Despite some misreports to the contrary, the market for single-family homes in San Francisco hasn’t become detached from the market for condos.

While the market for condos tends to be more volatile, with higher highs, lower lows and faster swings between the two, it remains a leading indicator for the market as a whole.  Keep in mind that roughly 60 percent more condos trade hands each year in San Francisco than single-family homes.

And with the number of condos on the market having hit a 9-year high in the absolute three months ago, the number of single-family homes on the market in San Francisco has just hit a 9-year high in the absolute as well, with 27 percent of the single-family homes on the market having been reduced at least once (versus 32 percent of the condos and 16 percent of the single-family homes on the market at the same time last year).

And yes, overall inventory levels in San Francisco are nearing a 10-year high in the absolute, which will effectively be a two-decade high as well, while the income a property produces (i.e., rent) has dropped like a rock.

Comments from Plugged-In Readers

  1. Posted by 94114

    So many single family houses are still priced well below what they ultimately sell for which makes it seems like the market is stronger than it is.

    • Posted by wilson

      Its harder to play the teaser list price game with some condos because sales of comparable units in the building show everyone where the market is actually at. Most SFHs are unique so it is easier for some sellers to try and incite a bidding war by setting an unrealistic list price. Even though that annoys and wastes the time of many buyers.

  2. Posted by tipster

    236 properties (of all types) listed last week, only 84 homes sold, so listings slowed but sales slowed even more, and it’s still running nearly 3 to 1.

    Above market street, 23 SFRs listed, only 4 SFRs sold. That’s all of the Richmond, Marina, all of Pac Heights and western addition. Below market street, 74 homes listed, 45 sold. So the market is down to Noe, the Sunset (where SFRs are still well below $2M) and the other cheaper, southern neighborhoods, where you can trade in your condo and get a SFR.

    Citywide, SFRs above $2.25M, 28 listings, 12 were sold last week.

    Over $5M, 6 SFRs were listed, 0 sold. The over $5M inventory is 65, and inventory/weekly sales is infinite. The 1 month sales in over $5M was 4, so there is well over a year’s worth of inventory in over $5M SFRs, and sales are slowing.

    • Posted by Ohlone Californio

      Where do you get your bad information from?

    • Posted by Dave (Seattle dude)

      There are nice homes in Miraloma Park for less than 2 million. Quite a few. Some detached, some with views and all with roomy backyards. My Miraloma home has a view of the Bay and Pacific and is worth 1.5 million or so. It’s aa non-upscale middle class neighborhood.

    • Posted by Sam Das

      Hello, Interesting data. Where did you get it from and where can I get it? Would be interesting for me to track on a weekly basis

  3. Posted by ST

    Despite all the statistics, SFH under $1.5M in places like Pac Height or Cole or Noe – you got the idea – are still rare and always get sold quickly and well above asking…..

    • Posted by SocketSite

      Speaking of statistics, as we noted last month, there have actually been around 10 percent more sub-$1.5 million single-family home sales in San Francisco over the past year versus the year before.

      But it’s true, single-family homes that are priced at a third of a neighborhood’s average, which would be the case for a $1.5 million home in Pacific Heights, tend to move rather quickly and for “over asking,” which is a meaningless statistic, as well.

  4. Posted by Arnold

    I’m considering buying [a condo] in the $1-1.25M range, but it doesn’t feel like prices have dropped yet. When I look at several Case Shiller SF indices from last downturn, I see that someone who bought roughly at the peak (towards the end of the peak at plateau), still needed to wait +/- 7 years to break even. When you add $20-25K/year in taxes, ins, HOA, it’s a long horizon to make money.

    I pay $36K/year in rent right now for a 1 bed in cow hollow. I’m optimistic about the market long term, but buying a 2 bed condo has a certain shelf life for me at my age, and I don’t have confidence I can make some money on it in ~5 years, why should I? I know we can’t make direct comparisons to past downturns, and also maybe my submarket has an impact? I’m looking at Marina, Laurel Heights, Inner Richmond.

    Feels like everyone is saying “buy the dip”, but we’re in fact very much at the peak still.

    • Posted by Ohlone Californio

      In my opinion there will remain a break between the small building condos that make up the majority of the flats in the areas you describe, and larger condo development type buildings. I don’t think Case Shiller is going to be particularly helpful in putting a fine point on values near term. Near term, the virus has created a marked shift in consumer perception between bigger buildings and smaller buildings.

