San Francisco Real Estate – Complicated Market Conditions August 2020

As illustrated below, the San Francisco market currently reflects a variety of both positive and negative indicators. Among Bay Area markets, the city is seeing the softest recovery from the initial shelter-in-place plunge in activity in early spring, while some other counties – less expensive, more suburban or rural – are experiencing extremely high demand. (See table near the end of this report.)

Within San Francisco itself, supply and demand conditions have diverged dramatically between house and condo markets, with the latter being far weaker and rapidly climbing into “buyer’s market” territory.

Median Home Sales Prices

On a 3-month rolling basis, SF median house sales prices are as high as they’ve ever been. The median condo sales price, while not particularly low, has been running lower than the highs of last year.

Supply & Demand Indicators

The number of listings going into contract has been increasing, but at a much lower rate than inventory is growing (chart 1). Sales volume is climbing, but is still far below the high points of recent years (chart 2). Price reductions have been soaring in recent months (chart 3).

Diverging House and Condo Market Conditions

The next 5 charts illustrate the increasingly stark divide in the levels of inventory and buyer demand between these 2 major market segments. However, it should be noted that within the condo market, certain segments and locations are performing better than others. The largest condo market in San Francisco – the greater South Beach, SoMa, Mission Bay, Civic Center area, dominated by large complexes and high-rise buildings, including continuing new construction projects – is seeing the weakest conditions.

As illustrated in the following 2 graphs, the supply of listings on the market is at its highest point in 8 years, with the inventory of condos spiking way, way up. As a market softens, correct pricing becomes increasingly critical for sellers. In a hot market, buyers compete for listings; in a cooler market, sellers compete for buyers.

Though climbing in recent months, the days-on-market figures are not high. It appears those listings selling are going into contract relatively quickly.

The amount and magnitude of buyers overbidding asking prices is considerably diminished from levels seen in the past 6 years. Part of this is due to the change in showing conditions brought about by strict shelter-in-place rules. But in an environment of increased inventory, buyers see a reduced necessity to compete with each other.

Luxury Homes Going into Contract

Comparative Conditions around the Bay Area

This table ranks each county by the percentage of active listings going into contract in June/July 2020 – a standard statistic of market heat – compares it to the same period of last year, and then rates the year-over-year change. Many counties are seeing hugely increased demand over last year. The SF house market is about the same as last year, and the SF condo market is substantially cooler.

San Francisco Era of Construction

This chart looks at the number of house sales over 2 years in different periods of construction. SF is a city of older houses with relatively little new house construction in the past 30 -40 years.

The condo market had similar divisions up until about 1980, when new condo construction blasted off to add tens of thousands of new units to the market, sometimes creating huge new residential neighborhoods.

San Francisco Market Rebounds – July 2020 Report

Despite the ongoing health and economic crisis precipitated by COVID-19, the SF real estate market made a large recovery from the steep declines in March and April. The SF median house price hit a new monthly high in June ($1,800,000), and high-end houses, in particular, have seen very strong demand – this applies to virtually every market in the Bay Area. More affluent buyers – the demographic least affected by COVID-19, unemployment, and also having the greatest financial resources – have been jumping back into the market to a greater degree than other segments.

The condo market has been weaker than the house market, as measured by both supply and demand metrics and median sales price. It may be that prospective condo buyers – often younger and less affluent than house owners – have been more affected by the huge jump in unemployment.

The first chart below illustrates the big rebound in buyer demand, as the number of listings accepting offers in June 2020 rose slightly higher on a year-over-year basis. Of course, closed-sales volume – a lagging indicator – was hammered in Q2 by shelter in place.

High-end sales staged a particularly strong recovery, reaching a new high as a percentage of total sales. This is one of the factors behind median house sales prices hitting a new peak in June.

As illustrated below, the house market (blue line) has performed much better than the condo market (purple line).

Three angles on median home sales price movements – annual, monthly and quarterly. While the median house price has hit a new peak, the median condo price has declined from its 2019 high.

Average days on market remained relatively low in Q2, though higher than Q2 in 2018 and 2019.

The average overbidding percentage declined to zero in Q2 as showing procedures and the offer-making process have been severely affected by shelter in place.

The Bay Area markets with the largest year-over-year increases in the number of listings accepting offers in June 2020 were the 4 outer Bay Area counties of Monterey (up 61%), Santa Cruz (58%), Sonoma (47%) and Napa (37%). They also have among the lowest population densities in the Bay Area. The more urban counties saw more modest y-o-y increases: San Francisco (6%) and Alameda (7%). Other factors may play a role in this: length/strictness of shelter-in-place rules, home price differences, second-home buying patterns, and so on.

