Looking ahead, anyone’s best guess is that San Francisco real estate is sizzling. It seems to always be the case. Interest rates have been low for going on years now, but that may change going into 2016.
At this point in time, the Federal Reserve is looking at ensuring that inflation does not go out of whack. For a while there, the concern was focused more on stabilizing the economy. Now, the focus has shifted to nipping inflation in the bud before it gets out of hand.
This hiking of interest rates has an impact on housing. That has the impact of potentially pulling back housing prices some.
As the focus continues to shifting away from stimulus efforts where jobs are starting to pop up, interest rates are sure to start increasing. This increases the costs to borrow. This is a particularly big hindrance for potential home buyers.
Affordability will be the hard sticking point of 2016. Affordability is always an in issue for San Francisco, but interest rate hikes might have the impact of stagnating prices. If you are a seller, looking to unload a home, this might be a tough pill to swallow.
For those looking to buy, it may be a blessing, particularly if they have loads more cash on hand. Though, the other added problem, is that as the interest rates go up, the affordability is not necessarily increasing either.
If the buyer needs to finance, what they are not paying at the closing table to purchase the home will be paid in monthly interest payments. It is in some ways more expensive. In addition, as the housing prices potentially stagnate, combined with interest rate hikes, the costs of higher food and energy make life in general more expensive.
The San Fransisco market is like a bellwether. What happens there, along with the other more costly real estate markets, will actually grow from just 3 percent to probably 25 percent.
In essence, San Francisco will get a whole lot more expensive, even if housing markets stabilize because the interest rates are likely to start increasing.
Overall, existing home sales should rise in by more than 6 percent over 2015, which is a good sign. Year-over-year, the market improved from 2014 to 2015 also by 6 percent. Though, 2016 is probably still going to show the slowest increase in prices in more than 5 years.
Prices might slow some as inflation takes hold in 2016. Otherwise, just expect San Francisco real estate to be pricey and you will be correct in your guess.