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2nd Quarter North Bay Market Report

2nd Quarter North Bay Real Estate Market Report

Home Prices and Luxury Home Sales Way Up

For Marin, Napa & Sonoma Counties

Another very strong quarter in the North Bay real estate market: Year over year, the median house sales price in the second quarter was up 25% in Marin and Sonoma, and 34% in Napa. Though there are a number of dynamics behind the rise in median price, including the large decrease in distressed property sales and large increase in luxury home sales, home values have clearly been rapidly appreciating over the past year, and especially in 2013, as buyer demand soared and inventory stayed low.

We have updated our home value maps to reflect spring’s recent sales. The North Bay map is just below the 2 San Francisco maps:
San Francisco Mapped Neighborhood Values

1North Bay Luxury Home Sales
In this chart, luxury houses are defined, rather arbitrarily, as those selling for $1,500,000 and above: Sales of such homes surged in the second quarter, just as they have around the Bay Area. North Bay high-end sales are concentrated in Marin, but Napa and Sonoma also have significant luxury home segments.

Distressed Home Sales: this link shows the opposite trend for distressed property sales in the North Bay: though rapidly dwindling, these sales still make up significant percentages of the Napa and Sonoma markets:
North Bay Distressed Home Sales

2North Bay Market Snapshot
79% of second quarter sales sold quickly without price reductions at an overall average of 1% over list price. 21% of sales sold after one or more price reductions at an average discount to original list price of 10%. And some listings didn’t sell at all, but ended up withdrawn from the market, typically due to being perceived as overpriced. Note the huge disparity in average days on market for those homes selling with and without price reductions: Pricing correctly makes a huge difference in market response.

3Trends in Average Dollar per Square Foot Values
As with median sales prices, the trajectory in dollar per square foot values has been significantly upward over the past year. Note also that Sonoma has far more house sales than Marin and Napa combined. As a point of comparison, last quarter in San Francisco, there were 720 house sales, the median price was $996,000 and the average dollar per square foot value was $687. The city’s recovery started somewhat earlier than most other counties in the Bay Area, and its overall median sales price has now exceeded previous peak values in 2007-2008. Marin is approaching the same threshold, with the other 2 counties’ median prices, much harder hit by distressed home sales, still distinctly below peak values.

4Interest Rates: The Sky Is Not Falling
Not to diminish legitimate concerns regarding rising mortgage rates and their effects on housing costs, but this graph puts recent increases in context. At any time before 2011, the current interest rates, even after their recent big percentage jump, would be reason for conga lines of celebration in the streets. Rates had to rise from their historic and artificial lows – how far and fast this may continue is unknown to us, but we don’t presently expect big shocks to the real estate market in the near future.

5Months Supply of Inventory (MSI)
Inventory began to creep up in the second quarter, but supply as compared to demand remains very low by any historical measure. This, of course, is the major dynamic behind rising home values.

And this link goes to a chart that tracks the actual unit inventory of homes listed and available for sale by month: as can be seen, units for sale remain far, far below levels of previous years:
Homes for Sale

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Updated Housing Market Charts

Noe & Eureka Valley Houses:

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Cole Valley-Ashbury Heights-Clarendon & Corona Heights Houses:

2

Glen Park Houses:

3

Condos, Selected District 5 Neighborhoods:

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District 5 Residential 2-4 Unit Buildings:

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District 2 Houses

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Inner Sunset House Median Sales Price. FYI: Inner Sunset general dollar per square foot values actually track overall District 2 dollar per square foot values. For example in the 1st half, District 2 was $579/sq.ft. and Inner Sunset was $580/sq.ft. – of course, it all varies by the specific property.

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Overheated? Yes. Bubble? No. Stabilizing? Maybe.

July 2013 San Francisco Market Report

If you prefer, you can skip the following analysis to go straight to the charts and maps following.

Many adjectives are used to describe San Francisco, but normal isn’t a common one – and the same can be said about our real estate market. Even taking into account its tendency to be unusual in one way or another, this past spring’s market was overheated by virtually any definition. Surging consumer confidence and huge buyer demand chased a deeply inadequate supply of homes for sale, abetted by interest rates so low that loans – factoring in inflation and mortgage interest deduction – were almost like free money. All this led to an extreme seller’s market, a feeding frenzy and dramatic price appreciation.

But not, in our opinion, a bubble. The Economist, one of the first to sound the alarm for the last bubble, sees no sign of a U.S. housing bubble, basing its conclusion upon historical comparisons of home prices with rents and incomes. Also, it is not unusual for the market to go somewhat crazy following a 4-5 year down cycle after all the repressed demand bursts forth – this happened in 1996-1997 too. Besides which, we are only about 18 months into the current recovery. Though real estate is susceptible to sudden economic and political shocks, in past cycles, recoveries have typically lasted at least 6-8 years before peaking. That doesn’t mean there won’t be any short-term market adjustments, up or down, for one reason or another, along the way.