    • Posted by Fishchum

      I don’t care when you buy, if you turn around and sell in less than five years, you’re asking for trouble.

      • Posted by Arnold

        I know you are right. That is my fear. We know we don’t want to live in the city much longer than 5 years. We should probably stay in our apartment until we can afford the suburbs. But hate to miss out on appreciation in that 3-5 year span.

        • Posted by Fishchum

          I hear what you’re saying, I just don’t think we’ll see a quick rebound to generate a substantial appreciation in 3-5 years.

          • Posted by wilson

            If you look at the last downturn, the bottom alone was about 3 years from 2009-2012. So a rebound in 3-5 seems very unlikely and also with a 3 year relatively flat bottom there was plenty of time at the bottom. I don’t think the bottom will pass you by quickly.

            I also don’t think there will be that significant a large/small building break vs a much larger break between SF the city and the whole Bay Area. If you look at the topic of this post. SFHs aren’t even detaching from condos so you aren’t going to see that much of small/large building detachment. Agree that you need to look at SF apples vs Case-Shiller if you want to see how SF city is behaving.

            Last piece of advice is to run the numbers on a prospective place as a rental. If it works as a rental it really doesn’t matter if you personally move out in 5 years, you can keep it as a rental. If the numbers don’t work I agree that a 5 year hold is asking for trouble. But if you plan that route be sure you look at rental trends and understand the SF rent laws.

          • Posted by Ohlone Californio

            This post did not make the case that SFRs are detaching from condos. It merely stated that SFRs for sale are at a 9 year high. What the site did not say is that they are also selling at a strong clip. September is going to mark some of the highest SFR volume ins 15 years or so ….

    • Posted by Panhandle Pro

      Arnold, my first reaction would be to hole up in your 1 BR for as long as possible and bank as much as you can for a down payment. It sounds like you have a partner. At $1K/month per person all-in right now, you can probably save a ton. You are living the best case scenario in terms of leveraging rent control to build up for a down payment,

      Regarding location for your next step, I’m a huge believer in North Oakland / South Berkeley. It’s gotta be near 100% chance to appreciate in value long term IMO. It has elements of suburbia (SFH with a yard) but it still keeps you in the mix of urban life with close access to SF.

      • Posted by Arnold

        It’s true. Financially makes the most sense to stay in our inexpensive one bedroom, but it comes with sacrifices (no parking, 4th floor walk up, dishwasher, laundry, etc). Covid magnified all those little annoyances.

        I think we will check out the east bay hills this winter. Agree with your point about it being a mix of suburban and urban.

      • Posted by sockettome

        Panhandle Pro – Your insight may still be best, however, Arnold is currently paying 3K/month or 1.5K/month per person. He doesn’t mention if it’s under rent control. Meanwhile, the average rent for a 1BR has dropped to 2800/month in SF. (SocketSite 9-28-20)

        • Posted by Arnold

          It is rent controlled. It was a “great” deal for the neighborhood two years ago, but less so now that rents have dropped. We plan to keep monitoring the rental market which we all know is dropping fast.

          • Posted by think about it

            Have you thought about what happens if a vaccine is slow to arrive? There is a massive downside risk embedded in urban real estate if they can’t get this disease under control. The vaccine timeline Trump is touting is unprecedentedly short and there are many diseases that scientists have been trying to make a vaccine for decades. While you are waiting for this vaccine you are in a city that is going to be under extreme financial strain. And rents are crashing if you need to rent the place out.

          • Posted by Ohlone Californio

            This is simply not so: “The vaccine timeline Trump is touting is unprecedentedly short.”

          • Posted by think about it

            H1N1 was a influenza strain, like flu shots every year. Compare COVID to other coronavirus like the common cold where no vaccine has ever worked.

          • Posted by heynonnynonny

            Some of the Covid vaccines certainly work. The time lag is to answer questions about how well they work, how often they need to be boosted, and the time and money to produce and distribute billions of doses.

            The common cold never got this kind of attention because it’s not deadly enough. There will probably be vaccines against the common cold after this, but you might have to take them every year like the flu shot and most people won’t bother.

            If there’s a massive downside risk here, it’s being forced back into the office after a one year hold on your new place in Tahoe, at the same time as everybody else.

          • Posted by jimbo

            the common cold has many strains and mutates frequently. Same for HIV. the spike protein on Covid-19 is easily accessible and not mutating enough to make it hard to create a vaccine. Its is structurally easy to target.

