Inflation seems to be taking hold of every part of our lives, from the cost of food and gas and maybe even real estate. The economic shift is due to many factors, including the war in Ukraine, rising oil and gas prices, and supply chain shortages.
After the real estate shifts of the pandemic across much of the country — including in San Francisco — there were not enough homes for sale to keep up with demand. This sellers’ market shot up home prices, and that meant more competition for buyers.
Now, with inflation tied into the mix, San Francisco home buyers and sellers may be wondering how inflation is affecting the housing market. There are some general trends to be aware of that you may want to consult with a real estate agent about if you are serious about buying or selling a house now.
New construction costs are up.
The backlog of construction from the pandemic is in flux, however, at a price. The cost of labor and goods is on the rise in San Francisco and across the country. As the cost of living increases, wages need to go up and that means higher labor prices. Raw materials are also more expensive now because of supply chain shortages.
All of that means that new construction homes may have higher price tags than in the pre-pandemic days. Home buyers might be worried about paying more for that new condo or single-family home.
Prices are higher
New construction homes aren’t the only properties with higher price tags. Home prices across the board are also higher. The average price of a San Francisco home, according to Zillow, is $1.5 million, which is up 3.4 percent from last year. While inflation isn’t the only factor contributing to this increase, it’s certainly a part of it. If you are buying now, you may pay more than you would if you wait it out a bit, but there’s no guarantee that prices won’t continue to rise. For sellers, you may get more for your home by waiting.
Some buyers are choosing to wait, causing a dip in demand
Those buyers who can wait may decide that they’d rather see if inflation and other economic shifts lead to price dips. However, top real estate agents are advising their clients to weigh all of the factors before deciding to wait it out. Buyers who do act now should stick to a budget, knowing that they may need to be patient rather than pay more than they can afford. Sellers, however, could be bringing home more.
Budgets are shifting
Inflation is causing people to reassess their spending in all aspects of their lives, and real estate is no exception. Buyers are modifying their budgets by reassessing their must-haves for their next home. Sellers are shifting too, knowing that they may be able to get more for their home and are perhaps less willing to offer discounts or add-ons. Watching the market closely is the best way to determine how budgets will shift for buyers or sellers.
San Francisco buyers and sellers are dealing with one of the hottest real estate markets in the United States, and knowing how inflation is affecting it can help you get ahead with your real estate goals.