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Bay Area Home Prices Drop For First Time in Four Years

This is not a drill!

Step outside for a minute. Does the general region feel cheaper today? Or at least a little less suffocatingly expensive?

That’s not your imagination – at least not according to Redfin, who report that home prices in the Bay Area declined overall for the first time in four years. March of 2016 saw a drop of 1.8 percent in the median sales price, down to $1.04 million.

Thank God. Now we can all kick back and enjoy easy street again? Not yet.

A small decline is not going to be much of a life boat for most of us. But it does snap a four-year hot streak that sometimes seemed on the verge of burning everything down. This on top of indicators earlier this week that demand for luxury housing in the city, particularly condos, has also dipped a bit.

Prices are up in San Francisco itself, but the 3.5 percent blip is the smallest in 12 months. Sales were down 23 percent last month compared to the same month in 2015 (the third straight drop in a row), and down 22 percent across the nine counties.

Redfin agent Mark Colwell’s theory: Some would-be sellers are holding onto their homes for fear of becoming buyers in the present market.

But this seems like a paradox: If there's not enough supply, why should prices drop? The answer Redfin offers is buyer burnout; even wealthy home buyers in the most expensive housing market in America are not merely giant, walking slot machines that pay out whenever a seller pulls the lever.

Sooner or later with the way things are, some people will decide that a home in San Francisco is just not worth it, and they will decamp for greener (or at least cheaper) pastures.

Buyer burnout seems like a hopeful sign that there are, in fact, limits to how crazy things can get. But the usual caveats apply: One agency’s analysis may differ from others, and one month or even one quarter do not a trend make. Could be prices and sales are already hopping right back up.

Still, any port in a storm. Think cheap.