The 2016 San Francisco Real Estate Wrap-Up: Houses on Simmer; Condos Cool

The data is now in for 2016 and we have sliced and diced it to perfection.  The results?  Single family homes are on simmer, with median prices up a “mere” 6% over last year.  City-wide,  houses hit $1,350,000 in the last quarter of 2017, an all-time high.  Meanwhile condominiums are going sideways.  At $1,078,000, they were down about $25,000 from a year previous. In fact, their median price is effectively the same as it was at the start of 2015.

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Here’s another look at the appreciation rates for houses and condos in recent years.  Clearly, double-digit gains are not sustainable forever. 

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Not Hot, Not Cold

The overall cooling of the market — and the fact that condos are cooling more than houses –shows up in a wide range of statistics.  Here are a couple of my favorites.  The first shows how many homes are selling over their final list price.  The second shows how much they’re selling for over the list price.

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So let’s be clear: even with condos cooling off, last year 58% of them received overbids.  The amount of the overbid, however, has declined markedly so that now on a $1 million condo, an overbid might be “just”  $15,000.  Meanwhile, 76% of houses are receiving overbids and they’re still around 10% over list price.

Will the cooling trend continue?  Right after election day, I discussed what a Trump administration might mean for San Francisco’s real estate market.  Now that he’s been in office for a week, I think it’s more prudent to say “who knows?”   While my views haven’t changed about why Trump and the Republicans should generally be “good” for a real estate market like ours where only the well-off and wealthy get a seat at the table, it seems to me that the dangers that uncertainty injects into any market just got a lot “bigly-er.”  Witness Monday’s slump in the stocks.

Getting Granular

Not all neighborhoods or price segments are performing equally.  Broadly speaking, more expensive properties are seeing weaker demand than more affordable properties.  You can see this most clearly in the following charts that track the percentage of listings that expire or are cancelled without a sale.  The first chart is for the overall market; the second focuses on properties that listed for $2 million or more:  quite a difference!

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Correspondingly, the more affordable neighborhoods saw decent price growth for single family homes, while home prices in the more luxurious neighborhoods plateaued.  Ie.  “Go West”  and Go “South” for value.   (In the first chart, imagine same-colored bars stacked beside each other to see prices changing over time.  The second chart does a clearer job for high-priced neighborhoods.)

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Consider the statistics in the second chart with caution:  there tend to be fewer sales in these ritzy neighborhoods and there can be wide discrepancies in sales prices that can throw the numbers off.  (No, we don’t believe that Inner Richmond prices really jumped 20%.)  Statistically speaking, the most reliable data is for Noe & Eureka Valleys, which have a high number of sales: The median sales price there has basically plateaued from 2015 to 2016. 

Condominium prices have flattened more uniformly across the city, but MLS District 9, which includes all the new construction taking place in SoMa, Mission Beach, etc, has dropped the most:  around 5% from last year.

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For my readers who just can’t get enough of this stuff, we have lots more charts here and here.  For everyone else, I’ll be breaking it down into bite-sized chunks over the coming months.

As always, your comments, questions, and referrals are much appreciated!

Misha

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San Francisco’s Hottest Neighborhoods: Not Where You Might Think

Noe Valley? Bernal Heights?  Those are so yesterday.  Maybe you’re thinking Bayview/Hunter’s Point as people search out more affordable housing at the city’s edges.

Well, you’re right about the edge but wrong about the direction.  Based on our recent analyses, San Francisco’s “hottest” neighborhoods are also some of its foggiest: go west to the Sunset and its more southerly counterpart, Parkside.

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Now admittedly, together these comprise a lot of smaller neighborhoods.  Many would object to, say, the Inner Sunset with its vibrant retail scene centered on 9th Ave and Irving, being lumped in with the quieter environs of the Outer Sunset.  Fair enough:  our analysis is really of MLS Districts, rather than individual neighborhoods, but it’s no less telling for that. Continue reading

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Bay Area Housing Affordability: A Grab-Bag of Charts

In my July Newsletter, I did a wrap-up of the year so far and concluded that the market, for the moment at least, seems to be going sideways. Post Labor-Day inventory has already shown a big jump in anticipation of the short buy/sell season between now and the end of November. It’s too soon to say whether the new inventory will excite buyers to loosen their wallets or simply cause them to be pickier.

So with the market on “pause,” I thought I’d put together a grab bag of charts that cover SF housing affordability, both from the standpoint of owning and renting. Many view housing affordability as a central concern for San Francisco’s long-term future. Changes in the rental Continue reading

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Real Data SF July Newsletter

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Mid-Year Report – A Soft Landing For San Francisco Residential Real Estate?

