Newsletter

Overheated? Yes. Bubble? No. Stabilizing? Maybe.

July 2013 San Francisco Market Report

If you prefer, you can skip the following analysis to go straight to the charts and maps following.

Many adjectives are used to describe San Francisco, but normal isn’t a common one – and the same can be said about our real estate market. Even taking into account its tendency to be unusual in one way or another, this past spring’s market was overheated by virtually any definition. Surging consumer confidence and huge buyer demand chased a deeply inadequate supply of homes for sale, abetted by interest rates so low that loans – factoring in inflation and mortgage interest deduction – were almost like free money. All this led to an extreme seller’s market, a feeding frenzy and dramatic price appreciation.

But not, in our opinion, a bubble. The Economist, one of the first to sound the alarm for the last bubble, sees no sign of a U.S. housing bubble, basing its conclusion upon historical comparisons of home prices with rents and incomes. Also, it is not unusual for the market to go somewhat crazy following a 4-5 year down cycle after all the repressed demand bursts forth – this happened in 1996-1997 too. Besides which, we are only about 18 months into the current recovery. Though real estate is susceptible to sudden economic and political shocks, in past cycles, recoveries have typically lasted at least 6-8 years before peaking. That doesn’t mean there won’t be any short-term market adjustments, up or down, for one reason or another, along the way.

There are some signs of a normalizing market. After a year of declines, the number of new listings in the 2nd quarter was a little higher than the 2nd quarter of 2012. Though this inventory was quickly gobbled up and overall supply remains very low, it’s a good sign more sellers are entering the market. Median prices may be leveling off after spring’s big pop – it’s still too soon to be sure, but summer often sees a cooling down. It’s not welcome news to buyers, but interest rates have increased from extreme lows – though remaining very low by any historical scale. (See below: The Sky is Not Falling.) The distressed home segment, which always distorts markets, is disappearing in the city and declining everywhere. And new-home construction continues to increase: even though we won’t see much of this new inventory until 2014 and later, it’s a very positive sign.

We have updated our home value maps to reflect spring’s recent sales:
San Francisco Neighborhood Values

1San Francisco Median Home Prices
For both houses and condos, the second quarter saw jumps well above previous peak values. Median sales prices are affected by other factors besides changes in value – seasonality, inventory, buyer profile, big changes in the distressed and luxury home segments – but the dramatic increases do reflect rapidly climbing home values in the city. Though all SF neighborhoods have been experiencing striking appreciation, this does not mean that all have now exceeded previous peak values.

2Sales Over & Under Asking Price
This chart illustrates the enormous percentage of listings selling for over – and sometimes far over – asking price. 25% of house sales in June sold for 20% or more above list price: At San Francisco prices, 20% above asking often equals hundreds of thousands of dollars.

Price reductions: 89% of second quarter sales sold quickly without price reductions at an overall average of 8% over list price – a clear indication of overheating. Still, not every listing sold without a price reduction and some didn’t sell at all, but ended up withdrawn from the market:
Price Reduction Chart

3San Francisco Luxury Home Sales
No market segment has been affected more dramatically by the recovery than luxury homes. In an inventory constrained environment, it has far out-performed the general market in unit sales.

This link goes to our luxury market report that also delineates the neighborhoods which dominate high-end house and condo sales in San Francisco:
Paragon Luxury Report

4Interest Rates: The Sky Is Not Falling
Not to diminish legitimate concerns regarding rising mortgage rates and their effects on housing costs, but this graph puts recent increases in context. At any time before 2011, the current interest rates, even after their recent big percentage jump, would be reason for conga lines of celebration in the streets. Rates had to rise from their historic and artificial lows – how far and fast this may continue is unknown to us, but we don’t presently expect big shocks to the real estate market in the near future.

Distressed Home Sales: this link goes to a chart illustrating the rapidly dwindling distressed home market in San Francisco. In most neighborhoods, the effect of these sales has disappeared altogether.
Distressed Home Sales

5Months Supply of Inventory (MSI)
Even with the increase in new listings in the second quarter, inventory as compared to demand remains drastically low.

Average Days on Market (DOM) have also hit historic lows for virtually every property type in the city:
Average Days on Market

7-13_Map-Unit_SalesWhat Sells Where
What district of San Francisco has more house sales than any other? Which area has far more condo sales? You may be surprised at the answers.

July 9, 2013 / by / in
SF Median Home Prices over $2,000,000 – in Some Neighborhoods

Multiple SF Neighborhoods Reach Median Home Prices Exceeding $2,000,000

and/or Average Dollar per Square Foot Values above $1000

San Francisco Home Value Maps, Updated June 30, 2013

The San Francisco 5-county metro area had the biggest gain in home
prices among the 20 largest national metro areas according to the
April S&P/Case-Shiller Index released on June 25th, increasing 24%
year over year. We expect to see another bump in May’s Index
reflecting the acceleration in home price appreciation that began to
show up in March. By itself, San Francisco is the only county in the
state to exceed previous peak values set in 2006-2008, according to
Leslie Appleton-Young, chief economist for the California Association
of Realtors. It should be noted however that this does not yet apply
to every neighborhood in the city.

