With new listings continuing to outpace sales in San Francisco, the overall inventory of single-family homes and condos listed for sale in the city (728), which doesn’t include the vast majority of new construction units on the market, ticked up another couple of points over the past week, is running 50 percent higher on a year-over-year basis, and is the highest since 2012 for this time of the year.

At the same time, the percentage of active listings for which the list price has been reduced at least once (129) has ticked up to 18 percent (versus 12 percent at the same time last year). And in the absolute, the number of reduced listings is running 119 percent higher, year-over-year.

At a more granular level, the number of listed single-family homes on the market (281) is now running 38 percent higher versus the same time last year, the greatest year-over-year increase since 2011, while the number of listed condos (447) is running 60 percent higher, year-over-year.

The percentage of active listings for homes priced at under a million dollars in San Francisco is holding at 38 percent.

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Comments from “Plugged-In” Readers

  1. Posted by soccermom

    Despite the increasing inventory noted above The Mark Company, a sales and marketing firm serving condo developers on the West Coast, and a source for real estate market data recently argued that oversupply is not an issue, low inventory will continue to drive pricing and demand, and that rather than diminishing, pricing is likely to stabilize.

    • Posted by SocketSite

      As noted, The Mark Company is a sales and marketing firm that makes its money selling condos for developers.

      And while they do a good job of collecting data, their track record with respect to interpreting and forecasting based on said data isn’t particularly strong.

    • Posted by anon

      So if you think that low inventory is driving pricing, doesn’t it make sense to watch closely for signs of rising inventory?

    • Posted by HousingWonk

      I have never met a realtor or condo marketer who didn’t insist “now is a great time to buy”. I would agree that long term – oversupply is not an issue given that the Bay Area shows no signs of forcing NIMBY’s to release their death grip on choking off supply.

      That said, there’s also a demand side to the equation – and a large part of that demand is driven by job growth. Which is already changing. Bay Area job growth is almost entirely driven by tech (and spillovers of that tech growth into other sectors). And that growth is starting to slow down already in 2016.

      The IPO market is frozen and bloom is coming off the unicorn rose. We are closer to start of next recession that we are farther from it – and I don’t think anyone has a solid grasp yet how much tech has – or has not – been over-funded this cycle – particularly given how much it has focused on primarily just two aspect of “tech” – social media and “sharing economy” applications. (Data mining might be a third, but Palantir is showing just how much that particular play may be completely over-sold.)

      [Editor’s Note: San Francisco and East Bay Employment Slip.]

  2. Posted by MKP

    is any data like this available for the east bay? in my neck of the woods (west oakland) I don’t see any slowdown – houses are still going fast and above asking. I wonder how much this is confined to SF, and when it might finally spill over…

  3. Posted by Anna

    I was wondering the same thing! We were looking in SF, finally gave up. If anything, it seems even hotter in Oakland right now. Inventory might well be up, but from an anecdotal perspective no sense whatsoever of a slowdown.

    • Posted by curmudgeon

      I think there’s a delay effect in how Oakland (or any secondary market) responds. It will take time for people to realize that there is a slowdown in SF (if, as the data suggest, it is starting). So the pool of people who have felt priced out of San Francisco (like you) and started looking in Oakland haven’t turned their attention back to SF yet. If the slowdown is profound, then they probably will, and Oakland prices will respond accordingly. Until that happens…Oakland is still looking cheap.

  4. Posted by sf resident

    Agree with comments that the dynamics in the city seem a bit different to other areas.

    We’re selling in the city and looking for a home in Burlingame. Our realtors have advised that the city is slowing down quickly yet the market in Burlingame is still red hot. The rationale given to us is that there is increasing demand for SFHs in areas with good public schools and slowing demand for other types of housing in SF.

    Not sure if this is based on just a hunch or any actual data – e.g. waves of young people who moved here during the tech build-up are now married and having children and looking to get out of the city.

    • Posted by HousingWonk

      Generational wave dynamics. And no, I don’t mean some sort of obscure area of particle physics.

      Fannie Mae’s economic research unit recently posted an analysis of apartment unit occupancy by generation (Silents, Boomers, Xers, Millennials..) in 5-year cohorts over a time. What they found is despite all the talk about empty-nest Boomers buying condos in urban areas, the primary driver of demand for apartment units has been the result of the largest generation in history (Millennials) being at the prime age cohort (19-29) that statistically coincides with consumer preference for rental units. Which is a fancy way of saying that 20-somethings rent, they don’t buy, and we have just passed through a period where we had more 20-somethings than ever before.

      Their analysis also shows the unsurprising pattern that as generations age, they enter their “household formation” year- AKA coupling up & making babies – at which point preference shifts for home ownership units, which typically means SFH’s. And lo and behold – as Millennials are now entering their 30s, that is exactly the market pattern we are starting to see.

