2) “Pricing could come off their highs both in the rental and sale residential market,” Fichelson said. (As the pace of appreciation cools, it can have a profound impact on sellers’ expectations. It’s one thing to hold out for a buyer willing to pay the seller’s steep price when waiting might take months for a rising market to meet that price. It’s another proposition when the wait could take years. )
3) “The highly anticipated tech correction could also have a very positive impact on the local real estate economy by creating more opportunities to do deals that were too difficult and expensive to put together a week ago,” Fichelson said. “It resets the bar, a refocusing of the lens to bring valuations back in line with an opportunity for growth.”
(There’s nothing like signs of slowing appreciation to bring a dose of reality to sellers who are overly optimistic on pricing their properties.)
4) “Initial public offerings have definitely seen a slowdown. Hopefully, the stock-market volatility this past week is only a correction and not a mud-slide like we saw during the mortgage meltdown,” Fichelson said. “A correction will serve to support a more sustainable long-term growth trajectory for our Bay Area economy.”
Zillow’s Chief Economist Svenja Gudell says their national housing data shows a slight bump in available homes for sale, or so-called inventory, in August. She expects inventory will rise further in the months ahead as more home owners on the fence about selling decide it’s time to put their homes on the market.
Realtor.com also saw more homes hitting the market nationally this month.
“This year we are seeing inventory continue to grow in August, and while overall demand is strong, the trend in median days on the market is suggesting that the market is finding more of a balance,” said Jonathan Smoke, chief economist for Realtor.com.
Realtor.com’s research shows San Francisco is the nation’s No. 1 market based on number of page views for each Realtor.com listing and median time homes have been on the market.
5) “The tech plunge reduces available liquidity,” Fichelson said, adding that action in the housing market can be divided into price levels, with the luxury-home segment making up one of the smallest tranches.
“Homes falling into the largest tranches will weather the volatility of the market much better because there is more demand,” Fichelson said. “Homes in the smaller tranches will get hit harder because of less demand.
“There are not as many buyers writing checks for multi-million-dollar homes — so the high-end luxury homes will take a bit longer to sell and will most likely see some price reductions,” Fichelson said.
One more thing to keep in mind: The role of “cash-rich and ready” buyers outside the tech sector — namely, buyers from China. In recent years, key U.S. cities such as San Francisco have enjoyed a flood of capital flowing in from international buyers based in China and elsewhere.
Fichelson expects Chinese capital to continue coming into the San Francisco housing market.
Zillow’s (NASDAQ: Z) (NASDAQ: ZG) Gudell said there are two types of buyers from China. The first group, she said, represents new wealth in that country, and the second group represents the extremely wealthy. Gudell expects those in China with new wealth to be more affected by that country’s falling stock market. But China’s extremely wealthy may continue investing in U.S. real estate, perhaps even picking up their pace of investing as they view American real estate as a solid investment.
We can only hope.