San Francisco Real Estate Market Report:
Heading into the Autumn Selling Season
Long-term home price appreciation, San Francisco neighborhood prices,
Bay Area housing affordability, seasonality, market dynamics statistics,
the S&P 500 vs. the Shanghai composite index
September 2016 Update
Annual Median Sales Price Appreciation since 1994
for San Francisco houses, condos and TICs
(Prices in thousands of dollars)
2015 to 2016 YTD, the overall median price for condos, which now comprise the majority of home sales in the city, remained exactly the same at $1,100,000: Among other issues, this market segment is clearly being impacted by an increase in new-project condos coming on market, altering the supply and demand dynamic. The house median price increased 6% to $1,328,000: This is far below the appreciation rates of the previous 4 years and is being driven mostly by continued demand for "more affordable" houses selling below $2 million. TICs, which only comprise 4% to 5% of home sales basically stayed flat year over year.
Where to Buy a Home in San Francisco
for the Money You Wish to Pay
We just issued our semi-annual update on home prices by property type and neighborhood. Below are 3 of the 8 charts in the analysis. The complete report is here: San Francisco Neighborhood Home Prices
26% of SF house sales were under $1 million so far in 2016;
In 2011, that percentage was 75%.
Autumn & the Expected Surge in New Home Listings
Autumn is the second biggest selling season of the year, and September is typically the single month with the highest number of new listings. Autumn is a relatively short market season, running from after Labor Day until mid-November, when the market begins its slide into its winter-holiday slowdown. It is particularly important for the luxury home segment as its market activity usually plunges to an almost standstill at Thanksgiving and doesn’t revive until February or early March, i.e. this 2-month window is basically it for the next 5 to 6 months.
At this point, we are waiting to see if the expected, dramatic spike in new listings occurs as usual, and how buyers react to it if it does.
After 6-Month Decline in 2016,
a Sudden Surge in SF Employment Numbers
From the middle of 2015, the Bay Area high-tech boom appeared to appreciably cool down in hiring, IPOs coming on market, venture capital flow and general economic optimism, and that was one factor in the cooling in the SF real estate market. (One local economist predicted "blood in the streets" of San Francisco from a crash in both high tech and real estate.) As to hiring, from 2010 through 2015, San Francisco added an astounding 100,000 new jobs (the Bay Area added 600,000), putting enormous pressure on home prices and rents, but then in the first six months of 2016, that trend reversed itself and the number of employed residents in the city dropped by over 3000. Well, whether it is a short-term, seasonal fluctuation will become clearer soon, but in July, the trend line reversed itself again and the number jumped by 9000 to hit a new all-time high, as illustrated in the above chart.
The SF market definitely shifted gears this past year, from ludicrous overdrive (as Tesla might describe it) to a more reasonable cruising speed, and it has become much more balanced between buyers and sellers, but we certainly haven’t seen any blood in the streets so far. One question now is whether the Bay Area high-tech boom is getting something of a second wind. The change in employment trends is one of the indications we are seeing that it might be, hopefully without the irrational exuberance, but it is far too early to come to any definitive conclusion.
Paragon Special Reports on San Francisco
and Bay Area Markets & Housing Affordability
In August we issued 2 reports that received extensive media coverage in Bloomberg News & BusinessWeek, WSJ Mansion Global, San Francisco Business Times, KGO, KTVU, KCBS, SFGate, Curbed and others, even some international publications. Below is a sampling of the many analyses in the reports, as well as links to the full articles.
A Tumultuous Time in Financial Markets
The S&P 500 vs. the Shanghai Composite Index
We initially created this chart last autumn, and thought it would be interesting to update it for a longer term perspective. Obviously, dramatic shifts in financial markets often affect real estate markets as well.
A year ago at the end of August 2015, a very volatile year began for national and international financial markets. Initially triggered by a crash in the Chinese stock market, sparking serious concerns regarding the international economy, the S&P 500 fell significantly, but then recovered completely by mid-autumn. Then the oil price crisis of early 2016 dramatically affected the S&P, but again, it recovered completely within 2 months. When the Brexit vote came in late June, the market barely reacted, and then the S&P soon hit a new all-time high, a little above its previous spring 2015 peak.
Thousands of pundit prognostications later, many predicting crash and doom, U.S. financial markets are basically back to where they were when the Chinese stock market crisis began one year ago.
San Francisco Market
By virtually every statistical measure of supply and demand, the SF market cooled in 2016: price appreciation generally plateaued, inventory ticked up and sales ticked down, months supply of inventory and days on market increased, and the percentage of sales price over asking price declined. All the changes have been statistically significant, but, except for the luxury condo market (which has softened more dramatically), none of the recent statistics by themselves indicate what would be typically called a weak market. For example, months supply of inventory increased from an average of 1.7 months in the first 8 months of 2015 to 2.3 in 2016, but 2.3 is still quite low; days on market went up 3 days for houses and 7 days for condos, but the current figures are still not high; the percentage of sales price over asking price decreased by about 4 percentage points in 2016, but condos and houses are still averaging sales prices 3% to 8% over original list price, which would have sellers in most other places jumping up and down in glee.
Perhaps the statistic most indicative of change is that the number of listings expiring or being withdrawn from the market without selling has gone up a whopping 60% (and for luxury condos, up over 100%). This is the clearest sign possible of sellers trying to sell their homes for more money than any buyer is willing to pay.
As always, please remember that the heat of different market segments can vary dramatically by property type, price range and location. The more affordable house market, for example, is still crazy hot in many areas of the city. And more affordable markets outside the city have also generally continued to be very competitive.
These analyses were made in good faith with data from sources deemed reliable, but they 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. Statistics are generalities, longer term trends are much more meaningful than short-term, and we will always know more about what’s actually going on in the present, in the future. New construction condos not listed or sold on MLS are not counted in these statistics, though they often affect market dynamics.