Author Archives: Pota Perimenis

A Soft Landing after 4 Years of Market Frenzy?

A Soft Landing after 4 Years of Market Frenzy?

The San Francisco Real Estate Market Report
including 15 custom charts, July 2016


 


Paragon Real Estate Group

Paragon Real Estate Group
 

A Soft Landing after 4 Years of Market Frenzy?

 

The San Francisco Real Estate Market Report
including 15 custom charts, July 2016————————————————————


San Francisco Median Sales Prices by Quarter 


Since median sales prices fluctuate so much by season, the most useful metric is year over year, i.e. comparing Q2 2016 to Q2 2015. In Q2 2016, the year-over-year appreciation rate was 4% for houses and less than 1% for condos, as compared with 2014 to 2015 rates of 20% and 18%.


Link to long-term median home price chart


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Transition
By virtually every measurement of supply and demand, the SF real estate market cooled in Q2 2016 when compared to the 4 previous, often wildly overheated spring selling seasons. Listing inventory is up significantly, while the number of sales is down; the number of listings that expired without selling jumped by over 50%; and, as seen above, median sales prices for houses and condos increased year over year, but at much smaller percentages than the torrid rates of previous years. On the other hand, to keep perspective, the months supply of inventory is still under 3 months of inventory, which typically denotes a seller-advantage market in the rest of the country; the median days on market was a relatively low 24 days in Q2; and almost 70% of SF home sales went for over the asking price. Many homes are still selling quickly for very high prices.

Within the city, different market segments are experiencing varying realities. Very generally speaking, the market for more affordable homes is stronger than that for luxury homes; the market for houses stronger than that for condos; and the market for luxury condos cooling most distinctly. Districts with the most new construction, i.e. adding more supply, are usually softening more quickly. It also appears that the city is cooling before other, more affordable Bay Area County markets. San Francisco led the way out of the market recession as the recovery began in 2012 and now may be leading the way in the transition to a less frenzied market. It is also true that transitional markets often send mixed signals in their data.

In any case, it is typical for the market to slow down appreciably during the mid-summer months and then pick up again after Labor Day. Which does not necessarily mean it is not a good time to either buy or sell. For buyers in particular, there is usually greatly reduced competition for listings and thus greater scope to negotiate purchase prices.


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Average Sales Price to Original List Price Percentage
Trends in Overbidding


As the market has cooled, competitive bidding has declined, thus this past June saw an average sales price 3% over original asking price as compared to the crazy 11% seen in June 2015, when it hit an all-time peak.

Link to our updated report on market seasonality


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Appreciation Trends, 2011 to 2016 YTD, by Neighborhood
These four charts below track median sales price appreciation from 2011 to 2015, generally the period of rapid increases, and then from 2015 to the first half of 2016, when prices started to stabilize for most areas. Areas that were hit hardest by the distressed property crisis, such as Bayview, often have the highest appreciation rates because they were bouncing back from unnatural lows in 2011. Median condo price appreciation is iffier as a measurement of change because the surge of new construction condos, which are typically more expensive than older units, have substantially impacted values in some neighborhoods. (House inventory in SF has barely changed in many decades, so year-over-year sales are closer to apples to apples.) There are also neighborhoods that have gone through both substantial gentrification and lots of new construction in recent years, such as the Mission and Hayes Valley.


Houses

Condos


Generally speaking, neighborhoods were chosen because they had higher numbers of sales, which usually makes the statistics more reliable. However, median prices can sometimes fluctuate dramatically without great meaningfulness when different baskets of relatively unique homes simply closed in different periods. This is especially true in the most expensive districts: As an example, 20 house sales closed in Pacific Heights by 6/29/16 for a 2016 YTD median price of $5,675,000. Then, one more closed on 6/30/16 and the median price jumped to $6 million. A reminder not to take specific median price appreciation percentages too seriously: They illustrate general trends, not exact measurements of changes in home values.


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Context
Anyone who reads real estate news, blogs or newsletters knows that there are 2 particularly vehement camps, each with emotional and sometimes financial attachments to diametrically opposed positions: One never stops insisting that the market is great and getting better (and apparently always will, for both buyers and sellers), and the other never stops shouting, usually gleefully, that the market is crashing or about to crash. Both marshal and exaggerate selected statistics and ignore others. The truth is that there are cycles, lulls and fluctuations in real estate markets and no market can go up 20% a year forever (nor should we want it to). On the other hand, we do not currently see local or macro-economic conditions suggesting any imminent crash. While it is true that economic, political or even environmental crises of various magnitudes can erupt suddenly (such as, in the past 12 months, the Chinese stock market plunge, the crash in oil prices, and Brexit), the impact of these crises can vary enormously, and it is very difficult to predict when the next one will hit.

The SF market is clearly in some kind of transition, currently at a relatively moderate pace, hopefully signifying what is called a soft landing from an over-exuberant state. The speed and scale of any further adjustment should become clearer over the second half of the year.


