San Francisco's Housing Market Cooling Down

The real estate market in San Francisco has started to cool after four years of boom that pushed the median cost of a home up to $1.2 million, according to a report on Bloomberg.

Why The Cool Down?

The report noted there are signs the San Francisco's real estate market is waning as job growth slows, venture-capital investment declines and the stock market stays weak.

"It's not the absolute feeding frenzy that we had for the last three springs before this one," Patrick Carlisle, chief market analyst at Paragon Real Estate Group in San Francisco told Bloomberg. "By any definition for the rest of the world, it's still a very, very strong market. It's just not as crazy hot as it has been."

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Bloomberg said, "The cooling is most notable at the high end of the market." There has been a record 95 San Francisco houses on the market for at least $2.5 million at the end of April, which is up a significant 42 percent from 2015, according to the Paragon report. For luxury condos — those $2 million and higher — inventory climbed 44 percent to a high of 75 units. "Sales of all luxury homes declined from January through May for the first time since 2010," Bloomberg added.

"It has definitely cooled a bit, which is a healthy thing," said Gregg Nelson, co-founder of Trumark Cos., a California-based developer. "It's more reflective of where prices are than a lack of demand."

Meanwhile, Bloomberg noted that San Francisco no longer ranks on Redfin's "20 hottest U.S. housing markets" list. Denver, Seattle, and Portland, Oregon, are now taking the lead, according to a recent report.

One Other Thing To Consider

Further, Microsoft Corporation MSFT's $26.2 billion acquisition of LinkedIn Corp LNKD may also affect housing demand.

While LinkedIn hasn't announced a reduction in workers, broader tech consolidation could lead to job cuts that will hurt home prices and rents, Bloomberg said, citing Kenneth Rosen, chairman of the Fisher Center for Real Estate and Urban Economics at the University of California, Berkeley.