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.

So Where Are We?

Inventory

As it typical this time of year, the total number of new listings entering the market over the past two weeks has dropped -- 472 vs 606 in the prior two week period.  The drop is seen for both single family homes (190 vs 236) and condos (282 vs 370).

But as the graph shows, we had substantially more new listings in the last two weeks compared to the same period a year ago:  190 single family homes vs 114 a year ago and 282 condos vs 176 a year ago.

As of Monday (11/2/2020) there were 1,803 active listings including 441 single family homes and 1362 condos/TICs.  A year ago 924 active listings (303 single family homes and 621 condos).

Sales and Sales Prices

We're seeing a similar number of sales this year (October) compared to the same month last year.  In fact total sales in October was actually 8% higher than a year ago (555 vs 512). 

Median sales prices for single family homes have held steady over the past year.  Median sales price in October this year was $1,650,000., unchanged from October 2019.  

Median sales prices for condos have dropped 11.5% from $1,325,000 in October 2019 to $1,173,000 in October this year. 

Break Ins

The California Association of Realtors publishes some interesting statistics from time to time.

http://subscribe.car.org/e/85202/Breaking20Down20the20Break20In/62h1tb/730285791?h=Chs6AMlpSDTOlo76_gO5YfONy0AxvDQnnH8DPtGaZ5A

New Listings Heading Down

As we speculated two weeks ago, we seem to have passed the peak of new listings for the year.  Total new listings for the past two weeks is down compared to the previous two weeks (340 vs 403).  Most of the decrease was in condos (189 vs 241) with single family homes remaining steady (151 vs 162).

Compared to the same period a year ago total for the past two weeks is down (340 vs 370).

There is every reason to believe we'll follow the same track for the rest of this year as we did in the previous two years.

With new listings down, the percentage of new listings going into contract in the same two week period has ticked up both for single family homes and condos compared to the previous two weeks and the same period a year ago.

Price reductions have increased for condos compared to the previous period (49 vs 34) but about the same during the same period a year ago (49 vs 46).  Price reductions for single family homes remained essentially the same compared to the previous period (18 vs 17) but are down compared to a year ago (18 vs 25).

If this year is similar to 2016 condo buyers may see a significant number of price reductions during the next two weeks.

Jump in new listings - as predicted

Right on time, as predicted, new listings have increased dramatically in the last two weeks.  Total new listings were 383 compared to 201 in the prior two week period.  For the same period a year ago new listings were 368.  The increase was evenly split between single family homes (155 vs 79 in the prior period) and condos (228 vs 122).

As can be seen from this graphic, this jump in new listings happens every year post Labor Day.

The percentage of new listings going into contract remained unchanged for single family homes compared to the prior period (6.5% vs 6.3%) but is up significantly compared to a year ago (6.5% vs 1.3%).  For condos 6.1% of new listings went into contract compared to 4.1% for the prior period and 3.9% a year ago.

The number of price reductions increased for single family homes to 11 compared to 5 in the prior period and 10 a year ago.  For condos, there were 31 price reductions compared to 21 for the prior period and 35 a year ago.

Are Buyers Finally Telling Sellers "No" to High Asking Prices?

At the beginning of each month we post a list of sales in the surrounding neighborhoods of our two offices (1715 Polk St. and 2324 Market St.) for the previous month.

August is traditionally a slow month for residential sales in San Francisco but something interesting seems to be happening in the Nob Hill, Russian Hill and Civic Center/Van Ness neighborhoods -- the number and percentage of sales closing at under asking prices is going up.

For August 2017 there were 17 residential sales in the three neighborhoods.  6 of those sales closed at below asking price -- 35%.  For August last year the numbers were 17 sales, 3 below asking -- 18%.

For the previous month (July 2017), there were 22 sales, 2 under asking -- 9%.

Admittedly the numbers are small and may not be indicative of a trend but we'll keep watching.

In the neighborhoods surrounding our Market St. office, the trend seems to be in the opposite direction.  This August only 6% of sales were under asking.  A year ago it was 19%.

New Listing Watch - two weeks ending 8/17/2015

Two weeks ago I mentioned that the drop in new listings was consistent for this time of year -- we see it every July/August until post Labor Day.  And the number of new listings continues to be lower than a year ago.  Although new listings for single family homes remains flat at 102 but condos was a different story with 114 this year compared to 149 last year.  In total new listings during this two week period are down 15% compared to last year.

What's even more interesting, the number of these new listings that have gone into contract already is at its lowest level since we've been keeping track.  This year just 11 of these listings (2 single family homes and 9 condos) are already in contract compared with 27 (11 single family homes and 16 condos) last year.

So, if you're looking to buy but reluctant to take on all the potential competition, now appears to be as good a time as any in the recent market.  Of course this doesn't mean there won't be competition, especially on the most desirable properties -- it's just no likely to be as intense.

See the entire report here:  www.boldsf.com/Statistics/index.html

New Listing Watch -- 2 week period ending 8/3/2015

Earlier this week we posted our biweekly report on new listings for the previous two weeks.

