San Francisco real estate markets are continuing their blistering streak through the second half of 2018, according to a report released this week by Paragon Real Estate Group. "The market in 2018 is probably as hot as all but two or three other times in the last 50 years," Patrick Carlisle, chief market analyst for Paragon, told Mansion Global in an interview Monday. "There's an immense amount of money sloshing around the Bay Area, for that matter, around the country."
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Perhaps most noteworthy: The San Francisco market has "completely shrugged off" interest rate increases and significant changes in the federal tax law regarding property tax deductions that were expected to slow growth back in the winter, he said.
"Maybe it hasn't come home because nobody will be doing their taxes with the new changes until early next year," he said.
Some of the heat is coming from renewed interest luxury condos flooding the market. After a slowdown in sales from 2015 through the 2016 election, sales of luxury condos reached a new peak this spring, the Paragon data show.
"Luxury condo buyers have come back in force," Mr. Carlisle said.
Even while many luxury projects don't list their offerings publicly, the sheer number of construction projects in the pipeline—68,000, by Paragon’s count, which includes all price points—are among the evidence of an uptick in demand over the last six to nine months, he said.
Among more affordable listings, to say it’s currently a seller’s market would be an understatement. Median sales prices for houses in the City by the Bay jumped by $205,000 in the first half of the year compared to calendar year 2017. And the last six months have seen higher dollar-value appreciation than any previous calendar year, according to Paragon.
Demand has remained ferocious, as Mr. Carlisle put it. New properties are staying on the market for an average of 24 days, a new low since 2012, when the market began recovering from the Great Recession.
Tech is also surging. After a quiet period during the 18 months prior to January, initial public offering, or IPO, activity among technology companies has picked up dramatically in 2018, Mr. Carlisle said.
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"The big tech companies continue to absolutely dominate stock market increases, which of course is particularly important to their tens of thousands or hundreds of thousands of employees in the Bay Area. ... (The IPOs) dump an incredible amount of new wealth into our area very very quickly. Suddenly you have thousands of people who are new millionaires," he said.
And they are eager to spend on housing. The second quarter of 2018 saw the highest quarterly number of homes, including single-family houses and condos, selling for $2 million and above, according to Paragon. When late-reported sales for Q2 are entered into the Multiple Listing Service, transactions for that three-month period are expected to total 320, exceeding the previous high of 267 sales in Q2 2017.
Sales over $3 million, meanwhile, have occurred less frequently.
"It seems right now that it's that $2 million to $3 million range that has fueled the greatest jump in activity," Mr. Carlisle said.
Supply of luxury single-family homes have historically been static, he said, as few are built in San Francisco each year thanks in part to major regulatory hurdles for construction.