Looking toward July and August, it is not unusual for median sales
prices to fall during the summer due to seasonal factors related less
to changes in value than to inventory available to purchase and buyer
profile.

San Francisco House Values

1

San Francisco Condo Values

2

Median sales prices and average dollar per square foot values often
disguise an enormous disparity of values among the underlying
individual home sales in the data set, and how they apply to any
particular property is impossible to say without a specific
comparative market analysis (CMA). Please call or email if you’d like
a quick CMA performed on your home or one you’re considering
purchasing.

MEDIAN SALES PRICE is that price at which half the sales occurred for
more and half for less. It can be, and often is, affected by other
factors besides changes in market values, such as short-term or
seasonal changes in inventory or buying trends. The median sales price
for San Francisco homes (in all their almost infinite variety) is not
like the price for a share of stock (all the same), and short-term
fluctuations in median price are common and often meaningless.
Consistent, long-term trends are most meaningful.

AVERAGE DOLLAR PER SQUARE FOOT ($/sf) is based upon the home’s
interior living space and does not include garages, unfinished attics
and basements, rooms built without permit, lot size, or patios and
decks — though all these can still add value. These figures are
usually derived from appraisals or tax records, but are sometimes
unreliable or unreported altogether. All things being equal, a smaller
home will typically sell for a higher dollar per square foot value
than a larger one. Generally speaking, about 60-80% of listings report
square footage, and this statistic is calculated on these listings
alone.

The neighborhoods in the maps above were chosen because their volumes
of sales were considered sufficient to generate meaningful statistics.
We began with sales closing in March because they generally reflect
offers negotiated in early 2013, when market dynamics went through
another shift. When medians and averages are being calculated for a
wide variety of properties of different locations, sizes, eras of
construction, amenities and condition – as is almost always the case
in San Francisco – they can only be considered very general
approximations of value and changes in value.

July 5, 2013 / by / in
San Francisco Neighborhoods Hit New Peak Values

Paragon Market Report, June 2013

New highs in home prices have not yet been reached in every San Francisco neighborhood, but the majority has either regained the value lost since the 2008 market meltdown, or now exceeded the previous high points of 2006-early 2008. (Different neighborhoods peaked at different times, just as they are now recovering at different speeds). This does not mean that every property bought at the height of the bubble in feverish multiple-offer bidding wars has now regained peak value. Nor does it mean that values might not fluctuate or drop in future months due to seasonal and/or other economic factors.

Though virtually every market in the country is now on a similar upward trajectory, San Francisco’s has recovered more quickly than most in the Bay Area, state and country. The city’s neighborhoods, with a few exceptions, were never hit as hard as most other areas by the tsunami of distressed property sales: our home values generally fell in the 15-25% range compared to huge declines of 40-60% elsewhere and so we have had less ground to recover. That said, the city has always been an exceptional real estate market and the confluence of economic factors both general (such as the lowest interest rates in history) and unique (such as the local, high-tech boom) jumpstarted and supercharged our recovery beyond most others.

It should be noted that, looking at past recoveries in the early eighties and mid-nineties, it is not unusual once a recovery gets underway after years of recession and repressed demand, for the market to regain previous peak values within a couple years of the turnaround beginning. Recoveries often start with a dramatic surge and that is what has happened with this one.
—————————————————————

City, State & National Long-Term Overview

In this chart, one can see the recovery occurring everywhere, but most dramatically in San Francisco. For this analysis, we’ve calculated the 2013 SF median house sales price for the 5 months since the year began; if we looked at just the last 3 months (reflecting offers accepted in 2013, when the market accelerated further), the SF median house price jumps to about $1,000,000. (Note: State and national data sources are behind those we can access for the city, and the last median prices reflect that disparity.)

1

SFD_Median-Averages_ChangeSF Houses: Previous Peak Values to Present
In this chart, since we’re also calculating average statistics, we’ve capped the sales price at $3,000,000 because ultra-high-end sales usually distort averages. We see the previous peak value in 2007 (for SF houses in general), the drop to the bottom of the market in 2011, and the rebound starting in 2012 and accelerating in 2013. By all 3 main statistical measures of value, San Francisco houses have met or exceeded previous peak values. To adjust for seasonality, the comparisons are for the spring months of each year.

This link goes to the same analysis for SF condos except it starts in 2008 when condo values peaked and sales are capped at $2m:
Condos: Previous Peak Values to Present

Median_SFD-Condo_by-Qtr_Short-termShort-Term Appreciation Trends
This chart breaks down the rise in SF home values occurring over the past 2.5 years. Though it appears that 2013 prices surged after the first quarter, the surge actually started in March, which is when the market really started to reflect offers negotiated in 2013. January and February sales mostly reflect the holiday season market, when the higher-end home market typically checks out. We prefer quarterly or longer time periods because they make for more reliable statistics: monthly statistics often fluctuate without great meaning. The high overall median prices achieved in March-May may drop somewhat during the summer due to seasonal and other factors.