      [Editor’s Note: Or as we first reported in March: Millennials More Likely to Buy in Suburbia, Not in the City.]

      • Posted by anon

        And as this millennial demand ebbs, what’s the supply profile for all the new construction coming online in the city?

        Is the construction targeting family friendly housing or techie apartments?

        Is the construction skating to where the puck is going to be or skating to where the puck used to be?

        • Posted by HousingWonk

          I don’t know what a “techie” apartment is, but if you mean studios and 1BR apartments, that is where the demand is – and where it mostly ALWAYS will be. The demand for rental units traditionally is at the younger age cohort – which is what Fannie’s analysis bears out. As people age and “form households” – that is, as they “form families”, their housing preference shifts to ownership housing, which typically is NOT demand for 2BR or 3BR rental apartments, but is demand for single-family homes & townhouse primarily, and 2BR+ condo units, but far less so. So the market isn’t mis-producing – its building product for the kind of demand there is.

          As for “what happens as Millenial demand” ebbs – the answer should be self evident from the Fannie Mae link I provided. Namely, that generational cohorts “on-board” into the housing market around age 18-19, and more significantly so around age 21-22. Which makes sense – that’s age around which younger people move out of their parent’s homes and/or graduate college.

          So the question isn’t – what happens as Millenial demand shifts to a different product type, but “what does the generational cohort following Millenials, who are the cohort entering their prime renting years, look like?” And the answer is: Gen Z, AKA iGen, AKA Homeland Generation – are a generation even larger than Millenials. The birth year cutoff between the two generations is around the Year 2000, so the oldest members of this generation are still in high school (or barely out of it) – they mostly tweens and teens right now – so they won’t be hitting the housing market for a few years, but they are on their way.

    • Posted by Sabbie

      Fannie Mae’s latest Home Purchase Sentiment Index says that the share of Americans who say that now is a good time to buy a house fell 3 percentage points to 30%, reaching an all-time survey low (since 2011).

    • Posted by vanillablue

      Yes, Burlingame/Millbrae/San Mateo are definitely still hot. Even sleepy Millbrae routinely has places going for more than $1.5M or $900/sf now.

      • Posted by alberto rossi

        Just how easy is it to sleep in Millbrae with all the airplanes roaring overhead?

  5. Posted by Pero

    According to the latest Paragon SF RE Market report, demand for houses under 1.35m is still strong, while demand for +3m houses is slowing. This would explain why Oakland is still hot, as most houses are priced below 1.35m and ‘within reach’ of the large pool of upper middle class buyers.

    • Posted by Sabbie

      I just looked at SFR in the City active over 60 DOM, the list was heavily skewed towards District 10 and District 7, aka the low end and the high end.

  6. Posted by Todd

    Wouldn’t more inventory make prices go up?

    • Posted by Frank C.

      There is certainly a point when that becomes true – but it’s debatable as to exactly when that point is. A marginal increase in supply doesn’t have to affect pricing at all, as people’s expectations/beliefs re: the validity of prices and the value of their own assets are very, very dug in. This is why they say prices are “sticky on the way down.”

    • Posted by anon

      With new listings coming on faster than sales are occurring, that indicates that supply is growing faster than demand. And all other things being equal, that pushes prices down. As Frank mentions, future price expectations play a large role in determining what current prices buyers and sellers are willing to agree upon. Sometimes price expectations can be so strong that expectations dominate other factors involved in setting prices.

      • Posted by Todd

        Yes, but if there are more movies out, you’re more likely to want to see one, so you pay more for to see it. Or if there are 6 popsicles in a box rather than 4 popsicles, the box costs more.

        • Posted by anon

          Not quite apt analogies. You pay more for for 6 popsicles, because you get more popsicles.

          What if there’s only one theater in town showing the hot new Star Wars movie? They can charge whatever they want. Now what if there are 10 theaters showing the same Star Wars movie. Competition lowers the price since if one theater tries to increase prices, you have 9 other options to see the movie.

          And notice above, that the percentage of properties with price reductions has increased right along with the rise in inventory.

        • Posted by curmudgeon

          You pay less per popsicle in a 6 popsicle box than a 4 popsicle box (generally). Are you confusing total sales with median or average home prices?

        • Posted by JR "Bob" Dobbs

          According to the Case-Shiller index for resales of popsicles, taking a weighted average that accounts for some melting after the first sale, warping of the popsicle stick, and the occasional oversized lick, resold popsicles will lower the index during times of increased supply.

          Don’t take my word for it – just google “supply and demand” to get the basics.

          • Posted by Todd

            I sense sarcasm, but I think we are saying the same thing… if you want 4 popsicles the price goes up if there is a higher inventory (ie: they are sold in boxes of 6). Even if you sell 2 back you still paid more because they are worth less than before once they are used.

