Tag: turnaround

Posted on

San Francisco Neighborhoods Hit New Peak Values

Paragon Market Report, June 2013

New highs in home prices have not yet been reached in every San Francisco neighborhood, but the majority has either regained the value lost since the 2008 market meltdown, or now exceeded the previous high points of 2006-early 2008. (Different neighborhoods peaked at different times, just as they are now recovering at different speeds). This does not mean that every property bought at the height of the bubble in feverish multiple-offer bidding wars has now regained peak value. Nor does it mean that values might not fluctuate or drop in future months due to seasonal and/or other economic factors.

Though virtually every market in the country is now on a similar upward trajectory, San Francisco’s has recovered more quickly than most in the Bay Area, state and country. The city’s neighborhoods, with a few exceptions, were never hit as hard as most other areas by the tsunami of distressed property sales: our home values generally fell in the 15-25% range compared to huge declines of 40-60% elsewhere and so we have had less ground to recover. That said, the city has always been an exceptional real estate market and the confluence of economic factors both general (such as the lowest interest rates in history) and unique (such as the local, high-tech boom) jumpstarted and supercharged our recovery beyond most others.

It should be noted that, looking at past recoveries in the early eighties and mid-nineties, it is not unusual once a recovery gets underway after years of recession and repressed demand, for the market to regain previous peak values within a couple years of the turnaround beginning. Recoveries often start with a dramatic surge and that is what has happened with this one.
—————————————————————

City, State & National Long-Term Overview

In this chart, one can see the recovery occurring everywhere, but most dramatically in San Francisco. For this analysis, we’ve calculated the 2013 SF median house sales price for the 5 months since the year began; if we looked at just the last 3 months (reflecting offers accepted in 2013, when the market accelerated further), the SF median house price jumps to about $1,000,000. (Note: State and national data sources are behind those we can access for the city, and the last median prices reflect that disparity.)

1

SFD_Median-Averages_ChangeSF Houses: Previous Peak Values to Present
In this chart, since we’re also calculating average statistics, we’ve capped the sales price at $3,000,000 because ultra-high-end sales usually distort averages. We see the previous peak value in 2007 (for SF houses in general), the drop to the bottom of the market in 2011, and the rebound starting in 2012 and accelerating in 2013. By all 3 main statistical measures of value, San Francisco houses have met or exceeded previous peak values. To adjust for seasonality, the comparisons are for the spring months of each year.

This link goes to the same analysis for SF condos except it starts in 2008 when condo values peaked and sales are capped at $2m:
Condos: Previous Peak Values to Present

Median_SFD-Condo_by-Qtr_Short-termShort-Term Appreciation Trends
This chart breaks down the rise in SF home values occurring over the past 2.5 years. Though it appears that 2013 prices surged after the first quarter, the surge actually started in March, which is when the market really started to reflect offers negotiated in 2013. January and February sales mostly reflect the holiday season market, when the higher-end home market typically checks out. We prefer quarterly or longer time periods because they make for more reliable statistics: monthly statistics often fluctuate without great meaning. The high overall median prices achieved in March-May may drop somewhat during the summer due to seasonal and other factors.

This link goes to an overview of the past 30 years: it helps give context to what we’re experiencing today:
30 Years of SF Real Estate Cycles

Median-SFD_Multi_Areas2006-Present: House Values by Neighborhood
These 4 SF Realtor districts generate a lot of house sales, so they’re good for statistical analysis. For 2013, this chart looks at the last 5 months of sales-if assessing just the last 3 months, 2013 numbers would typically be higher. The central Noe-Eureka-Cole Valleys district, a hot bed of high-tech buyer demand, has soared well beyond its previous peak value in 2008. The very affluent northern district of Pacific Heights-Marina has also exceeded its previous peak. Sunset-Parkside in the southwest has regained its 2007 peak, and the southeast Bayview-Portola-Excelsior district, which was hit hardest by distressed sales, while recovering rapidly, has not yet made up the value lost since its 2006 peak. This district, with more house sales than any other, lost more percentage value in the downturn (25-45% depending on neighborhood) and so has more ground to make up. But it’s well on its way.

2BR_Condos_Medians_Multiple_Areas-V22006-Present: SF Condo Values by Neighborhood
These 6 areas of the city generate high numbers of condo sales, which is why we chose them for this analysis. Condos in all these areas have increased in value beyond their previous peaks in 2006-2008; some of them, such as South Beach, dramatically so.

This link illustrates how, over the past 5 years, the SF market has switched from being dominated by house sales to condo sales; with the continuing construction of large condo projects, we expect this trend to continue. TIC sales have dropped significantly, both as a percentage of sales and in actual unit sales: This is due to a number of complex issues such as changes in city condo conversion and tenant protection regulations.
Sales by Property Type

Unit-Sales_by_Price-Range_Year-Year_CompPrice Range Dynamics
There are 3 main underlying currents occurring in San Francisco. First is the rapid dwindling of distressed property sales: Thus, sales under $500,000, the price range of most distressed sales, have dropped by 62% since last year. This segment is on the verge of disappearing completely in SF. Second is the dramatic resurgence in luxury home sales: the affluent have profited most from the economic recovery and the city also has large numbers of the newly affluent (often high-tech) who wish to buy homes. So, sales of homes costing $1,500,000 plus have surged by 76%. The third dynamic is simply the general appreciation of home values. All 3 factors add up to a large migration from lower-priced to higher-priced sales. Note: The medians quoted on this chart are for many different property types combined.