This link goes to an overview of the past 30 years: it helps give context to what we’re experiencing today:
30 Years of SF Real Estate Cycles

Median-SFD_Multi_Areas2006-Present: House Values by Neighborhood
These 4 SF Realtor districts generate a lot of house sales, so they’re good for statistical analysis. For 2013, this chart looks at the last 5 months of sales-if assessing just the last 3 months, 2013 numbers would typically be higher. The central Noe-Eureka-Cole Valleys district, a hot bed of high-tech buyer demand, has soared well beyond its previous peak value in 2008. The very affluent northern district of Pacific Heights-Marina has also exceeded its previous peak. Sunset-Parkside in the southwest has regained its 2007 peak, and the southeast Bayview-Portola-Excelsior district, which was hit hardest by distressed sales, while recovering rapidly, has not yet made up the value lost since its 2006 peak. This district, with more house sales than any other, lost more percentage value in the downturn (25-45% depending on neighborhood) and so has more ground to make up. But it’s well on its way.

2BR_Condos_Medians_Multiple_Areas-V22006-Present: SF Condo Values by Neighborhood
These 6 areas of the city generate high numbers of condo sales, which is why we chose them for this analysis. Condos in all these areas have increased in value beyond their previous peaks in 2006-2008; some of them, such as South Beach, dramatically so.

This link illustrates how, over the past 5 years, the SF market has switched from being dominated by house sales to condo sales; with the continuing construction of large condo projects, we expect this trend to continue. TIC sales have dropped significantly, both as a percentage of sales and in actual unit sales: This is due to a number of complex issues such as changes in city condo conversion and tenant protection regulations.
Sales by Property Type

Unit-Sales_by_Price-Range_Year-Year_CompPrice Range Dynamics
There are 3 main underlying currents occurring in San Francisco. First is the rapid dwindling of distressed property sales: Thus, sales under $500,000, the price range of most distressed sales, have dropped by 62% since last year. This segment is on the verge of disappearing completely in SF. Second is the dramatic resurgence in luxury home sales: the affluent have profited most from the economic recovery and the city also has large numbers of the newly affluent (often high-tech) who wish to buy homes. So, sales of homes costing $1,500,000 plus have surged by 76%. The third dynamic is simply the general appreciation of home values. All 3 factors add up to a large migration from lower-priced to higher-priced sales. Note: The medians quoted on this chart are for many different property types combined.

May-Snapshot_Sales-UC-ExpiredMay Listings/Sales Snapshot
A clear indication of the red-hot heat of our market: 90% of SF home sales closing in May sold without going through any price reductions, at an average sales price 7% higher than the asking price and a very low average days-on-market of 29 days. These are very dramatic statistics illustrating the high demand/low supply situation here in the city.

June 27, 2013 / by / in
April Newsletter: A Hot Market Getting Hotter

San Francisco: A Hot Market Getting Hotter

1st Quarter 2013 Market Report

In 2012, the market turned with a vengeance and grew very hot very quickly. Now in 2013 it has grown even hotter. Recent deal-making stories almost make the seemingly crazy, multiple-offer tales of last year appear sedate. The supply of listings is drastically low against buyer demand, and the pace of price appreciation looks to be accelerating. Some city neighborhoods appear to be surpassing the previous peak values reached in 2007-2008. As seen below, the first quarter’s numbers reveal big increases in home values year over year. And the month of March alone saw a particularly big jump of almost 9% above February’s median price.

March sales prices reflect the heat of the market 4-8 weeks earlier, when the offers were actually negotiated. Much of the first quarter’s sales data reflects offers negotiated in late 2012. In a rapidly changing market, we’re always looking in the rearview mirror.

N1

N2How Does Supply & Demand Affect Prices?
The past 18 months give a text book example of how the supply and demand dynamic affects home values. Months supply of inventory (MSI) measures the strength of buyer demand against the available inventory of homes to purchase: the lower the MSI, the hotter the market. The hotter the market, the greater the upward pressure on prices.

This link shows the details of the recent increases in median sales price:
SF Median Home Price by Month

N3Sales Prices Over & Under List Price
As the market has strengthened, the percentage of SF homes selling for over — and sometimes far over — list price, has soared to almost unbelievable levels. In the last 2 months, 30% of SF house sales have sold for 15% or more above asking price.

This link shows the huge decline in inventory since the market turnaround began. Typically, we see a surge in early spring. Not this year, at least not so far:
Inventory of Listings for Sale

N4Percentage of Listings Accepting Offers
This is another excellent indicator of demand vs. supply, and it is now at the highest levels in memory for virtually all property types.