San Francisco Real Estate Spring 2020 Report

Supply & demand statistics, median sales price trends, sales and values by city district, the luxury home market, and the ongoing effects of COVID-19

June 2020

Generally speaking, market activity – as measured by the number of listings going into contract – continued to pick up rapidly in May, bouncing back from the steep plunge following the first shelter in place orders. However, activity in May, which is typically among the busiest selling months of the year, still remained well below May 2019. Still, with the easing of shelter in place, as well as the market learning to adjust to new circumstances, it is expected the recovery will continue to surge closer to normal.

Interest rates hit yet another historic low at the end of May.

Median sales prices for both houses and condos dropped significantly in San Francisco in May, but those figures are based on a very low volume of closed sales in the month. An even bigger drop in higher-price home sales also put downward pressure on median prices. May sales and sales prices mostly reflect the huge impact of COVID-19 on the SF market in late March and April. Based on the large jump in accepted-offer activity in May (and especially for more expensive homes), coming months will constitute a better indicator of whether changes in fair market value are occurring.

Anecdotally, word on the street is that buyer demand has come surging back and home prices have so far been little affected, though opinions vary regarding different market segments. We’ll know more soon.

The SF market – as also common in other urban centers – was more deeply and more quickly affected by COVID-19 and shelter-in-place than other more suburban county markets, seeing larger initial drops in activity. Even with the remarkable rebound of buyer demand in May, its recovery is, so far, lagging other counties on a year-over-year basis, especially more suburban and rural counties, such as Marin and Sonoma. A variety of factors may be at play, which are discussed on a chart within this report, however definitive pronouncements regarding longer-term market, economic and demographic effects are impossible to make while the crisis is still at hand.

Rent rates appear to be dropping quickly, subsequent to the enormous increase in unemployment – which typically impacts the rental market more rapidly and significantly than the for-sale market.

NOTE: Any statistics derived from closed sales – such as median sales prices, sales volume and days on market – reflect the state of the market 3-6 weeks ago when the offers were negotiated and accepted – and when the market was most terribly impacted by the crisis.

 

San Francisco Real Estate Market Begins to Bounce Back – Slowly

May 2020 Crisis Update. Market activity begins to tick up after severe shelter-in-place plunge. Median home sales prices are up. Interest rates hit new low.

Shelter-in-place caused steep drops in activity across the board in what is typically the busiest selling season of the year. However, though still far below normal levels, activity has been picking up since bottoming out in late March/early April, and will presumably continue to do so with the easing of both shelter-in-place and property-showing rules.

So far, home prices have increased, but a fair proportion of the sales behind April median sales prices still reflects offers accepted prior to shelter in place.

Interest rates hit a new historic low in the last week of April.

Week by Week Supply & Demand Trends

The only way to clearly perceive the recent changes in the market – sudden plunge and the beginning of recovery – is by looking at WEEKLY trends in buyer and seller activity. These are illustrated in this first chart below.

Year-over-Year Changes in Median Home Sales Prices

Generally speaking, the first months of 2020 have been characterized by year-over-year increases – often considerable – in median home sales prices across the Bay Area.

Longer-Term Trends in Median Home Prices
– 12-Month Rolling Illustration

Year-over-Year Monthly Activity Comparisons

The next series of charts reflects the dramatic changes in market dynamics by MONTH as compared to spring 2019. These don’t illustrate the uptick in activity in the most recent weeks.

Year-over-Year Changes in Luxury Home Markets

Mortgage Interest Rates

At the end of April mortgage interest rates hit a new historic low.

Unemployment

We are not going to review the economic news already extensively covered in the media, except for this stark illustration of the unparalleled rise in unemployment. How quickly this horrifying trend can be reversed will probably be the single largest factor behind an economic recovery.

Bay Area Real Estate & the Coronavirus Effects on Market Supply & Demand Dynamics April 2020 Report

Note that there is a time lag – usually 3 to 6+ weeks – between a new listing coming on market, an offer being negotiated and accepted, and when the transaction actually closes sale. This means that almost all of the sales price data we have, as of the first week of April, still reflects the market BEFORE the shelter-in-place rules went into effect. In virtually all Bay Area counties, March median home sales prices were quite strong.