          • Posted by anon

            Being sold in higher minimum quantities is not the same as higher inventory.

  7. Posted by Chad N Freud

    “Sticky on the way down” sounds like a good album title

  8. Posted by alberto rossi

    ITunes kids ask, “What’s an album”?

  9. Posted by jason

    We are in the market this summer after choosing to rent for two years. Our current rental we got for 40% off asking (it’s a five bedroom in Cow Hollow).

    We’ve been looking in the market in the 3-7m range and things are sitting much longer than 2 years ago (at least in the range).

    Plan is to make seven offers over seven weeks and see if we can get something for a reasonable price, given we think the market is heading south. If we can’t we’re going to either rent for another two years or give up on san fran and head east or south.

    … so, that’s feedback from one tech transplant.

    Would be interested in people feedback, if you had a family and could buy in this range would you rent, buy in SF or just buy Steph Curry’s house and call it a day? :-p

    • Posted by jack

      Jason, with all due respect, it gives me pause that someone with the financial wherewithal to purchase a $3-$7m house is interested on feedback from the internet board.

      My suggestion: buy in SF because I would love to have you as my neighbor. The reason: from the highest order, land is limited in SF, but not so in Orinda. 🙂

    • Posted by Sabbie

      If I could buy in that range, I would take the down payment and buy all cash in a cheaper city, which is basically any other city. Even with the higher pay scale here, you will still come out ahead elsewhere, and live like a king to boot. San Francisco is great but come on, it’s really not THAT great, especially these days. And it’s beyond overvalued right now due to zero interest rates creating a VC funding bubble.

      • Posted by SocketSite

        If you haven’t already, we might suggest clicking on Jason’s namelink for a better understanding of the audience you’re addressing.

        • Posted by Sabbie

          Hilarious. Well he should know better than all of us where this market is headed. And my advice is even better if you can work remotely 😉

          • Posted by jason

            The tech industry isn’t going anywhere, and while things have cooled down, the fact is the revenue in this wave of startups is just unprecedented (be it Twitter, Dropbox, Airbnb or Uber).

            I’m long the Bay Area (say 10 year view), however the market was absurdly hot for real estate 24 months ago and had to cool down.

            It is MUCH cooler based on what I’m seeing two weeks into looking.

            We put in an all cash offer for $950 a sq foot on a property that was asking $1060 this past week…. and… the seller removed the property from the market! Feels like the ask/bid gap is 10-20% and that — in my experience — means it will take months and months to hash out.

            Going to look at four houses tomorrow and hopefully find something I can make a *slightly* aggressive bid on (but not obnoxiously so). If we find something to buy at a 10% discount to the market and the market corrects 20% (my guess) we will be splitting the difference with the seller.

            Two other interesting wrinkles:

            1. mortgage rates are on the floor (again)
            2. 838 Rhode Island is doing a “1 week price reduction opportunity” — that’s a bit of a tell in my mind.

          • Posted by Sabbie

            Good to hear some insider info on the market thanks. But the “tech is here to stay” argument kinda reminds me of the “everyone needs a place to live” argument during the real estate bubble. If these companies are doing great then why is $TWTR in the gutter and it’s looking like we may not see a single tech IPO in 2016? Yes they’re here to stay, but maybe they’ll have to do some serious transformation, which due to silly human emotions could become just as messy to the downside as the last few years have been to the upside…

          • Posted by Ohlone Californio

            Why would you possibly feel like “tech is here to stay” is similar to “everyone needs a place to live” ? Because he is talking his book? That’s pretty broad. And you don’t seem to have more than one note your own self.

          • Posted by jason

            Sabbie: What I’ve learned in 25 years in the business is that while the stock market and VC funding can experience significant volatility, the adoption of technology by consumers and businesses is consistently strong (and will remain so in our lifetime).

            So, twitter and FB stocks might swing up and down wildly, but mobile phone usage is a juggernaut that is multiple times bigger than the desktop internet (which still exists).

            The IPO market is a very unique business, with companies sometimes waiting until they have billions in revenue to go public — a very, very new trend. However, these companies take down IPO level funding in the private markets from sophisticated investors so the result is similar but not the same. Specifically, you don’t have large amounts of employees becoming liquid at the same time (which impacts RE a lot I suppose).

            If we have a huge bust it will likely be a black swan event, not the tech industry this time around, i.e. Russia aggression, Pakistan collapsing while owning nukes, the Chinese economy being rigged or a massive pandemic.

            80% chance of the next 36 months in Bay Area being a flat market, +/- 10-20%. Which means, people should be doing deals but they’re not… because….

            there is a 20% chance we experience a bust that drops home prices 20%+.