This link goes to our chart on average days on market. Generally speaking, the hotter the market, the faster listings go into contract and that is what we are indeed seeing now:
Average Days on Market

April 4, 2013 / by / in
March Newsletter: What Costs How Much Where in San Francisco

San Francisco Home Values by Neighborhood & Bedroom Count

The March 2013 Paragon Market

1

We’ve just completed our semiannual review of SF house and condo values by average and median prices, average size and average dollar per square foot for sales occurring September 1, 2012 – February 28, 2013, as reported to MLS.

The maps contain median sales price data only, while the tables include the full range of value statistics. (The tables are easier to read, but they’re not as colorful.) If a price is followed by a “k” it references thousands of dollars; if followed by an “m”, it signifies millions. Remember that medians and averages are very general statistics.

Further down in the newsletter are charts tracking supply and demand dynamics and price appreciation trends for the city’s residential real estate market. Statistical definitions can be found at the very bottom. For the smaller images, you’ll need to click-to-expand them to really make them decipherable.

2
 
4-Bedroom House Values
This is the table for 4-bedroom house sales over the past 6 months. This link goes to the full analysis by property type, neighborhood and bedroom count.
Neighborhood, Property Type, Bedrooms

3
 
 
 
2-Bedroom Condo Median Price Map
A map of median sales prices for 2-bedroom condos around the city. The table in the full analysis provides further statistical measures.
Full Analysis

4
 
Trends in Inventory & Sales Volume
Sometimes there’s nothing like a chart to depict trends. Here one can clearly see the drastic decline in inventory. And this link goes to a chart on Months Supply of Inventory, another statistic of supply and demand:
Months Supply of Inventory

5New Listings Coming on Market
The quantity of new listings ebbs and flows by season, however even accounting for seasonality, the number of new listings coming on market is much lower than usual. And this link shows the increasing demand since the market recovery really got underway in 2012:
Percentage of Listings Accepting Offers

6Median Price Trends by Month
Monthly price data often fluctuates due to a variety factors. For example, median and average prices almost always drop in January since the higher end of the market usually checks out for the holidays: Values haven’t changed; the demographic of buyers and available inventory changed. However, the clear upward trajectory of prices over the past year is clear in both median and average sales prices.
Average Price Trends

The MEDIAN SALES PRICE is that price at which half the properties sold for more and half for less. If there were 3 sales, at $1, $2 and $10, the median price would be $2. If there were 4 sales at $2, $2, $5 and $10, the median would be $3.50. Median sales price may be affected by seasonal trends, and by changes in inventory or buying trends, as well as by changes in value.

AVERAGE DOLLAR PER SQUARE FOOT is based upon the home’s interior living space and does not include garages, storage, unfinished attics and basements; rooms and apartments built without permit; decks, patios or yards. These figures are typically derived from appraisals or tax records, but can be unreliable, measured in different ways, or unreported altogether: thus consider square footage and $/sq.ft. figures to be very general approximations. Generally speaking, about 60-80% of listings report square footage, and dollar per square foot statistics are based solely on those listings. All things being equal, a house will have a higher dollar per square foot than a condo (because of land value), a condo will have a higher $/sq.ft. than a TIC (quality of title), and a TIC’s will be higher than a multi-unit building’s (quality of use). All things being equal, a smaller home will have a higher $/sq.ft. than a larger one. The highest dollar per square foot values in San Francisco are typically found in upper floor condos in prestige buildings with utterly spectacular views.

The AVERAGE SIZE of homes of the same bedroom count may vary widely by neighborhood: for example, the average size of a 4-bedroom house in Pacific Heights is much larger than one in Noe Valley; and the average of a Marina 2-bedroom condo is larger than one in South Beach. Besides the affluence factor, the era and style of construction often play large roles in these disparities.

Some neighborhoods are well known for having additional ROOMS BUILT WITHOUT PERMIT, such as the classic 1940′s Sunset house with “bedrooms” and baths built out behind the garage. These additions often add value, but being unpermitted are not reflected in $/sq.ft. figures.

Many aspects of value cannot be adequately reflected in general statistics: curb appeal, age, condition, views, amenities, outdoor space, “bonus” rooms, parking, quality of location within the neighborhood, and so forth. Thus, how these statistics apply to any particular home is unknown.

March 9, 2013 / by / in
The Crunch in San Francisco’s Real Estate Market

Over the last 13 months, for a variety of compelling economic reasons, home-buyer demand in San Francisco has continued to grow ever stronger, while the inventory of homes available to purchase has only become tighter. This is the classic supply and demand dynamic — increased competition for a scarce commodity — that leads to increasing prices. Our inventory crunch, at least so far in 2013, is not easing. This situation is advantageous to sellers, and difficult and aggravating for buyers (and their agents): the time, effort, emotional energy and money that it takes to find and buy a home have all been increasing.