            No one should listen to trump, but the timelines from the companies to hit the pre-specified events are clear and scientifically robust. We will have results from 2 vaccines in November and likely 2 more by Jan. There is certainly a chance that they don’t all work, or that they only work as well as seasonal flu, but I feel strongly that one of them will work. the key question for me is safety in a large population as that will drive usage.

            The vaccine wont magically fix things, and will likely take 6 months to vaccinate enough of the population to make a significant dent in transmission. We will be in the deep of this through Q2 but 2H of next year should lighten up. In addition the antibodies being created by regeneron and Lilly (and others coming) will likely be available on a widespread basis by March and will lessen the impact of deaths and morbidity. despite what you are hearing, the companies are in charge of these trials and not trump and he cant influence the outcome.

            Other treatments like dexamethason and resmedivir, and learning how to manage COVID patients have already lowered the mortality rate, but not good enough yet. Ignore trump, but not scientists (for the most part).

    • Posted by rl

      I’m in a similar position as you. I agree, we’re very much still at the peak.

      I get the sense that the influx of inventory happened so fast that it will take some time for the market to get the “memo” and adjust to the new supply and demand. I also think this is the very beginning, with the price of rentals crashing, illegal Airbnb hoteliers losing their hats and buyers in the last 5 years who overextended themselves believing they had an escape hatch of renting their place out if they found themselves (now rents won’t cover their high mortgage payments). When pandemic protections end, we will begin to see foreclosure and short-sale inventory pushing the market down even further.

      I’m moving to a better part of town in the next few months, now that rents are down. I expect housing prices to start getting affordable in another year or two. Housing market prices have been detached from the actual labor market and local salaries for a long time, it will again have to rely on people making incomes to pay mortgages again.

  5. Posted by Dave (Seattle dude)

    If you are not staying in the city for 5 years (at least) don’t purchase a home. As it is SF home prices will be flat for a long time once the bottom is hit. SF will likely mirror national home appreciation (or less) for the coming decade. Suburban SF homes will likely out-appreciate SF homes so buying a home when you can move out of the city is the best bet. You say a minimum of 3 years before you leave – my suggestion would be to try to speed up your departure if you can. BTW, you can get a home in the Oakland Hills with a Bay view for 1.25 million.

    • Posted by Arnold

      Before reverting back to the city, we were looking around in Marin and Lamorinda, but felt prices were so overheated it would be a bad decision. We were competing against families fleeing for more space (and seemingly desperate), when we didn’t necessarily have to have the yard and 3-4 bedrooms yet. We felt like we may have more of a chance to be opportunistic in the city.

      I know timing the market is impossible, but as first time homebuyers, we’re trying to leverage our flexibility to make the most of our investment.

      Do you really think the suburban SF market can continue to appreciate over the next decade?

      Appreciate all the replies and thoughtful comments!

      • Posted by Dave (Seattle dude)

        IMO overall home appreciation in the Bay Area will mirror that of the country for a prolonged period. So appreciation (sluggish) will happen and more so appreciation in the suburbs. But BA appreciation will not be of the double digit kind we’ve seen. Marin is pricey so cast a larger net. Petaluma is a cozy city with some nice neighborhoods and a great downtown. Novato too is a more affordable option. The East Bay Hills IMO will see big demand as techies leave SF and discover that generally unknown area. Right now it is more affordable than Marin or places like Orinda/Lafayette where many SF couples with young kids have been moving.

        • Posted by Arnold

          I think you’re right. I’m definitely seeing techies moving to Oakland/Berkeley hills sans kids. Kind of a suburban babystep.

          • Posted by Dave (Seattle dude)

            I’m a big fan of having a dramatic view. I grew up with that and my current home has that. Some of the homes in the Oakland Hills have two bridge views and a rural feel despite being 10s of minutes from everything. In today’s world a bit of space is at a premium and will continue to be so. Having a nice yard is a strong selling point.

        • Posted by scurvy

          Lamorinda returns will outpace Oakland hills. Contra Cost County > Alameda County (in the long run). The schools are the deal sealers for families.

  6. Posted by SeeyaSF

    There is no way houses anywhere appreciate over the next 3-5 years. Interest rates are going up, and that will put a serious cap on real estate prices.