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San Francisco Luxury Home Market

A Breakdown of Expensive Home Sales by City District

Luxury Home Sales Trends, by Quarter
Luxury house sales were basically the same year-over-year in Q2 (though listing count was up almost 25%), however luxury condo sales saw a significant year-over-year drop, even while the number of expensive condo listings on MLS jumped to its highest level ever. The resale luxury condo market is clearly being impacted by an increase in new, luxury condo projects coming on market, especially in those areas where most of the new construction is occurring.

Some of the new projects coming on line or expected soon will be the most expensive ever seen in San Francisco, estimating average dollar per square foot values for their units over, and sometimes well over, $2000. It will be interesting to see the match up of supply and demand for these condos, since such values in the existing resale market are relatively rare, as illustrated in the third chart below.


Condo Sales by Average Dollar per Square Foot Values
2012 to 2015 Trends, for Condo Sales Reported to MLS

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Home Sales Breakdown by District
Underlying the median sales prices commonly quoted is commonly a huge range of prices in the specific home sales that go to make them up. We have updated our breakdowns for every district in San Francisco. Below are 2 of 15 charts which can be found here: SF District Sales by Price Segment.


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San Francisco Residential Construction Pipeline
Projects of 60+ Units, per San Francisco Business Times Analysis


The San Francisco Business Times performed a superb in-depth analysis of the many housing projects, rental and sale, market rate and affordable, currently in the Planning Department new construction pipeline, breaking out and describing major projects of 60 units or more, and mapping them as well. Above is our attempt to boil down much of that information into one chart. Please note that projects are constantly being added, revised, sold to new developers, or even abandoned, and the median time from filing a plan to building completion is 3 to 6 years depending on the size of the project. Our full report is here: SF Housing Inventory and Pipeline Report.

Hundreds of condos under construction have already been pre-sold to buyers, with close of escrow and occupancy to occur upon final building completion, sometimes well in the future. These sales of units not yet built still have a significant impact on market supply and demand dynamics.

It is also interesting to note that of projects either under construction or approved by Planning (and leaving aside the long-term mega-projects such as Treasure Island), rental units outnumber sale units by about 2 to 1. This is a very recent development in SF housing construction, which has long been dominated by condo projects (though there are plenty of those too). This expected rush of new rentals, most of which are at the high end of rental cost, is coming just as the rental market is dramatically softening in the city. Indeed, the rental market appears to have cooled much more quickly than the sale market.

 

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. Statistics are generalities, longer term trends are much more meaningful than short-term, and we will always know more about what is 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. It is impossible to know how median prices apply to any particular home without a specific comparative market analysis.

© 2016 Paragon Real Estate Group
No one knows San Francisco real estate better than Paragon.
Paragon Real Estate Group
www.paragon-re.com/

Pota Perimenis
Lic# 01117624
1400 Van Ness Avenue
San Francisco, CA 94109
Direct 415-738-7075
Cell 415-407-2595
pperimenis@paragon-re.com
www.sfcityhomes.com

 

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Significant changes in Bay Area employment trends – Paragon

Significant changes in Bay Area employment trends – Paragon

Our analyst at Paragon, Patrick Carlyle, provides these insights:
Analyzing new data (preliminary May numbers) from the CA Employment Development Department indicates a significant shift in Bay Area employment numbers. As seen in the chart below, looking at the 4 central Bay Area Counties, comparing the first 5 months of last year to the same period of this year, the change in the number of employed residents during each period went from an increase of 28,100 last year to a decline of 5000 in this past December to May.

(Santa Clara County continued to grow in number of employed residents, but at a substantially reduced rate from the previous year.)

This is the first time since 2009 that the number of employed residents in this area has declined instead of increasing, though this is still relatively short-term data and doesn’t prove a lasting, long-term trend.

Changes in employment figures, up or down, typically affect the rental market relatively quickly and dramatically – more so than the real estate purchase market – and that certainly appears to be the case in San Francisco, where softening demand and rents have been widely reported. The big increases in employment, and thus of population, of past years put immense pressure on rental rates over the past 5 years around the Bay Area (see last chart below). The decreases in employment we’re seeing this year are coupled with recent, increased rental inventory construction, albeit most of which has been at the very high end of rent rates.

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Average asking rents have actually plateaued over the last 3 quarters (not illustrated below), which may disguise a decline in actual rent rates which have not yet showed up in the statistics.
rent 1

1968-2016_US-CA-SF_Median_Price

Wealth, Employment, Demand, Inventory, Affordability and San Francisco Home Prices

 


Paragon Real Estate Group

Paragon Real Estate Group
 

Wealth, Employment, Demand, Inventory,
Affordability and San Francisco Home Prices

 

The San Francisco Market Report
including 12 custom charts, June 2016

Link to our updated interactive SF & Bay Area Home Price Maps

Link to our recent SF Housing & New Construction Report


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An Astounding Recovery since 2011


Chart: Long-term SF Rent Trends

Two of the biggest drivers of local real estate demand in recent years have been increasing employment and new wealth creation, both of which exploded in San Francisco and the Bay Area. Approximately 600,000 new Bay Area jobs and 100,000 SF jobs have been added in the past 6 years. IPOs, unicorns and surging stock valuations created thousands of millionaires, dozens of billionaires and trillions of dollars in new wealth. The S&P 500 roughly doubled in the 5 years to mid-2015. Interest rates plummeted. And there was an exuberant optimism that the boom would only continue to soar. Add those ingredients to a deeply inadequate supply of housing and the result is a real estate market boiling over, with skyrocketing home prices and rents.

