According to DataQuick, home sales volume in San Francisco fell 3.7% on a year-over-year basis last month (593 recorded sales in May ’08 versus 616 sales in May ‘07) and fell 2.0% compared to the month prior.
Keep in mind that DataQuick reports recorded sales which not only includes activity in new developments, but contracts that were signed (“sold”) many months or even years prior and are just now closing escrow (or being recorded).
San Francisco’s median sales price in May was $790,000, down 5.4% compared to May ’07 ($835,000) but up 5.3% compared to the month prior. And yes, we continue to see mix supporting the median in San Francisco proper.
For the greater Bay Area, recorded sales volume in May was down 23.1% on a year-over-year basis (the slowest May in at least twenty years) and fell 1.5% from the month prior (6,216 recorded sales in May ’08 versus 8,080 in May ’07 and 6,310 in April ’08). And the recorded median sales price fell 21.7% on a year-over-year basis (down 0.2% compared to the month prior).
At the extremes, Marin recorded a 37.0% year-over-year reduction in sales volume (a loss of 133 transactions) but a 5.8% increase in median sales price (the only Bay Area county to record an increase), while Contra Costa recorded a 11.7% drop in sales volume (a loss of 160 transactions) and a 33.8% drop in median sales price.
∙ Bay Area home sales return to record low in May [DQNews]
∙ San Francisco Recorded Sales Activity In April: Up 6.5% YOY [SocketSite]
It will be interesting to see the figures once the blips (both the number of sales and the prices) from One Rincon and Infinity have worked themselves out of the system. Both of those developments are large and have somewhat distant prices built in (though one can argue that people who got in early are not paying that much more than current market prices).
On the flip side, if CoCo prices are down 33%, and not just the median, that should help things a lot in that area, and sales should start to recover there, at least for a while. People who wanted to buy for the past year, but stood on the sidelines, will start to think more seriously about buying there, with those kinds of drops.
“And yes, we continue to see mix supporting the median in San Francisco proper.”
@SS: You’ve made this comment numerous times, and I think we all understand what you are saying. That said, it’s a rather conclusory observation — can you provide some additional detail and specific evidence that leads you to this conclusion?
Is the mix much different than the prior month’s mix? I understand the argument that the mix has reflected slower sales in District 10 vs. more expensive districts, compared with the time of peak sales activity, but is this difference only in comparing 2008 with 2005, or is the mix continuing to change month-by-month?
Wasn’t April’s median higher than 2007’s April median? I know that for SFRs the 2008 average was 5.4% higher (1.212M vs. 1.149M) and volume 4.3% lower (198 vs 207). So price-wise it’s couple of blips in either direction in a row, pretty much?
With volume and prices only fractionally down YoY, I’d say it is still a good year for SF Realtors and sellers, considering the bloodbath happening in other regions.
To be honest, I am absolutely amazed at how well things continue to be in SF proper, even with the collapse of D10 trying its best to pull medians down.
Yes, its been a great year for SF real estate 9so far) given whats gone on elsewhere. In December there were signs things could go the same way as the rest of the ay Area. Have to remember the median price for May07 represents the absolute peak, so 5% off that is pretty good. Median prices look like they have only been higher in about 4 prior months.
SFS,
The other regions did not have the same level of contracts from years ago converting into sales, so it’s tough to know what the normalized data would have been like without that influence. It obviously would have been down further, but that also requires that you remove the closings of 2007 from contracts signed in 2005 to allow you to do a true 2007 to 2008 comparison. I suspect volumes would be down if you did that, but don’t have the data to back that up.
fluj, that’s good data (because it took out the condos), though the SFR situation in SF in 2007 was pretty supply constrained, but I’d agree, SFRs in SF have not yet been hit as badly, probably because the supply didn’t go up as high.
Nevertheless, it’s all interrelated: as an extreme example, if you can get a 2br condo for $400K, you might not pay $2M for a 3br house up the street: you’d just buy two adjacent condos and blow out the walls.
You guys ought to stop debating individual data point and imagine a trend line going through the charts … that would show you prices moving pretty much sideways since the end of 2005 and transactions moving slowly down since the same period.
It would be nice if the editor could actually build a trend line in the chart.
Still not a good market for buyers, especially rental properties.
I guess I’ll take my chances of being “priced out forever” as they say.
Then again, other regions are looking more and more attractive and I might just give up and buy where it makes sense economically. Because with a low rent/buy ratio compounded with insane rent control laws, it would take a huge decline to make SF landlording attractive again.
