In June 2014, San Francisco homes’ selling prices hit a million dollar median for the first time in the city’s history. That’s the sold price. The listing price was a much more conservative $799,000, a fact that speaks to the power of too many buyers vying for too few properties.
But this million dollar price tag won’t fetch buyers a lavish mansion in San Francisco. Instead it scores an 800-square-foot starter home that most likely needs work. In SF Gate, Cece Doricko, a realtor with TRI Coldwell Banker, says “The nosebleed price is a result of limited inventory and an influx of cash buyers willing to pay whatever it takes.” San Francisco’s limited inventory has led to both sky-high prices and a stalling real estate market.
In 2014, San Francisco homebuyers faced a 245% increase in prices since the previous year, while New York homebuyers saw a much more moderate 3.3% increase, according to data from S&P/Case-Shiller’s latest 20-City index.
San Francisco homes’ price tags highlight their brutal fall of four years ago, when they dove 19% in less than three years. “Shrinking inventory combined with low interest rates and motivated buyers has resulted in historically high sale prices,” says Christine Dwiggins, president of the San Francisco Association of Realtors, in Digital Journal.
During the past two decades, Bay Area home prices have historically fluctuated: they’ve gone up 58% before 2008, then down 27% in 2008, then up 50%. But each time they go up, they go up higher than before. “The numbers signal a steady recovery from the housing market crash as the overall economy improves,” the NY Daily News reports. New developments are underway and the San Francisco skyline is once again dotted with towering construction cranes.
One anomaly of San Francisco’s housing market, Glenn Kelman, CEO of real estate brokerage Redfin told the Huffington Post, is that even in a struggling economy, housing prices continually go up. “You could have huge unemployment numbers here and home prices would still go up because [the supply is so constrained and] there are enough people with limitless amounts of money who want to live here.”
Where does the seemingly limitless money come from that skews San Francisco’s housing prices? The Bay Area leads the world in technology. Workers in the tech sector drive up San Francisco’s home prices with their high salaries.
Additionally, media exacerbates the stellar rise of San Francisco’s housing prices. Reality TV cameras are here to record the whole phenomenon. One can watch the Million Dollar Listings franchise on Bravo, which showcases multi-million dollar homes whose selling price leaps beyond the original offer.
A rise in rental prices has paralleled the rise in selling prices. On average, an apartment in San Francisco rents for $3,229 a month. Rent prices can range anywhere from $2,583 for a studio to $4,248 for a two bedroom/two bathroom rental.
The city’s prices are further aggravated by the disproportionate supply and demand in the housing market, gentrification, and a growing tech industry. Because of this, it’s practically impossible to live in San Francisco.
Ken Rosen, chairman of the Fisher Center for Real Estate, is concerned about the competitive and expensive real estate market in San Francisco. “Housing affordability is the biggest single issue facing the Bay Area economy,” said Rosen in SF Gate. “Booms have unintended consequences.”