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A Second Wind for San Francisco Real Estate?
Since the year began, preliminary data has been trickling in regarding the Bay Area and city economy, and the commercial and residential real estate markets in particular, that appears to indicate that things may be heating up again after clearly cooling in late 2015 and 2016 (subsequent to the increasingly torrid conditions in the 4 years prior). It is far too early to come to any definitive conclusions regarding the long-term significance of recent local or national shifts: Some of the data is not always consistent with such a conclusion; some of the data may indicate over-exuberance in the markets. Though always hesitant to make too much of short-term trends, we will take a look at a few angles on current developments. A recent article in the San Francisco Business Times (of similar title) describes what is going on in commercial real estate, while this report will primarily focus on the SF residential market.
Percentage of Home Listings Accepting Offers by Property Type & Price Segment
Note: 12-month median sales prices in San Francisco are currently approximately $1,350,000 for houses and $1,100,000 for condos One of the classic statistics of supply and demand is percentage-of-listings-accepting-offers: The higher the percentage, the hotter the market. In the chart above, we assessed San Francisco by property type and price segment, comparing this past April to the same months of 2015 and 2016. Note that spring 2015 was considered a particularly feverish market characterized by very high demand and very low inventory. Most of the segments saw a considerable cooling from April 2015 to April 2016. However, almost all the segments bounced back in April 2017, and, indeed, the lower price segments performed significantly better than 2 years ago. Other standard measures of market heat such as average-days-on-market, and months-supply-of-inventory saw similar changes (approaching all-time lows), though we did not chart them for this report. On the ground, increased buyer competition for an inadequate supply of houses under $2 million and condos under $1.5 million, dovetails with the statistics. We have also heard that new-project condo sales have seen a considerable surge in buyer demand, but we cannot verify that. It will be interesting to see if these dynamics continue through Q2, usually the most active selling season of the year, and, if so, how they will affect median sales prices: As seen in the second chart below, so far, there has been no appreciable year-over-year change. However, most listings accepting offers in April will not close sale until May, which will then be reflected in median sales price data available in June.

Year-over-Year SF Median Sales Price Comparison

Looking at 3-month rolling median sales prices in the chart above, comparing the February through April periods of 2015, 2016 and 2017, the SF median house price is relatively flat since last year, and the median condo price is relatively flat since 2015, after both saw rapid appreciation rates in the previous years. (At this point, the recent, minor percentage changes comparing 3-month periods should not be considered significant.) The flattening in condo median price for the additional year reflects the earlier and greater cooling that occurred in that market segment.  

Comparative Neighborhood Values & Appreciation Trends

One of our readers suggested that it would be interesting to see multiple San Francisco neighborhoods illustrated on a single chart to compare home prices and appreciation rates. We got a little carried away and created more than 2 dozen graphs, of which 6 are below. The extremely affluent Presidio Heights neighborhood has the largest houses and highest prices in the city, with next door Pacific Heights right behind.
All the charts in this series are here: San Francisco Neighborhood Comparisons, which also includes an SF neighborhood map. If you are interested in a city neighborhood not included our full report, please let us know.  

San Francisco Luxury Home Pricing

It has been clear over the past 2 years that the market for higher priced homes has cooled more than that for less expensive homes, and this is reflected in the first chart of this report. One of the big issues is that many luxury home sellers have simply been asking for more money than buyers are willing to pay: This is illustrated in the chart above which compares median sales prices with median asking prices, and then with the median prices of expired listings that were ultimately pulled from the market without selling.  

Various Economic Indicators Bay Area Employment & Unemployment Rates

The lowest unemployment rates in 15 years, but the picture in hiring and new high-tech hiring in particular, is a bit unclear with recent shifts up and down.

S&P 500 Stock Index

Maybe some irrational exuberance at play since the election?

Housing Affordability

Perhaps the biggest social, economic and political issue in the Bay Area right now: Remaining close to all-time lows

San Francisco, Alameda & Marin Rents

Rents in all 3 counties ticked back up in Q1 after recent declines, but too much should not be made of this until substantiated over a longer term than 1 quarter

Mortgage Interest Rates

Up after the election, down since the new year began, rates remain extremely low by historical standards

S&P Case-Shiller House Price Index Another Angle on Bay Area Home Price Appreciation Trends

According to Case-Shiller, which divides sales into 3 price tiers and measures Bay Area home price appreciation using its own proprietary algorithm (instead of median sales prices): In the period from April 2016 through February 2017 (its most recent report), less expensive homes appreciated by 7% during the period; mid-priced homes appreciated by 3%; and high-priced homes remained flat over the 11 months. Over the last year or two, the greatest pressure of buyer demand in the Bay Area has shifted to the more affordable home segment. Again, the first chart in this report highlights this dynamic in San Francisco. C-S numbers all refer to a January 2000 home price set at 100. Thus, a reading of 249 signifies a price 149% over than of January 2000.
If you have any questions or comments regarding this report, or if assistance can be provided in any other way, please call or email. Our full article on market cycles: 30+ Years of San Francisco Real Estate Cycles All our analyses can be found here: Paragon Market Reports It is impossible to know how median and average value statistics apply to any particular home without a specific, tailored, comparative market analysis. These analyses were made in good faith with data from sources deemed reliable, but may contain errors and are subject to revision. It is not our intent to convince you of a particular position, but to attempt to provide straightforward data and analysis, so you can make your own informed decisions. Median and average statistics are enormous generalities: There are hundreds of different markets in San Francisco and the Bay Area, each with its own unique dynamics. Median prices and average dollar per square foot values can be and often are affected by other factors besides changes in fair market value. Longer term trends are much more meaningful than short-term.
© 2017 Paragon Real Estate Group

Ric Rocchiccioli

San Francisco Bay Area

Real Estate License #01017500
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