Drama, drama everywhere. There so much going on in the San Francisco homes market right now it’s a little hard to decide what to highlight in this month’s newsletter. The supply and demand situation has created the most ferociously competitive environment for buyers in years. There’s huge buyer demand and an extremely low inventory of homes available to be purchase. We saw this start to build when the market turned in 2011. It made a quantum jump early this spring. Now we’re seeing big increases in sales prices. Certain neighborhoods blazed the way for this recovery and they’re showing the most dramatic changes in values, but pretty much all the city’s neighborhoods are now experiencing similar supply and demand dynamics.
Any data you view on recent closed sales will reflect the market heat from 4-10 weeks prior when the new listings first came on the market and offer were accepted and negotiated. The April/May spike in values reflects the market in February, March, and early April. If anything, the market has gotten even hotter since then. In the past, the market has usually slowed down during the summer months. We’ll have to wait and see if that happens this year or whether the current trend will continue.
Explanations for the statistics referenced can be found on the Paragon website: Statistical Definitions
-------------------------------------------------Short-Term Trends in SF Home Values
Median and average sales prices are calculated in different ways, and each has its advantages and weaknesses as a statistical measure. Any statistic is a generalized, market-condition snapshot taken from a specific angle on the data. Ideally, different statistics should all point to the same conclusion regarding market trends, which is what we're seeing below.
Long-Term Trends in San Francisco Home Values
By some measures, property values, at least in April and May - which is a very short statistical period of time - are rapidly approaching peak values in 2007/early 2008. In the next couple quarters, it will be seen if this is simply a dramatic fluctuation or an initial indication of a sea change in market prices. Based upon what we are seeing in the statistics and on the street, we lean toward the second view.
Home Value Trends by San Francisco Neighborhood
Some neighborhoods, such as the greater Noe Valley area, the greater South Beach/SoMa area and the older, prestige northern neighborhoods such as Pacific Heights and Russian Hill, have been at the leading edge of the market recovery. Other areas, such as many neighborhoods in the southern districts of the city, are a step behind and price increases have not yet shown up as dramatically in the statistics. But we believe they will very soon: the markets there have become very hot as well.
The Distressed Home Market in San Francisco
Distressed home listings in San Francisco are rapidly declining by units and as a percentage of the overall market, and as home values and home equity increase, this trend will continue. Since distressed home sales have a negative effect on values, this dwindling will continue to strengthen the market.
The New-Homes Market in San Francisco
Another important dynamic is the crash in new-home construction 5 years ago and the resultant reduction in new homes (mostly new condos) now available to purchase. As these units are highly sought after, this adds to the crunch in supply and the upward pressure on prices. As the city's economy and housing market has recovered, builders are jumping back into the market in a big way, but there is a significant lag time between the decision to build and the acquiring of permits and having new condos ready to sell to eager buyers.
Supply & Demand Statistics
Units for sale and Months Supply of Inventory: Probably at their lowest in decades.
Percentage of San Francisco Home Listings Accepting Offers
In many ways, this is the single clearest statistic regarding what's going on in the market. Average days on market have also plunged in May (not shown on this chart).
Mortgage Interest Rates
Interest rates just hit another historic low. Someone buying the same priced home now as in 2006-2007 would have a monthly mortgage payment approximately 25% lower. The Rent vs. Buy equation in the city has changed dramatically as interest rates have dropped and apartment rents have soared.
Median Home Prices Around the Bay Area
This is a companion to our recent San Francisco home-values-by-neighborhood maps.
SF Mapped Values