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Market Transition, Lull or Short-Term Fluctuation?


But in mid-2015, fears regarding the world economy burgeoned; Bay Area IPOs started to dry up, (over 80 in 2013 to mid-2015; 1 so far in 2016); the valuations of many high-profile IPOs and unicorns declined; and the firehose of venture capital investment slackened. The S&P 500 is now flat year over year and housing affordability has dropped close to historic lows. Hiring slowed and then in early 2016, employment numbers started to decline a little in San Francisco. Some of the wild exuberance leaked out of the general economic optimism, and in the city, demand began to soften a little, while listing inventory started to tick up.



Chart: Long-term SF Employment Trends

In the first 4 months of 2016, after 6 years of heated growth, the trend in increasing employment numbers in San Francisco reversed itself. This aligns with stories of local start-ups starting to slow hiring and trim staff as venture capitalists have become more demanding. However, this change in hiring could be a short-term phenomenon.



Since 2012, the spring selling season has been the most dynamic period of median home price appreciation. In spring 2016, after years of major increases, year-over-year house and condo price appreciation basically plateaued.

Note: Virtually every time the analysis is changed even slightly, the result will change. The combined house-condo median sales price ($1,280,000) was 5% higher year-over-year, still way down from its 23% jump seen in 2015. Median sales prices can be and often are affected by other factors besides changes in fair market value.



In 2016, the supply and demand dynamic shifted somewhat, with the number of listings available to purchase increasing, but the number of closed sales declining. (There was also a significant increase in listings expiring or being withdrawn from the market without selling, an indication of sellers demanding more than buyers were willing to pay.)

Slowing or plateauing appreciation does not imply a crash, and the cooling of a desperately overheated market to something closer to normal is not bad news. Indeed, an improvement in housing affordability (and supply) would be good news, both socially and economically. Likewise, a shift from irrational exuberance in the local economy to rational optimism would be a healthy change.

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San Francisco Luxury Home Market


As mentioned in previous reports, it appears the luxury segment has softened to a greater degree than more affordable segments (some of which remain very competitive): The number of high-end listings in MLS has jumped, while sales have plateaued or declined. Why the more dramatic change in the luxury condo market? Firstly, increased competition from new, big, luxury-condo projects may be taking a toll (more supply). Secondly, a significant percentage of these very expensive units are usually purchased as second or third homes, not primary residences: When economic uncertainty swells, this is a market segment often affected first (less demand). Note: We do not have access to up-to-date statistics on new-project, luxury condo sales activity, so do not know if that segment has also cooled or is simply cannibalizing the resale market illustrated above.

Based on preliminary data, it appears that accepted-offer activity in May for luxury houses was very strong, possibly even exceeding levels of Spring 2015, suggesting that buyers took advantage of the greater selection of listings to jump in. If so, this will show up in the sales data for June.

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Rental Market Trends


The rental market is especially sensitive to changes in hiring, and, as illustrated above, asking-rent appreciation has plateaued. It is quite possible that actual lease rents have already started to decline, though no decline has yet shown up in the above statistics. (There is no MLS for reporting actual rents paid, so we have to rely on advertised asking-rent data, which is a lagging indicator.) Clearly, available apartment inventory has grown, and renter demand has softened. Large new apartment buildings have been entering the SF market, with more in the pipeline. This quote is from a June 1 Bloomberg article: Softening apartment rents in New York and San Francisco have forced landlord Equity Residential to lower its revenue forecast for the second time this year, as newly signed leases are not meeting company expectations.


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Important Caveats & Perspective


This recent data measures relatively short-term changes and may reflect only a temporary economic lull or market fluctuation (which is not uncommon). Also, different neighborhoods, property types and price segments in San Francisco are experiencing varying market conditions, from still-quite-hot (non-luxury houses) to cooler (luxury condos).

A staggering amount of wealth yet remains in the Bay Area. Hundreds of local companies worth hundreds of billions of dollars, including the likes of Uber, Airbnb, Palantir and Pinterest, remain in the near-future, possible-IPO pipeline, and economic optimism can shift quickly. Our business environment continues to be the envy of the world, and unemployment rates persist at near-historic lows. San Francisco ranks with the greatest cities of the world in quality of life, even if stressed by growth and housing-affordability issues. Overall city and Bay Area housing supply remains acutely inadequate to recent population increases.

Compared to almost any other in the country, our real estate market remains quite strong as measured by a wide variety of standard supply and demand statistics, and a substantial percentage of San Francisco home listings still sells quickly for well over asking price.