With the data in for the for the first six months of 2016, the cooling trend that I’ve noted in recent newsletters is increasingly clear. Since sales typically dip in the middle of summer due to seasonal factors (everyone, especially those who own or are looking to buy higher end homes, is on vacation), it’s best to compare 2nd quarter results with those of a year ago.

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In Q2 2016, the year-over-year appreciation rate was 4% for houses and less than 1% for condos, as compared with 2014 to 2015 rates of 20% and 18%: A significant slowdown. However, median home prices are still at their highest point ever. Continue reading

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The San Francisco Rental Market and Why It Matters

For starters, the most recent US Census Bureau estimate (2014) concludes that about 57% of San Francisco’s population are renters.  That’s reason enough, especially when housing affordability is perhaps the major social and economic challenge that San Francisco faces over the long-term.

Rent and Condo Conversion Control.  With strength in numbers comes political power: San Francisco’s Rent Control ordinance applies to the vast majority of San Francisco’s housing stock, regulating everything from the rental increases that landlord’s can charge to existing tenants to how much interest owners have to pay renters on their security deposits.  Other ordinances have severely restricted the ability of owners to “remove” units from the rental market by converting them to condominiums.  Regardless of whether you think these controls are a good or bad idea, they have created an incredibly complicated legal landscape.  Whether you’re a tenant or an aspiring landlord, it pays to know your rights.  Here’s my favorite cheat sheet, courtesy of the Law Firm of Bornstein & Bornstein.

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Home Prices:  Chicken and Egg.  Furthermore, the correlation between the price of renting and owning is well-known, as this fascinating article from the Economist  shows. All things being equal, high rental rates tend to make buying – for those who can – a more attractive option.  When rents fall, home prices may fall too due to less demand.  Conversely, high home prices may swell renter demand while falling home prices may entice more renters into buying.  Of course, other factors are at play too:  rents and home prices will fall if employment drops, interest rates increase, wages fall, etc.  This is a complicated “chicken and egg” cycle – my guess is that while we can say there’s a correlation, it’s probably impossible to say which comes first.
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Mapping the Spread of the Million Dollar Home in the Bay Area

Thanks to my well-read friend at The Economist for sending me this fascinating infographic.

You can find the full article here at The Atlantic. Their choice of Westwood Park as their poster-neighborhood is an interesting one. On the one hand, it’s a tiny area tucked in to the west of City College between Monterey and Ocean Avenue and it’s not exactly a household name, even to longtime SF denizens. On the other hand, the statistics are impressive: four years ago, according to the article, just 2.9% of its homes cost $1 million or more. Today, 96% of them do.

Only in San Francisco would a $1 million home be considered “a bargain.” But I think that it’s precisely in the lesser-known neighborhoods loosely clustered around Mount Davidson like Westwood Park, Miraloma Park, and Monterey Heights, where a buyer can still find “value.”

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El Niño Doesn’t Appear to Have Dampened the SF Housing Market

It happens every year. People decide that holiday parties, visiting with family, and staying dry are more important than visiting open houses on the week-end. Activity drops and often so do prices. But with the first glimmers of sunshine and longer days, buyers and sellers get back into the market and the home buying/selling season takes off.

And that seems to be exactly what’s happening this year, despite the lingering effects of El Niño and a bumpy stock market ride. Take a look at the chart below:

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The 2015 San Francisco Real Estate Wrap-Up

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Happy New Year everyone!  San Francisco residential real estate recorded another year of double-digit appreciation last year.  Our Chief Market Analyst has been busy slicing and dicing the data every which-way, and has created over 20 charts that serve up the market from soup to nuts (which, is exactly how some people view it!).  You can experience the full meal at Paragon Real Estate Group’s main website.  I’m doing the prix fixe menu here for those with less time and/or appetite.

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It’s Now a Buyers’ Market for Higher End Homes and Condos

“Months’ Supply of Inventory,” or MSI, shows the theoretical number of months needed to “absorb” available homes for sale in a given month based on the number of homes going into contract in a given month. The shorter the time period, the stronger the market for sellers, leading to upward pricing pressure.  Longer time periods indicate slower absorption and a buyers’ market.

The chart below illustrates the dramatic difference in MSI for homes up to the median price ($1.3 million for houses, $1.1 million for condos) and in the next price segment higher, versus the luxury home segment, defined here as houses selling for $2,000,000+ and condos for $1,500,000+. (By this definition, luxury sales currently make up about 20% of San Francisco’s home sales.)
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