With pending home sales in San Francisco down nearly 50 percent on a year-over-year basis, the number of homes listed for sale in the city has ticked up another 11 percent over the past week and is now north of 600.

As such, listed inventory levels are now up 60 percent since plummeting at the end of March, following the issuance of San Francisco’s original stay-at-home order, and back to within 5 percent of their levels at the same time last year, with 27 percent of the active listings priced at under a million dollars (which is even with the same time last year).

29 thoughts on “Inventory Levels Up Another 11 Percent in San Francisco”
  1. Will the “real estate is a lot more than Econ 101 supply and demand” crowd come out and talk down to us this time? I wonder how a lot of supply will impact prices?

    1. You seem to think that we’ve finally simply out-built demand. I think we are witnessing the collapse of an historic debt-fueled speculative bubble. So, yes, real estate is a lot more than Econ 101 supply and demand (debt and bubbles don’t appear in Econ 101, or anywhere else in neo-classical economics, for that matter).

    2. Yeah if you went on in Econ, you would find there was also Econ 102 and Econ 111 and Econ 145 …
      Such as the macro- forces at work behind the static micro-model that is 101 (or more likely Econ 1…it’s really the Jr. High version “the way the world is supposed to work (but really doesn’t)”)

    3. I’m sure you guys are right and I am I ignorant. The emerging market condition of more sellers than buyers will probably not have any impact at all on prices.

      1. Ok, I know this is a tough question to answer, but why is there “an emerging market condition of more sellers than buyers”?

        I suppose that all of a sudden as of May 4 2020, we have just – finally!!- built our way to one unit of supply over “equilibrium,” et voila!, there is suddenly downward pressure on prices! The cratering of demand has nothing to do with it, right?

        1. “Demand” is half of “Supply & Demand”. Yes, this is Econ 101. Seems to hold true, no?

    4. Who makes up the group that would be talked down to, and what was it that group got correct or incorrect previously?

      1. I think she means the group that would be talked down to is the group that thinks the model of supply & demand taught to high school students explains all price movements in all markets.

        The Venn diagram of the set that believes that the basic S&D model explains all price movement, and the set that believes (or at least, claims) that building luxury units to meet demand from foreign capital flight, Airbnb, and speculation will simultaneously make housing affordable for workers, is identical.

    5. Mary Jane recently asked everyone to use local REIT valuations as a proxy for the value of residential real estate. AvalonBay is trading flat from 2018, a time when local homes where famously inexpensive.

      1. I did? I might have. Tell me where and I can help explain. Public markets react to information faster that the MLS market and can be useful even if they aren’t perfect proxies.

  2. I saw this post this morning and thought to myself “I hope that ‘two beers’ person who doesn’t believe in S/D engages in this post” and boy were my wishes granted. I can’t wait for the mental gymnastics in coming months to explain how a huge drop in demand due to layoffs or fear of cities isn’t what’s causing declining prices.

  3. I’d be interested in understanding the criteria for a “local REIT”. According to their website, AvalonBay operates in “markets…located in the Northeast, Mid-Atlantic, Pacific Northwest, and Northern and Southern California regions of the country.” It’s not at all clear that a majority of their projects are in San Francisco or even in the Bay Area at large, so using that company’s stock value isn’t even close to a fair proxy for the value of S.F. residential real estate.

    1. AvalonBay is definitely not a local REIT. They own primarily higher end rental buildings, so probably they are better insulated from the short term inability of some tenants to pay rent. But probably if rental prices drop overall, they will see greater declines due to their position in the market.

  4. Isn’t this a moot argument? Pre-Covid19 the adult population of SF was already declining. And the housing pipeline was at a record high.

    So how do you arguing factions (two beers, mary jj & Panhandle pro) plan to determine if prices are falling due to pre-covid19 demand drops? Or due to pre-covid19 supply increases? Or post-covid19 demand drops due to layoffs and people leaving cities? Or post-covid19 supply increase due to former rentals and airbnb units hitting the market? Or due to the collapse of an historic debt-fueled speculative bubble?

      1. Well, to be honest, AirBnB could still salvage things. Keep your eye on them. If they can go public this year, things might not fall more than 10-20%. They’re this market’s only hope at this point. If they falter, it’s hard to see where the bottom really is.

        1. There’s no need to be disingenuous, Airbnb’s memo announcing that “nearly 1,900 teammates will [be laid off], comprising around 25% of [the] company” started making the rounds a few hours ago, prior to their noon-ish (PST) call.

          And while Airbnb’s projected 50 percent drop in revenue from 2019 is certainly troublesome, the upstream impact we referenced last week, in terms of all the individual units that are no longer generating any income, will have a more profound impact on local market conditions: from rents to inventory to underlying values.

          1. And further depressing things will be Airbnb’s layoffs in SF which are added to those of tech/start-up companies that are reducing force and announcing they are relocating out of SF.

