Despite the fact that around 8 percent fewer properties were listed for sale in San Francisco over the past week versus the same week last year, with the pace of sales having slowed by roughly 14 percent, the current inventory of homes for sale in the city (704) remains 12 percent higher, year-over-year.
At the same time, the absolute number of active listings for which the asking price has been reduced (109) ticked up 20 percent over the past week and is currently running 18 percent higher versus the same time last year.
The number of homes on the market listed for less than a million dollars, including both houses and condos, remains at 42 percent, which is down from over 50 percent two months ago and should help boost the “median sale price” assuming an even distribution of closings.
If typical seasonality holds true, the absolute number of homes on the market with at least one price cut should continue to rise through the end of November, at which point unsold inventory will start to be withdrawn from the market driving the overall percentage of homes on the market with a reduced price higher through the end of the year.
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I’ve seen a few homes take multiple cuts as they struggle to find the magic price point. It does seem the market has adopted the feeding frenzy mentality where under pricing is the norm. At some point we’ll see “under priced” homes initiating price hikes if (when?) demand drops and the strategy no longer works.
This strategy has worked for 15+ years. Why would it change?
Just like in any cycle, this agressive strategy has worked on bullish years, except in 2001-2002 and 2009-2011 when we had buyers’ markets. The sellers’ market looks like it is coming to an end in this cycle. It’s not a given of course, but the spring will tell us if buyers are ready to confirm the 60 to 75% increases in prices since 2009.
Are there any patterns to the occurrence of price reductions across different price ranges? I’m curious if there’s any difference in the multi-million dollar properties vs. sub-million dollar properties…
This is exciting news! Maybe we won’t have to move to Portland to buy a house.
Where were you in 2009-2012? You could purchase move-in-ready houses in some areas of the Sunset or the Richmond for 500K. I do not think these prices will ever come back even after a correction.
you could also buy 2bdrooms at the Palms for $500K in 2010-2012
Yup, and you can easily rent them out for $50K/year, which gives a pretty swell 120 ratio compared with purchase price. And no rent control! Who said the landlord business was not profitable in SF?
move in ready, for 500K? i don’t think so but i might be wrong.
my fault. some parts of the sunset for sure, Richmond I don’t think so
A quick search in Zillow of sub-500K SFHs from up to 3 years ago pull quite a few hits. Now the online property search engines have a policy of removing info and photos on previous sales which means there’s no way to see if the places were decent, and none allow to go further than late 2012. But my recollection of searches from 2009-2010 was that there were quite some good deals at the time in the Richmond.
I saw 8. Every one had some sort of big issue, looked like. whether tenants or dilapidation or stripped or half built, or all of the above. Still, whoever had the fortitude got a great deal in hindsight.
You could buy commercial buildings in SOMA for $500-$600k. If you did, you were a genius.
Not quite. Likely a stalling out/small decrease (10%) over the next several years. Unfortunately I don’t see it as enough to impact affordability here much.
It’s much a factor of CAP rates. A $2.5m 3 unit building will be hard to sell if you’ve got “dog” tenancies, yielding say $6000 in monthly rents. A 3 unit building yielding $14,000 in rents, on the other hand, will be snatched up at that price.
I think we may be nearing the end of this tech cycle. Twitter is laying off. Venture investors and Wall Street are suddenly realizing some “unicorns” are cows with horns pasted on.
For now, suddenly unemployed techies may readily find work, but for how long?
I remember 2000/2001 when SOMA lofts cleared out rapidly and dropped in price just as rapidly. It can happen again and probably will. We may be seeing the early signs.
I have always been impressed with the work and the economics that these guys have been able to pull off.
And they too had to lower the price on a project in Laurel Heights, FWIW.
Originally listed for $6.5 million, the sale of 18 Palm (the listing for which is referenced above) has closed escrow with a reported contract price of $4.525 million.
30-40% of what I have learned about developing housing in San Francisco came from watching Rick Teed’s PT Barnum sales videos. That guy is awesome. (But he seemed a little weary in the promo for this house.)