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Advice for Buyers


Buy a home that is affordable now and in the foreseeable future, keeping an appropriate reserve for the unexpected. Buying for the longer term is usually safer than for the shorter term. Lock in a low, fixed, interest rate for an extended period. Expand the list of neighborhoods you are willing to consider and do not just run after brand new listings, but look at those the market has passed by: There will often good buying opportunities with greater room to negotiate. Do not be afraid to make offers below asking price and to negotiate, but carefully review the most recent comparable sales and market indicators. During the summer and mid-winter holiday seasons, the competition for listings significantly declines, and can be excellent times to buy. Be patient: New homes come on the market every day.

Historically, homeownership in the Bay Area has been a good investment, because of long-term appreciation trends, the advantages of leverage, what is called the forced-savings effect (each mortgage payment including principal pay-down), and the many tax advantages. Talk to your accountant or financial planner regarding how these factors might impact you specifically. Admittedly, if one has to sell at the bottom of a down cycle, it can be painful.


Advice for Sellers


There are still plenty of motivated, qualified homebuyers in San Francisco, but do not take for granted that mobs of desperate buyers will show up waving over-asking offers. Price your home correctly right from the moment of going on market as overpricing can have significant negative ramifications. Prepare your home to show in its best possible light: You only have one chance to make the right impression on buyers. Hire an agent who will implement a full-court marketing plan to reach every possible prospective buyer and seize their attention. Stay up to date on comparable listings and sales, market conditions and trends, and adjust appropriately. If you receive an unacceptable offer, do not be insulted: It almost always makes more sense to issue a counter offer instead of outright rejection.

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San Francisco Housing Inventory & New Home Construction


Above are 2 charts from our updated report which contains a great deal of additional information: SF Housing Inventory & Construction Report

 

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.

© 2016 Paragon Real Estate Group
No one knows San Francisco real estate better than Paragon.
Paragon Real Estate Group
www.paragon-re.com/

Pota Perimenis
Lic# 01117624
1400 Van Ness Avenue
San Francisco, CA 94109
Direct 415-738-7075
Cell 415-407-2595
pperimenis@paragon-re.com
www.sfcityhomes.com

 

PLACE. A new digitalzine

Issue 2 of Place is here!

Click here for issue 2 of Place!

“Spring has officially arrived around the Bay Area – the beauty of this past season’s El Nino’ rain has put a blanket of green on the hills and all the trees and flowers are in full bloom.

We’ve packed a lot in to this second issue of PLACE to celebrate this fresh season that is upon us. Foodies can feast their eyes upon MKT, Rodney Worth and Farmshop. Inspire your inner decorator (or hire one) with Timothy Quillen and Folger & Burt. We’ve been busy selling real estate and we’ve packed in listings from Phil Lesh of the Grateful Dead and a history lesson on the Hearst family’s build from the early 1900’s. We also focus on Passive Homes and Net Zero building. It’s a trend that will definitely continue to grow and take hold in this chang­ing environmental climate. Don’t miss out on everything the Bay Area has to offer in our events pages.

The San Francisco Luxury Home Market

The San Francisco Luxury Home Market

Homes of $2 Million & Above

Auto-Updating Market Analytics

The bar charts compare year-over-year data, going back 2 years, for the latest month. The line charts track monthly data over a period of 3 to 5 years. Note that it can take 7 to 15 days after a month’s end for agents to enter in transaction data pertinent to the month in question, so statistics for the latest month can sometimes change significantly as this data is added to calculations.



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The San Francisco Luxury Home Market

Homes of $2 Million & Above

Auto-Updating Market Analytics

The bar charts compare year-over-year data for the latest month. The line charts track monthly data over a period of 3 to 5 years. Note that it can take 7 to 15 days after a month’s end for agents to enter in transaction data pertinent to the month in question, so statistics can change as this data is added to calculations.

Seasonality plays a significant role in luxury real estate statistics as the market ebbs and flows during active and less active sales seasons. Typically, the market is most active in the spring and fall, and much slower in the summer and, especially, the mid-winter holidays.


Moving your cursor over the line charts will reveal monthly data.

New Listings Coming on Market, by Month

September is usually the single biggest month for new high-end home listings.
Spring is typically the most active season for new listings.
New listing activity plunges during the mid-summer and mid-winter holidays.

Total Number of Active Listings for Sale during Month

Number of Listings Accepting Offers, by Month

Number of Sales, by Month

Percentage of Listings Selling for over Asking Price, by Month

Median Percentage of List Price Achieved on Sale

Over 100% usually signifies competitive overbidding;
under 100% signifies more aggressive buyer negotiation.

Median Dollar per Square Foot (upon Sale)
3-Month Rolling Average

Months Supply of Inventory (MSI), by Month

The lower the MSI, the greater the buyer demand as compared
to the inventory of listings available to buy.

Median Days on Market before Acceptance of Offer
3-Month Rolling Average

Expensive Home Sales by San Francisco District & Neighborhood

Note that these charts using differing price points for the “luxury home” designation.