Call me crazy but I don’t find a May 2008 median that doesn’t look to be any higher than May 2005 to be cause for celebration. That’s three years without price appreciation in a market where the cost to rent is less than the cost to own.
Nevertheless, it’s all interrelated: as an extreme example, if you can get a 2br condo for $400K, you might not pay $2M for a 3br house up the street: you’d just buy two adjacent condos and blow out the walls.
I believe there was a discussion related to this within the past month or so. I know doing something like that is frowned upon over here (very hard to do unless it returns the property to its original state). So I would guess it is just as hard to do in Ess Eff.
^ Yeah, planning doesn’t allow you to merge two separate apartment units.
I think 2005 was a typo? We’re talking YoY. I see that 2008 properties were 70K higher on average than 2005’s.
And there’s a difference between celebrating and being surprised at relative stability. Everyone qualified what they said. There was no celebratory language. It was “a great year given” and “I continue to be surprised” and the like.
some of this may be seen as seasonality and not necessarily “mix”… it would seem that winter tends to have lower prices, with a significant price jump in spring/summer. this happened in 2005, 2006, and 2007. (look at Novembers and Mays in each of those years)
still, regardless of mix or whatever, I’d also say that nominal RE values are holding up pretty well, comparatively. This is the magic of letting inflation ‘cure’ overvalued real estate.
all SF needs is 3-5 more years of near 0% appreciation/depreciation. if inflation runs at 3-4% that’s an additional 9-20% reduction in real housing prices without making anybody “upside down” on their home loan. this plan could work so long as we can somehow get wage inflation of around that amount as well. people’s mortgages stay the same nominally but their income goes up nominally… they can thus weather the real losses.
the killer would be if we have 4% price inflation but no wage inflation… that would make life very hard.
the other problem of course is that it costs so much more to buy RE than rent comparable RE in the city. without appreciation, buying really doesn’t seem to make much sense financially at these rent:own ratios.
lastly, if you look at the squiggly line you can easily see why nobody should take one data point and make too much of it. it also become glaringly obvious why nobody cares what month to month data does, and why we rely on year over year instead.
and yes, I even say this when RE data points “fall” in value.
Who’s going to be the first to say, “It’s different here,” hmmm? Well, the tulip-bulb investment mania of the 1630s in Amsterdam made that place different from all other places. It was different there for a while, too. We know how that turned out.
The ‘tulip’ analogy is a red herring because there never was such a severe run-up in SF prices in the first place. If you compare 2002 prices to 2008 prices, you see roughly 40-50% appreciation on psf basis, with almost all of that appreciation from 2002 thru 2005 and prices flat or sidways since (see comments above). Though 7-9% annual appreciation is clearly not sustainable (hence, the sideways trends of late), it is not a bubble.
Nice to see that the worst is behind us and May showed solid improvement (as predicted, thanks).
A lot of people have been jumping into the market at these levels. June is going to be another solid month. We are now at all-time high three-month moving median and average prices for district 9 condominiums (south beach, soma, etc) condominiums, trending steadily upward since Feb.
“It’s different here” doesn’t belong in this conversation, other than a bear taking the piss. It isn’t different here. There are other regions behaving similarly. As someone pointed out yesterday, Seattle is one.
However, it’s been a while since “the tulip bulb craze” has reared its lovely, beflowered head. So kudos for that.
I wonder how many SF sales so far this year compared to 2006 and 2007?
If lower, is SFRE evolving from a BMW dealership to a Maserati dealership–fewer sales, higher prices?
Though 7-9% annual appreciation is clearly not sustainable (hence, the sideways trends of late), it is not a bubble.
defining a bubble is always difficult (as example, are we in an oil bubble right now?). however, I think the key is that the appreciation we’ve seen is not sustainable.
I’m not sure why you chose 2002-2005 time frame though… it would have probably chosen a longer time frame, like 1998 until 2008 (10 years) or even 1988 until 2008 (20 years). based on that data, it does seem like SF Real Estate rose further than one would have expected given population and income changes.
was it a bubble? who knows. There was clearly a RE mania that occurred across almost every major US market from 1998 until 2007 (especially 2002 until 2007), and now there is clearly a RE downturn that is developing in most major markets from 2006/2007 until present.
how much of that mania “infected” SF? how much of the resultant downturn will affect SF? this is the billion dollar question.