May-Snapshot_Sales-UC-ExpiredMay Listings/Sales Snapshot
A clear indication of the red-hot heat of our market: 90% of SF home sales closing in May sold without going through any price reductions, at an average sales price 7% higher than the asking price and a very low average days-on-market of 29 days. These are very dramatic statistics illustrating the high demand/low supply situation here in the city.

Posted on

Summer’s Unflagging Demand Fuels Higher SF Home Prices

San Francisco Real Estate Market: September 2012 Update

Typically, the real estate market slows down during the summer months – a period often called the summer doldrums — but that certainly did not occur this year in San Francisco: unflagging buyer demand continued through August. The market recovery that began in some SF neighborhoods late last year has now spread throughout the city. Bay Area, state and national home markets are also showing clear, if still early signs of turnaround.
******************************

San Francisco House Values Rising

It’s rare that the 3 main statistical measurements of home value line up so perfectly, but comparing this summer’s house sales to last summer’s shows 12% increases across the board. Which doesn’t mean uniform appreciation for SF homes: changes in value vary by property and neighborhood. This analysis and the one following are for non-distressed sales in the city’s 8 northern and central districts, which generally run north of the Sloat Blvd/ Highway 280 line: The 2 southern districts were hit much harder by foreclosures and though they too are recovering quickly, mixing in their data distorts the results. During this 3-month period, house sales volume in the 8 districts was up 5% in units and 18% in dollar volume — and would be up much higher if more inventory had been available. Average days on market fell from 52 days to 39 days year over year.

San Francisco Condo Values Rising

The condo statistics don’t line up quite as neatly, but nearly so: they’re up from 9.4% to almost 12.5%, with the average being about 11%, which is very close to the 12% increase seen in houses. (Remember: these statistics are generalities regarding the sale of many hundreds of relatively unique homes.) Closed sales follow the time when new listings hit the market and offers are negotiated by 4 to 10 weeks, so these charts reflect the market from April through July. Non-distressed condo sales volume in the 8 northern/central city districts during this 3-month period is up 41% in units and 54% in dollar volume from last summer, and average days on market dropped from 69 days to 47 days.

Most Listings Selling At or Over Asking Price

San Francisco is currently seeing remarkable percentages of homes selling above and sometimes far above the asking price: 64% of house sales and 45% of condo sales in August closed at above list price, and solid percentages sold at 10% higher or more. This is perhaps as good a snapshot as any of the ferocious heat of buyer demand right now. (Sales that were within a quarter percent of 100% were considered “At List Price.”)

Percentage of Listings Accepting Offers

No summer slowdown is showing up in this important metric of supply and demand.

Price Reductions, Sales Price Percentages, Time on Market

Over two thirds of SF listings are selling quickly at an average of almost 4% over the asking price. Those listings that go through one or more price reductions take much longer to sell (over 2 1?2 months longer on average) to close at a significant discount to original price. For every listing selling after a price reduction, another listing expires or is withdrawn without selling, typically due to being perceived as overpriced. The keys to getting the best price for your home: price it right to begin with; prepare it to show at its absolute best; comprehensively market it to buyers and agents; negotiate offers aggressively. And it doesn’t hurt to take advantage of a low inventory/high demand market.

Distressed House Sales Declining

Distressed house sales – bank-owned and short sales – are clustered in the city’s two southern districts, running from Bayview to Oceanview. However, these listings are rapidly declining as the market turns around and values increase: distressed house sales have dropped from 20% of sales in 2011 to 12% in August 2012. This becomes a virtuous circle of market recovery: higher values mean fewer distressed listings; fewer distressed listings lessen their (significant) negative effect on neighborhood home values.

Distressed Condo Sales Sinking

The distressed condo segment of the SF market is dwindling rapidly both as a percentage of total sales (from 20% in 2011 to 14% YTD, and 10% in August 2012), and even more dramatically, as a percentage of listings for sale (down to only 4% as of August 31). The greatest number of distressed condo sales has been in the greater SoMa/ South Beach area, where so many of the new, big developments were built over the past 10-15 years, but the impact of these sales is shrinking very quickly everywhere in the city.

Unit Sales Up

Condo and 2-4 unit building unit sales are up over 20% from last year this time – this time comparing a six-month period of each year. House sales — and indeed sales of all types — would certainly be up by a much greater percentage if there were simply more listings for buyers to purchase.

Inventory Way Down

There’s no ambiguity in this chart: An inadequate number of new listings and extremely high demand have kept the inventory of listings available to choose from on any given day lower than at any time in recent memory. It’s not unusual for September to bring a large burst of new listings to fuel the autumn sales season: in this chart, you can see the big jump in September 2010 and the smaller surge in September 2011. Buyers and their agents are certainly praying for a surge in inventory to alleviate the intense competition for available homes.

Days on Market Continue to Decline

The trend is clear: listings are selling much more quickly. Though 37 days as an average is very, very low — nationally, there’s excitement that the figure just fell to 69 days — many new listings in the city are accepting offers within 7-10 days of coming on market.

Values by Neighborhood, Property Type & Bedroom Count

We just completed our detailed semi-annual survey of SF home values. This is one of seven charts: the complete report can be found by clicking on the Market Dynamics Charts link in the footer below and then selecting Neighborhood Values from the sections listed on the upper left of the webpage.