The San Francisco housing bubble

San Francisco often ranks among the “hottest” housing markets due to its rapidly rising housing prices. In the last month alone, San Francisco appeared on three separate lists of the “hottest” or “strongest” housing markets for 2016.

But how hot is too hot?

According to a new report from Fitch Ratings, San Francisco is reaching that point, with the dreaded “b” word being thrown around now in regards to San Francisco housing.

Fitch’s report suggests that Bay Area home prices are “overheating” and have reached a “level unsupportable by area income,” and asks if there is a “Bay Area bubble.”

According to Fitch’s report, San Francisco home prices hit an all-time high in third quarter of 2015 and are now 62% above their post-recession low in early 2012.

In the report, Fitch Managing Director Grant Bailey said that San Francisco home prices are up more than 10% in the past year alone, making the San Francisco housing market now approximately 16% overvalued when compared to the area’s underlying supporting economic fundamentals.