A new report out Tuesday shows the real estate market in the Bay Area is hot.

San Francisco home prices have surged nearly 25 percent in the past year; the biggest increase in seven years. That’s more than double the nationwide average of major cities.

According to the SP/Case-Shiller index that ranks metropolitan cities, Las Vegas reported the next biggest jump at 23 percent, followed by Phoenix at nearly 21 percent.

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Article source: http://abclocal.go.com/kgo/story?section=news/business&id=9190210

And if a recent analysis by real estate brokerage Redfin is any indication, the city may be in the midst of a burgeoning housing bubble.

Redfin’s study looked at home sales in major cities across the country and found San Francisco to be among a handful of metro areas where the median home price-to-household income ratio is high enough to suggest the formation of a real estate bubble. Other factors, including rapid growth in prices, low levels of available properties and houses regularly selling within a week of first being placed on the market, also pointed to a similar conclusion.

“A lot of people [in San Francisco] are really frustrated that they can’t buy a home in the city because it’s so expensive,” explained Redfin CEO Glenn Kelman.

Over the first three months of the 2013, the median home sale price in San Francisco was $771,750. The median annual household income is currently $72,947. The former number is rising much faster than the latter, indicating that the price of housing in the city has increasingly less to do with what the average home buyer can actually pay.

The meager supply of available housing in San Francisco further exacerbates the problem.

“Some properties are receiving in upward of 40 to 60 offers and selling in 24 hours or less,” said Bay Area Redfin agent Charmaine Frank, who noted that on a number of occasions, every single Redfin agent in San Francisco represented a different potential buyer for a single property.

“The normal laws of economics don’t apply to the Bay Area,” added Kelman. “You could have huge unemployment numbers here and home prices would still go up because [the supply is so constrained and] there are enough people with limitless amounts of money who want to live there.”

As a result, it’s becoming increasingly difficult for anyone but the wealthy to afford a house in San Francisco. Last year, real estate blog Movoto urged prospective house hunters to cool their jets until the bubble bursts.

“Unless you happen to be a billionaire, you should probably steer clear of shopping for a new home in the city,” Movato writer Kristin Crosier advised. “Even then it would be an unfortunate way to spend your piles of money.”

In a typical real estate bubble, individuals put all their money into buying property on the assumption that they can later sell it for a profit. But market forces cause home values to eventually decrease. When that happens on a massive scale, the bubble pops, a large amount of money suddenly evaporates, and a trail of economic destruction ensues.

Deterred by skyrocketing home prices, many San Franciscans have opted to navigate the city’s mind-bogglingly expensive rental market on the assumption that renting will be cheaper. However, according to a recent investigation by real estate site Trulia, buying a home is still cheaper than renting in every major American city, San Francisco included.

This rapid growth in home sale prices isn’t limited to San Francisco’s city limits. Over the past year, the median sale price of homes in the whole San Francisco Bay Area jumped by nearly 40 percent — the biggest spike of any metro region in the country. Over that same time period, the number of new listings decreased by eight percent.

In fact, overheated housing markets have popped up all along the California coastline. After Washington, D.C., which the Redfin study ranked as having the biggest housing bubble in the nation, the next three cities — Los Angeles, San Diego and San Francisco — were all in California

“California is hot because that’s where so many people want to live,” Frank said. “There are long-term demographic patterns driving people into California.”

Related on HuffPost:

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• Sacramento, Calif.

  Year Over Year Increase: 42.57 percent

  Median Home Listing Price: $285,000

  Total # Of Listings: 2,962

• Santa Barbara/Santa Maria/Lompoc, Calif.

  Year Over Year Increase: 35.72 percent

  Median Home Listing Price: $699,000

  Total # Of Listings: 1,195

• San Francisco, Calif.

  Year Over Year Increase: 25.04 percent

  Median Home Listing Price: $749,000

  Total # Of Listings: 2,292

• San Jose, Calif.

  Year Over Year Increase: 23.53 percent

  Median Home Listing Price: $562,000

  Total # Of Listings: 2,035

• Phoenix, Ariz.

  Year Over Year Increase: 21.21 percent

  Median Home Listing Price: $200,000

  Total # Of Listings: 15,114

• Atlanta, Ga.

  Year Over Year Increase: 19.93 percent

  Median Home Listing Price: $179,000

  Total # Of Listings: 32,530

• Oakland, Calif.

  Year Over Year Increase: 17.22 percent

  Median Home Listing Price: $375,000

  Total # Of Listings: 1,911

• Seattle/Bellevue/Everett, Wash.

  Year Over Year Increase: 16.66 percent

  Median Home Listing Price: $349,950

  Total # Of Listings: 4,381

• Fresno, Calif.

  Year Over Year Increase: 16.28 percent

  Median Home Listing Price: $184,900

  Total # Of Listings: 1,949

• Riverside, Calif.

  Year Over Year Increase: 15.65 percent

  Median Home Listing Price: $229,000

  Total # Of Listings: 14,909

Article source: http://www.huffingtonpost.com/2013/04/16/san-francisco-housing-bubble_n_3088591.html