San Francisco Real Estate Bubble 2017 – Price Expectations
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San Francisco Real Estate Bubble 2017 – Price Expectations

San Francisco is the most fascinating real
estate market in the United States right now. Home prices aren’t skyrocketing in San Francisco anymore. The big question is whether home prices will just level off or whether they will end up falling. Hi everybody, I’m John Wake with Real Estate Decoded and I’m a real estate agent with HomeSmart in Arizona. The party line is that home prices in San
Francisco have gone up so fast, in part, because of the low supply of homes for sale in San
Francisco. And the low supply of homes for sale in San Francisco is usually blamed on San Francisco’s hostility to building new homes. That’s true but there’s another obvious
reason for the low supply that everyone forgets. Doesn’t it seem weird to you that with such crazy high home prices that there would be a SHORTAGE of homes for sale in San Francisco? That’s because the supply of homes is determined by CURRENT home prices AND expected FUTURE home prices. Let’s say you’re thinking of selling your
San Francisco house either this year or next and home prices have been going up at 20% a year. So you can either sell now or you can wait
till next year and maybe make 20% more. And if you have a mortgage like most people, a 20% increase in your sales price would mean a lot more than a 20% increase in your profit. So you decide to wait. Everyone forgets that rapidly increasing home prices DECREASE the supply of homes for sale because many potential home sellers will, quite rationally, expect home prices to be even higher next year. So – if they can – they wait. That’s why I expect the number of homes
hitting the market in San Francisco to INCREASE as San Francisco home price gains DECREASE. And don’t forget the effect also works in
reverse. If San Francisco home prices actually start to FALL, many potential home sellers who were thinking of selling this year or next will
decide to sell SOONER rather than later. We could see a rush to the exit. So be careful! And please subscribe to my website Thanks, everybody!


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