However, if buyers can summon the patience and endurance to see the process through, they might take some solace in the last 2 real estate recoveries, in the eighties and nineties. As can be seen on charts further down, it’s not unusual for repressed buyer demand to explode after a long down market, creating the same rapid appreciation situation we are experiencing now. But even with increasing competition and rising prices, those who purchased in the first few years of the past 2 turnarounds ended up doing very well with their investments. We don’t know if this recovery will continue to follow the same trend lines as past market cycles, but it has thus far.

Below are analyses that look at both short-term and long-term trends from a variety of angles.

Click for larger image
Click for larger image

Is Everything Selling Over the Asking Price?
No, of course not: not all listings are selling for over list price. Some homes still go through price reductions and some don’t sell at all, but it is true that a large percentage of SF listings is now selling for over asking price and sometimes far over. This is especially the case with houses, where 1 in 4 sold in the past 2 months went 10% or more over the list price. (Note: Homes selling for within a quarter percent of the list price were considered to have sold AT asking price.) And this link shows the dramatic increase in median home prices in 2012:
Median House & Condo Prices

Click for larger image
Click for larger image

New Listings vs. Accepted Offers
There are two issues behind the current low inventory crunch: firstly, there’s the simple matter of fewer listings coming on market, and secondly, that the listings that do arrive are being snatched up very quickly. This chart compares the influx of inventory and buyer demand in January of the last 4 years. Currently, on any given day, the choice of listings available to purchase is far below that of previous years — which fuels fierce competition between buyers. This link illustrates that fact and the overall decline in listings for sale:
Listings for Sale

Click for larger image
Click for larger image

Ratio of Expired Listings to Sold Listings
Even in a hot market, not every listing sells: some listings viewed as overpriced end up expiring or being withdrawn. However, the ratio of expired and withdrawn listings to sales declines significantly in a strong market, which is what happened last year. Typically, the fourth quarter is marked by a very high rate of expired and withdrawn listings due to the holiday season and end of the year, but in the last quarter of 2012, buyers continued to aggressively snap up listings. And this link goes to a days-on-market chart illustrating the increasing speed with which buyers are snapping up listings:
Average Days on Market

Click for larger image
Click for larger image

Perspective on 3 Recoveries
This Case-Shiller chart for the 5-county SF Metro Area begins with the recovery following the market recession/ doldrums of 1991 – 1995. The market of 1996 and 1997 had basically the same dynamic of repressed demand exploding alongside a recovering economy that we’re experiencing today. (All chart numbers reflect a percentage of the home values in January 2000.) There followed a 100% increase in values over the next 5 years, even before the inflation of the big bubble of 2004-2008. Buyers who bought in the mid-late nineties ended up doing quite well. This link shows the same dynamic in the transition from the late seventies/ early eighties recession to the mid-eighties rebound. Those buying in the early years of that recovery also did pretty well, even factoring in the following recession and market correction:
Market Recovery in the 1980′s

Click for larger image
Click for larger image

Supply & Demand
The chart and the one in the following link are two classic measures of supply and demand. The lower the months supply of inventory and the higher the percentage of listings accepting offers, the stronger the demand when compared to the supply of homes available to purchase.
Percentage of Listings Accepting Offers

Click for larger image
Click for larger image

Buying vs. Renting in San Francisco
This analysis (just 1 part of a full report) compares buying a 2-bedroom SF home at the current median price of $775,000 to renting a 2-BR at the current average asking rent of $3800. It illustrates how buying can make excellent financial sense after tax benefits and principal pay-down are factored in, much less building substantial home equity over time. In this analysis, the “net” house payment comes out well below the rent. However, these scenarios depend on many assumptions such as interest, appreciation, inflation and income-tax rates. It depends on the rent one is paying and having the 20% down payment and closing cost monies available. Still, there’s no doubt that with current interest rates and rents, the equation is much more favorable to buying than it has been for a very long time. Feel free to perform your own analyses using our Rent vs. Buy calculator, which can be accessed using this link. After putting in your numbers, be sure to click on Calculate and View Report:
Calculators

February 7, 2013 / by / in
January Newsletter

San Francisco Rankings, Real Estate Prices & Trends, and the Biggest Home Sales of 2012
January 2013 Paragon Market Report

Here is a look at how a diverse group of major and minor organizations have recently ranked San Francisco on a wide variety of important and whimsical measures. Where disagreements existed — 3 different surveys ranked SF as the 1st, 2nd and 3rd “Greenest City” in America, and 2 surveys ranked us as second and third smartest city in the country — we naturally chose the highest grade as most accurate.

The ranking report is followed by some fascinating snapshots of the San Francisco and Bay Area real estate markets.

1

Median Home Sales Prices around the Bay Area

This mapped analysis calculates median prices from both distressed and non-distressed property sales around the Bay Area as reported to MLS. Median price is a very general statistic and many cities include districts of wildly varying value. For example, San Francisco contains neighborhoods whose median prices vary by over $4,000,000: The overall statistic mixes them all up together and comes up with $810,000. Maps with SF neighborhood values are included later in this report.