  7. Posted by ST

    As someone that lives (renting!) in South Bay and has 4 rental properties in SF (1 pac height, 2 russian hill, 1 cole), if you think SF is hard, South Bay is harder. and that is why I invest in SF, because it is easier to break even, believe it or not!

    A nice 3/2 with 1500 sq is around $1.9M, and you can rent it for about $4800 (in zip code 94087). I would love to buy a primary home here in Sunnyvale, except I can’t afford to buy. So instead, I buy in SF and collect rent in SF to pay for my Sunnyvale rental…

    • Posted by rl

      Your numbers make no sense from a business perspective. Assuming you have $1.9M lying around and there is no mortgage:

      Annual Rent = $57,600
      Property Tax = $20,000
      Home Insurance = $4000

      Left: $33,600
      Annual ROI: %1.768

      Any index fund would beat the ROI. Even coming in with $1M down, the remaining $33,600 does not cover the P&I on a $900,000 loan resulting in a negative ROI.

      • Posted by ST

        in term of that $1.9m house in South Bay, I am renting it, from the landlord.

        That is my entire point, for $1.9M, I will buy 2 places in SF and collect $7K in rent And turn around and pay $4500 to rent a place in South Bay…

    • Posted by Looper

      That seems like a very poor cap ratio. You can get almost 2x that cap rate in low tier South Bay

  8. Posted by Panhandle Pro

    Number of listings is a datapoint worth noting, but wake me up when actual prices start dropping significantly.

    Patrick Carlisle just released his Bay Area Market Reports. SF SFH’s were flat in June/July/August 2020 vs the same time in 2019. Condos were down 5%. However, unsurprisingly, that condo number is being dragged down by Soma/South Beach. Hayes/NoPa/Alamo condos are up. Pac Heights/Marina condos are up.

    My thesis continues to be that people are listing, and if they can get their 2019 price, they’ll sell. But they aren’t willing to take a major loss. This thesis is supported by the fact that in Q3 2020, at least in the 2.5M and up category, only 15% of condos listed were actually sold.

    • Posted by civ-e

      if owners are listing at, say, previously prevailing prices, but there are no takers and therefore no transactions, doesn’t that still count as the market having dropped from that price? you seem to be implying that because owners are not able to sell at 2019 prices and are not dropping their prices or withdrawing the listing altogether, it means the market has not dropped. i thought the mantra is that market value is what a buyer is willing to pay.

      • Posted by SocketSite

        And as noted above, “27 percent of the single-family homes on the market having been reduced at least once,” which is up from 16 percent of the single-family homes on the market at the same time last year and versus 32 percent of the condos.

      • Posted by Panhandle Pro

        We’re getting theoretical, but to me the market hasn’t dropped unless actual sale prices have.

        FWIW, I do expect actual price drops (about 10% overall across SFH + condo), but I don’t think they will be nearly as high as people think. We now have six months of data.

    • Posted by SocketSite

      Inventory levels are a leading indicator of the market, closed sales are lagging.

      In addition, it would appear that you and Patrick are conflating changes in the median sale price with actual changes in value.

      And while a shift in sales has propped the “median sale price” up, and there hasn’t been any wholesale capitulation on prices, values have, in fact, dropped on both an apples-to-apples and price per square foot basis. And that’s for both condos and single-family homes.

      • Posted by Panhandle Pro

        You and Patrick know a lot more about these metrics and methodologies than I do, so I won’t haggle with you there.

        How long is the lag typically between inventory levels and actual price capitulation, historically?

        • Posted by Looper

          3 to 6 months

          • Posted by Ohlone Californio

            OK. But the next person who really puts it on the line that this market resembles either of the previous downturns will be the first one I’ve seen. Various sectors all up and down the affordability scale continue to be competitive right now, still, seven months into a black swan event. And the national market differs as well. We’re neither a harbinger nor the last dog hung right now. Were 30 buyers vying for low to mid 1Ms Parkside SFRs six months past mid September 2008? or four months into 2002? I know they were not.

  9. Posted by SanFranSeeYa

    Don’t forget, California is effectively bankrupt, they are going to tap real estate taxes in a BIG way in the coming years. Owning any asset in California will be a liability. All those $1mm+ 1 bedrooms in SOMA that are all built around community? They won’t be able to give them away.

    • Posted by Johnny Y

      Didn’t we hear from the media that California was bankrupt in 2010? And also 2000? etc?

      • Posted by SanFranSeeYa

        Take a look at the unfunded pension gaps and get back to me

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