Not surprisingly for this time of year, inventory (new listings) continues to drop.  We see this cycle every year with fewer listings starting at the 4th of July holiday and continuing until just after Labor Day.

Also, continuing a trend for most of this year, there have been fewer new listings for most of the two week periods this year compared to the same period last year thus exacerbating the low inventory problem which then contributes to overbidding and higher and higher prices.  Compared to the same two week period last year new listings were down 22% from 290 to just 229.

See the entire report here:  www.boldsf.com/Statistics/index.html

Rent vs Buy?

Trulia recently published an updated report comparing costs to rent vs. buy in a number of real estate markets.

(Click on the map to embiggen).

I've highlighted the San Francisco market.  Click here to see the full Trulia article where you can play with some of the assumptions included in their calculations.  They also offer a full calculator where you can plug in numbers specific to your situation.

One of the main points of their article is to be sure to include the cost of monthly home owners association (HOA) dues.  We've noticed a significant increase in dues over the past few years and they can make a significant impact on your rent vs. buy situation.

Our Market in Microcosm ...

... if anything about a $1,100,000+ 2 bedroom, 2 bath single family home less than 1,000 sq. ft. can be referred to as small.

Four years ago this modest home on Potrero Hill (south slope) sold for $29,000 less than its original asking price.  It took almost 50 days to go into contract during which the asking price was reduced by $20,000.   It took another 50 days to close.

The same house (with a some mostly cosmetic improvements) has just sold for $420,000 more than it's previous sales price.  This time the property went into contract in less than two weeks after it hit the market and closed 40 days later.

I'm not identifying the specific house since that's not the point of this post.  (If anyone wants to know the specifics, feel free to contact me directly).  This particular transaction is of interest since the property is in essentially the same condition it was when it last sold.  That works out to be a 14%+ increase in value per year during the four years the the house was owned by the seller.

DJIA graph 2010 through 2014

That's about the same annual increase as the Dow-Jones Industrial stock overage has achieved over the same period.







Obviously, not every home in San Francisco has seen such increases in value.  There are a lot of variables that can affect pricing.  Nevertheless, our monthly and quarterly statistics tracking suggests that there will be more homes selling for over $1,000,000 in San Francisco than under a million by the end of the year!

Market Competition

Our biweekly report on new listings gives us a look at the current market activity.  It shows a lower number of new listings of single family homes but an increase in condo listings compared to two weeks ago.  But the number of listings is well below where it was last summer (when we first started tracking this particular metric).

Click to enlarge.

The percentage of those new listings that went into contract within that two week period has dropped slightly over the past two weeks but still showed almost 17% of single family homes and almost 20% of condos in contract within two weeks.  

Click to enlarge.

These numbers continue to confirm the competition buyers are running into when making offers and which results in significant overbidding and final selling prices averaging 10% over asking.

Click here for the complete report.

Annual Median Sales Price Continues to Zoom Up

Most of our reports and statistics focus on specific configurations of single family homes and condos.  For buyers and sellers that tends to provide a more realistic picture of the slide of the market their property or prospective property lies.

On the other hand it's useful to step back occasionally and look at the whole picture.  Here's what the annual median sales price for single family homes and condos/TICs/co-ops looks like since 2000:

(Click to enlarge)

The blue line shows the annual median sales price trend.  The median sales price in 2011 was 6% lower than the previous year.  In 2012 the median sales price was more than 12% above 2011 and that trend continued in 2013 when the median sales price increased almost 16% over the prior year.

So far this year (first two months) the median sales price has been almost 12% over 2013.  Prior to the economic downturn the highest annual median sales price was in 2007 which we have now far surpassed.

At the same time, inventory has struggled to keep pace.

(Keep in mind these numbers are derived from listings/sales reported in the San Francisco Association of Realtors MLS system so they do not include private sales and sales of many/most new construction condos).

Pulse of the Market

Our bi-weekly look at early trends in the San Francisco real estate market:

Of course this covers the holiday period from just before Christmas so no one is surprised that the number of new listings is down significantly.  But this also shows there is less competition for the existing listings.

Total number of new listings for single family homes was down as was the percentage of those listings that went into contract within two weeks.  New condo listings was also down was essentially flat as was the percentage that went into contract within two weeks.

Pulse of the Market

Our bi-weekly look at early trends in the San Francisco real estate market:

Total number of new listings for single family homes was down as was the percentage of those listings that went into contract within two weeks.  New listings of condos was essentially flat and then percentage that went into contract within two weeks was down slightly.

Interest Rates and Purchasing Power

"For every 1% rise in interest rates, home prices must fall by 10% in order for you to maintain the same monthly mortgage payment. And at the end of the day, that's what matters, the monthly payment. So take advantage of low rates; they add much more buying power to your purchase than low prices."

Dave Ness of Denver's Thrive Real Estate Group

Monthly Sales Statistics

We've just posted our monthly sales reports for February (in PDF format) and there are some telling numbers.

(BTW, the new look is to complement our new office on Nob Hill at 1715 Polk Street).

Basically, inventory (properties being actively marketed on the MLS) is down substantially compared to a year ago although, as is typical for this time of year, there has been some increase between February 1 and March 1.