2

The 2012 Rebound

Exactly a year ago, we suggested that, based upon the changing market and economic dynamics we perceived developing in 2011, the SF real estate market was on the cusp of a major turnaround in 2012, possibly similar to what occurred in 1996 when the market blasted off after years of doldrums. And that is what happened, not only for the city, which led the way early in the year, but for the Bay Area, state and country somewhat later. Note that the SF house median price quoted here for 2012 is for 4th quarter non-distressed sales only.

3

4
San Francisco Neighborhood Values
This map charts median sales prices and average dollar per square foot for houses by city neighborhood. And this link goes to a map for SF condo values:
SF Condo Values Map

5
 
 
Year over Year Changes in Values
Very generally speaking, and depending on neighborhood and property type, SF home values have risen by 10% to 20% over the past year. Here is a chart assessing the surprisingly consistent change in overall SF condo value statistics and this link looks at SF house statistics.
SF House Value Statistics

6
SF Homes Sales by Price Range
One client once called this the “high-heel shoe” graph of San Francisco home prices. One of the big components of the 2012 market was the resurgence in luxury home sales, the chart for which can be found using this link:
SF Luxury Home Sales

7
Sales by Property Type
Gradually, with the addition of the big new developments in the SoMa-South Beach district (and other areas of the city), condos have become the largest single category of property type sales in the city. This trend will only accelerate with the new burst in construction plans. And this link leads to a chart showing the resurgence in unit sales. Unit sales would have been much higher in 2012 if inventory had not been so drastically low:
Unit Sales Trends

8
Distressed Sales: Goodbye to All That
Distressed home sales have been a market aberration caused by the collapse in loan underwriting standards and the refinancing frenzy of the bubble years. Fair market value is defined as “the price a willing, able and reasonably knowledgeable buyer would pay to a seller not under distress.” But bank and short sales radiate distress: underwater sellers, overwhelmed and unresponsive banks; often the physical condition of the homes themselves is distressed. Buyers demanded a huge discount to deal with them. In SF, this market segment was largely confined to the lower price ranges and less affluent neighborhoods. Now, with the market recovery, the city’s distressed home market is rapidly dwindling and should soon disappear altogether.

9
Percentage of Listings Accepting Offers
This one statistic provides the context to everything we’ve seen in the market this past year: ferocious, pent-up, buyer demand met a drastically inadequate inventory of homes for sale, leading to much more competition for listings and strong upward pressure on prices.

10

Median SF home prices vary on some of the charts above, depending on whether the price specified is for both distressed and non-distressed properties together, only non-distressed homes, for the last 4 months of 2012 or for the last quarter of the year, or whether price limits were placed on the analysis (limiting sales to under a certain sales price). This is natural: the statistics will change depending on the parameters of the analysis, and it’s always useful to look at the market from slightly different angles.

Statistics are generalities and should be considered approximations: How they apply to any specific property is unknown. These analyses were performed in good faith with data derived from sources deemed reliable, but they may contain errors and are subject to revision. If you have any questions, please don’t hesitate to contact us.

© Paragon Real Estate Group, January 2013

January 3, 2013 / by / in
December Newsletter: SF Neighborhood Values

San Francisco Neighborhood Values

December 2012

The general market dynamics in November were little changed from October, so for a different perspective, below are long-term trends in average sales prices and average dollar-per-square-foot values in a variety of areas around the city. The last sales period assessed on the charts is made up of the three months September through November; the neighborhoods chosen were picked for their high volume of sales for the property type being tracked — generally speaking, the greater the volume of sales, the more reliable the statistics.

Pretty much all areas of San Francisco are now showing the same general trend line, a distinct and substantial recovery in values, though some neighborhoods began their recovery earlier in the year and have seen greater increases year to date.

If you’d like to review the overall real estate market dynamics of San Francisco — months supply of inventory, days on market, the number of new listings coming on market, percentage of listings accepting offers, and so on — these can be found online here: SF December Market Report


Inner & Central Richmond House Values
House sales here over the past three months had an average sales price of $1,186,000 at an average of $575 per square foot. Compared to 2011, those figures reflect a 13% to 14% increase.


