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San Francisco Real Estate Overvalued, According to Fitch Ratings

Posted by Jereco O. Paloma on Feb 12, 2016 09:16 AM EST
New Study Names San Francisco As Most Expensive To Buy A Home more big
SAN FRANCISCO, CA - FEBRUARY 18: A victorian home stands next to the San Francisco skyline on February 18, 2014 in San Francisco, California. According to a report by mortgage resource site, an annual salary of $115,510 is needed to purchase a house in San Francisco where the median home price is $682,410. The report included 25 of the nations largest metropolitan cities with Cleveland, Ohio being the cheapest with a needed salary of $19,435 to purchase a home. (Photo : Justin Sullivan/Getty Images)

Over the past several years, the rise of San Francisco's real estate market had been stellar. However, some experts say the city's housing market is overvalued by as much as 16 percent.

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According to a report published by the SF Gate, while citing data from the real estate analytics firm Fitch Ratings, although housing price increases have been common in most housing markets in the U.S., the level of increase in the Bay Area has been way too high. The Fitch report even considered that it has outpaced the salary and income increase in the area.

While this news is rather disturbing and needs immediate attention, real estate stakeholders across San Francisco are no longer surprised about this kind of scenario as overpriced properties have become the new norm in the area. In 2015, the average house price increase in San Francisco was pegged at 10 percent, compared to the previous year. This, according to Grant Bailey, Fitch Managing Director, is a clear indicator that the housing market in San Francisco is overvalued.

Apart from San Francisco, the report added, some other housing markets in the country are also exhibiting the same trend, such as those in Texas and Florida. House prices in these areas outpaced the income growth, making home purchasing less accessible to the general public.

"For-sale inventory has declined and the percentage of new homes sold prior to completion has normalized while new home construction spending continues to show strength," the Fitch Ratings report noted, as quoted by the SF Gate.

San Francisco was also included in a Forbes list of America's Most Overpriced Cities, along with the nine other cities in California. In San Francisco, where the median income was pegged at $101,200, families here can only afford 14 percent of the houses available on the market. In fact, San Francisco was tagged as the least affordable city to buy a house, according to Forbes.

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