Driving with one eye on the rear-view mirror is a good thing. Driving with both eyes on it is likely to get you into a crash.
At a recent sales meeting where 40 or so agents discussed their impressions of the autumn sales market which opened on Labor Day, quite a few bemoaned the lack of agents showing up on brokers’ tour on Tuesdays and Wednesdays. Others said that they’d had Sunday open houses with nary a visitor. Agent and client fatigue? The “flood” of new listings on the market (though that’s typical for this time of year)? An ominous sign of things to come?
Another agent got up and spoke about how over 100 people had showed up at her Sunday open house in the Outer Sunset. Someone else talked about the 1,500 square foot condo that went into contract at 30% over list price. Another mused that maybe the market was diverging for properties below $2 million (strong) and those above $2 million (weakening).
A recent article in the SF Examiner quoted data produced by our own Chief Market Analyst Patrick Carlisle and concluded that, right now, it’s anybody’s guess which way the market is headed. The metrics are pointing every which-way. I liked the closing quote, which reflects what I’ve told my clients for years:
If your aim is to keep living where you’ve been living, if you’ve been sitting on a property for more than 10 years or if you plan to buy a house and hang onto it for awhile, all of this should be white noise to you.
What makes predicting where the market is headed so difficult is that all our data points backwards to where we’ve been, not where we’re going. September’s sales numbers reflect contracts that were entered into 20 to 40 days previous, on properties that might have hit the market 10 to 30 days before that, thus reflecting a summer market whose own dynamics are different and usually slower than the autumn “big-surge-before-winter-shuts-everything down” market we are in today. If you think there’s any reliable leading indicator for what’s going to happen, please – please! – let me know.
Here are some selected charts from Patrick’s most recent newsletter (email me if you want the full version), starting with a snapshot of Q3 compared to the last three years.
Prices for single family homes eked out a 1.8% gain year-over-year. That still leaves home prices up 16% from Q3 2017. Meanwhile condos are up a healthy 7.6% over last year, but up “merely” 11% from Q3 2017.
If there are any warning signs here it may be that both the number of sales and the percentage of listings sold are stalling. Is this the buyer and agent fatigue that agents mentioned in our sales meeting? Remember, the chart above shows what happened July – September, whereas discussions at our recent sales meeting reflect current sentiment. If that sentiment shows up in this quarter’s numbers too, then maybe – just maybe – we are looking at a slowing market.
Here’s another chart that suggests a bit of a plateau in home prices – but only because we’re used to a stream of double-digit gains.
Price reductions, however, which can obviously indicate a slowing market, do not seem to be signaling an imminent slowdown; they’re about the same as last year and maybe a tad lower than earlier years.
And “Days on Market,” which signals very directly the “heat” of the market, seems to show a continuing and robust sellers’ market when compared to recent years.
And for what it’s worth, from a global perspective, some analyses suggest that San Francisco may be over-valued but is not in bubble territory. Here’s a chart from a recent UBS report on global cities (email me if you want a copy of the full report). A recent article in The Economist also concluded. that prices in San Francisco had room to run.
My personal view is – as the 8-ball so wisely says – “Ask again later.” There’s nothing in these numbers that suggest that we’re heading into the kind of feeding frenzy that the IPO’s of Lyft, Uber and the like were predicted not long ago to ignite. (I got that one right.) Nor is there evidence that suggests things are going to change dramatically for the worse in the near term.
That said, if you’re thinking of selling I wouldn’t wait. Despite the (rear-view) numbers, I’d say there’s more downside risk then upside potential ahead. Prepare your home as well as possible for sale (I can help, and Compass Concierge can help pay for the costs upfront) and price it right. Homes that “check the boxes” and are move-in ready continue to sell well.
Conversely, if you’re a buyer, think about focusing on properties that have been on the market for three weeks or more and may not be “perfect.” That’s where you’ll find the values.
As always, your questions, comments and referrals are much appreciated!