With the number of new listings for homes on the market in San Francisco having slightly outpaced sales activity over the past week, the number of homes currently listed for sale in San Francisco (808) remains at a five-year seasonal high and is now running 67 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 (300) is running 42 percent higher versus the same time last year, the largest year-over-year increase in single-family inventory since early 2011, while the number of condos (508) is running 87 higher, not including the vast majority of unlisted new construction units, the unsold inventory of which currently totals around 1,200 and is up over 40 percent versus the same time last year.
And while the percentage of all active listings in San Francisco for which the asking price has been reduced at least once dropped from 19 percent (156) to 18 percent (146) over the past week, that’s versus 9 percent (45) at the same time last year and 224 percent higher in the absolute having hit a four-year high (165) three weeks ago.
Comments from Plugged-In Readers
All the signs are pointing to phase 3 — hypersupply — of the real estate cycle.
The fed had a chance to slow down supply of new construction about a year ago, but hadn’t.
Indeed, the Bay Area is replete with hyper supply of housing according to The poster in chief. Just look at how prices are crashing.
You’re conflating supply increase with instantaneous equilibration* (in a market in which the very conceit of equilibrium is is almost meaningless). Housing is not tomatoes.
Ever heard of sticky prices? Could it be there are numerous factors in the housing market that prevent price discovery, rendering a simplistic wielding of supply and demand theory an exercise in disingenuous obfuscation?
*equilibration being a central neo-classical fairy tale.
No no. This downtrend was identified long ago. This is the equilibration that hyper supply will render. Haven’t you been following the violent moves in the Mark Index? Over 5% lower than all time high in absolute terms!
We made an offer on [a house] two months ago and they came back with an offer for 20% over asking. We declined.
They came back to us this week and wanted to sell for asking. We already bought another place.
It’s just one story, but I think it represents something you two are addressing: sellers are not stupid, but sometimes it takes them time to adjust to the new reality.
I’m sticking with flat/down 15% over the next two years. In the second half of 2017 you will see some notable companies (airbnb, spotify, etc) go public I predict, and when they do you *might* see some increase.
The bigger picture I’m seeing is that MANY of my friends in the industry are moving south because what $5-10m buys you down there is a LOT more than what $5-10m buys you in the city.
How long do you think this trend will last?
Prices are stable. Inventory up. Days on market increase. But still selling at flat prices.
“…still selling at flat prices.”
People who don’t have to sell, can sit on a price, or take the property off the market. Only eager or desperate sellers have to take a cut. Reason 17b why simplistic supply and demand theory from Econ 1 doesn’t accurately model housing.
The mounting price reductions would seem to point to people who don’t want to sit on a price. And the addition of new supply makes sitting even more irrational, since shiny new units will increasingly come online to compete with your increasingly dated older property.
Again, I’d point to price expectations as the reason for sitting on supply. If you think your prices are going up, it makes sense to wait since you believe you’ll get a better price later. But when you believe prices are dropping waiting makes little sense.
“shiny new units will increasingly come online to compete with your increasingly dated older property.”
Your statement may be true true for neighorhoods say South Beach with lots of recent building of cookie cutter luxury condos but the NIMBYs of SF have soon to it that most of the housing stock in SF are older properties (esp for the single family homes). I actually prefer this style of house (if it has been remodeled and kept up) over more modern construction and I can’t imagine that I’m alone.
Personally, I’d expect prices to be flat and or go into slight decline from it’s peak. Will it crash back down to 2010 price levels? I find that very doubtful as even the Loma Prieta earthquake only cause a 2% price correction in 1yr (IIRC).
I agree that the neo classical exon models are garbage however i kind of think of it as like s&d can explain part if it but not all of it. I agree with anon that expectations can play a role and that is missing from the neo-classical models.
As usual, i think its a combination of factors. The big question is how big of a percent is each factor?
There are a substantial percent of people who can’t wait, like the woman across the street from us who recently died and left her home, or, those who are getting divorced. Those who lost their job. And, i would imagine, there are a percent who are seeing prices level off and therefore are not speculating anymore, and all of those things drive supply and demand and probably prices but admittedly do not fit into an overly simplistic s&d graph.
I do however, think that more signs point to a higher probability of a decrease in prices. These are very odd times of low 10year tbills, with concurrent inflated pe in the S&P and as we all know, a segment if the tech industry in the bay area that is untenable. Historically we’re due for a recession and the fed is out of ammo and the political climate is not open to fiscal stimulus. It all feels very tenuous to me.
