Inventory in ‘Overheated’ San Francisco ClimbsApril 18, 2016
The inventory of unsold homes listed for sale in San Francisco ticked up to 615 over the past week and is now running 40 percent higher versus the same time last year, the greatest year-over-year increase we’ve recorded since 2010 and the highest mid-April inventory level since 2012.
Redfin’s assessment of San Francisco’s housing market being “overheated” lsat week was based on a year-over-year increase in inventory of less than 5 percent.
At a more granular level, the net number of listed single-family homes on the market and not in contract has ticked up to 234, which is 23 percent higher on a year-over-year basis, while the number of listed condos, which doesn’t include the vast majority of new construction units on the market in the San Francisco, has ticked up to 382 and is running 53 percent higher versus the same time last year.
Comments from Plugged-In Readers
How is the overall condo inventory looking?
STEPH CURRY MISSED TWO (TWO!!!) THREE POINTERS IN HIS MOST RECENT GAME VS. THE ROCKETS.
COULD THIS BE THE END OF AN ERA?!?!?!?!?!?
Haha, this comment made my day :)))
Yes, as soccermom has so cleverly proved by way of Reductio ad absurdum and all caps above, all trends are actually meaningless, especially those we’ve only been tracking on a weekly basis for the past ten years.
Increasing inventory? Meaningless! (see soccermom’s Steph Curry anecdote above) Slowing pace of sales? Meaningless! (see soccermom’s Steph Curry anecdote above) Collapsing pricing index for new condos? Meaningless! (see soccermom’s Steph Curry anecdote above)
What’s collapsing here? The rate of increase of prices or prices? Those are not the same thing.
Flat YOY and +2% MOM new condo pricing (per the Mark report) don’t constitute a collapsing new condo market. All of the new affordability requirements will continue to make new development challenging economically in the city. People are still moving here. Entrenched residents still don’t want the city to grow. I don’t have a crystal ball about the market but I remain dubious that we are on the verge of anything other than a normalizing real estate market, especially in a global race-to-the-bottom in interest rates. 627 new condos for sale now, vs. 3000 in ’07? We haven’t reached an inflection point yet. Following is a quote from the March 2016 Mark Company report you have relied on previously.
“The Condominium Pricing Index for San Francisco increased 2 percent to $1,263 per square foot in March, compared to $1,243 per square foot in February and $1,194 per square foot in January, indicating a return to moderate appreciation after several years of robust growth. Several developments are poised to commence sales later this year. The Harrison launched in early April with 298 units. There are currently approximately 627 new condominiums available for sale, compared to a peak of approximately 3,000 in 2007.”
A man dying of thirst, when offered two glasses of water, need not fear drowning.
Nowhere in the article was there mention of a collapsing condo market or decrease in prices. However, if inventory continues to rise (and is noticeably higher than prices YoY), prices are likely to follow.
A+ for quoting lots of numbers though!
Read harder. “Collapsing” was the editor’s choice of words.
Over the past seven months, the pricing index has steadily collapsed, from 20 percent year-over-year gains to zero. But again, as you clearly illustrated above, all trends are as meaningless as your absurdest example.
I’d moderate me too.
That is, I’d ‘moderate’ somebody if I was embarrassed about a straw man argument I’d been using and didn’t want to show people the response. Prices of the dubious, proprietary Mark Company Index for New Condos are up each month of 2016 through the end of March.
Please tell me that you aren’t trying to pull a YoY vs MoM spin job ignoring the seasonal uplift from the holiday season?
Et tu Soccermom?
The editor used the word collapse to talk about precipitous gain ceasing. Collapse is hyperbolic in that context.
Were the 3000 for sale condos in 2007 new construction? If so there must have been quite a few large condo projects that came on line then. What were these projects? All I can think of from back then is One Rincon and the Hawthorne St. condo tower. Not sure if they were on the market in 2007 or a year or two later. When did the Millennium condos go on the market?
Infinity went on in 2007/8ish, Millennium slightly later as I recall. Anyone who was on the boards then will recall the endless ENDLESS jockeying back and forth between future Infinity residents vs future Rincon residents about which project was better.
Steph Curry actually injured his ankle in that game, and the league’s best player was unable to play the following game. Fairly big deal. But the Warriors won the next game anyway. So the analogy to SF’s real estate market still works pretty well (for now).
Now for prices to decrease (or at the very least, multiple offer scenarios to decrease) for sub $1MM condos.
The editor is right to keep an eye on this – rising supply is certainly a leading indicator of price trends. Of course, you need to also keep track of sales volume to determine whether demand is keeping up with supply. I agree that there is no indication that prices are falling now. But that doesn’t mean everyone should just ignore the indicators. This hint of a softening market (and that is all it is right now) can be very useful for:
a) one who is on the fence whether to buy or continue to rent where buying would only make sense if prices continued to climb;
b) an investor whose target doesn’t pencil out now but would do so if prices rose another X%;
c) one looking to sell within the next few years and is trying to figure out whether to sell now or hold off;
(d) one considering buying who may be moving in a few years and would have to sell then.
I’m still seeing psycho high prices and would much rather be a seller than a buyer. And I’d much rather be selling at the top than buying at the top. I’m not saying we are at a top (not nearly enough evidence wither way – we could just as likely jump 10% a year from here), but this all could be very useful for a number of people in the market to spot the trend early.
Exactly. Sometimes accuracy and precision is what you want and sometimes catching things early is what you want.
A collapse in YoY price changes from 20% to 0% along with a 40% rise in inventory is certainly noteworthy. Will YoY price trend go negative? If you’re writing an academic paper on SF housing prices, just wait a year and you’ll have your answer. But as JR points out in some cases a decision needs to be made on imperfect information now rather then more perfect historical data.
I’d add another group.
Investors with multiple rental properties here who have been thinking of diversifying some of their rental holdings (via a 1031) to other markets where the affordability level is much better and where there is both job and population growth.
Totally agree – I fall into group A and have been following socketsite religiously as of late.
Some imperfect information now is better than no information at all.
We interrupt this pissing match for a question:
Whatcha mean by “inventory of unsold homes?” Are these expired listings, or just any old home that is currently on the market? If the latter, don’t we need absorption rate to make a determination i.e. there sure are a lot of homes for sale, but a whole buncha them are selling; or, they’re selling fast, but prices are way lower than before (that would be bad, at least for us invested in Frisco RE.) If expired listings is way up, that’s not a bad indication that sellers aren’t getting the prices they want, kinda indicating a softening market IMO. Kapish?
Wasn’t that the point of Redfin’s scatter plot of sales vs inventory?
Inventory means inventory. It is a leading indicator, “prices way lower than before” do not happen by magic but rather when supply exceeds demand.
Inventory up, notice of defaults up, tax defaults up, personal debt up.
Anyone want to tell the Fat Lady it’s time to sing?
Soccermom: I love your posts, keep them coming =)
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