Other reports you might find interesting:

Market Analytics for General SF Market

30+ Years of San Francisco Real Estate Cycles

San Francisco Neighborhood Affordability

10 Big Factors behind the San Francisco Real Estate Market

Bay Area Apartment Building Market

Link to San Francisco Neighborhood Map

It is the relationship between supply and demand that defines the state of the market. Looking at one statistic such as the number of sales, without comparing it to how many listings were available to purchase, may give a distorted view of market conditions. Some statistics, such as months supply of inventory take both supply and demand into account. Last but not least, short-term statistics sometimes fluctuate without great meaningfulness - longer-term trends are always most meaningful.

Sales data usually reflects market activity, i.e. when a new listing comes on market and offers are negotiated, occurring 4 to 8 weeks before the sale date. Thus, for example, sales in June mostly reflect new listings and offers negotiated in late April and May.

These charts were generated using the Infosparks system by Paragon’s chief market analyst. The statistics only reflect activity reported to MLS, and many new-project-condo sales are not reported. Data is from sources deemed reliable but may contain errors and subject to revision.

San Francisco House & Condo Markets Diverge

San Francisco House & Condo Markets Diverge

Non-Luxury House Market Remains White Hot
Supply & Demand Balance Shifts in Condo Market
Luxury Condo Market Continues to Cool

April 2016 report, including 15 custom charts

In the first quarter of 2016, various market segments in the city began to trend in significantly different directions. Houses, especially those below $2 million, are still often selling in a frenzy of bidding: Recent reports of houses selling with 5, 10 or more competing offers are not uncommon, especially in neighborhoods considered more affordable (by San Francisco standards). Demand remains very high, supply remains extremely low, and new house construction is virtually nil.




Paragon Real Estate Group
 

Paragon Real Estate Group

San Francisco House & Condo Markets Diverge

Non-Luxury House Market Remains White Hot
Supply & Demand Balance Shifts in Condo Market
Luxury Condo Market Continues to Cool

April 2016 report, including 15 custom charts

In the first quarter of 2016, various market segments in the city began to trend in significantly different directions. Houses, especially those below $2 million, are still often selling in a frenzy of bidding: Recent reports of houses selling with 5, 10 or more competing offers are not uncommon, especially in neighborhoods considered more affordable (by San Francisco standards). Demand remains very high, supply remains extremely low, and new house construction is virtually nil.

However, thousands of new-construction condos have hit the market in recent years or are arriving shortly, with many thousands more in the 5-year pipeline. In recent years, the new supply added to the usual resale-condo inventory still did not keep up with demand, but that seems to be shifting, especially at the more expensive end of the condo market. As of early April, the number of condo listings actively for sale in MLS is up over 40% year over year, and that does not include most of the new-construction condo units hitting the market (not listed in MLS).

This does not mean that condos are not selling, because many are at top prices. But the demand-per-listing ratio is declining, multiple offers are less common, and more listings are expiring without being sold. This particularly appears to be the case in those neighborhoods where most of the new construction projects are concentrated, and, again, the luxury-condo segment appears to be most affected. Apparently, the developer rush to build large projects of very expensive condos, possibly outpacing long-term demand for such units, is also playing out in Manhattan (where admittedly luxury condos are much more expensive).

It is unclear at this point whether new condo projects themselves are being affected in their rate of sales or sales prices. These condos often go into contract during the construction phase, long before sales actually close, and access to information during that period is very limited. There can be no doubt that they comprise serious competition to resale condos in the areas they’re being built.

Please note: The data of one quarter is not definitive and Q1 was a very volatile period for the financial markets, which may have had a short-term effect that might now shift. SF is also a city of micro-markets, so what applies in one district may not apply in another. Q2, just beginning, is typically the busiest of the year, and market trends will become much clearer in coming months. Last but not least, in real estate, what we see today generally reflects the market 4 to 8 weeks ago due to the gap between listings coming on market, offers being negotiated, and sales finally closing escrow.

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Market Supply & Demand Trends
by Property Type and Price Segment


It should be noted that some of the Q1 2016 MLS statistics shown below, which appear to illustrate a cooling of certain market segments in San Francisco, would in most other areas of the country often be considered signs of crazy-hot markets.



An astonishing 84% of Q1 2016 SF house sales under $2 million sold for over asking price, a very small decline from the most active quarters of last year. The percentage for more expensive houses is 16 percentage points lower than less expensive houses, but still above Q1 2015. Condos, also shown in two price segments, have lower percentages than any time in the past 4 quarters. We shall see if those percentages rebound in Q2, as usually occurs once the spring season warms up, or whether increased inventory dampens overbidding going forward.



The same trends seen in the first chart above apply to this illustration of the median percentage of sales price over list price over the past 5 quarters. For houses under $2 million, the median percentage over asking price remains incredibly high at 12%, a clear sign of feverish competition between buyers. In contrast, luxury condos overall sold just a tiny bit above list price (less than one half of one percent), and in those districts seeing the most high-rise, luxury condo construction, the median sales price to list price percentage fell well below list price (not shown on chart). More supply means less competition and less sense of urgency in buyers; overbidding becomes rarer and buyers negotiate more aggressively.