Central & Outer Sunset & Parkside
This table shows the changes in average sales price and dollar per square foot since 1995. One can also see that the average size of the houses sold can fluctuate (which will affect the average sales price). Distressed home sales are in rapid decline here, as they are throughout the city. The average dollar per square foot is up about 9% since 2011.
Chart


Bernal Heights House Values
With an average sales price of $896,000 and a distressed home market that has basically disappeared, the Bernal Heights averages are up about 19% from the bottom of the market in 2011. And getting very close to the previous peak in values in 2007.
Numbers Table


Noe & Eureka Valley House Values
Average house sales price in this extremely hot market area was $1,665,000 in the past 3 months, which is actually higher than previous peak values in 2008. However, we’ll have to wait to see what occurs over the longer trend since seasonality is one of the factors in prices. Average dollar per square foot is still somewhat below the 2008 peak.
Chart


Noe, Eureka & Cole Valleys: Condo Values
Condo values in these highly sought after Upper-Market neighborhoods have followed a similar trajectory. The average condo sales price here over the past 3 months was $1,000,000.
Numbers Table


Prestige Northern Neighborhoods
The most expensive area for houses in San Francisco is in the northern band of old-prestige neighborhoods running from Telegraph Hill in the east to Sea Cliff in the west. As the luxury market has rebounded in a big way in 2012, we’ve seen increases in value in the 18% to 20% range since the market bottom in 2010.


South Beach – Yerba Buena Condo Values
The greater South Beach area has seen a rebound in condo values in the 15% to 20% range. This area has some of the most expensive condos in the city, many featuring spectacular views.
Numbers Table


Pacific Heights-Marina Condo Values
At $1,235,000, the average condo sales price in the neighborhoods of Pacific & Presidio Heights, Cow Hollow and the Marina is now back up to the previous peak-value level of 2008. While the condos in South Beach have all been built in the last 15 years or so, condos in these older prestige neighborhoods are in buildings typically built 70 – 100 years ago.


Portola & Mission Terrace House Values
The southern-most neighborhoods of San Francisco were those hit hardest by the distressed sale crisis. But the distressed property market is rapidly dwindling here and prices have been rebounding dramatically in the past 6 months. The recovery here started a step behind the recoveries in the most affluent neighborhoods, but is now accelerating rapidly.

December 11, 2012 / by / in
October Stats Show No Sign of Slowdown

October Statistics Show No Slowdown in SF Market

November 2012 Market Update

Last month’s newsletter mentioned anecdotal word on the street that the San Francisco market might be slowing down a bit – it appeared the frenzy had diminished somewhat and that fewer listings were selling instantly with ridiculous numbers of competing offers – and the question was whether this would soon show up in the statistics. It hasn’t. Though September did see a burst of new inventory that temporarily changed the equation between buyers and inventory, now with October’s statistics it’s clear the market is still dominated by a high demand/ low supply/ upward pressure on prices dynamic. However, it should be noted that there is a difference in market heat between a listing receiving 1 or 2 offers compared to it receiving 5 to 20 offers, however that difference might not show up in the statistics as long as one good offer is accepted.

Comparing September-October sales reported to MLS with the same two months in 2011, SF dollar volume home sales were up 41%; at Paragon, our sales were up over 109%. These are not the signs of an ebbing market, nor are the statistics illustrated below.

Typically, at this time of year, the number of new listings begins to markedly decline in preparation for the slowdown that usually begins at Thanksgiving and runs through mid-January. But we saw very little of the usual summer slowdown this year, so we will see how much market activity slackens during this year’s holiday season.

Median Sales Price Jumps in October
The median home sales price is that price at which half the sales occurred for more and half for less. It is a very general statistic and big monthly fluctuations, such as seen in October, should be taken with a grain of salt until substantiated over the longer term. Still, October saw a very large increase over the relatively static median prices seen in the previous 6 months, which followed the big jump in early 2012. Remember that sales prices reflect accepted offer activity in the 4 to 10 weeks prior.

Average Sales Price Jumps
The average price is simply the total dollar volume of sales divided by the number of sales. Like median price, it is a general statistic affected by a variety of factors and often fluctuates without great significance on a monthly basis. Among other factors, a decline in distressed home sales and/or an increase in high-end home sales, both of which are occurring now in SF, can have an outsized effect on average sales price. We will see if October’s big increase is sustained in future months or is simply one of those anomalous fluctuations which occur in real estate.

Buyer Demand Remains at Peak Level
The percentage of listings accepting offers in October was probably about as high as it has ever been, close to twice the level of October 2011. The decline seen in September was the result of a large influx of new listings hitting the market in mid-month.

New Home Construction Blasting Off
After crashing in 2008, developers are building again in a big way: over 4000 housing units are currently under construction in San Francisco, with many thousands more in the planning/permit phases. The lack of new homes on the market in the past few years has greatly impacted the supply side of the supply and demand equation. However, with the significant time lag between construction beginning on the larger projects and new condos arriving on market, the effects of this building surge will be a while before being felt.

Distressed Home Market Dwindling
The city was never as hard hit as many other areas by distressed home sales (bank-owned and short sales), and now they are declining rapidly with the market recovery. The number of distressed home listings has declined by 80% since it peaked in November 2010. On this course, this segment will soon be only a negligible part of the SF market.

Listings for Sale Still Very Low
After the spike in September from the large influx of new listings – September is typically the month with the greatest number of new listings – the number of homes for sale is declining again and will almost certainly continue to do so until early 2013.

Months’ Supply of Inventory (MSI)
MSI is a measure of how long it would take to sell the current supply of listings at the existing rate of sales. In October, it was about as low as it has ever been.

