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Chief Economist Selma Hepp quoted by Mercury News

$3 million listing: Amid affordability crisis, sales of luxury homes double in the Bay Area

Finding a Bay Area home for less than $1 million is harder than ever, but if you have $3 million to spend, you could have better luck: Sales of such luxury homes doubled across the region in February, compared to the previous year, according to an analysis by Pacific Union.

Meanwhile, the number of Silicon Valley homes selling for $2 million to $3 million grew by 33 percent from the previous February, and sales of homes for $1 million to $2 million increased by 30 percent.

“I must admit, coming into the year, I didn’t expect to see as much appreciation as we’ve seen so far,” said Selma Hepp, an economist for the real estate firm based in San Francisco.

The number of Bay Area homes selling for $3 million or more rose in February, compared to the previous year, while fewer homes are selling for under $1 million, according to a Pacific Union analysis. (Source: Terradatum, Inc. from data provided by local MLSes.) 

Hepp attributes the uptick in luxury home sales to continued job growth and low inventory caused by decades of building too little. It’s also possible, she said, that recent stock market volatility caused some investors to put their money in the Bay Area housing market instead.

But none of this is good for first-time home buyers with budgets in the mere six figures. The inventory of homes under $1 million has been drastically dwindling over the years, and in February the number of sales in that price range shrank another 15 percent across the Bay Area.

Sales of homes for under $1 million dropped by 8 percent in Contra Costa County; 16 percent in Alameda County; 34 percent in Santa Clara County and a staggering 47 percent in San Mateo County from February 2017 to this past February, according to the report.

“On one hand we are fortunate that the economic growth has been so strong,” Hepp said, “but the lack of affordability for people who have not risen with the same wave of economic growth — where are they going to go?”

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