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A: What an exciting time to be in San Francisco real estate: adjusting interest rates, chaotic political environment, volatile stock market, short term rental restrictions.

Can anything else be added to the formula? Yes — low unemployment, limited construction, city-based IT/biotech/hi-tech companies and rumors of IPOs.

This seemingly incompatible recipe has created an extremely expensive market for renters and buyers. “Super commutes” are becoming more prevalent.

Buyers should consider a “hold” position of five to seven years, as we are at a nearly 10 year bull market and are seeing signs of “cooling” appreciation. Flip buyers should be particularly astute with purchase/remodeling costs to hedge against more modest gains. Sellers should be aware that buyers are price sensitive and “location location location” still rings true.

Though the holiday feast may suggest a lethargic market, those prepared to strike may find themselves with less competition or an opportunity to negotiate.

Paul Ybarbo, Sotheby’s International Realty, 415-640-7281, paul.ybarbo@sothebyshomes.com.

A: The Bay Area real estate market shifted in 2018 with buyers gaining a bit of control. The market will be more balanced in 2019, bringing stable prices and opportunities for both buyers and sellers.

Sellers will still be able to lock in profits, but higher interest rates and high prices will result in less demand and more days on market. Proper pricing and choosing an agent who is expert at marketing and making deals will be essential.

Cooling demand will give buyers more time to investigate and make an informed decision.

The Bay Area’s innovative companies will create wealth and buoy the market. Several local companies plan to go public in 2019, and each IPO event should create new millionaires who will diversify into real estate.

There are warning signs in other markets—including New York and Los Angeles—where the market has been slowing. Consumer confidence is up right now, but markets can turn by a terrorist attack or a natural disaster. There is also political risk, with a federal government that is stagnated and in chaos. Markets hate that unpredictability.

John Solaegui, Compass, 415-999-0673, john@havengroupsf.com.

A: Based on 2018 data I can extrapolate trends for the first quarter of 2019 but not beyond. Since the mid 2018, single family prices have decreased 2 to 10 percent. Smart sellers adjusted by lowering asking prices. Still, homes that sold within 30 days closed an average of 115 percent above list, or about $100,000 on a $900,000 home.

San Leandro has been the most active market recently. This is not surprising given it has the lowest average price per square foot and reasonable access to employment centers. No question buyers are out looking. One new listing in Montclair, which had its first open two days before Christmas, had around 40 buyers come through and is considering three offers.

More housing will come on the market in the first quarter of 2019, but there are still more buyers than sellers. Prices have already adjusted and rates are stable, thus there is no further downward pressure on prices.

Astrid Lacitis, Vanguard Properties, 415-860-0765, astrid.lacitis@gmail.com.

Development of market-rate housing in San Francisco will slow to a trickle in 2019, because a combination of higher construction costs, escalating fees, a softening market and increased interest rates has persuaded many builders to wait on the sidelines, developers and industry analysts say.

Development “is not going to happen,” said Sean Keighran, president of the Residential Builders Association, which represents developers and contractors. “There are four strikes, and you only get three. It’s hard to foresee a rosy path forward.”

The median price of a single-family home in the city has fallen 15 percent from its peak of $1.7 million in February 2017, according to real estate brokerage Compass. While the median price of $1.44 million is still out of reach for most people, it’s enough to have a chilling effect.

“Nobody buys land and develops in a downward market,” Keighran said. “Our guys stopped buying sites a year and a half ago.”

Construction costs in San Francisco have more than doubled during the past five years — the average cost of building a new home in San Francisco is now more than $700,000. In addition, the minimum percentage of affordable housing units required in a development has jumped from 12 to 18 percent during that time. The Board of Supervisors will soon vote on whether to increase that requirement to at least 19 percent.

Mark Conroe, a managing partner with Presidio Development Partners, recently completed a 28-unit condominium project at 1598 Bay St. in the Marina district and is building a 160-unit rental building at 1699 Market St. But he said he has no plans to jump into any new projects.

