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San Francisco Bay Area Home Sales Sink to Lowest Level Since 2008, Median Home Price Jumps 12.8 Percent Y-o-Y to $750,000

February 2017 San Francisco Bay Area home sales, including condominiums, fell 2.8 percent from January 2017 and were down 4.1 percent from February 2016.

“February San Francisco Bay Area home sales were the lowest of any month since February 2008, the middle of the sub-prime mortgage crisis,” said Madeline Schnapp, Director of Economic Research for PropertyRadar. “February 2017’s dismal results reflect the trend of low affordable housing inventory and high prices depressing sales.”At the county level, sales were down double digits from last year in four of the region’s eight counties. Marin and San Mateo counties posted the largest year-over-year declines of 13.7 and 12.4 percent, respectively.

At the county level, sales were down double digits from last year in four of the region’s eight counties. Marin and San Mateo counties posted the largest year-over-year declines of 13.7 and 12.4 percent, respectively. “Double-digit home sale declines in Marin and San Mateo counties reflect their median prices topping $1 million,” noted Schnapp. “It’s no wonder headlines are dominated by stories of millennial homebuyers wanting out.”

“Double-digit home sale declines in Marin and San Mateo counties reflect their median prices topping $1 million,” noted Schnapp. “It’s no wonder headlines are dominated by stories of millennial homebuyers wanting out.”San Francisco Bay Area Home Sales Summary by County

The San Francisco Bay Area February median home price (single-family residence) was $750,000, up 7.9 percent from $695,000 in January 2017 and up 12.8 percent from $665,000 a year earlier.

“Prospective buyers, especially millennials, are seeing red, literally,” said Schnapp. “When we examine heatmaps of home values in the San Francisco Bay Area counties, large swaths are color-coded red, indicating values north of $2 million.”

Since February 2016, median prices were up in six of the eight counties in the Bay Area. San Mateo County was home to the highest annual price increase of 22.7 percent followed by Alameda County with an annual gain of 13.0 percent. Median prices fell in San Francisco and Marin counties lower by 2.9 and 3.4 percent, respectively. In four of the eight Bay Area counties, Marin, San Francisco, San Mateo and Santa Clara, median prices topped $1 million.

In four Bay Area counties, median prices have exceeded their prior peaks. In San Francisco, San Mateo, and Santa Clara counties, median prices surpassed $1 million and are higher than their prior peaks by 27.1, 35.5, and 24.4 percent, respectively. By comparison, Southern California median home prices in all but Orange County remain well below their prior peaks.

Is it a Housing Bubble?

“News of soaring prices amidst weak sales is fueling speculation that the San Francisco Bay Area housing market is a housing bubble about to pop,” said Schnapp. “It’s not a housing bubble. It’s a market dislocation caused largely by government policy.”

“A housing bubble requires both an unwarranted surge in prices followed by a massive selloff,” said Schnapp. “Today’s high prices are due to a combination of factors. Demand is being fueled by market stimulus in the form plentiful jobs and government-backed low-interest, below market rate loans that require little down. Supply constraints are coming from burdensome regulations on new building. A massive selloff — a housing bubble bursting — is unlikely because a regulatory change in 2009 means that even if consumers default on their loans, banks will now sit on inventory rather than foreclose and sell like they did in 2008.”

“California’s housing problem boils down to bad government policy. Local, state and federal housing regulations have made it all but impossible for builders to meet housing demand in California’s growing economy,” said Schnapp. “Conceptually the solutions to California’s affordability crisis are simple, but politically we should expect the current situation to continue for the foreseeable future.”

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