Perhaps nothing is more indicative of a cooling market than increasing numbers of listings expiring and being withdrawn from the market without selling. Q1 2016 saw big jumps in expired/withdrawn condo listings over the first quarters of the previous 3 years. Many such listings end up coming back on the market at lower prices.



Again, houses under $2 million have maintained a very high level of listings going into contract on a monthly basis. High percentages of this statistic keep inventory low even when increased inventory starts coming on market, analogous to putting food in front of a very fast, hungry eater. However, if a low percentage of listings accepting offers is coupled with increasing numbers of new listings, inventory starts mounting quickly, because more unsold listings from previous months get added on top of the additional new listings streaming onto the market. The slow-eating diner is outpaced by the delivery of new courses, and the table fills up with uneaten food.

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San Francisco Median Home Sales Prices
House & Condo, by Quarter

Chart: Median Price Trends since 1993


So far, any market cooling that has occurred is not showing up in Q1 median sales prices: Median prices for both houses and condos remain close to the high points hit in spring 2015. However, for the first time in 4 years, condo median prices did not jump in the first quarter of the year, though neither was there any significant decline. 2012 to 2015, overheated spring selling seasons of very high demand and deeply inadequate supplies of homes for sale have fueled most of the home-price appreciation occurring each year in San Francisco. We shall soon know whether this trend will continue this spring, or whether the median prices of some market segments will finally plateau, or even adjust downward with changing supply and demand dynamics.

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Employment Statistics


Perhaps nothing underpins an appreciating real estate market more than increasing numbers of people moving into an area to take new jobs, especially well paid ones. These charts illustrate the recent explosion of employment in San Francisco and the Bay Area. Of course, employment trends can slow or even reverse directions as occurred after the dotcom bubble burst. It is interesting to note that SF employment (and rents) fell much more after the dotcom adjustment than after the 2008 financial markets crash. On the other hand, SF home prices only temporarily dipped in 2002, while dropping rapidly in late 2008/early 2009 and then remaining depressed until the recovery began in 2012.

Chart: SF High-Tech Employment Trends

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Stock Markets & Interest Rates


After all the travail regarding the stock market volatility since last summer, it is now, as of early April, pretty much back to where it began. And interest rates have actually fallen since the Fed raised the benchmark rate in mid-December. These conditions are typically considered very positive for real estate markets, though both can be subject to sudden and significant change.


Chart: Short-term Interest Rate Trends


Other recent reports you might find interesting:

San Francisco New-Housing Pipeline

San Francisco Neighborhood Affordability

Seasonality & Real Estate Markets

Bay Area Housing Affordability

S&P Case-Shiller Index for SF Metro Area

These analyses were made in good faith with data from sources deemed reliable, but they may contain errors and are subject to revision. Statistics are generalities and all numbers should be considered approximate. New construction condos not listed or sold on MLS are not counted in these statistics, though they often affect market dynamics. Sales statistics of one month generally reflect offers negotiated 4 to 6 weeks earlier, thus a fair number of YTD 2016 sales reflect market activity in late 2015.


© 2016 Paragon Real Estate Group
 
No one knows San Francisco real estate better than Paragon.
Paragon Real Estate Group
www.paragon-re.com/

Pota Perimenis
Lic# 01117624
1400 Van Ness Avenue
San Francisco, CA 94109
Direct 415-738-7075
Cell 415-407-2595
pperimenis@paragon-re.com
www.sfcityhomes.com
 

San Francisco Real Estate Market Report March 2016, including 13 custom charts.

San Francisco Real Estate Market Report March 2016, including 13 custom charts.




Paragon Real Estate Group
 

Paragon Real Estate Group

San Francisco Real Estate Market Report

March 2016
Including 13 custom charts


San Francisco Median Home Sales Prices
Combined House & Condo Sales, by Month

Chart: Median Price Trends since 1993

Chart: Case-Shiller Metro Area Home Price Index


Monthly and seasonal fluctuations in median sales prices are quite normal and do not necessarily say much about changes in fair market values. For that one must look at longer-term trends. However, for what it is worth, the median price in February was the highest since it peaked in May of 2015. If this spring is like the past 4 springs in which a very-high-demand/ very-low-supply dynamic prevailed, then sustained home-price appreciation may start showing up in the statistics during the next few months.

We say this very preliminarily since the 2016 market has just gotten started after the holiday doldrums, but it appears that San Francisco homebuyers are generally shrugging off the recent volatility in the stock market. That doesn't necessarily mean there will be a repeat of the overheated markets of the past few years. Much more will be known once the spring selling season really gets into full swing.