“There are a couple of cracks in the dam,” he said. “Brokers will tell you, if they are being honest, that the market changed at the beginning of the summer. There is no question the condo market is going down.”

Plenty of developers are looking to sell sites where projects have been approved but construction has not started, he added.

“I question why anyone would start construction now,” Conroe said. “Before, you had to track down sites. Now, the seller tracks you down. My response is always the same: I am not a buyer. Revenues are going down and costs are going up.”

While groundbreakings will be rare in 2019, plenty of new units will hit the market next year because many of them were started about two years ago. The city expects that about 4,700 units will be completed in 2019, more than twice the 1,900 a year the city has averaged since 1990, and almost as many as the roughly 4,900 units that opened in 2016, the most productive year in recent history. About 2,300 homes in multifamily buildings were completed in 2018.

The biggest project opening in 2019 will be UCSF Housing at the Tidelands, on Minnesota Street at the northern edge of Dogpatch. The development is scheduled to open next summer and will allow the university to house an additional 708 students and medical interns, reflecting a 77 percent increase in its housing inventory, said Leslie Santos, executive director for housing services at UCSF.

“The cost of living in San Francisco continues to be a substantial part of the cost of education,” Santos said. “Being able to provide more housing, conveniently located near our campus at below-market rates, will be of significant benefit to UCSF’s recruitment.”

The next-largest project to open next year will be Avery 450, at 450 Folsom St. near the Transbay Transit Center. That complex — a 548-unit, 56-story tower — will have a bit of everything: 118 high-end condos, 280 market-rate rentals, and 150 affordable units, most of which are financed with public money.

Jonathan Shum, a vice president for developer Related California, said the first residents will move into Avery 450 in early summer.

Related California is also set to complete 1601 Mariposa, a 299-unit development in Potrero Hill. The project, which overlooks Jackson Park, will have three buildings, 10,000 square feet of retail, and a walkway from Mariposa Street to 18th Street, according to Gino Canori, the company’s chief development officer.

While rental complexes already in the pipeline will continue to open next year, new condo buildings will be scarce. Miles Garber, director of research for condominium marketing firm Polaris Pacific, said only 314 new condos will hit the market in 2019, compared with about 1,000 in 2018, 584 in 2017 and 1,427 in 2016. The average over the last decade has been about 800 units a year.

While middle-market projects are stalled, towers at the higher end of the price spectrum are still feasible, he said.

“Everything that is going forward is falling above the $2,000 (per square foot) price point,” Garber said. Projects with a projected price of $1,300 or $1,400 per square foot are not worth it to developers, he said. “In the short term, we are not going to see a lot of those delivered.”

The crop of condo projects opening next year will be dominated by smaller boutique buildings in established neighborhoods. These will include 44 units at 875 California St. in Nob Hill, 40 units at 901 Tennessee St. in Dogpatch, and 35 units at 1868 Van Ness Ave. in Pacific Heights.

Conroe — whose recently completed development at 1598 Bay St. fetched between $1,400 and $1,800 per square foot — said the market is strong for new for-sale buildings in neighborhoods like the Marina that don’t see much development.

“You have two kinds of buyers in San Francisco — the generic buyer and the specialty buyer,” he said, adding that the latter group wants to buy only in certain neighborhoods. “It’s like selling a Tiffany’s or a Bentley.”

Garber said he doesn’t expect to see condo inventory picking up until 2020 or 2021, and even then, most units for sale will be in super-luxury towers like 706 Mission and One Steuart Lane — which will open in 2021 — and Mira (160 Folsom St.), which opens in 2020.

Gregg Lynn, a Sotheby’s broker who focuses on the luxury downtown market, said his clients are still bullish and are eagerly awaiting the next generation of deluxe towers. “We have clients who have been waiting for (706 Mission St.) for 10 years,” he said.

He said the stock market’s recent dip has not hurt his business.

“If anything, it’s helped,” he said. “Our customers look at real estate as a more stable, alternative investment.”

