Part One: Factors that underpin the San Francisco market
What are the main factors at play in determining the San Francisco real estate market? That’s what the folks at Paragon wanted to know, hence this report titled 10 Factors Behind San Francisco’s Real Estate Market. (Original name, don’t you think?)
Specifically, as the report notes, some of these “reflect general macro-economic trends and some … are specific to the city itself.” It goes on to state that in 1989, 2001 and 2008, many of those factors stalled or even went into reverse rapidly due to a large, negative, economic, political or even ecological event such as the Loma Prieta earthquake. The most current version was updated at year-end 2015.
So with no further ado, let’s start to look at these factors:
- Population growth. With an approximate annual addition of 10,000-plus new residents, San Francisco is struggling to keep up with city housing needs. “New construction is booming again in the city,” the report proclaims, “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 buy) to substantially change the existing high-demand/low-supply market dynamic.”
- Brand new wealth. For the newly affluent residents of San Francisco, the number of which include many millionaires and even billionaires thanks to stock options, IPOs and company sales, the market’s wealth effect has been super-charged.
- Stock market upswing. Despite the turbulence last fall, the S&P 500 is nonetheless up about 60 percent since 2011 – an increase that has benefitted largely from a major increase in the value of financial holdings.
We’ll continue this discussion next time, when we’ll pinpoint more factors behind the market.