But the dynamics seen in other major markets were also witnessed in SF. Near record low affordability, high % of borrowers in ARMs (historically), high % of borrowers with lower down payments (historically), high % of “Alt A” products (historically) and so on. Those demographics have not fared well elsewhere in the country.
SF is clearly not an exact duplicate of other markets… but it certainly was eerily similar IMO. And there are other markets that have held up reasonably well (Portland and Seattle as example). But now all 3 areas are showing some strain that wasn’t present before.
only the future will tell… and due to the “stickiness” of RE it’ll be a LONGGGG time before we know. I for one will consider jumping in when we have 12-24 consecutive months of YOY median price increases AND YOY inventory decreases. I’m not worried about missing out on “the bottom”
I wonder what the effect of flattening or slightly decreasing prices will have on the market for fixer uppers. There are a few properties in my Nabe that were bought in the past 3 years that were gutted and fully redone. The typical example is 4226 25th street. The place was sold for 1.125M in March ’06, a lot of work was done to add a garage, plenty of SFs. It’s a sizable investment and the asking price (2.95M) reflects this, even though I think the 1000/sf region is a bit steep (then again, all it takes is one buyer). I hope the guy gets his investment back and then some. He made the bets that not only could he get all the permits to greatly upgrade the place, but that the price/sf would go up at the same time.
If prices flatten out even in Noe, this could slow down or even outright discourage this kind of “sweat equity” venture.
Fronzi – The same thought had occurred to me before when analyzing how the flipper “business plan” worked. Initially I was baffled then I realized that in a boom environment, the steep appreciation actually covers the construction costs. So even if the flip flopped, you’ve still taken no risk. Even if the flip was nothing other than the superficial cleanup, landscape (I forget how many times I saw sod tiles carelessly laid just a few days before the standard 2 weekend OH cycle that had a snowball’s chance in hell of surviving more than a month), and paint job, you’re guaranteed to profit by just collecting the appreciated value alone at COE.
That doesn’t work these days. Now flippers are actually absorbing risk and profit is tied a lot closer to the value added.
in a boom environment, the steep appreciation actually covers the construction costs.
That was true in a lot of places in CA, but the tables have turned in the bubble markets. We still see decent returns in SF for sweat equity flippers, but we also see a few asking price decreases wherever the seller had priced in an unrealistic appreciation. And remember that people who just redid their place and are selling today bought 1 to 3 years ago. If these properties are selling for a decent price today, then this technique will probably go on for a while. But if they have lower or inexistent profits, flippers will be discouraged to retry this same kind of venture and that could mean less demand for fixer uppers.
I forget how many times I saw sod tiles carelessly laid just a few days before the standard 2 weekend OH cycle that had a snowball’s chance in hell of surviving more than a month
I have a friends who bought a house with brand new sod like that. The backyard looked fantastic when he got the key but the sod just wouldn’t survive.
Flipping, even for high-end properties, is very risky right now in part because construction costs are sky high. I suspect that’s why several fixers remain on the market (see the Clay St. property). Also, wealthy buyers aren’t looking to customize places because, basically, it takes forever. Every day I drive by homes in district 7 that are on their third or fourth year of a major renovation. It doesn’t help that the city currently has no clear definition of “historical,” making projects like 2820 Vallejo overly challenging. I suspect that certain prime homes in move-in condition can more or less justify huge price-tags while the stuff that needs work will suffer more than in the past five years.
Speaking of flips, amazingly 4226 has received an offer after 14 days.
Speaking of flips, amazingly 4226 25th street has received an offer after 14 days.
That would be a big wow if it goes close to asking. Then again, I didn’t see 4400 24th going for the 2.1 Mil in february (an insane 9 month 90% flip). Dare to share the offer price?
Man, if I knew this soon I’d be involved in the deal and I certainly wouldn’t post it on here.
I don’t know why you say we continue to see mix supporting the median in San Francisco proper. I subscribe to Alexander Clark’s weekly newsletter and his “sold in the last month” list of homes is something I watch pretty carefully. One thing I have noticed is that average home sizes sold are trending slightly down. In the past, 3.1/2.1 homes (bedroom/bath) were the average, now it is 2.8/1.8. So I would think that this would be depressing the median. Maybe my memory is faulty though.
It is definitely a slow spring in the neighborhoods I have been watching, probably the slowest ever. Ever, for me, being since 1998, when I first started watching San Francisco real estate.