Number of Reduced Listings Nearing a 10-Year High in S.F.September 21, 2020
With the gap between the average list price per square foot of the homes on the market in San Francisco and those which are in contract having doubled over the past month, the percentage of homes on the market with a list price that has been reduced at least once has been ticking up.
And with 30 percent of the homes on the market having been reduced at least once, which is 17 percentage points, or 130 percent, higher than at the same time last year, with 27 percent of the active listings for single-family homes having been reduced and 31 percent of the listings for condos, the absolute number of listings with a reduced price (540) has increased 19 percent over the past month to a new 9-year high and is now within 8 percent of a 10-year high and closing.
Comments from Plugged-In Readers
The fact that there are still commenters on this site that are in denial about what is going on is astounding. And we still have a ways to go until bottom. No, this time it’s not different.
The market is definitely taking a hit and you can’t really predict when this softening in the market will recover. There is a lot of factors at play with the future of San Francisco–restaurants and stores closing, no end in sight for the immediate impact of COVID (on bars, events, etc.), people moving out given the ability to work remote in the short term, and how many companies will transition to a remote workforce.
I don’t think we’ll see something similar to 2008 where the bottom absolutely fell out or 2001 where tech completely imploded (yet?). Until we see an impact to tech companies besides going remote, this one will be entirely driven by how many people decide to leave SF permanently that we’ll see in the next few years.
I’ve said it once and I’ll say it again, this will be worse than ‘08 for expensive metros such as NYC and San Francisco.
How is the first coronavirus global pandemic in 102 years not “different” ? Anyway, you might be rather surprised when September’s sales figures come out versus Septembers of years past.
I used to tell myself that the next time I buy, 2 things need to happen – unemployment >5%, interest rate >5%. Today, 1 of those 2 is in place, but Fed is playing too much of a support for both RE and stock. That said, I have to say I am tempted at a couple of listings now. I feel like anyone buying today will be happy 3-5 years down the road. But I would like to bottom fish here…
“Fed is playing too much of a support for both RE and stock”
Isn’t this a sucker trap? Buy when prices are being propped up and you are the sucker holding the bag when the support goes away.
“I feel like anyone buying today will be happy 3-5 years down the road.”
Really? Last time trouble started in 2007 and we didn’t bottom till 2012. Not many 2007 buyers were happy in 2012. I feel like anyone buying 5 years down the road will be very happy.
It’s not a good idea to cite the most recent downturn and assume the timeline will be identical.
– 2008-2012 was a 28% drop and lasted 3-5 years depending on how you count it.
– 2001 was a 10% drop and was much quicker to rebound, only about two years.
– 1991 recession was an 11% drop and was 3-4 years.
2008 was unusually large and deep. My bet is that this is closer to the other two. As fast as the virus crashed things, it can just as quickly go back to normal once we’re in the clear. My prediction is that 2021 will be the year to buy and that Spring 2022 will be a strong market.
The “2008-2012” downturn actually started in 2006 (which is when the southern neighborhoods peaked). And the current downturn, which has been amplified by the pandemic, actually started in late 2015 (with a pull back in new construction pricing, sales and rents).
I agree that it won’t be identical to the last downturn, but curious to know more about why you think this drop won’t be as bad as the last one. It seems like the window for a quick recovery is closing rapidly, if not missed already. Sadly, tons of SF businesses that make the city appealing to live in will not be able to survive the current climate, and the virus has shown no signs of slowing down yet, despite the limited reopenings. It takes a ton of time and money to get a business off the ground, and the current lockdowns have already put a huge strain on a lot of people’s finances.
From what I’ve seen, it looks like the economic damage will be much greater than the great recession, and with a longer recovery. I’m sure you’re aware of the kinds of issues SF and similar cities are facing, like the trend towards WFH etc., so I won’t echo those.
Here’s a thought experiment: In the next few years, do you think that those who could afford a median house in SF before the pandemic will be willing to pay ~90% (or more) of pre-pandemic prices, but without many of the amenities that existed before the pandemic? Sure, many are buying using their tech stocks which have shot through the roof and have kept prices relatively steady so far, but even those people with the means to do so will ask what they’re getting for their money. As people’s favorite venues/restaurants/stores shut down, they’ll be asking themselves why they should pay such a huge city premium.
Overall I’m confident the Bay Area as a whole will be fine, and despite all this I plan to buy in SF eventually, but not until I feel like we’ve bottomed out. Considering there’s still an eviction moratorium in place for businesses and renters, and unfavorable weather hasn’t yet interfered with outdoor dining, things are just getting started.
2012 was NOT the bottom. Not even close. Prices were already exploding upwards by that point. The bottom was more mid-late 2010 or Q1 2011.