Average sales prices have increased 20-25% compared to a year ago.

These reports are based on data from our MLS.  We survey five specific configurations of single family homes and condos in an effort to compare, as much as possible, similar properties.  Together, these five configurations account for 43% of single family homes that sold in 2012 and 60% of condos based on 2012 sales.  Our reports also include information on all 2-, 3-, and 4-unit residential properties.

The last page of the report shows historical pricing for these types of properties back to 1996.  In each of our survey categories the average annual sales price has gone up (year over year) two years in a row.

Foreclosures Sharply Down

Notices of Default, the first step in the foreclosure process, are down sharply the last two months:

CA - Foreclosure Filings

For San Francisco county the trend is the same:

06075 - Foreclosure Filings

Similar declines in Notice of Default filings can be seen in all of the immediately surrounding counties (Marin, Contra Costa, Alameda and San Mateo) at the Foreclosure Radar site.

Department of Good News

A couple of recent reports are bolstering the anecdotal stories that the San Francisco Bay area real estate market is improving:

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According to a report from Chapman University's Anderson Center for Economic Research, the consumer confidence level of Californians is the highest it's been since before the beginning of the recession in late 2007:

Chapman University, California Consumer Sentiment, 9/10/12

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Foreclosure Radar reports that foreclosure filings (notices of default and notices of sale) were down sharply in August.  This continues a mostly downward trend over the last year.

06075 - Foreclosure Filings

The same trend, although not as dramatic, is seen in the statewide numbers as well as the surrounding counties (Marin, Contra Costa, Alameda, San Mateo and Santa Clara).

More Signs of Recovery

Sales results in San Francisco for the first quarter of 2012 is one of the strongest starts since the height of our Real Estate Market back in 2006-7.  And, after two consecutive years of year-over-year growth in the number of sales, it appears that 2012 could be the third year in a row -- which most analysts consider to be a trend.   

The explosion in demand which started in February caught almost everyone by surprise and has continued through March and the first part of April.  Inventory which normally begins to build in February and March has failed to keep up with the unprecedented buyer demand and the resulting shortage of inventory has driven multiple offer situations and, ultimately, prices.

 

Looking at the current active listings for single family homes and condos/TIC illustrates just what buyers are facing.  Of the 1,790+ listings as of today, 438 of them are under contract having been on the Market for less then 2 weeks (they still have conditions remaining and some may well fall out of contract).  502  are "pending" (no contingencies remain).  This leave only about 740 listings for buyers to select among.  This is less than 2 months of inventory, a far cry from what we hear about in many other markets around the country where 6-12 months is more the norm!

If one studies certain categories of residential property and compares the highest average selling prices which were reached in 2006-7 to the average selling prices in the first quarter of 2012, it becomes rather revealing!  One of the largest declines in average selling prices was for 2bed/1bath single family homes, generally considered to be an entry-level home purchase. Having reached an average high in 2007 of $755,000 and fallen to an average price of $536,000 in the First Quarter of 2012, a decline of about 29%. On the other hand average selling prices for  1bed/1bath condos in 2007 reached $697,000, compared to first quarter 2012 at $631,000 a decline of only about 9%.  If our Market continues to have low inventory and high demand, one would logically expect for almost every category of property in San Francisco will regain value, probably an additional 10-12% by year’s end.

More signs of a trend ...

The San Francisco Real Estate Market exploded two weeks ago and while most thought it would be another solid year of sales, the shear quickness and intensity of Buyer demand was not anticipated. Inventory has been unusually low and it appears it has not been building as fast as most years. Since March 1 there have been 180 new condos and 170 new single family homes appearing in the San Francisco MLS. 88 of the condos (about 49%) are now under contract with an average DOM of 14, and 87 of the single families (about 51%) are now under contract. Shades of '05 and '06!

With two consecutive year-over-year growth years behind us and the first quarter of 2012 about to show very strong numbers, 2012 should be the third year of year-over-year growth. Most analysts and prognosticators usually consider three in a row to be a TREND. As the Bay Area goes so goes California, and as California goes so goes the Nation, let's hope the old saying holds this year!

Sellers are finding that if you generally list your property consistent with the most recent comparable sales, 1 in 3 are finding a willing and eager group of buyers, pre-qualified and able to close in 30-45 days. These buyers are anxious to WIN even if it means offering a little over asking -- in some cases with a 5 to 10% premium.

It is quite confusing to buyers, especially first-time buyers, to understand this hectic market pace since national news outlets are still talking about a sluggish real estate market. Buyers who are new to the area often remain in denial for their first two or three offers. It's gratifying for SF agents when they begin to listen to educated advice.

Seller's had just about been convinced that premium pricing was not working unless the property truly reflected premium quality. This might just make it more difficult to convince them that over pricing can still leave a property languishing on the market.

In taking a closer look at the data, it appears that this phenomenon is showing up in properties ranging from $400K to $1.5M+ and includes most of the 10 MLS districts in San Francisco. Also, Mill Valley in Marin and some South Bay Communities are experiencing similar demand.