Observations from January 2023 Reports

Most of our monthly reports were posted a week ago.  Here are some observations:

• Total sales are down compared to last month and last year.

• Recent headlines such as “Existing-home sales fell every single month in 2022, new NAR data shows”  is true but look closer:

The headline is only true if you’re comparing 2022 to 2021 both of which were anomalies.  (See first graph).  But 2021 had the highest number of monthly sales in 10 of 12 months.  Compared to 2019 (pre Covid) 2022 had more sales in 7 of 12 months (second graph).  

                (Click here for full size graphs)

• Annual average sales prices:  All but one of the five categories we survey (3/2 single family homes) are down compared to 2021.  2/1 and 3/2 single family homes and 2-flats are averaging above 2019 levels.  2/1 and 2/2 condos are within 3-45 of 2019 levels.  

• Big drop in DOM for 2/1 single family in January sales

• 1/1 condos avg selling price back up over $700k after dropping below $700k in December

• Big uptick in 2/1 condo listings

• Number of active listings is up across the board – not surprising since the comparison is to early January.

• No sales of 3-unit buildings in January – 28 available

• Premiums are easing on some single family homes.

• DOM on condos increasing 

• Of the 69 units active, in contract or pending priced under $500k 44 were BMR units (64%)

December and 4th Quarter Recap

This week we posted our regular monthly and quarterly reports for 2022 as well as our biweekly New Listing Market Watch report.  Here are some highlights (lowlights?).

NewListing Market Watch

• ·       Single family new listings: 94 in 2021, 64 in 2022, 42 this year.
• ·       Condo new listings: 241, 151, and 84

Fundamentals

• ·       Sales in December down compared to November (typical for this time of year)

• ·       Average selling prices are down compared to November, -2% for single family homes and 22% for condos.  Compared to December a year ago average selling prices are down 22% for single family homes and 24% for condos.

• ·       Inventory is up over 50% for single family homes compared to a year ago, and 7-8% for condos.

 

By PriceRange

• ·       Premiums for the year compared to 2021 were steady at 112% for single family homes and 103% for condos. 

• ·       BUT, for the last six months premiums dropped for single family homes to 105% and for condos to 100%.  (By comparison for the last half of 2021 premiums were 112% for single family homes and 105% for condos).

 

Quarterly

• ·       For the five configurations of single family homes and condos we track, the number of sales and average sales prices were down across the board.

4th Quarter sales among the lowest in years

While the number of San Francisco residential sales in the 2021 4th quarter was one of the highest in years it appears the this year’s 4th quarter will be among the lowest.  It’s already clear that this year’s 4th quarter will be the lowest of all four quarters in 2022.  Last year there were 1,879 closed sales in the 4^th quarter (801 single family homes and 1,078 condos/TICs).  This year so far (through December 5^th) there have been 804 closed sales (380 single family homes and 424 condos/TICs).

There are also currently 159 single family homes in contract and pending and 177 condos/TICs for a total of 336.

As mortgage rates climb competition has almost disappeared and negotiations have become commonplace, particularly over selling price.  Comparing average selling price during the first three quarters of 2022 for the five categories we survey monthly vs. the average selling price from October 1r 2/1 single family homes declined by 8%, 3/2 single family homes declined 14%, 1/1 condos by 8%, 2/1 condos by 6% and 2/2 condos by 8%.

Even with the normal inventory withdrawls and cancellation which we typically see following Thanksgiving, there is still plenty of inventory on the market:  5 weeks of single family home inventory and about 9 weeks of condo/TIC inventory.

Where are the buyers?

What a difference a year makes in the San Francisco real estate market.  2021 was the best year for total closed sales since 2004, including the fourth quarter.  The fourth quarter usually vies with the first quarter in a typical year for the fewest sales.  Yet in 2021 it turned out to be the second best quarter after our second quarter spring market.

The 2022 fourth quarter has started out very slowly.  The single family home segment is still showing demand but rising interest rates are affecting even that portion of the market with moderating final selling prices, disappearing offer dates, and fewer buyers overall.

The condo/TIC segment has seen an almost 25% drop in closed sales compared to 2021 with falling average selling prices, increasing days on market, price reductions, and withdrawals.  Available inventory remains almost three months.  Most of us would call this a “buyer’s market” which hasn’t been part of our vocabulary since 2010.

Single family homes average selling prices remain at historic highs for properties priced below $2.5 million, but there are signs of downward moderation.  For the 1/1, 2/1, and 2/2 condos we survey average selling prices are down by 6%, 2%, and 3% compared to previous historic highs established in 2019.

The numbers indicate a slowdown is here.  Sellers are slowly adjusting to that realization.

Has sanity returned to the San Francisco residential real estate marketplace?

 

September ends a very slow third quarter for closed residential sales.  There were 1,815 single family homes that closed and 2,466 condos/TICs.  Compared to the third quarter of 2021 single family home closed sales declined 15%, condos/TICs declined 25% and total combined residential sales declined 21%.

Inventory continues to build following the Labor Day holiday weekend as it does most years.  Single family homes have an inventory of about two months supply and condos/TICs show an almost three month supply.  Of the 432 currently active single family homes 138 of them, almost 32%, are priced at or above $2.5 million.

Average selling prices continue to moderate downward.  While single family homes remain at historic highs they have been declining in recent months.  Days on market are increasing and overbidding is declining.  All of which means lower average selling prices.  And, as we approach the 7% mortgage interest rate level, this will probably dampen sales even further.

Active buyers are finding plenty of available inventory.  Competition has dwindled and, in many cases, disappeared.  Negotiating is back on the table.  DOM continue to increase.  While some overbidding continues in a few “pockets of popularity”, offer dates have largely disappeared and the few we’ve seen have not succeeded in generating accepted offers.