While the market effectively bottomed in 2011, the rebound didn’t take hold until the first quarter of 2012 (which was the year of peak foreclosure activity in San Francisco).
I believe you’re incorrect. Q1 2012 was the absolute bottom. It started rocketing up in Q2 2012.
agree mid 2012 was the bottom, and there was barely any rise even by Q1 13
Just remembering what it was like in the trenches. All my buyers were consistently getting outbid in multiple-offers situations in 2012.
The only way for those two things to coincide (unemployment rate greater than 5% and interest rates greater than 5%) today would be for congress to repeal The 1913 Federal Reserve Act. Globalization has pretty much made high rates of inflation in the face of heightened unemployment impossible unless you don’t have active implementation of monetary policy.
Brahma – I have to agree with you, and it is hard for me to see how interest rate would EVER be above 5% again, after 10 years (and counting) of money printing. At the same time, having the experience of buying in 2012 for $350K from an owner who paid $510K back in 2004 made me think patience always pay off in the end. So I am torn.
In the mean time, Robinhood seems to be the best place on this planet for now…
Fact. The Fed has already indicated publicly it won’t meaningfully raise interest rates until 2023 at the earliest. (Spoiler alert: they won’t raise interest rates in 2023, either.) Macroeconomists are much more interested in whether the Fed can/will move to negative interest rates at some point in the future (as seen in the EU + Japan).
There are a lot of reasons for this permanently loose monetary policy, and the effect on Bay Area real estate prices in the 2020’s is very much up for debate. But if you are waiting for interest rates to spike, you will be waiting a very long time.
wait 1 year and you’ll get better pricing
Can you provide the ave. list price/sq ft and ave. in contract price/sq ft?
A few reasons include…
1) I think there are plenty of people waiting in the wings who haven’t lost any money at all during this, in fact with a rapidly growing nest egg since expenses have cratered. Similarly, if entrepreneurs can sense a chance to lock in a great lease, optimists might pull the trigger.
2) the rental numbers look awful, listings are up, reductions are up, but actual sale prices haven’t moved downward yet. Yes, it’s only a few months but it doesn’t seem like people are willing to sell at big discounts.
3) a vaccine by this fall is ridiculous, but I think a widely distributed vaccine that people are willing to take has a solid chance by Spring 2022.
4) bars and restaurants are closed elsewhere, too, so uprooting for another city doesn’t make a ton of sense. many people aren’t ready for full-on suburbia or rural living which can mean Abandoning your job, friends and family…
While a shift in sales has propped up the “median sale price,” and there hasn’t been any wholesale capitulation on prices, values have, in fact, dropped on an apples-to-apples, indexed and price per square foot basis. And that’s for both condos and single-family homes.
If I’m making a bet around how far SFH or condo prices will drop in the next two years, the fact that three months in, prices are anywhere from +3% to -1% YoY would be good news.
We’ll know a ton more in December when the fall buying season data appears.
And if values in San Francisco were, on average, “+3% to -1% YoY,” we’d agree. But they’re not.
Re: “…uprooting for another city doesn’t make a ton of sense…which can mean Abandoning your job, friends and family”
Panhandle Pro, many, many folks (perhaps even the majority) are in this city just to work at a job that pays more than they can make in their home city or even country, and so they are what social scientists would term “marginally attached” to San Francisco or the Bay Area in general. The job market has already performed the uprooting and the invisible hand facilitated the abandoning of friends and family.
If workers are only here to shorten their commute and capture a larger paycheck, a large portion of which they then payout to rapacious landlords, then returning to the place where their friends and family are makes tons of sense, since they have to work from home anyway due to the new corona virus outbreak.
All true. But very few of those people are homeowners. The demographic you’re referring to is very likely to a be a renter, and yes, they left. Rents are down big time. This discussion is about whether home prices will drop. Homeowners are more likely to be here long term, have a community, and thus are unlikely to leave and sell at a major loss.
Then why are there For Sale signs all over the place?
[Editor’s Note: Number of Homes for Sale in San Francisco Jumps (to a 10-year high).]
Yes, there are homeowners with or without a community who are willing to sell (due to COVID/city fears, wildfire fears, having young kids and needing to move anyways, retiring etc) but only for the right price. I’ll refer you to the interesting post by Socketsite titled “Expectation Gap” which supports this theory. If they don’t hit their number, they’ll stay.
Keep in mind that “right price” appears to be dropping, with the average sale price per square foot in the city down around 4 percent from the second to third quarter (so far).
And while we’re not sure what you’d categorize as a “major,” drops of over 10 percent, as measured on an apples-to-apples basis and resulting in real six-figure losses, abound.
Why the sales at 2015 pricing?
Why so many price reductions?
With 2015 comps and a choice between kids, retirement or lungs vs expectation, how does that end?
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