There are some signs of a normalizing market. After a year of declines, the number of new listings in the 2nd quarter was a little higher than the 2nd quarter of 2012. Though this inventory was quickly gobbled up and overall supply remains very low, it’s a good sign more sellers are entering the market. Median prices may be leveling off after spring’s big pop – it’s still too soon to be sure, but summer often sees a cooling down. It’s not welcome news to buyers, but interest rates have increased from extreme lows – though remaining very low by any historical scale. (See below: The Sky is Not Falling.) The distressed home segment, which always distorts markets, is disappearing in the city and declining everywhere. And new-home construction continues to increase: even though we won’t see much of this new inventory until 2014 and later, it’s a very positive sign.

We have updated our home value maps to reflect spring’s recent sales:
San Francisco Neighborhood Values

1San Francisco Median Home Prices
For both houses and condos, the second quarter saw jumps well above previous peak values. Median sales prices are affected by other factors besides changes in value – seasonality, inventory, buyer profile, big changes in the distressed and luxury home segments – but the dramatic increases do reflect rapidly climbing home values in the city. Though all SF neighborhoods have been experiencing striking appreciation, this does not mean that all have now exceeded previous peak values.

2Sales Over & Under Asking Price
This chart illustrates the enormous percentage of listings selling for over – and sometimes far over – asking price. 25% of house sales in June sold for 20% or more above list price: At San Francisco prices, 20% above asking often equals hundreds of thousands of dollars.

Price reductions: 89% of second quarter sales sold quickly without price reductions at an overall average of 8% over list price – a clear indication of overheating. Still, not every listing sold without a price reduction and some didn’t sell at all, but ended up withdrawn from the market:
Price Reduction Chart

3San Francisco Luxury Home Sales
No market segment has been affected more dramatically by the recovery than luxury homes. In an inventory constrained environment, it has far out-performed the general market in unit sales.

This link goes to our luxury market report that also delineates the neighborhoods which dominate high-end house and condo sales in San Francisco:
Paragon Luxury Report

4Interest Rates: The Sky Is Not Falling
Not to diminish legitimate concerns regarding rising mortgage rates and their effects on housing costs, but this graph puts recent increases in context. At any time before 2011, the current interest rates, even after their recent big percentage jump, would be reason for conga lines of celebration in the streets. Rates had to rise from their historic and artificial lows – how far and fast this may continue is unknown to us, but we don’t presently expect big shocks to the real estate market in the near future.

Distressed Home Sales: this link goes to a chart illustrating the rapidly dwindling distressed home market in San Francisco. In most neighborhoods, the effect of these sales has disappeared altogether.
Distressed Home Sales

5Months Supply of Inventory (MSI)
Even with the increase in new listings in the second quarter, inventory as compared to demand remains drastically low.

Average Days on Market (DOM) have also hit historic lows for virtually every property type in the city:
Average Days on Market

7-13_Map-Unit_SalesWhat Sells Where
What district of San Francisco has more house sales than any other? Which area has far more condo sales? You may be surprised at the answers.

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SF Jewish Film Festival – July 25 – August 12, 2013

The San Francisco Jewish Film Festival, the world’s first and largest Jewish film festival, takes place in San Francisco and three other Bay Area cities in late July and early August, drawing an audience of approximately 30,000 people. Founded in 1980, SFJFF uses film and media arts to foster cultural understanding. The festival presents a variety of film as well as vigorous panels about Jewish history, culture and identity. The mission is to promote awareness and diversity of the Jewish people, provide a dynamic and inclusive forum for the exploration and dialogue about the Jewish experience and encourage independent filmmakers working with Jewish themes.

The 33nd Festival will be held July 25th through August 12, 2013. Festival guests can enjoy the cultural richness of the Festival and of San Francisco as well as lively discussions from the audiences. Befitting the region, the Festival draws an unusually diverse audience and welcomes affiliated Jews, those who may not otherwise seek out more traditional forms of Jewish participation and non-Jews alike. Audience, whether secular, religious or non-Jewish proudly refer to the festival as “the Bay Area’s favorite Jewish holiday.”

July 25th through August 12, 2013
San Francisco, Berkeley, Oakland, Piedmont, Palo Alto and San Rafael
General admission tickets are $12 per showing and include only a seat in the theatre. Parties, special programs and events all have their own admission. All-Festival Passes are $225.

For more information go to www.sfjff.org/

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SF AIDS Walk TBA

The 27th annual, 10K AIDS Walk in San Francisco will take place on July 14th, 2013. Benefitting San Francisco AIDS Foundation and HIV/AIDS programs and services throughout the Bay Area, this event has raised over $77 million during its history. Last year alone, participants and sponsors raised $2.7 million to support education, advocacy and direct services for prevention and care in communities most vulnerable to the disease. The money is distributed among Bay Area groups that provide no-cost health screenings, sterile needle exchanges and advocates to help find housing, support groups and health care for those with HIV or AIDS.

