With new listings outpacing sales over the past post-holiday week, the number of homes currently listed for sale in San Francisco ticked up by 10 percent to 804, another five-year seasonal high and 65 percent higher versus the same time last year.
At a more granular level, the number of single-family homes on the market in San Francisco (291) is currently running 27 percent higher versus the same time last year while the number of condos (513) remains roughly twice as high with 98 percent more active listings, not including the vast majority of unlisted new construction units available for purchase in individual sales offices around town (the unsold inventory of which currently totals around 1,200).
And in terms of pricing and expectations, the percentage of all active listings in San Francisco for which the asking price has been reduced at least once sits at 19 percent* versus 13 percent at the same time last year, 150 percent higher in the absolute having hit a four-year high two weeks ago.
Correction: While the percentage of listed condos for which the price has been reduced is 22 percent, the percentage of all listings for which the price has been reduced at least once is currently 19 percent as corrected above.
What are the broader bay area trends? I’m interested in knowing if this is related to a migration away from San Francisco city to suburbs, increase in new inventory, or broader economic forces (like less foreign investment).
Anecdotally, I’ve noticed three condos in the sub-$1MM price point recently fall out of contract. All three were seemingly priced appropriately for the market we’ve been experiencing in recent months and were nice units.
I’m wondering if this is just pure coincidence or if people are getting gun-shy after recent world events. I’m probably reading too much into this, but figured I’d throw this out there.
Keep in mind that the change from wild overbids to price reductions has been over a year in the making. With rising inventory and high end sellers “rushing to the exit” according to scuttlebutt a month before the Brexit vote.
Not to say that SF RE is immune to world events, but rather that local RE and tech have their own up and down cycles as well.
yeah but at the same time the S&P hit a record high today
That’s true.
I agree with anon that this has been a year in the making though falling out of contract seems to be abnormal so I’m wondering if recent volatility played any part.
I think its as much local as anything else. Real estate is local. There is no national real estate market.
Prices here are at historic unaffordability levels. Prices in other growing markets are near historic affordability levels. There is a natural shift towards more affordable markets by those who can transfer jobs or are young enough to move and find a new job. I know 5 hi-tech friends who have done this in the past year. I know of retirees on my street who have moved to tax-free states and freed up hundreds of thousands of equity in the process. Small scale investors such as myself are either priced out of this market or won’t settle for a 2% or whatever ROI when they can get 8% in other places. Waiting on huge price appreciation which has worked recently does not look like it can be counted on for the medium term future.
A bunch of factors – plus too all the new condo inventory coming online in the next few years.
The bubble is not about to burst IMO. This is more likely a flattening with a small decrease in prices.
Well, perhaps, but I see the houses in my neighborhood at “historic affordable” levels. Otherwise, why would I see 3 houses in the past month on my street all sell for over asking and in about 25 days?
Lots of people can afford them.
Stick to your anodyne design work dude.
“Affordability” in the for-sale marketplace, as it is commonly understood, is the comparison between median household incomes and median sales prices in a given market, and the degree to which there is or is not a mismatch between the two.
As an extreme illustrative example, there are plenty of buyers for real estate in Vancouver, as evidenced by the fact that somebody is buying all those million dollars homes up there. Definitionally, if prices are high, somebody is paying them. Which isn’t really saying anything as it just a tautology.
But when you compare those median sales prices in Vancouver to median household income in Vancouver, there is a HUGE disconnect, with the multiple of median income to median sales price being fairly insane, where the median local household is way outpaced from buying – to the point where an increasing number of critics are characterizing the Vancouver market as one big money laundering operation for Chinese nationals.
It may or may not be a so called “money laundering operation”. who’s to say. Fact is, up there or down here, houses are still selling.
What’s the problem?
You don’t see a problem with propping up asset prices through international financial gimmickry?
Blowing bubbles, all the time. Hey, houses are selling! What could possibly go wrong?
“I’m wondering if this is just pure coincidence or if people are getting gun-shy after recent world events. I’m probably reading too much into this, but figured I’d throw this out there.”
You are probably not reading too much into this. “Brexit” and the implications for the future of the EU are a pretty big deal in the world economy. While equity prices have climbed back up, we are getting very different (mostly more pessimistic) signals from the bond markets with low interest rates globally. I would expect some more apprehension from buyers, especially first-time buyers for the balance of the year. Will we be able to settle into Spring 2017 with 2.XX% mortgage rates? That would make people more comfortable.
TLDR: Uncertainty will keep a lid on prices in the short term, but the gradual ratcheting down of interest rates (and mortgage rates) will over the medium term improve affordability for debt-dependent buyers in the @$1mm condo range.
The S&P 500 hit a record high today.
That’s primarily a function of the bond market. Underlying fundamentals of corporate profits haven’t really changed that much lately (which is essentially what one is purchasing when one buys equities – the combination of current dividends and expected future dividends) – and if anything earnings growth has become more anemic.
What’s shifted is the equity risk premium. Which in turn is in part affected by the government bond market – and particularly the market for Treasuries as the benchmark asset for the risk-free rate of return. Market analysts are pointing to that as most of the recent rally in equities, for more than any other factor- and bigger factor than it has been in past decades. The equity risk premium shot up during the financial crisis, but it has been falling back to its historic norms. And as the risk-free rate of return has fallen, combined with a falling equity risk premium, the overall equity return rate of the market has fallen.
I wouldn’t read anything into the equities rally in connection with underlying macroeconomic trends, in terms of where the economy is headed. We’re still trapped in a low growth world, with excess industrial capacity, central banks desperate to escape the zero lower-bound, and the long painful process that follows a deleveraging world post-global economic crisis.
Last time we ran this experiment, the Axis powers solved everyone’s problems by plunging us into a global war that destroyed most of the industrial capacity of every industrial nation not named Uncle Sam.