The 2021 San Francisco Residential Wrap-Up: Pandemic? What Pandemic?

A very happy New Year to my loyal readers and apologies for the long delay between my last newsletter and now.  Between a death in the family and a very busy end-of-year, my newsletter got put on the backburner, if not taken off the stove altogether.

But enough of that.  Let’s dig into the data! 

The Executive Summary

For those that want the big picture fast, the table below summarizes key metrics for the market as a whole.

While the price data may be interesting, what really strikes me is the absolute explosion in Dollar Sales Volume ($13.55 billion), which must have been driven by a combination of (a) a massive increase in condo sales (4590 units), (b) a very healthy increase in house sales (3075 units), and (c) huge increases in the number of properties that sold for $3 million or more (766 units at over $3 million; 203 at over $5 million).

Houses:  Still As American as Apple Pie

Despite the breathless predictions (once again) of the bottom dropping out of the San Francisco real estate market as locals fled to cheaper, cleaner, more suburban areas during or because of the pandemic, 2021 saw the city hit its highest median price for single family homes ever ($1.8 million), a 12% increase over 2020.  In fact, the last year houses had a decline in prices was in 2011 at the end of the Great Financial Crisis (second chart).

As we’ll see with condominiums, these broad metrics disguise some interesting trends. Perhaps unsurprisingly, given how well those at the top of the socio-economic levels have done notwithstanding the pandemic, luxury home sales (which we define as homes selling for $5 million or more) skyrocketed last year to more than double their pre-pandemic levels, though these remain a small fraction of overall sales (first chart below).  At the same time, median sales prices for this lofty price tier actually fell by 7.5% (second chart below).  “Months Supply of Inventory” (MSI), which is a rough ratio of available inventory to demand, returned to pre-pandemic levels for both luxury and non-luxury homes, (third chart below).  However, the luxury segment had seen an enormous increase in MSI during 2020.  Since a higher MSI suggests a “cooler” market, its return to an MSI of around 8 in 2021 might signal better price performance for luxury homes in the future.

Houses in Your Neighborhood

Here’s a table with key metrics for houses selling in various neighborhoods.  If your neighborhood isn’t included, or if you’d like a more specifically mapped area, please contact me.

Condominiums – Still a Mixed Story

I’ve previously posted about how condo prices suffered during the pandemic as their generally younger techie owners or tenants moved to areas with more outdoor space and took advantage of “remote work” opportunities.  Still, as the first chart below shows, condo prices overall suffered only a 1% decline in 2020.  And in 2021, prices were up 3% over the previous year, an increase in line with the 2% to 5% annual rates of increase we’ve generally seen since 2017.  

However, as also noted in my previous newsletter,  both the 2020 decline and the 2021 increase disguise a more complex picture of what’s going on with the condo market.  In a nutshell, newer mid- and high-rise neighborhoods like Mission Bay and China Beach where most new condo buildings are concentrated, were hit harder in the pandemic than the city as a whole and those same neighborhoods are recovering more slowly (first chart below).  And “luxury” condos (defined as selling for $2 million or more) appear to be seeing substantially better price improvement (2.7%) than those selling for under $2 million (1.3%) (second chart below).  Finally, though luxury condos, like luxury homes, represent a small fraction of total condo sales (about 13%), their sales in 2021 nearly doubled their pre-pandemic levels.  Non-luxury condo sales also increased significantly over pre-pandemic levels, as the third chart below shows.

Condominiums in Your Neighborhood

Here’s a table with key metrics for condos selling in various neighborhoods.  If your neighborhood isn’t included, or if you’d like a more specifically mapped area, please contact me.

Pandemic? What Pandemic?

The pretty robust market we’ve seen in San Francisco is, if anything, even more robust throughout other areas of California.  In the California Association of Realtors’ most recent survey, the amount of real estate activity throughout the state is exceptional.  I’ve highlighted some of the major takeaways in the slide below.  Perhaps the most astonishing of all: 60% of all offers were non-contingent (no appraisal, financing or inspection contingencies!).

Predictions.  Not.

Patrick Carlisle, Compass’s oft-quoted Chief Market Analyst, is our “secret sauce” and one of the most sophisticated residential real estate analysts working today.  Most of the charts I use for my newsletters are the results of his research.  (For those wanting even more charts, you can see Patrick’s SF Report, without commentary, here.) Patrick is generally loath to make predictions, and, while I’ll call it the way I see it and risk being wrong, right now I don’t see a clear long-term direction for the market.  In the short term, I think this Spring is going to be a very strong buying season as anticipated interest rate increases push people into the market out of FOMO.  Similarly, a strong rebound in rental rates might cause renters to re-evaluate.  And, of course, if the silver lining to the Omicron variant is to turn Covid into an endemic that we can live with, a return to something like normal life should reinvigorate the city’s appeal.

Longer term, a suddenly shaky stock market and uncertainty about the mid-term elections, the next Covid variant, Ukraine, and inflation may cause a shift that no one sees coming.  As the 8-ball says, “Ask Again Later.”

As always, your questions, comments and referrals are much appreciated!  Best wishes to all for a healthy, safe, and rewarding year to you and yours from me and mine.


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