The constant interchange between property prices, interest rates, consumer confidence, job growth, employment rates, and marketplace trends continuously affect real estate. added factors include access to cash in the form of down payments and loans, how many real estate speculators and real estate investors exist in a marketplace, delayed retirement and homeowners with negative equity.
Given this complex interchange, the current real estate market offers a glimpse at how long-term trends, policies, and even strategies play out. In San Francisco, as in many other cities in the United States, housing affordability and transportation availability head the list of hot-button issues. These issues have many implications and an impact on the urban landscape. More obvious ones are social, economic, environmental and political.
Job growth ties to both housing affordability and transit options. Since the 1990s cities in the United States show most of the job growth. Rural areas and outlying suburbs generate few jobs and many of the ones they generate are low-wage jobs. Employment opportunities have dwindled in smaller towns and rural communities and the millennials have little choice but to move to the cities. One of the by-products of this trend is intense competition for jobs in those cities. Others include housing shortages and housing affordability.
The demographic shift in United States’ cities creates more unstable environments, bubbles, and social issues like homelessness on scales not seen until now. Increased city populations strain cities’ infrastructures, whether public services or the transportation infrastructure. As an example, the San Francisco Bay Area is now one of the most congested traffic areas in the country. Who would have known?
The high cost of living, the tech influx, start-ups, the gig economy, the survival mentality that reigns, the quality of life issues affect all strata of San Francisco. Long-time residents see their neighborhood and the city change, sometimes for the better, sometimes not.
Some long-term residents in San Francisco sell their now immensely appreciated properties if they are homeowners but many of them don’t because they enjoy Prop 13 benefits and are in no position to replace their current lifestyle in the open market. This restrains residential property inventory and drives up prices.
The high property prices generate high expectations in property sellers. Sellers count on overbids to drive up the sale price. Listing prices and sold amounts often are far apart. This dismays and discourages buyers, especially those who have access to finite amounts of money and must adhere to a price range.
Supply and demand still drive markets, but these factors influence and define supply and demand. They interrelate. It is time well spent to understand and analyze them.