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San Francisco Construction Boom Continues


Developers continue to add projects with thousands of new units to the San Francisco new-housing pipeline. If they are built as currently planned (as of Q4 2015), the city should add over 60,000 new housing units (market-rate condos and apartments, and affordable and social-project housing) over the next 5 to 6 years, with another 25,000 in 3 huge projects that may take decades to complete. However, new developments are being constantly added to the pipeline, and existing plans are regularly altered. They may even be abandoned if economic or political conditions dramatically change.

So far, increased supply due to completed new construction has not created significant downward pressure on prices. This may change as construction completion accelerates in coming years, however almost all of the market-rate development is directed toward the more (or most) expensive end of the condo and apartment market. House sales will continue to become a smaller and smaller percentage of the SF market, which may play a role in enhancing their values.

Our full article: San Francisco Housing Pipeline

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Where to Buy a Home in San Francisco
for the Money You Want to Spend


The charts above are 3 of 8 in our updated report:
San Francisco Neighborhood Affordability

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Seasonality & the Spring Market

Overbidding by Month

Luxury Home Listings Accepting Offers
by Month


The San Francisco real estate market is deeply affected by seasonality, which shows up in the rise and fall of inventory, buyer demand, overbidding and median prices. For the past 4 years, spring has experienced the most feverish buyer competition for new listings, which led to the highest overbidding percentages, as seen in the first chart above. (111% signifies an average sales price 11% over the asking price.) In February 2016, the percentage over list price started climbing again after the usual slowdown of the winter holidays.

The luxury home segment is even more dramatically affected by seasonality than the general market. As seen in the second chart above tracking accepted offers, expensive home sales typically soar to their high point in spring, drop during the summer holidays, rebound for the relatively short autumn season, and then plunge deeply in mid-winter. This ebb and flow of high-end sales is one of the factors behind short-term, seasonal ups and downs in median sales price. So far in 2016, luxury home closings have been comparable to early 2015, but we are just entering the main selling season now.

Our full overview: Seasonality & the SF Real Estate Market

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Mortgage Interest Rate Trends

Short-Term Changes since the Fed Raised Rates


Chart: Long-Term Interest Rate Trends

Since the Federal Reserve Bank raised the benchmark interest rate in mid-December, interest rates have actually dropped by about 8% (as of March 3), which makes a significant difference in monthly mortgage costs and loan underwriting qualification. This downward pressure on rates is generally ascribed to the dramatic volatility in the stock market since the year began. (Investors often pour money into bonds in times of stock market volatility, which then lowers the interest rate.) It is famously difficult to predict interest rate movements, which can be sudden and dramatic, but for the time being, they are getting closer to the all-time low in 2013. That is good news for the real estate market, while it lasts.

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Bay Area Housing Affordability
by County


Chart: Long-Term Trends in Housing Affordability

Housing affordability is one of the biggest political issues in the city and the Bay Area. The California Association of Realtors recently released its Housing Affordability Index (HAI) for the 4th quarter of 2015, and above are 3 of 10 charts in our updated analysis. San Francisco is now 3 percentage points above its all-time low of 8%, last reached in Q3 2007, however there has not yet occurred the convergence in extreme low affordability across Bay Area counties seen in 2007. Interest rates play a big role in affordability calculations and, as noted earlier, they have been falling in 2016.

Our full report: Bay Area Housing Affordability

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San Francisco & U.S. Rents


Chart: Long-Term SF Rent Trends

Despite ticking down a tiny bit at the end of 2015, San Francisco rents remain the highest in the nation. Since rents are not ameliorated by low interest rates and the numerous tax advantages pertaining to homeownership, new renters in the city bear the worst brunt of the housing affordability crisis, even more so than new homebuyers. A number of large, new rental apartment buildings have recently been coming on the market and many more are planned. This new inventory may eventually help provide significant rental-rate relief, however almost all the market-rate projects being built feature luxury apartments priced at the very high end: New studio units can rent for $3500 per month and more.

Our goal is not to convince you of a certain position, but to provide you with what we believe to be reliable data, so that you can make your own informed decisions. These analyses were made in good faith with data from sources deemed reliable, but they may contain errors and are subject to revision. Statistics are generalities and all numbers should be considered approximate. Sales statistics of one month generally reflect offers negotiated 4 to 6 weeks earlier, thus a fair number of the sales in early 2016 reflect market activity in late 2015.


© 2016 Paragon Real Estate Group
 
No one knows San Francisco real estate better than Paragon.
Paragon Real Estate Group
www.paragon-re.com/

Pota Perimenis
Lic# 01117624
1400 Van Ness Avenue
San Francisco, CA 94109
Direct 415-738-7075
Cell 415-407-2595
pperimenis@paragon-re.com
www.sfcityhomes.com
 

San Francisco Neighborhood Affordability

San Francisco Neighborhood Affordability
Where a buyer is most likely to find a home in the price segment they’re looking in, whether under $1 million or over $5 million.


Where to Buy a Home in San Francisco
for the Money You Want to Spend


February 2016 Report on Neighborhood Home Prices

A city neighborhood map is provided at the bottom of this analysis.

