If you thought the Bay Area housing prices couldn’t continue to climb, the market ended 2017 with a strong fourth quarter as all seven counties saw year-over-year increases in the average sales price. We also saw a bit of concern in the first half of Q4 2017 due to the looming tax bill issues — causing some to move faster on properties during that time of indecision — but eventually balanced out again in December once the tax bill was finally passed.
Overall, the market in Q4 continued to see restricted inventory throughout the region along with demand remaining high, causing an upward pressure on average sales prices in several of the Bay Area’s most active marketplaces. SFGate.com reported in January that, “increased buyer demand, decreased existing home turnover and not enough new home building has created a perfect storm of ‘crisis level’ low inventory in many of the nation’s most popular cities, including San Francisco.” According to the report, the Bay Area had the second biggest drop in inventory in the U.S. this year.
Also pressuring prices is the fact that there is record low unemployment rates in Bay Area, which basically stayed at an overall average of 3 percent for 2017. The Mayor’s office recently released its report with a 2.1 percent unemployment rate for the East Bay and 2.4 percent for San Francisco/San Mateo Metro Area. According to the report, San Francisco has added six jobs for every one unit of housing in 2017, which has and will continue to push prices upward and incentivize buyers to look outside of the city as they seek value and affordability.
The Bay Area’s economic growth is expected to carry on into 2018 and in turn will continue to fuel the high buyer demand, so we anticipate another robust year. Any lingering concerns regarding the impacts of the tax reform, as of now, are not expected to have a large scale cooling effect on the San Francisco marketplace, although any big increases in interest rates could affect the entry-level buyer.