Happy Thanksgiving everyone. It’s been an emotional roller-coaster November with a surprise election result (on my birthday, no less) that sent many San Francisco residents into a state akin to mourning. (Full disclosure: I count myself among them.) Several of my own buyer clients have put their plans on hold while they regroup emotionally and assess how Donald Trump’s election affects their own plans to invest a sizable chunk of money in real estate and/or put down roots. Meanwhile, sellers ponder whether to speed up bringing their homes to market as the post-election spike in interest rates may presage more of the same, which in turn may reduce the amount that people can afford to pay.
It’s too soon to say whether these are short-term effects that will soon fade into the background noise of broader market forces already at work. Several articles have suggested that a Trump administration may be “good” for real estate – at least in the short term. For example, the SF Chronicle, quoting Paragon’s own Patrick Carlisle, noted that if a stronger stock market allows large Bay Area tech companies like Uber and AirBnB to finally go public, adding “6,000 more millionaires to the mix, that could make a difference.” Forbes and Fortune point to a likely loosening of credit standards, easing access to loans, and – if Trump follows through – stronger employment via infrastructure projects – though whether blue states like California will see any of them is another unknown. On the other hand, higher interest rates and fewer foreign buyers could dampen home sales.
As we head into the annual winter home-buying lull, we see a market that is softening unevenly depending on segment. High end condos and house prices are plateauing or falling somewhat, while more affordable single family home prices are holding up better. The following Case Shiller Chart reflects sales in the Greater Bay Area.
And the chart below tracks percentage of homes selling for over their final asking price in San Francisco alone. By this metric, it’s clear that condos are currently getting the short end of the stick; single family homes, by comparison, are holding up well – even at the luxury end.
But while more than half of properties are still receiving overbids, the amount of the overbid has been dropping, as shown in the following chart (note, it reflects only October sales in each of the last three years).
The bottom line seems to be that single family homes, which are a shrinking segment of the market in terms of numbers (see chart below), are continuing to hold up well. Condos – especially at the high end are essentially flat or falling. Generally, broad market metrics tend to fall during the winter months as both buyers and sellers go into hibernation. It can be a good time to be out looking if you’re a buyer; if you’re a seller, it’s time “to get your house in order” for the 2017 Spring selling season.
As we enter the holiday season, it’s worth remembering how lucky we are to live in this world-class city, with its great physical beauty, diverse economy and culture of inclusiveness. To help you celebrate the holiday season in the weeks ahead, you can find a great list of local events below. Happy Holidays everyone!