J.K. Dineen is a San Francisco Chronicle staff writer. Email: jdineen@sfchronicle.com Twitter: @sfjkdineen

Frustrated with the Bay Area’s absurdly expensive housing market, Siena Shaw and her husband, Brian Rubin, spent the past two years parenting and working full-time jobs — and constructing the Mighty House.

The couple and their then-2-year-old daughter had relocated from New York and were living with Shaw’s parents in Menlo Park.

“We didn’t know where we were going to live and couldn’t figure that out right away because of housing costs,” she said. “We were like, ‘There has to be a better solution to this.’”

Their passion for building sustainable structures combined with a desire to get out of her parents’ house, Shaw said, resulted in the Mighty House, a 250-square-foot tiny home on wheels. The Mighty House sits on an 8-by-24-foot trailer and has a sitting area, kitchen with fridge, stove and oven, a bathroom with a shower and toilet, plus a lofted area for a mattress. The median cost for a home or condo in the nine-county Bay Area was $815,000 in November, but the Mighty House prototype cost just $45,000 to build, Shaw said.

She and her family have since settled in Santa Cruz while the recently completed Mighty House sits empty in Menlo Park, but the 36-year-old architect has ambitious plans for the structure: Once the project can be scaled, they want Mighty Houses to shelter those living on the street.

Tiny homes have been cropping up here and there around the Bay Area in recent years as an inexpensive way to house homeless people. Advocates see the small domiciles as an interim solution, because they’re cheaper to build and maintain than permanent supportive housing, and they can be erected quicker. Officials in Oakland, San Jose and Sonoma County have embraced different versions of the tiny home movement in the form of sheds or villages to get more people off the streets.

Shaw has a passion for building energy-efficient homes, but it wasn’t until she met Gloria Berry, a former candidate for District 10 supervisor in San Francisco, that Shaw contemplated the Mighty House’s potential as a solution for the city’s housing crisis. Berry visited the Mighty House while she was on the campaign trail.

“The dignity it had, compared to the sheds in Oakland, the level of humanity that the Mighty House has is through the roof,” Berry said. “A shower, toilet, kitchen — the houses in Oakland don’t have any of that.”

But not all advocates for the homeless are as excited about the tiny home movement.

Jennifer Loving, CEO of Destination: Home, a San Jose nonprofit aimed at ending homelessness, has questioned the tiny home trend as a tenable solution, in part because they do little to address premium land prices in the region.

“When you think about building tiny homes, that’s not a very densified development. Generally, those are one story,” Loving said. “Are tiny homes the best use of land in an area like the bay? Each acre of land is very precious.”

Instead, tiny homes should be used in the same way municipalities use shelters and navigation centers: temporary housing until people can secure permanent living spaces, she said. However, city officials have repeatedly resisted building individual tiny homes in the past, opting for structures that are even more space-efficient.

As a compromise, officials and housing advocates have explored modular housing, or small units that can stack on top of one another to make better use of scarce real estate. In September, San Francisco Mayor London Breed committed $100 million to building modular units to house people living on the streets. Some modular housing already exists in San Francisco, but it’s market rate.

Though Berry didn’t win her race for supervisor, she wants to see Mighty Houses take root in her district, which has the second-highest number of homeless people in San Francisco, according to the city’s last count.

Berry and Shaw are working on obtaining a permit so they can move the Mighty House from Menlo Park to San Francisco. To scale the project, Shaw hopes to incorporate a sweat equity component for eventual residents, similar to Habitat for Humanity, an organization she’s worked with in the past.

In her work with Habitat for Humanity, Shaw learned that many of the first-time homeowners the organization helps have trouble maintaining the costs of living in a home, such as electricity, gas and garbage. What sets Shaw’s tiny home apart from other models is its energy efficiency, she said. The Mighty House consumes 90 percent less energy than standard homes, bringing those costs down, Shaw said.

“It’s really empowering to physically build a space and be able to walk away from it and be like, ‘I made that,’” she said. “People own the space and also feel like they’re responsible for it in some way I think could be powerful.”

Ashley McBride is a San Francisco Chronicle staff writer. Email: ashley.mcbride@sfchronicle.com Twitter: @ashleynmcb