With the stock market down roughly 10 percent from last year and volatility expected to persist, homes in the Bay Area are forecasted to experience some softness, in terms of sales and pricing, later this year. The forecasted “softness,” however, will not be uniform across all housing price tiers, according to Selma Hepp, economist for real estate firm Pacific Union, who notes the Bay Area is more sensitive to stock market-wealth effects than other parts of the country.

  • Pacific Union expects cumulative price appreciation of 10 percent in the Bay Area during the next three years.
  • The $5 million and above housing market will be impacted to a lesser extent by stock market volatility.
  • Pacific Union's closed 16 percent more deals this January than last.

With the stock market down roughly 10 percent from last year and volatility expected to persist, homes in the Bay Area are forecasted to experience some softness, in terms of sales and pricing, later this year.

The forecasted “softness,” however, will not be uniform across all housing price tiers, according to Selma Hepp, economist for real estate firm Pacific Union, who notes the Bay Area is more sensitive to stock market-wealth effects than other parts of the country.

Home sales activity in the $2 million and $5 million range is expected to be most impacted by stock market conditions.

“Preliminary data shows that homes priced below $1.5 million are seeing much more activity than homes priced between $2 million and $5 million,” Hepp stated, adding homes in the lower price range are being buoyed by favorable mortgage interest rates, high demand among younger buyers and strong job growth. The Bay Area’s technology sector is still growing at a more than 5 percent year-over-year pace.

Bay Area luxury homes priced higher than $5 million will be impacted the least by stock market conditions, as buyers in this price point possess wealth that is typically more diversified.

Overall, Pacific Union forecasts annual existing home sales growth in the Bay Area of one or two percent during both 2016 and 2017. The firm is also calling for 10 percent cumulative price appreciation spanning the next three years, which would equate to “normalization.”

Bay Area brokerages still reaping the rewards

As a brokerage, Pacific Union started 2016 on an up note. According to Hepp, the firm as a whole sold 16 percent more properties this January than last. Sales prices for these sold homes were also up year-over-year by 13 percent.

Considering one of the largest Bay Area real estate firms, Pacific Union definitely contributed to the 4,845 homes that sold last month in the nine counties that comprise the Bay Area. This figure represented the strongest January for home sales in three years, according to CoreLogic.

As is likely the case with most brokerage, Pacific Union’s listings were down by 9 percent for the first 50 days of this year. Hepp pointed to markets like Santa Rosa, which currently has less than a half month of supply.

Entering February, Alameda, San Mateo, Santa Clara and San Francisco counties all had unsold inventory levels ranging from 1.9 months to 2.3 months, according to California Association of Realtors.

Email Erik Pisor

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