The charts below are based upon San Francisco home sales reported to MLS in the 10 to 12 months through February 15, 2016, breaking out the neighborhoods with the most sales within given price points. Other neighborhoods not listed did have smaller numbers of sales within given price segments.


Where to Buy a HOUSE for under $1 million

The overall median HOUSE price in the city in the 4th quarter of 2015 was $1,250,000, so the under million-dollar house is becoming increasingly less common. The vast majority of house sales in this price segment now occur in a large swath of neighborhoods running across the southern border of the city, which are by far its most affordable house markets: from Bayview through Portola, Excelsior, Visitacion Valley and Crocker Amazon, to Oceanview and Ingleside.

The chart’s horizontal columns reflect the number of sales of houses with at least 2 bedrooms, with parking, for under $1 million, while the median sales prices noted are for all 2BR house sales during the period. Median price provides a good idea of overall neighborhood house prices.


Where to Buy a CONDO, CO-OP OR TIC for under $1 million

The overall SF median condo price in the 4th quarter of 2015 was about $1,100,000, and sales under $1m still occur in almost every area of the city that features these property types – but a studio unit in Russian Hill may cost as much as a 2-bedroom condo in Diamond Heights.

Of these property types, condos make up about 90% of sales, stock co-op apartments 1 to 2%, with TICs making up the balance. TICs typically sell at a significant discount (10% - 20%) to similar condos.

The horizontal columns reflect the number of sales under $1m broken out by 1-bedroom and 2-bedroom units. The box of median sales prices is just for 1BR units, again simply to give an idea of relative values between neighborhoods.


Spending $1 Million to $1.5 Million in San Francisco


In this price point for houses, one starts moving into another layer of neighborhoods in the west and the central-south areas of the city: Central Sunset and Parkside, Miraloma Park, Sunnyside, Mission Terrace, Bernal Heights and others as shown. There has been a lot of upward pressure on these areas in the past 2 years in particular.

The horizontal columns reflect the number of sales, with the average dollar per square foot values for the homes in this price range noted alongside.



Condo and co-op sales in this price range are mostly concentrated in those areas where newer condo developments have surged onto market over the past 10 – 15 years, and continue to arrive in increasing numbers – South Beach, Inner Mission, Hayes Valley, Dogpatch, SoMa – as well as in high-end neighborhoods such as Pacific Heights, Russian Hill and the greater Noe-Eureka Valleys area.


Buying a HOUSE for $1.5 million to $2 million

Buying a HOUSE for $2 million to $2.5 million


When you get to the $2 to 2.5 million dollars range, the house market becomes dominated by the greater Noe-Eureka-Cole Valleys district, the St. Francis Wood-Forest Hill district, the Potrero Hill-Inner Mission area, and the Inner-Central Richmond and Lake Street area.


Buying a LUXURY HOME in San Francisco


For the sake of this report, houses selling for $2.5 million and above, and condos, co-ops and TICs selling for $1.5 million and above are designated (somewhat arbitrarily) as luxury home sales. What you get in different neighborhoods for your millions of dollars will vary widely. Views often play a significant role in SF home values, but particularly in the luxury condo market, where the most expensive units often offer staggering views from very high floors. Over the past 15 years – and accelerating in the current market recovery – there have occurred some very large shifts in the luxury home market, with districts other than the old-prestige, northern neighborhoods becoming major destinations for (very) high-end homebuyers. However the northern neighborhoods like Pacific Heights still dominate the ultra-high end in SF: houses selling for $5 million or more. The greater South Beach-Yerba Buena area, with its many new luxury condo towers now has more luxury condo sales than any other area.


Luxury CONDO, CO-OP & TIC Sales

Luxury HOUSE Sales

San Francisco Neighborhood Map


For prevailing SF median house and condo prices, our interactive
map of neighborhood values can be found here: SF Neighborhood
Home-Price Map

Other updated reports you might find interesting:

Our Most Recent Market Analyses

30+ Years of San Francisco Real Estate Cycles: This is by far the most popular article on our website – for 3 years running.

San Francisco Market Overview Analytics: Interactive, auto-updating charts for all the standard real estate statistics – median sales price, average dollar per square foot, days on market, months supply of inventory, listings for sale, and so on.

San Francisco District Sales Overview: A breakdown of sales by price segment for 14 different sections of the city.

10 Big Factors behind the San Francisco Real Estate Market: A review of the major economic, political and demographic issues underlying the city’s current market.

As always, the quality of the specific location and the range of amenities of the property; its curb appeal, condition, size and graciousness; and the existence and quality of parking, views and outside space can all significantly impact unit values.

These analyses were made in good faith with data from sources deemed reliable, but they may contain errors and are subject to revision. Statistics are generalities and how they apply to any specific property is unknown without a tailored comparative market analysis. Sales statistics of one month generally reflect offers negotiated 4 – 6 weeks earlier. Median sales prices often change with even the smallest change in the period of time or parameters of the analysis. All numbers should be considered approximate.


© 2016 Paragon Real Estate Group