December 2009 Newsletter: Real Estate in San Francisco
It has been an interesting year in real estate, and it continues to be a very interesting time for home buyers and sellers in San Francisco. Below are a number of charts which review the city’s market from a variety of angles.
The data below is from sources deemed reliable but may contain errors or omissions, and is not warranted. Sales not reported to MLS (such as many new-development condo sales) are not reflected in these statistics.
San Francisco Foreclosure Sales by Neighborhood
As has been the case since the foreclosure crisis began, the majority of bank-owned (REO) house sales occur in the city’s less affluent, southern border neighborhoods running from Oceanview to Bayview-indeed, a little more than half of all house sales in those neighborhoods are either REO or short sales. For REO condos, the main neighborhoods are SOMA, South Beach and Mission Bay, where most recent condo development has taken place. For a much fuller analysis of foreclosure and short sales in San Francisco:
SF Foreclosure Sales & Short Sales Analysis
Home Appreciation & Depreciation in San Francisco since 1995
This chart graphs the changes in median price for 3-bedroom houses selling at various points over the past 15 years in selected neighborhoods. Remember that median prices are generalities which can fluctuate for a number of reasons, and may or may not reflect values for any particular property. The complete analysis, which includes condos and TICs can be found here:
Appreciation & Depreciation since 1995
San Francisco Median Home Prices
The median home price (house and condo) in the city has been remarkably stable, running between $685,000 and $710,000 from April through October 2009, then ticking up to $731,000 in November. This is after the general 15% to 25% decline in values from their times of peak value. (The southern neighborhoods hit hard by foreclosures have seen 25% – 40% declines.) In comparison, in 2007, the median home price in the city hit $829,000. It is too soon to tell if November’s increase in median price is the beginning of a trend or just an anomalous blip.
Mortgage Rates Hit All-Time Low
Loan interest rates are such a vital part of the home-purchase affordability equation because of their impact on both qualifying for a loan and the ongoing monthly cost of home ownership. Interest rates hit at all time low in late November. It’s harder to qualify than in past years, but if you can qualify, the rates are fantastic. Many analysts expect interest rates to jump by at least 1 percentage point in 2010. (The attached chart was provided by Julian Hebron of RPM Mortgage.)
Listings Accepting Offers
More listings accepted offers in October than in any month in the past 2 years. Business began to taper off in November, which is common for the holidays, but the number of accepted offers was still higher than in November 2008 or 2007. Buyer demand remains quite strong and homes perceived as good values are selling quickly. The holiday season is actually a good time to make offers because there isn’t as much competition from other buyers and sellers are eager to move on with their lives.
Homes for Sale
The number of active listings for sale normally decline in November and December, and then pick up again in January, but there is still a fair amount of inventory available.
MSI is a calculation of how many months it would take to sell the existing inventory of homes for sale at the current rate of sale. At 3.4 months, the MSI for San Francisco homes is about as low as at any time in the past 2 years. There is certainly no glut of homes for sale.
Listings That Do Not Sell
Comparing this chart to the earlier chart of homes accepting offers, we see that for every 2 listings that sell, about one listing expires without selling. Not reflected on this chart are listings withdrawn from the market by their sellers before the listing period expires, usually because they are not generating “acceptable” offers. Unlike the hot market of earlier years, not all listings sell nowadays; only those that are perceived as good values are selling. Listings perceived as overpriced sit on the market for months (or years) until finally expiring or being withdrawn.
Federal Tax Credit Extended and Improved
The Federal Homebuyers’ Tax Credit is one of several major factors that have fueled the resurgence in sales – the other main factors being low interest rates and the decline in prices. Attached is an outline, put together by the National Association of Home Builders, of the basics of the $6500 – $8000 tax credit. The NAHB also has the most extensive FAQ sections on the details of the program:
Return on Investment: SF Real Estate vs. Stock Market
Obviously, the comparison shown on this chart depends wholly on the period of the analysis, but considering that real estate values have generally dropped 15% – 25% over the past year or two, and that the stock market is way up for the year, it doesn’t seem unfair to look at return on investment over the past 10 years.
When is the time to buy?