Dive Brief:
- One-third of housing experts surveyed by Zillow said they believed San Francisco is in a housing market bubble, and 20% said they believed the Bay Area would reach bubble levels in 2016.
- Housing experts also referenced New York, Houston, Los Angeles, Seattle and San Diego as possibly at risk of a housing bubble — or an area where home price overvaluation growth will soon pop and put homeowners at risk — but San Francisco led the pack by far.
- In Zillow's Home Price Expectations Survey, respondents also predicted home price growth would slightly level off in the coming years. On average, experts estimated an annual rise of 3.9% in home prices, and a 3% gain over the next five years. That pace would result in the median value of U.S. homes at $215,000 by the end of 2020.
Dive Insight:
Although it is no surprise San Francisco is leading concerns about an impending snap-back in price growth, the fact that housing experts are now willing to use the word "bubble" raises new worries.
Warning signs of a possible housing market cooldown in the Bay Area began in August of this year, when Zillow reported signs the area's home values starting to slightly slip, according to the Silicon Valley Business Journal.
Then in November, Paragon Real Estate Group’s November market report indicated the San Francisco luxury home market might finally be "cooling" after the feverish buying it saw in the spring.
Other real estate analysts have predicted a slowdown in the Bay Area real estate market due to the pullback in the IPO market and a nationwide deceleration of home appreciation.
Still, despite the heightened buzz of a possible housing bubble, industry experts were quick to caution that the current situation is not nearly as dire as the pre-Recession housing bubble, which sent homebuilders and buyers reeling for years.
"It’s significant that some experts are starting to worry about bubble conditions, but in my opinion, there’s no real danger of a severe crash like the one we all remember from the last decade," Zillow Chief Economist Svenja Gudell said in a release.
