June 2016

“San Francisco’s risk is all these private companies that have huge valuations. They are using that capital to fund money-losing hiring,” continued Rosen. “They’re hiring lots of people. But if the capital markets correct, as they will in the tech sector, and valuations come back dramatically — as they might well come back 40 percent, 50 percent or 60 percent — there will be lots of layoffs. And the job growth numbers that have been so robust could slow or even decline.” Not only is Rosen cautious, but Fitch Ratings, the rating agency, recently said San Francisco is reaching the boiling point, with Bay Area home prices “overheating.” “Home prices in the Bay Area have risen to a level unsupportable by area income,” wrote Grant Bailey, Fitch’s managing director. “Driven by the booming technology sector, San Francisco home prices hit an all-time high in the third-quarter 2015 and are now 62 percent above their post-recession low of early 2012. The last time the Bay Area experienced this kind of home price growth was during the dot-com era from 1997-2000.”

Aldo Congi, vice president of sales and the managing broker at McGuire Real Estate in San Francisco, is bullish on the long-term prospects of the San Francisco residential real estate market. Conge said global demand and lifestyle issues will continue to fuel demand. Compared with global cities like London and Hong Kong, he said, San Francisco home prices are cheap. “It’s inevitable that there’s going to be a correction,” said Congi, a 37-year real estate veteran referring to a possibility of the Bay Area real estate bubble bursting. “What fuels this market is demand. Right now, consumer confidence is very strong on purchasing property in San Francisco. There’s going to be a correction we just don’t know when.” Simultaneously, with home prices rising and affordability locking out most buyers, San Francisco is also experiencing one of the biggest new housing construction booms in history, said Congi. The city, after a recent 2007 to 2012 new construction slump, is now experiencing a building boom. In 2009, Continued Next Page Flood of Condos Hits the Market

Aldo Congi Vice President of Sales & Managing Broker McGuire Real Estate San Francisco, California “ It’s inevitable that there’s going to be a correction. What fuels this market is demand. Right now, consumer confidence is very strong on purchasing property in San Francisco. ”

San Francisco New Home Building Permits By Year











0 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

SOURCE: U.S. Census Bureau


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