Inventory may be low but sales continue to boom

As buyers agents we're routinely bemoaning the lack of inventory.  But sometimes it's worth taking a high level view of sales.

By most measurers, last year (2021) was a boom year for residential sales in San Francisco with over 7,300 units changing hands -- the highest number we've recorded in the 16 years we've been keeping records.  The prior three years (2018-2020) total sales were in the 5,200-5,300 range, 28% below 2021.

To get a closer perspective on how we're doing so far this year here is a graph comparing the first four months of 2022 to the same period for previous years.

With the exception of 2021, the first four months this year have seen more sales than any of the years back to 2006.  Climate change (earlier spring market)?  Afraid of missing out on historically low interest rates?

Will this trend last for the rest of the year?

Inventory Increases, Sales Lag, Price Reductions Increase

Historically the end of April and May produces the largest numbers of new residential home inventory coming onto our market and this year has been no exception.  But compared to a comparable 14-day period a year ago new single family homes are down by 22% (47) while condos/TICs are down by 8% (28 homes).

https://boldsf.blogspot.com/2022/05/inventory-increases-sales-lag-price.html

As of May 15 we have about four weeks of available inventory for single family homes and 11 weeks for condos/TICs.

http://www.boldsf.com/Statistics%20test/Statistics%20reports/2022/04-2022/San%20Francisco%20Fundamentals%202022-combined.pdf

Total sales continue to lag behind last year which was our best year since 2004 in the number of closed sales.  Single family homes are down 11% and condos/TICs by almost 20% as of the end of April.

As telling, are the number of price reductions in the last two weeks.  Single family homes saw 32 price reductions and condos/TICs saw 146 price reductions.

With that being said it must be pointed out that as of May 15th there are 126 homes in contract (28 single family homes and 98 condos/TICs).  Also there are 492 homes pending (230 single family homes and 262 condos/TICs).  That's almost an entire month of average closings.  So demand seems to remain strong and consistent.

 

Month-to-month Fundamentals

Each month we prepare a one-page "fundamentals" report, one each for San Francisco, Marin and Sonoma.  Here are some highlights for Marin and San Francisco:

Marin Fundamentals – March sales were up substantially compared to last month 163 to 100 (single family homes) and 54 to 46 (condos).

Average selling prices were up $2,002 compared to $1,952 for single family homes but, as you can see, that increase was not uniform across all configurations.  Same with condos:  with average selling price $897 vs $859 a month ago.

Inventory has increased 126 compared to 96 at the beginning of February (single family homes) and 63 compared to 57 (condos).

 

San Francisco Fundamentals – the number of sales and average selling prices were up with a one exception.  Sales increased slightly for single family homes 239 vs 236 a month ago.  For condos sales increased substantially 367 vs 236 (55%).  Average sales prices have increased for single family homes ($2467 vs $2335 – 6%) and condos ($1,417 vs $1,377 – 3%).  The average premium (selling price / asking price) for single family homes is            117% for single family homes) and 106% for condos (about the same as last month).

Annual average sales prices are at record highs for the two categories of single family homes we track.  The largest condo configuration we track (2/2) is also back at all time highs with 2/1 condos on $35k off its all time high (2019).  Smaller condos like the 1/1 configuration are recovering more slowly.

Days-on-market have decreased across the board.

Inventory of single family homes is flat (203 vs 204) but condo inventory has jumped 10% to 734 vs 662 a month ago.

 

First Quarter 2022

We just completed our monthly reports and first quarter 2022 reports and have several observations.

[Reports page link]

SAN FRANCISCO

In San Francisco, 2021 recorded the highest number of residential sales since 2004 including single family homes and condos/TICs.  However, for the first quarter this year compared to 2021 first quarter there has been a decline of 17% in closed sales.  Single family homes fell about 12% and condos/TICs fell about 21% in the same first quarter comparison.

[San Francisco quarterly link]

At the same time the average selling prices for single family homes increased by 7% while condos/TICs were down by almost 2%.

Is scarcity driving up prices?  For single family homes this obviously has been true.  As of April 4 there was only 3 weeks of available inventory (number of available properties divided by the average number of monthly sales).  On the other hand, condos/TICs were a surprise as inventory has been hovering between 2 and 3 months.

Both 2 bedroom/1 bath and 3 bedroom/2 bath single family homes continue to establish new historic high average selling prices almost every month.  And 2/2 condos have returned to historic high prices after a downturn during the two years following the start of the pandemic.

And 1/1 and 2/1 condos have also seen recent upticks in recent selling prices but are still 3% off their previous high reached in 2019.

 

MARIN

Total residential sales (including single family homes and condos) for the first quarter of this year compared to 2021 first quarter show a drop of 18% for all sales with single family homes falling 17% and condos falling 19%.  At the same time average selling prices for Marin County residential sales were up 6% with single family homes up 3% and condos up 16%.

[Marin quarterly link]

As of 4/4/22 Marin has almost three weeks of available inventory of single family homes and four weeks of available inventory of condos. 

Monthly Review and Clues to the Remainder of the Year

 

Some notes from our recent monthly reports and our weekly 3-county report

·         3-county report

o   There are fewer active listings of single family homes in both Marin and San Francisco than there are homes that are “pending” (already in contract).  Same situation last month.  While this happens sporadically, it's unusual for it to happen two months in a row and seems be a symptom of low inventory and climbing interest rates.

o   Inventory is trending up slightly compared to a week ago for single family homes in all three counties with condos down slightly in both Marin and San Francisco

o   But compared to a year ago numbers are down across the board.  San Francisco down approx. 15%; Marin down 40% in single family homes and down 35% in condos. 

·         Fundamentals:

o   San Francisco number of sales of single family homes is down compared to January (22 vs 28) but overall number of sales was higher in February than January, as expected.

o   San Francisco average selling prices are generally up compared to the previous month, with 3/2 homes essentially flat. However, compared to a year ago average selling prices for single family homes are down 19% and average selling prices for condos is up slightly 2%.

o   San Francisco DOM is down substantially across the board and premiums are up

o   Marin number of sales of single family homes is up, as expected.

o   Marin average selling prices are down slightly overall for both single family homes and condos with the notable exception of 3/2, 3/3 and 4/4 configurations.  Compared to a year ago average selling prices for single family homes are down by 6% but condos are up by almost 10%.

o   Marin DOM is down significantly overall and premiums are up.

·         So, overall, month-to-month inventory numbers are following typical trends for this time of year but, again, compared to a year ago volume is down.