“What Goes Up Just Might Be Coming Down.” The 2018 San Francisco Residential Real Estate Wrap-Up

Off to the Races

In 2018, San Francisco’s median house sales price was $1.6 million.  That’s an increase of 13% over the previous year.  Meanwhile, the median condominium sales price increased about 5% to $1,210,000.

If the chart above was the only one you consulted on SF real estate, you could be forgiven for thinking that since the 2012 recovery from the Great Financial Crisis, the city’s real estate prices have been rocketing inexorably upward. 

Slow Finish

But you’d be wrong.  As Mark Twain said, quoting Benjamin Disraeli: “There’s lies, damn lies, and statistics.”  In 2018, the year had two very distinct halves.  And if you don’t look at the statistics for those two halves, you’ll miss the real story here – which is that single family home prices fell precipitously over the last two quarters. The chart below shows price changes by quarter. ...  Additional Details

Three Studies Suggest a Mild IPO Effect on Residential Real Estate

A February 5 article in the SF Chronicle discusses three recent studies on whether IPO’s actually affect residential real estate prices. None of the studies focus specifically on the San Francisco market; only one, by Zillow, suggests that the IPO effect on neighborhoods populated by employees who benefited from an IPO, might have seen a substantial increase in prices as a result.

Nevertheless, with San Francisco home prices cooling at the end of 2018 and with AirBnB, Uber, and Slack among others, all poised to go public this year, it will be interesting to see if all the newly minted money will add some “spring” to the spring market. Stay tuned. ...  Additional Details

Where is Bay Area Housing Headed?

In my last newsletter in late October, I suggested that despite data indicating the possibility of a slowing real estate market, it was too soon to tell.  It may still be too soon – but the evidence is mounting.

Notably, we’re seeing evidence of a slowdown across the Bay Area and, indeed, nationally.  The December 1 issue of The Economist describes a national “housing wobble”, citing declining new construction  and higher interest rates as among the contributing factors.  Nationwide, sales of existing homes were down 5.1% from the year previously and sales of new homes were down by 12%.  (interestingly, the article suggests that declines in residential purchases and homebuilding are a leading indicator of recessions, rather than the other way around.) ...  Additional Details

Signs of a Slowdown? – “Ask Again Later”

Every couple of weeks, around a hundred (formerly Paragon, now Compass) agents get together to discuss the market and share their sense of what’s going on.  Is there lots of activity at open houses?  What’s selling? What’s not?  Are buyers active – or tired?  Are sellers getting greedy?  That sort of stuff.  We also receive regular updates from our stellar Chief Market Analyst, Patrick Carlisle – the best in the business – who puts together the charts that I use in these newsletters. ...  Additional Details

Update on Prop 10 and The Repeal of Costa Hawkins

I covered Proposition 10 on November’s upcoming ballot in detail last month. Today’s NY Times article has a brief summary of what it’s about. In addition, there’s a link to another article that explains the pros and cons of rent control, including why most economists on both the left and the right “are almost universally against rent control.” No one, least of all me, is disputing that housing affordability both for renters and buyers is an issue in the Bay Area. I just don’t think that expanding rent control is the way to fix the problem. ...  Additional Details

Housing Market Slows, as Rising Prices Outpace Wages

This Sunday’s front page NY Times article suggests a national slowdown as wage increases fail to keep up with home price increases. Indeed, it “feels” as though there is some slowing in the market, especially at the higher end – and we do have the data to indicate that there’s been a lot more new inventory coming to the market in the months of August and September than in the previous two years. We do not yet have hard data on whether this and other factors are creating downward pressure on sales prices. Stay tuned! ...  Additional Details

Prop 10 and How Your Own Home Might Become Subject to Rent Control

I don’t mean to sound alarmist – well yes I do – but there’s a California ballot measure up for vote this November that could significantly curtail your rights as an owner of a single family house or condominium if you should ever decide to rent it out.    

Most people are aware that San Francisco has rent and eviction control legislation.  Briefly summarized and simplified, if you own a multi-unit building (ie. two units or more) which was completed prior to the date the Rent Ordinance was passed, June 13, 1979, you cannot increase the rent of an existing tenant by more than 60% of the annual Consumer Price Index each year. In addition, you can only evict a tenant for a limited set of reasons enumerated under the Ordinance.  In practical effect this means that a lease for a fixed term has no meaning:  once the lease is up, a tenant who is otherwise paying rent on time can stay as long as she wants to stay. And, for as long as she stays, the maximum annual amount that her rent can increase is determined by the Rent Ordinance, not by you.  ...  Additional Details