        2. You cant honestly think airbnb will go public this year? Travel is basically stopping until a vaccine and they had to take out 2 billion in loans

        3. From The NYT, The Results Are In for ‘The Sharing Economy’. They Are Ugly.:

          The home-sharing company Airbnb, which investors valued at $31 billion, had planned to go public this year. Instead, the company has slashed costs and raised emergency funding, and on Tuesday it laid off 1,900 employees, about 25 percent of its staff. It also reduced its revenue forecast for this year to half of what it brought in last year…“While we know Airbnb’s business will fully recover, the changes it will undergo are not temporary or short-lived,” Brian Chesky, Airbnb’s chief executive, wrote in a memo to employees.

          Emphasis added. Turns out some of those “tech” companies are really in the tourism business, which at least one commenter here insist that the economy of SF is not dependent on. Anyway, it doesn’t matter if these companies leave San Francisco or not, if the highly-compensated employees are leaving in droves, because U.I. isn’t going to make their mortgage payments, that will be an economic impact that will be neither temporary nor short-lived.

  5. If you believe in Zillow’s models; from Coronavirus: Home sales, prices expected to dip, recover slowly:

    Driven by pandemic fears, shut-downs and job losses, U.S. home prices are expected to dip between 2 and 3 percent this year, with sales falling by as much as 60 percent, according to a new forecast by Zillow. But the roaring Bay Area home market — heedless of economic ups and downs for nearly a decade — will likely see few price retreats and discounts, analysts say. Buyers and sellers have pulled out of the Bay Area market in equal measure during the pandemic shutdowns, leaving strong demand for relatively few homes for sale…cancelled deals have grown by 20 percent year-over-year, and homes pulled off the market have risen 70 percent, according to MLSListings data.

    Emphasis added. It also says “Bay Area home prices shouldn’t see deeper discounts than the rest of the country, though, due to long-standing supply shortage”, so if they are right Bay Area home prices will “dip between 2 and 3 percent this year” and “then buyers and sellers will rush back into the market”.

    1. The economic pain from this pandemic has not even started. I know people in tech, engineering, city/gov jobs, finance, law, and they are all dealing with potential job cuts and pay cuts. People whose are expecting a quick recovery are delusional.

    2. Buyers and sellers have pulled out of the Bay Area market in equal measure during the pandemic shutdowns…

      If that were true in San Francisco, inventory levels would be holding, which they’re not. And while inventory levels are back to within 4 percent of their mark at the same time last year, pending sales are down by half.

      And once again, while the pandemic is certainly acerbating the situation, particularly with respect to (un)employment, there are underlying trends in play.

  6. We shall see. As I’ve noted before, I’m astonished at the sale activity I’m seeing given the extreme restrictions in place. I would have thought listing and sales activity would grind to a near halt. Take 4660 18th Street. Nice 3BR condo. Just closed at $2,485,000. Listed on April 3. In contract on April 8. Closed on May 4. And for $135,000 more than it sold for exactly 3 years ago. All during a quarantine when I need to wait in line for an hour to get into Safeway. I would expect things to fall off dramatically, but so far I’ve just been astounded at the lack of such an occurrence.

    1. I agree. I am surprised people are still buying at the prices they are. However, I doubt, and have a hard time seeing how that lasts. Mainstream economists across the board are predicting the worst recession since the great depression. And its not like there is going to be a quick recovery. Even in SF Bay I have a hard time seeing how that doesnt have a significant (more than 2-3%) decrease in housing costs. This is just getting started and IMO prices are sticky and some folks who still have a lot of money are falling for the realtor bs and succumbing to the recency bias. But as you said, we shall see.

  7. Question to folks who were in SF during the last downturn, ~2008 – 2011: What were your observations in terms of sales volumes and prices around SF? I’ve found it difficult to find data for SF specifically, carve outs between SFH and condos, let alone by zipcode. It seems like prices maybe dipped about 10% when other areas around the Bay decreased much more significantly.

    What lessons from that time can be applied this time around?

    What’s different this time? The tech industry wasn’t as large in SF in 2008; gentrification has occurred in many neighborhoods…indicating prices may be stickier and not decrease much in SF?

    1. The average decline for property values across San Francisco was actually closer to 20 percent in the last downturn, with drops ranging from nearly 50 percent in Bayview to around 10 percent in Pacific Heights and greater volatility for condos (which tend to be a leading indicator for the market overall).

      And in terms of key lessons, keep in mind that the downturn actually started back in 2006, at which point “median prices” were still on the rise and many in the industry were dismissing the notion of a downturn as bearish folly despite the fact that sales volumes were already on the decline and the prevalence of apples-to-apples losses was on the rise.

  8. Came here for the the self-linking bear stats and no talk of prices (outside of cherry picks) and was not disappointed!!

    1. Well, you clearly aren’t reading the comments. Scroll up to the one from sfres posted 7 May, regarding a 3BR condo that zoomed into contract five days after listing and at a price $135,000 more than it sold for thee years ago for an example of a cherry pick from the bulls.

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