The 2017 San Francisco Real Estate Wrap-Up: Data Sliced and Diced

2017 is a wrap, and it’s been another solid one for residential real estate in the City by the Bay.  For anyone so inclined you can read our full report —  complete with over 41 charts— here.  For those with less than a couple of hours to kill, I’ve sliced and diced the juiciest parts below.

Going Up

2017 was the seventh year in a row that the median price for a single family home in San Francisco increased.  It’s now over $1.4 million.  After taking a breather for the last couple of years, condominium prices also resumed their climb: their median price is $1.150 million.  Our data indicates that fourth quarter prices for both homes and condos are already above these figures.

While annual price increases for single family homes have slowed from the double digit increases we saw earlier in the recovery, at over 6% they are healthy by any measure.  With condos increasing at 5% over 2016, it will be interesting to see if they also continue upward or if they will lose steam again.  My guess is that it will depend very much on segment (luxury high-rise or not) and location.

City-wide, a single family home now averages nearly $1,000 per square foot and I would expect it to climb further (see below).  Condo prices, at a little above $1,000 per square foot, seem to be stuck in a range.

The Shrinking Part of the Pie:  Single Family Homes

The two charts below help explain the seemingly inexorable increase in single family home prices.  Simply put, they’re are a shrinking segment of sales, while condos have been an increasing segment since approximately 2012, when the boom in new condo construction really took off.  Note that the condo trend line in the second chart does NOT reflect condos offered for the first time directly by the developer, as these are not sold through the MLS database. If it did, the condo trend line would be significantly higher than shown for recent years.  We estimate that these direct-from-developer condo sales would add around 500 -700 units per year!

I’ll stick my neck out and wager that buying a single family home practically anywhere in San Francisco is going to be a good long-term investment.  This is a global city with all of the perquisites that pertain thereto.  Barring a cataclysm, natural or geopolitical, I think demand for this quintessential piece of American pie is going to outstrip supply for the foreseeable future.

(To read more about the long-term forces constraining supply, click here.)

Signs Point To another Robust Year

Regardless what you may think of The Man with Orange Hair, his ascendancy certainly has been accompanied by a continuation of robust economic growth and a record high stock market.  (Coincidence is not correlation!)  And while it’s difficult to guess what the net effect of the recently enacted tax reforms will be here in the Bay Area, I suspect that the people who can afford to buy here will continue to do so.

Months’ Supply of Inventory is probably the best overall indicator of the market.  The chart below shows that pretty much every segment showed some tightening of inventory after having loosened a bit (condos more than a bit) in the previous two years. 

A less objective indicator is all the construction and renovation I’m seeing as I tour the neighborhoods, not to mention all the people at open homes during the warm, dry week-ends we’ve been enjoying. 

All in all, I suspect it’s going to be another strong seller’s market in 2018.  That is, provided, the man with orange hair keeps his hat on.  Eat your carrots!

We Have a Winner!

And finally, a shout-out to Noah B., who correctly identified this image from my October 2017 newsletter as being the fairy shrine tucked into a tree stump on a walking trail through Glen Canyon.  (Glen Canyon, incidentally, was the site of first dynamite factory in the US, operating under license to none other than Sir Alfred Nobel. Until it blew up.) Noah wins a bottle of Dashe Cellars Dry Creek Zinfandel, awarded Double Gold by the SF Chronicle and 90 Points by Robert Parker.

As always, your questions, comments, and referrals are greatly appreciated.  If you like this newsletter, please consider forwarding it to people and “liking” RealDataSF on Facebook by clicking here.

Misha