It’s the news buyers have been waiting for and sellers have been dreading: the Bay Area’s rapid price appreciation seems to be showing signs of slowing down, according to the SP’s Case-Shiller Home Price Index. The index measures home prices across the nation and in 20 metro areas. The San Francisco Metro Area includes San Francisco, Marin, San Mateo, Alameda and Contra Costa counties. Therefore, most of the sales in San Francisco proper fall into the index’s highest tier—above $850,000.
The index shows that this tier has seen a more than a 40% increase since 2012, an astonishing degree of appreciation in just two years. The Lower Haight Victorian in the gallery above is a perfect example; it sold for $1.95 million in April 2012 and in August 2014 it sold again for $2.8 million.
But home values, while still heading up, seems to be slowing, according to the index. David M. Blitzer, chairman of the S P index committee, even called out San Francisco in a Forbes.com article on the latest figures. “In San Francisco, the pace of price increases halved since late last summer,” he said.
However, the Bay Area is still well ahead of the many other cities in the U.S. While we are back to or even above 2006-level peak pricing, the average U.S. home price is still about 17% below where it was at the peak. Cities hit particularly hard by the housing crash in 2008—Las Vegas, Phoenix and Miami among them—are only at about two-thirds of their 2006 values.
Blitzer expects that this slowing trend will continue if the Fed raises interest rates, which could happen as soon as early 2015. But Blitzer said that other housing indicators, like housing starts, existing home sales and builders’ sentiments, are positive, which could “point to a more normal housing market.” For local buyers who have been repeatedly outbid on a home (or just plain priced out of the area), “more normal” can’t come soon enough.
Emily Landes is a writer and editor who is obsessed with all things real estate. She also has a DIY problem that she blogs about at pritical.com.