This report will look at the effects of the crisis on supply and demand by reviewing week by week statistics through April 5. The spring selling season is usually the most active of the year and, typically, the standard market indicators – new listings coming on market, total listings for sale, listings going into contract, sales closing escrow – all climb steadily from the mid-winter slowdown until peaking in late spring (or in a few markets, in summer). Since the coronavirus really began to impact the public consciousness locally in early March, and especially when the shelter in place rules came into effect, all these standard indicators have seen very significant declines. At the same time, the number of listings pulled off the market has spiked. Though the numbers are much reduced, some listings continue to go into contract.

San Francisco Real Estate & the Coronavirus April 2020 Report

The first thing to remember is that there is a time lag – usually 3 to 6+ weeks – between a new listing coming on market, an offer being negotiated and accepted, and when the transaction actually closes sale. This means that almost all of the sales price data we have, as of the first week of April, still reflects the market BEFORE the shelter-in-place rules went into effect. In virtually all Bay Area counties, first quarter and March median sales prices were quite strong.

This report will look at the effect of the crisis on supply and demand by reviewing week by week statistics, sales price trends reflecting the market before the crisis, and longer-term trend data to give context to how the market typically performs at this time of year. Spring is usually the most active selling season and often sees the highest median sales prices of the calendar year, due to both the level of buyer demand and the seasonal surge in the luxury home market. (A higher percentage of luxury home sales pulls up the overall median sales price.)

We do not know how the crisis will ultimately play out, depending as it does on so many, rapidly changing, socio-economic factors.

Median Sales Price Trends

These first 4 charts review median sales price trends in the short, medium and long-term. March and first quarter prices generally reflect the pre-crisis market.

Link to our San Francisco home price map

Shelter-in-Place Effect on Inventory & Deals
– by Week

The following 4 charts detail the plunge in listing and accepted-offer activity, and the surge in listings being pulled off the market by sellers, over the past 4 weeks. Typically, at this time of year, the first 3 charts would be seeing steady climbs over February numbers, and the 4th chart would have a very low, flat trend line.

Though the numbers are way down, some listings have still been going into contract.

Average Days on Market by Month

Those listings that did go into contract in March – a much lower number than normal – apparently did so quite quickly after coming on market, presumably seizing the attention of buyers despite the crisis. Or the buyers and sellers may already have been in the midst of negotiations when shelter in place rules began.

Real estate cycles, effects on prices, recoveries and Lease Forbearance Addenda language you can use!

COMMUNITY

Our hearts go out to you all in these unprecedented times. One way or another, we will all be affected by these turbulent times. Together, let’s figure out how to somehow be better for it!

As we sit and ponder this month’s outreach, it is with saddened heart. Being on lockdown from business and socializing, erratic panic from both the Corona-19 bug and crashing stock market, we have to wonder, what is next? Yet, we cannot let fear or sadness of the unknown dictate how we continue to serve our community.

Let us be constantly reminded of how good our lives are here in the Bay Area! Without friendship and comradery for one another, what would we really have? One thing we know for sure is that we cannot buy time. Our recommendation is to gather your loved ones around you while giving all you can. Reach out in any way possible, to let others know they are in our hearts and minds. The more love we can share, the more benefit our community will receive, and of course, pay forward.

Roark and I, in collaboration with Compass specialize in investment, value-add, and commercial real estate sales and we believe once this is over there will be a lot of people making moves on purchasing and selling properties. We work for one of the largest private independent owned brokerage firms in the United States and are in constant contact with economists, think tanks, lending and brokerage professionals, and most importantly, you. We are speaking to our clients on a daily basis and I would love your thoughts on where you think the market will go. We promise to keep you appraised with insightful real estate forecasts, Buyer and Seller needs, and advice to help you plan and protect yourself. We will be here for you when this challenging time is in our rear view mirror.

Please see graphs below with real estate cycles – and remember, we have seen downturns before, and gotten through them together. Also, we have sourced language here and here you can use for working with tenants, as we all anticipate conversations about money being tight over the next couple of months. As you know, we are not ‘Qualified Landlord Attorneys’, but in an effort to assist our clients in this challenging Covid – 19 business environment, we thought it may be helpful for you to have some language to create addenda to your property leases, in the event a tenant is expressing their inability to pay rent.

Hope this helps and please reach out if you need anything. Here to assist!

Market Cycles in Bay Area Real Estate

This article was written before the coronavirus – in fact, the first version was written over 10 years ago by our chief market analyst to help place the 2008 crash into context. We realize there are much more important things than real estate right now, but since some of our clients are trying to make decisions about buying and selling, we will continue to try to provide useful information on market trends and conditions. At this point, we cannot know how the current crisis will play out.

