quarter, there were 102 high-end home sales, up only marginally from 99 a year earlier, while the number of luxury homes on the market increased by nearly 25%, according to the report. Meanwhile, the number of luxury condo sales fell by 24% year-over-year, from 140 to 107.
Part of the problem is an oversupply as the number of high-end condo listings jumped to an all-time high — thanks to an increase in new projects that came onto the market. Most of these new developments are located in the South of Market neighborhood, which is one of the only areas in the city zoned for high-rise construction, said agent Justin Fichelson of Climb Real Estate, and star of Bravo’s “Million Dollar Listing San Francisco.”
Paragon Real Estate Group
What’s more, a large number of luxury condos are sold as second homes to wealthy foreign investors, many of whom have been affected by volatility in the financial markets.
“When volatility soars — and in the past 12 months, we’ve seen the Chinese stock market crash, the oil price crash and just recently, Brexit, all of which dramatically affected national and international financial markets — the affluent buyer is the one most likely to step back on making big purchases and wait to see how things shake out,” Mr. Carlisle said in an email.
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