Average Days on Market (DOM)
Strong buyer demand plus low inventory typically leads to lower average days on market, and this is what occurred in October.

The Longer Term View
Pulling back from monthly data to look at the longer term cycles of real estate gives greater context to what’s happening in our current recovery.

In October, we completed quarterly updates for San Francisco’s luxury home market, the SoMa-South Beach condo market, the Noe Valley-Castro-Cole Valley home market, as well as for many of the city’s other neighborhoods. If you would like to review these analyses, please reply to this email with your specific request and the information will be sent to you.

November 8, 2012 / by / in
Newsletter: Is the SF Market Easing a Little?

Is the Ferocious SF Market Easing a Little?

October 2012 San Francisco Market Update

September brought a burst of new inventory that helped satisfy some of the fierce buyer demand for San Francisco homes. Anecdotally, word on the street is that the market may have calmed down a little after Labor Day: not every listing is selling immediately amid high numbers of competing offers — though this may simply reflect the temporary increase in new listings, or sellers too hopeful in their asking prices. But it also appears that home price appreciation has been stabilizing or at least slowing in the last quarter after the big jump earlier in the year. It’s still too early for conclusions: Since most statistics are like looking in a rearview mirror, what is happening today will only become clear in coming months.

Even if the market has eased a little, it is still very strong and very competitive by any historical measure.

Below are 2 updated, mapped analyses of median sales prices and average dollar per square foot values. Almost all the current values reflect a significant jump from 2011: for the city overall, the increase has been in the 10 to 12% range, but it can vary from 4% to 18% by neighborhood and property type.

Median Sales Prices

After the big jump early in the year, median price appreciation for both house and condos appear to have stabilized or slowed – at least for the city as a whole. (Market conditions vary widely by neighborhood.) The median sales price for non-distressed SF condos now slightly exceeds the median price in 2007, the last peak of the market, while that of SF houses is only 5% below 2007. We have similar charts going back 15 to 30 years available on our website.

Inventory

September had the highest number of new listings of any month in the past year, though well below previous Septembers: 760 new home listings in September 2012 vs. 888 in 2011 and 1138 in 2010. This significantly, if temporarily, expanded the choice of homes available to buyers. But now, in October, the number of new listings is dwindling again and inventory is still drastically low by any historical measure. Overall, in the third quarter, there were 1100 fewer listings than in the same period last year, but the number of sales increased by 21%.

2-Bedroom Condo Median Prices

In the 5 areas shown, condo values jumped across the board, though the most dramatic increase from the bottom of the market has been in South Beach/Yerba Buena — where in the last 2 quarters, the median price surged ahead of that for Pacific and Presidio Heights. Noe and Eureka Valleys and surrounding neighborhoods, SoMa and Hayes Valley/NoPa have also seen large increases. If you’d like data on a neighborhood not listed, please let us know.

Average Dollar per Square Foot House Values

Though pretty much all SF neighborhoods are seeing increases in dollar per square foot values for houses, the more affluent districts 5 (Noe/Eureka/Cole Valleys) and 7 (Pacific Heights-Marina) have seen some of the largest jumps. In the last 2 quarters, District 5 hit a point matching the peak of the market in 2007. If you’d like data on a neighborhood not listed, please let us know.

Luxury Home Sales

Comparing the 3rd Quarter 2012 with 3rd Quarter 2011, MLS listings of San Francisco homes of $1,500,000 and above increased by 23% and sales soared by 54%. This map shows where those sales occurred: 18 in the Sea Cliff/ Lake Street/ Richmond district; 26 in the Pacific Heights/ Marina district; 21 in Russian/ Nob/ Telegraph Hills; 19 in the greater SoMa/South Beach area; 53 in the Noe/ Eureka/ Cole Valleys district; 10 in the St. Francis Wood/ Forest Hill district; 2 in Potrero Hill and 3 in Bernal Heights. The highest prices are still generally achieved in the band of very affluent neighborhoods running across the northern boundary of the city, though growth in the number of luxury home sales is strongest in the central and northeastern areas.

Months Supply of Inventory (MSI)

Still bumping along at the lowest levels in memory. MSI reflects the amount of time it would take to sell the current inventory of homes for sale at the existing rate of sales. Lower MSI means higher demand as compared to supply.

Percentage of Listings Accepting Offers

Houses, condos and TICs all hit historic highs in the 54% to 60% range earlier in the year, but have now fallen back a bit. In the third quarter, TICs saw a rather large decrease, but their percentage is still much higher than in the last four calendar years. The percentages for houses and condos are still extraordinarily high. This statistic is one of the clearest measures of supply and demand.

Average Days on Market

For those listings that did accept offers in September, the average days on market was the lowest in a long while. Many new listings, especially those considered most appealing and well-priced, are accepting offers within 7 to 10 days of coming on market.

October 9, 2012 / by / in