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The signs and numbers are already lining up.

According to Federal Housing Finance Agency data on our glorious Housing Bubble 2, house prices are doing what they've been doing for years: they're surging. In the first quarter, they rose 6.0% year-over-year.

"The steep, multi-year rise in U.S. home prices continued in the first quarter," explained FHFA Deputy Chief Economist Andrew Leventis on Wednesday. So house price are going up everywhere. Well, not everywhere.

In the once hottest metropolitan statistical area where house prices have surged in the double digits for years - San Francisco, Redwood City, and the city of South San Francisco which make up the tip of the Peninsula - was the sole exception: there, house prices fell 2.5% in Q1 year-over-year.

It was the first decline since Q2 2011, when the last housing bust ended. This chart shows the year-over-year percentage change per quarter of the FHFA's House Price Index (HPI). Note how many times prices increased between 10% and 20%-plus:

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The HPI is based on data from mortgages that lenders have sold to Fannie Mae and Freddie Mac or that were guaranteed by them. These mortgages are capped - for the San Francisco area, at $636,150. In San Francisco itself, the median house price is about $1.35 million and the median condo price about $1.1 million, according to Paragon Real Estate in San Francisco. With a 20% down-payment, the home could be priced at $800,000 to qualify. I know buyers who made a much bigger down payment - given how little their money earns at the bank - to get a conforming mortgage because they wanted to benefit from the lower rates.


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  • The HPI then soared 83% to peak in Q4 2016. The median price in San Francisco soared over 100% - and stalled in early 2016…


So the turning points of the HPI were leading indicators of turning points in the median price in San Francisco, though the HPI's movements were less steep, plunging a little less during the bust, and soaring a little less during the boom. Now San Francisco's housing market is into the next phase.


And here may be part of the reason for the lumpiness in the housing market: The construction boom has been throwing thousands of new housing units - all condos and apartments - on the market every year in recent years, and will continue to do so, just as employment growth, according to California's Employment Development Department, has slowed down sharply:

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Note that the "labor force" is based on the number of residents in San Francisco; "employment" is based on the number of jobs in San Francisco, including those jobs filled by people who commute into the city.




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