Over the past 25 years, AIDS Walk San Francisco has inspired thousands of people to walk, millions to donate and enables organization to provide prevention, care and advocacy programs for the thousands of men, women and children living with HIV/AIDS. In addition, funding is used to battle the stigma and pursue the mission of radically reducing new infections in San Francisco with the help of the compassionate San Francisco community.

July 14th, 2013

For more information go to www.aidswalk.net/sanfran/

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SF Median Home Prices over $2,000,000 – in Some Neighborhoods

Multiple SF Neighborhoods Reach Median Home Prices Exceeding $2,000,000

and/or Average Dollar per Square Foot Values above $1000

San Francisco Home Value Maps, Updated June 30, 2013

The San Francisco 5-county metro area had the biggest gain in home
prices among the 20 largest national metro areas according to the
April S&P/Case-Shiller Index released on June 25th, increasing 24%
year over year. We expect to see another bump in May’s Index
reflecting the acceleration in home price appreciation that began to
show up in March. By itself, San Francisco is the only county in the
state to exceed previous peak values set in 2006-2008, according to
Leslie Appleton-Young, chief economist for the California Association
of Realtors. It should be noted however that this does not yet apply
to every neighborhood in the city.

Looking toward July and August, it is not unusual for median sales
prices to fall during the summer due to seasonal factors related less
to changes in value than to inventory available to purchase and buyer
profile.

San Francisco House Values

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San Francisco Condo Values

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Median sales prices and average dollar per square foot values often
disguise an enormous disparity of values among the underlying
individual home sales in the data set, and how they apply to any
particular property is impossible to say without a specific
comparative market analysis (CMA). Please call or email if you’d like
a quick CMA performed on your home or one you’re considering
purchasing.

MEDIAN SALES PRICE is that price at which half the sales occurred for
more and half for less. It can be, and often is, affected by other
factors besides changes in market values, such as short-term or
seasonal changes in inventory or buying trends. The median sales price
for San Francisco homes (in all their almost infinite variety) is not
like the price for a share of stock (all the same), and short-term
fluctuations in median price are common and often meaningless.
Consistent, long-term trends are most meaningful.

AVERAGE DOLLAR PER SQUARE FOOT ($/sf) is based upon the home’s
interior living space and does not include garages, unfinished attics
and basements, rooms built without permit, lot size, or patios and
decks — though all these can still add value. These figures are
usually derived from appraisals or tax records, but are sometimes
unreliable or unreported altogether. All things being equal, a smaller
home will typically sell for a higher dollar per square foot value
than a larger one. Generally speaking, about 60-80% of listings report
square footage, and this statistic is calculated on these listings
alone.

The neighborhoods in the maps above were chosen because their volumes
of sales were considered sufficient to generate meaningful statistics.
We began with sales closing in March because they generally reflect
offers negotiated in early 2013, when market dynamics went through
another shift. When medians and averages are being calculated for a
wide variety of properties of different locations, sizes, eras of
construction, amenities and condition – as is almost always the case
in San Francisco – they can only be considered very general
approximations of value and changes in value.

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San Francisco Luxury Home Sales Soar in 2013

San Francisco Luxury Home Sales Soar

2nd Quarter 2013 Update

In San Francisco, no market segment has recovered as dramatically as that for high-end homes. There are a number of reasons for this: the general economic recovery, the huge local increase in high-tech wealth, an increase in the number of highly affluent foreign buyers, and the fact that, as a group, the affluent have profited most from the large rebound in stock market values in recent years. And then the general appreciation the city has experienced of 20% – 30% since 2011 has simply moved a lot of sales into a higher sales price category. Whatever the reason, there is an enormous amount of money sloshing around the Bay Area that is now being invested in homes — many of which are being purchased all-cash. At Paragon, we have seen an increase of over 100%, year over year, in the number of luxury home sales we have brokered so far in 2013.

In the first chart below, we are defining luxury homes as condos, co-ops and TICs selling for $1,500,000 and above (the vast majority of these are condo sales), and houses selling for $2,000,000 and above. These are relatively arbitrary thresholds since a $2,000,000 house in Presidio Heights can be a small-ish fixer-upper, while a home of that price in another neighborhood might be a pristine mansion. In the charts breaking down sales by neighborhood, we’ve added the price segment for houses of $1,500,000 to $2,000,000 since what is happening there is quite interesting as well.

Luxury Home Sales by Quarter

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High-End Home Sales by District & Neighborhood

The first chart is for condo, co-op and TIC sales, and the three following are for house sales.

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The neighborhoods listed are representative of one of the 10 Realtor Districts for San Francisco, so consider them as indications of the general area where the sales occurred. This analysis tracks sales reported to San Francisco MLS. A fair number of high-end homes sell “off-market” and are not reported, however we don’t believe these alter the general picture painted in the charts above.