You can finally see the signs that some have predicted and others have feared (and a few have cheered) for some time: the local economy is beginning to cool, and its impact is being felt in the real estate market. It might just bring more buyers into the market. We’re seeing downward price reductions in some condo rentals, we’re hearing reports of properties — especially condos — being on the market longer before they are sold. It is no surprise that the same things that drove up the economy are now cooling it off, and buyers and sellers can take note of it.
The tech industry in the Bay Area has been slowing for at least a year, with IPOs dropping, valuations of startups declining, hiring slowed a bit, and venture capital firms becoming stingier with their dollars, notes Paragon Real Estate Group in a new market report. “Some of the wild exuberance leaked out of the general economic optimism, and in the city, demand began to soften a little, while listing inventory started to pick up,” the company notes. All of those blocks (or, on Market Street near Castro, those angled wedges on corners) of new condominiums coming online have begun to have a supply-and-demand impact as well.
Price appreciation has slowed down dramatically, according to Paragon, which notes that the combined house-condo median sales price in spring of 2016 of $1.28 million was still up 5 percent from a year earlier, but the previous year’s increase had been a startling 23 percent. “Since 2012, the spring selling season has been the most dynamic period of median home price appreciation,” said Paragon. “In spring 2016, after years of major increases, year-over-year house and condo price appreciation basically plateaued.”
Of course, there are plenty of markets around the country where home sellers would be thrilled with an annual 5 percent increase. But it is one more indication that people are holding their money a little more tightly these days, whether they be venture capitalists, home buyers, renters, or employers.