This first chart is a very simplified, smoothed out look at Bay Area market cycles for higher-price-tier homes using data from the S&P CoreLogic Case-Shiller Home Price Index. It is a very approximate overview of hundreds of different neighborhood markets – whose trends up and down were broadly similar, but whose details, such as specific appreciation percentages, varied.

San Francisco Real Estate March 2020 Report

There is a lot going on in the world right now and we won’t pretend to know how things will turn out or affect the local real estate market over the next few months. In the meantime, this report will look at the most recent data available, though the impact of the wild volatility in the financial markets and the unfolding situation with the coronavirus has yet to show up in reliable statistics. Typically, the spring selling season is the most active of the year.

One positive for real estate is that mortgage interest rates hit a historic low in early March, as illustrated below, and rates play a huge role in housing affordability.

Short-Term & Long-Term Trends
in Median Home Sales Prices

Median Dollar per Square Foot Values

Mortgage Interest Rates Hit New All-Time Low

Home Sales Breakdown

Listing Inventory vs. Sales since 2005

Trends in Overbidding Asking Price

Overbidding remains common and at high levels for house listings in particular, however part of this is due strategic under-pricing on the part of listing agents. The supply and demand dynamic for condos has been affected over the last few years by new-condo inventory coming on market.

Trends in Overbidding Asking Price

Overbidding remains common and at high levels for house listings in particular, however part of this is due strategic under-pricing on the part of listing agents. The supply and demand dynamic for condos has been affected over the last few years by new-condo inventory coming on market.

Home Sales & Values by San Francisco District

District Home Price Trends

There are 70+ neighborhoods in ten Realtor districts in San Francisco – too many to cover in one newsletter. Below are some representative snapshots, but we also have trend data on every neighborhood in the city, which can be supplied upon request.

It is impossible to know how median and average value statistics apply to any particular home without a specific comparative market analysis. 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. Median and average statistics are enormous generalities: There are hundreds of different markets in San Francisco and the Bay Area, each with its own unique dynamics. Median prices and average dollar per square foot values can be and often are affected by other factors besides changes in fair market value. Longer term trends are much more meaningful than short-term. Compass is a real estate broker licensed by the State of California, DRE 01527235. Equal Housing Opportunity. This report has been prepared solely for information purposes. The information herein is based on or derived from information generally available to the public and/or from sources believed to be reliable. No representation or warranty can be given with respect to the accuracy or completeness of the information. Compass disclaims any and all liability relating to this report, including without limitation any express or implied representations or warranties for statements contained in, and omissions from, the report. Nothing contained herein is intended to be or should be read as any regulatory, legal, tax, accounting or other advice and Compass does not provide such advice. All opinions are subject to change without notice. Compass makes no representation regarding the accuracy of any statements regarding any references to the laws, statutes or regulations of any state are those of the author(s). Past performance is no guarantee of future results.

Bay Area Real Estate February 2020 Report

It’s important to note that the Bay Area contains many different markets and market segments, sometimes following diverging trends in supply and demand, and home-price appreciation. Most of the materials in this report reflect overall trends for the entire region.

When the data is available we’ve charted longer-term trends since they give much greater context to what the state of the market is today, and where it may be heading.

How these statistics pertain to any particular home is unknown without a specific comparative market analysis.

San Francisco Real Estate January 2020 Report

Generally speaking, after years of high appreciation rates, annual 2019 Bay Area median home prices went down a little bit, went up a little bit or basically remained unchanged as compared to 2018. SF hit new quarterly price highs in spring of 2019 (amid all the IPO excitement), but ended up the year at about flat for houses and a little up for condos. (Since there has been so much new luxury condo construction in recent years, year-over-year median price comparisons may not be exactly apples to apples.)

For 2020, economist Ken Rosen at UC Berkeley has said he expects the Bay Area median price to remain basically flat, within a general range of up or down 2% – in other words, similar to what happened last year. We can’t predict the future, but that certainly doesn’t sound unreasonable, and happily avoids the sensationalism of many other media-grabbing forecasts.

One of the big factors in SF house price appreciation since 2012 has been that fewer house owners are selling (dark green portion of chart below). If demand increases, but supply drops, that puts upward pressure on prices. Overall, house prices have out-appreciated condos over the past 7 years due to 2 factors: All the new condo construction and the fact that condo owners sell their homes more often than house owners. Both those factors increase supply to help meet increased demand.

San Francisco Home Prices by Neighborhood

Below are just two of the tables in our much longer analysis of home prices by property type and bedroom count for every neighborhood in the city. If you’d like the complete report, contact your Compass agent.

San Francisco Luxury Home
Markets by District

Economic Factors Affecting
Real Estate Markets