The thing that may end, and hopefully so, is the price speculation. investing. Investors who took negative or a small positive cash flow as they counted on huge price appreciation so they could turn the house over in several years and make buck.
That is not a good force for the local housing economy and, to some extent, it was a factor. Lots of pieces or factors were going on in the recent run-up.
In “normal” times investors would be looking for a good ROI with appreciation – as it came over time – icing on the cake.
In any case, I’d imagine that this type of speculative investing will fall off in SF and the Bay Area for a while. That would be a very good thing.
And not to mention the international climate financially and politically (china, turkey,brexit)
Flat prices combined with wage growth would still help with affordability.
Uh, where? And for whom?
Obviously for the people who are able to afford to purchase the median home price in SF.
Realistically, this means that the late 20s to early 30s professional might actually be able to save up for their first $1-1.2M ‘starter’ home in SF earlier than they would have otherwise.
For the average retail/restaurant employee, this softening means nothing.
2.6 percent wage growth YoY, per June jobs report.
Prices are softening; the market is softening. Factual evidence so far is softening a “little bit” ( term of science).
Future trend very hard to predict, esp because of interest rates so low, so expect trend line will continue down to flat. Prices last 3 years run up at unsustainable levels, so some of pull back just pushing aside “froth”.
Three potential major factors to increase down velocity
(1)interest rates up ( more than 1/4%, dont see it too soon);
(2) stock market down to 1800 (sp500) and stays there for a while
(3) Major bad story in a top 10 tech company (not a few layoffs, but a real puncture to psychology)
Hard to see a major pricing reset (“crash”) without one or more of those.
Geopolitical risk, appears to be something market shrugs off so far. Ps, Trump election would be major market down event.
still seeing record prices in Palo Alto, Menlo Park and Atherton, but happy to subscribe to the softening narrative as it is hard to believe that after the 5 year run-up a pause isn’t in order. however, I find it ironic that a site that has led the battle against the way “above asking” data is misused places so much credence in price cut metrics.
there is a lot that goes into the strategy of setting a list price. buyers naturally want to set it high — it only takes one, sets an anchor and they don’t trust their agent to have their best interests at heart. agents would rather set it low — wider set of buyers, will move faster, they understand what happens with stale houses and multiple sets of price cuts better than buyers. when markets are hot and all the talk is about bidding wars, buyers are more willing to trust their agents and list low. when markets cool, and their is enough anecdotal evidence that the bidding frenzy has tapered, especially now that we are past peak season, you often see wishing prices instead of listing prices. I’d also note that wishing prices are common with high end new construction, so it isn’t just the novices who opt for this strategy.
my theory is that listing strategy is changing, but, as always, all that matters are apples. run up from the trough in my area is 100%. will those who stayed on the sidelines in 09 and 10 be vindicated with a 50% cut? absent an earthquake, president trump and collapse of digital advertising trifecta, it seems unlikely.
If prices are “softening” it’s due to the fact that most home buyers have children, and the kids start school in August 15th. Registration started in mid-July, with the deadline coming up in late July. That’s the reason for the “softening”. Schools.
I would take the home off the market till April. Also I’d have it staged & immaculate. I have a tale of 3 neighbors who were selling.
1 – way underpriced their home. Sold it within a day or two.
2 – $5k less than #3 but STAGED the house professionally, and had ONE open house. House was sold on the open house date. In contingency right now.
3 – See #2 but did not have the home staged. There are some really awful things in there & it would have looked better empty or staged. #3 is still waiting to sell & they’re a bit desperate to move.
No doubt you are a stager. One has to be a bit dim to buy a house because of staging.
You would be surprised about the effects of staging. Very early in the buying process, people decide if a house is DESIRABLE or not. E.g. Staging a nursery sells not just the house but the life 30 something imagine for their future. I’m not in the real estate business and I bought an unstaged home, but if you keep an eye on Redfin, you will see that unstaged homes go for much much less. Especially the crammed ones.
I almost always buy complete dumps — massive asbestos-covered furnaces in dark cobwebby basements, dirt and grime everywhere, peeling paint, smells, leaks, broken windows, overgrown yards, rotting meat on the counters and trash-filled garages, just total crap. Always in a good location though. Those are the best deals out there.
People simply cannot envision the finished product (just try selling a place with some part of the project unfinished — it’s impossible). I enjoy visualizing and then realizing the conversion of a run down dump into a yuppie money trap.
No, not a stager. I am pretty much addicted to reading about RE / watching the shows, etc.
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