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San Francisco – A Time to Buy?
November 2011 Market Update
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“Years of falling prices and falling mortgage rates have made home buying more affordable than it has been in decades. Moreover, home prices look downright cheap, not only from the perspective of mortgage rates and income, but also relative to the cost of renting or the cost of constructing a new home. Meanwhile, continued population growth, combined with lender and borrower caution, has increased pent-up demand.”
“Beyond the implications for the macro-economy and financial markets, the numbers on housing have an important message for American families today, and particularly younger families setting out on life’s great adventure: Five years ago, at the peak of the home-buying euphoria, it was emphatically a time to rent. Today, when home ownership is depreciated more than ever before, the numbers tell us it is a time to buy.”
From “Housing – a Time to Buy” by Dr. David Kelly, Chief Market Strategist for J.P. Morgan Funds, and David M. Lebovitz, Market Analyst, the J.P. Morgan Funds U.S. Market Strategy Team.
This view point is echoed by the latest Hanley Wood analysis, “Intel for a Changing Market,” which using data and projections from the Bureau of Labor Statistics, Moody Analytics, FHFA and the National Association of Realtors, predicts an accelerating recovery in employment and median household income in the Bay Area in 2012 through 2015; that national home prices have hit bottom and are beginning a recovery; and that new home sales in the Bay Area will start improving significantly in 2012.
We don’t know what the future holds, but certain signs point to a recovery in process: rising rents in the city; incredibly low interest rates, which impact the ongoing cost of housing enormously; increasing high-tech and bio-tech employment in the Bay Area; the beginning of an upswing in the Case-Shiller Index; and strong buyer demand and low inventory of homes for sale since the beginning of 2011. Of course, national and international economic conditions are still uncertain and fragile, and some pundits predict further declines. But if current circumstances continue, this might indeed turn out to be a very good time to buy, comparable to the early 1990’s when the market went through another huge correction, a flat lining in values that lasted several years, and then a return to significant appreciation. As always, it is up to you to come to your own conclusions.
Statistics are generalities, subject to fluctuation due to a variety of reasons. All information herein is derived from sources deemed reliable, but may contain errors and omissions, and is subject to revision. Except for the Case-Shiller data, sales not reported to MLS are not included in this analysis.
Due to the length of this report, it has been truncated. If you'd like the full report, contact me and I'll make sure you get it.
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Sales by Property Type
Houses and condo sales make up the large majority of overall property sales in San Francisco. Stock cooperatives, or co-ops, are a very small and distinct market segment in SF, mostly found in the most expensive neighborhoods (though very common in Manhattan). TIC sales have picked up in recent quarters as financing conditions have stabilized. The multi-unit market is divided into 2-4 unit buildings, in which buyers typically plan to owner-occupy at least one unit, and 5+ unit buildings, where the buyers will most likely use the property as a rental income investment. |
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Sales by Price Range
An overview of the price breakdown of home sales in San Francisco. The vast majority of distress sales (bank-owned property and short sales) occur in the lower price points (and generally speaking, the less affluent neighborhoods), and that is where they affect values the most. Once you get above the overall median price, distress sales make up a very small percentage of sales and have little effect on values. What is called the luxury home market usually constitutes just under 10% of the market. |
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Percentage of Listings Accepting Offers
This statistic is an excellent one to measure demand vs. supply, and ever since February the percentage has been running at its highest in years. October had a very high percentage of listings going under contract, 23%, versus the 14% of October 2010. Typically, the market will start slowing down soon for the holidays. |
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Months Supply of Inventory (MSI)
MSI has been bumping along at what are historically very low levels of inventory since the beginning of the year, reflecting high demand and low inventory. On October 31st, there were almost 700 fewer listings on the market when compared to the same day of 2010, a huge reduction in supply. |
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House Sales: Average Dollar per Square Foot
This chart is not proportional to the timeline but it gives a sense of value trends in various neighborhoods since the year 2000. The city’s southern district 10, running from Bayview to Crocker Amazon, has been most affected by distress sales and has thus seen the greatest percentage drop in values, over 30%. The central and northern districts, where distress house sales have not played a large role in the market, have seen declines more in the 15% - 22% range since peak values. |
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Median Condo Sales Prices
This graph is not proportional to the timeline, but it gives a good idea of trends in value over the past 11 years. As new-development condo sales have dwindled, the SoMa and South Beach area have seen a steady increase in median sales prices in the last 2 years. For our complete report on values by neighborhood:
Values by Neighborhood |
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