SAN FRANCISCO, Kalifornia (PNN) - November 18, 2016 - We have frequently written over the past couple of quarters about the bubbly San Francisco housing market that looks set for another epic reversal as home prices have reached staggering new highs just as employment levels seem to be rolling over. With home prices now implying that only 10-20% of residents can afford the “median” priced home, it's certainly not difficult to understand why demand may be waning. According to HousingWire and a new report from PropertyRadar, home sales in the Bay Area are finally starting to rollover with Q3 YTD volumes down 10.3% YoY, reflecting the fewest number of homes sold over that same time period since 2008.  Perhaps even more staggering is that distressed property sales fell 35.7% YoY so far in 2016, to the lowest level since 2001, as "low-priced" inventory dried up and buyers have found it financially impossible to move up to higher price tiers.

Conversely, non-distressed property sales fell 7.1% on a year-over-year basis. But it should be noted that as a percentage of total sales, distressed property sales accounted for only 7.9% of total sales, compared to 11.1% in 2015 and a high of 56.3% in 2009.

“The 35.7% decline in distressed property sales drove the overall decline in Bay Area sales to its lowest level since 2001,” said Madeline Schnapp, director of Economic Research for PropertyRadar.

“For several years now, the affordability of distressed properties contributed significantly to overall sales,” Schnapp added. “Distressed property inventory has declined to the point it’s now a drag on overall sales. Bay Area sales will likely remain relatively flat until new, attractively priced inventory arrives on the scene.”

According to PropertyRadar’s data, the number of homes sold priced from $0 to $500,000 fell by nearly 27% from 2015 to 2016. Homes priced from $500,000 to $750,000 fell by just shy of 9%.

Homes priced from $750,000 to $1 million fell by just 3.6%, while homes priced above $1 million actually rose, albeit by only 0.4%.

“The outsized decline in distressed property sales combined with the rapid increase in prices and the lack of buyers that qualify for higher priced homes is reflected in the 26.7% decline in the sales of lower priced homes,” Schnapp said. “Income growth in the Bay Area has not kept up with rapidly rising home prices shutting out a significant percentage of would-be buyers.”

Of course, none of this should be terribly surprising in light of the fact that median San Francisco home prices have surged 86% over the past 4 years to a mere $1.4 million.

As Paragon Real Estate points out, the only question left to answer now isn't whether San Francisco real estate will crash, but rather just how deep the crash will be.