As we all know, San Francisco real estate prices are skyrocketing, and low inventory is almost always considered to be a factor in these major price jumps. But why are there so few homes for sale in a city where the market is so hot? Real estate site Redfin has identified four major categories of homes that are unlikely to go on sale, and sees all of them in San Francisco's real estate mix. In fact, in San Francisco only .3% of existing homes are currently for sale. Of all the major housing markets examined by Redfin, this was the second lowest, after only San Jose.
Homes that were purchased with mortgage rates lower than 4.25% are often unlikely to sell because buying a new home would mean paying a higher rate. 20.6% of San Francisco houses were purchased with low rates and are therefore less likely to go back up for sale. Another 16.2% of houses were purchased or refinanced within the past seven years, meaning that owners will probably hold onto them a bit longer before selling. An additional 13.5% of San Francisco homeowners have low equity in their homes, meaning that they owe more than 80% of the value of the home. These homeowners are unlikely to sell because a sale would leave them with little money to put towards their next home. Finally, 1.6% of San Francisco homes are owned by a company or investor and therefore not likely to turn over soon.
All of this adds up to make more than half of San Francisco's inventory "suppressed," meaning that it will probably not hit the market in the near future. Other cities do have even higher levels of suppressed inventory than San Francisco but a higher percentage of existing homes currently on the market, which means that there may be additional factors in play here. Regardless, the high home prices of the 2004 to 2009 peak combined with low mortgage interest rates following that period have combined to create a low inventory situation around the country, according to Redfin. High prices may push homeowners into selling, but for now very few existing homes in San Francisco are hitting the market.
· SF Homes Prices Surpass 2007 Peak Levels, Hit Record High [Curbed SF]
· Why Aren't There More Homes for Sale? [Redfin]