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Ten Factors Behind the San Francisco Real Estate Market

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Huge Demand + Surging Wealth + Severely Inadequate Supply = Today’s San Francisco Real Estate Market

A consideration of the main factors at play behind the current San Francisco real estate market, some of which reflect general macro-economic trends and some of which are specific to the city itself. As we’ve seen in 1989, 2001 and 2008, many of these factors can stall or go into reverse very quickly in the event of a large, negative, economic, political or even ecological event.

To see the infographic version of this article, please see the bottom of this article or click San Francisco Real Estate Market Trend InfoGraphic.

Population Growth

San Francisco has recently been adding approximately 10,000+ new residents per year and new home construction has not come close to adding enough additional housing units to meet increased demand. New construction is booming again in the city, and tens of thousands of new housing units are now somewhere in the planning and construction pipeline, but, for the time being, it appears that it will still be a while before enough new units arrive (to rent or to buy) to substantially change the existing high-demand/low-supply market dynamic.

We want to reiterate that none of this implies justification for an ever-appreciating real estate market: Almost all these factors can stall or even go into reverse. Real estate and financial markets are prone to a wide variety of extremely complex and hard-to-predict economic and political factors – and they typically go in cycles: up, down, flat, up again (repeat). And economic and market fluctuations are not uncommon within cycle phases. Still, these are, we believe, the fundamental realities underpinning the city’s homes market now.

San Francisco’s real estate market is now about 4 years into its latest recovery. In the last few cycles, recoveries have typically lasted 5 to 7 years before a significant market adjustment, but, of course, the past is no guarantee of the future. Much depends on how strong and sustained the current high-tech boom turns out to be.

All data from sources deemed reliable, but may contain errors and is subject to revision.

© 2014-2016 Paragon Real Estate Group

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