            That’s my handicapping of the situation: the market is in the muck. It’s going to take time for sellers to come down 10-20% and buyers to “not give up on SF” (which we are on the bubble of doing… we might just go North, East or South and get more value).

            Going to look at five houses today, wish me luck (and tell me the truth about these ones):

            4335 23rd St, San Francisco, CA 94114
            4061 25th St, San Francisco, CA 94114
            739 27th St, San Francisco, CA 94131
            2127 Castro St, San Francisco, CA 94131
            300 Sussex St, San Francisco, CA 94131

          • Posted by SocketSite

            Speaking of 2127 Castro, its list price was just reduced $300K (6 percent) and the list price for 300 Sussex is now $3.495 million, 6 percent below its original asking price.

            The asking price for 4335 23rd street was reduced 9 percent to $4.095 million and is now in contract, while 739 27th Street has been withdrawn from the market without a reported sale.

            And 4061 25th Street sold for $4.1 million or $1,100 per square foot, 3 percent over the price at which it was listed.

          • Posted by SocketSite

            The aforementioned sale of 4335 23rd street has closed escrow with a reported contract price of $4 million, 11 percent below its original list price.

          • Posted by SocketSite

            The sale of 300 Sussex has closed escrow with a contract price of $3.365 million, 9.6 percent below its original list ($3.725 million). But as the list price for the 3,190 square foot Glen Park property was reduced to $3.495 million in June, the sale will be considered to be 3.7 percent under asking according to all industry stats and reports.

          • Posted by anon

            “Why would you possibly feel like “tech is here to stay” is similar to “everyone needs a place to live”?”

            Always tricky to explain someone else’s words, but I’ll give it a shot.

            My take is that what these statements have in common is that they’ve been true through a series of ups and downs and so don’t have much predictive power.

            Everyone has needed a place to live throughout many many regional housing booms and busts and throughout our recent national boom and bust.

            It’s called Silicon Valley, not Social Media Valley or Big Data Valley. Tech has been around here for a very long time throughout many booms and busts. Silicon chips were around when we had pre-2000 housing prices.

            Just because everyone needs a house doesn’t mean that the price for that house can become arbitrarily detached from incomes.

            Just because a technology is here to stay doesn’t mean that current valuations, salaries and housing prices are sustainable.

            The valley’s has had many many ups and downs and I’m not in the camp that thinks we’re on the brink of Armageddon, but those that think that our current up won’t be followed by a down are taking things too far in the Pollyanna direction.

            And even beyond the valley, Railroads were hugely transformative yet still produced a speculative bubble.

            Just because something is real doesn’t imply that people can’t vastly overvalue it.

          • Posted by Ohlone Californio

            So your answer is, “empires crumble” ? Fair enough. They do, over long time horizons. This “tech” thing, which is the mobilization and monetization of the internet thing is pretty new. Those who talk about it working its way out of town fairly quickly are pretty wrong, IMO.

          • Posted by anon

            “So your answer is, “empires crumble””

            No, quite the opposite.

            No housing bust in the past was due to people’s need to live indoors crumbling. And the internet is still here, yet the first dot com bubble burst.

            What connects the two statements that you asked about was not that they eventually became false, but that they were true throughout boom and bust times.

          • Posted by Sabbie

            Ohlone, what the two statements have in common is this: bubbles always begin with a very rational idea. But then emotion takes over (greed, irrational exuberance), the prices overshoot the fundamentals to the upside, and we set up for a crash when the right catalyst appears. Just like housing never “went away” after the housing bubble popped, tech will never “go away” after the tech bubble pops. The values will be marked down, which likewise is a very emotional process (fear, excessive caution) that overshoots to the downside.

          • Posted by Ohlone Californio

            OK, I see the point now. Thanks for that.

  10. Posted by JR "Bob" Dobbs

    My 2 cents (which is what you’ve asked for – and worth every penny, er, both pennies, of it):

    If you think the market is heading south, then it does not make sense (at least, not financial sense) to buy anything now. Wait a couple of years and buy when prices are, as predicted, lower. If your bet is wrong, c’est la vie.

    With this kind of budget, just pick where you want to live. Personally, I like living right in SF for a host of reasons. We carefully selected the precise neighborhood to buy in. But most people in the bay area choose not to live in SF. There are plenty of advantages to living outside the city. Once you’ve picked the location you want, just rent and wait for the right house at the right price for you. I hate overpaying for things even when I can afford to do so, so we waited out the last bubble and bought during the ensuing downturn. I’m not so sure prices will be materially lower in two years, but I have more confidence that they, at least, won’t be materially higher.

  11. Posted by jason

    two agents this weekend used the term “rushing for the exit” to describe sellers.

    two mega price reductions, as well as couple of really nice places removed from the MLS…. these two I took note of:

    3196 Pacific Ave -$1m
    2710 California St -$900k

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