Having hit a 9-year high earlier this month, the number of homes on the market which have been listed for under a million dollars has since ticked up another 15 percent to 640, representing 34 percent of all listed inventory versus 26 percent of the inventory on the market at the same time last year.

And with inventory levels having ticked up another 3 percent over the past week to a new 10-year high, there are now 140 percent more sub-million dollar homes on the market in San Francisco, in the absolute, than there were at the same time last year (270).

Comments from Plugged-In Readers

  1. Posted by ST

    My RE agent was telling me that this time around is worse than 2009, and she has been agent for 30+ years. We will see what is next

    • Posted by SocketSite

      As we outlined over a month ago, having foreshadowed back in June: Number of Homes for Sale in SF Surpasses Recession-Era Marks.

      At the same time, Drop in San Francisco Rents Is Accelerating.

      Fundamental trends which shouldn’t have caught any plugged-in readers by surprise.

    • Posted by Inquisitive

      Did your RE agent mention any drivers that brought him to the conclusion that this is worse than 2009?

      • Posted by Alice

        Agent here- I’ve been doing bids with clients and many of those that LOOK affordable tend to get bid up. It’s a classic tactic. As far as less desirable areas, those are definitely not going as quickly. Those in hot areas go fast. ESP surrounding towns in affordable price points. Condos are flat atm. Homes / plots with backyards as one might expect are hotter.

        • Posted by Brahma (incensed renter)

          I have never seen the phrase “hot area” or “hot neighborhood” defined by a real estate agent, but when I do, I would bet ahead of time that the way they will tell me how to determine if an area is “hot” is whether or not homes in said “…areas go fast”.

          Of course homes “…in hot areas go fast”. Because “going fast” is what defines a “hot area”. So it’s banal and doesn’t say anything.

          • Posted by two beers

            Easy on her, man. One good tautology deserves another. It’s almost zen: “it goes slow that is desired less, but that which goes fast, is hot”…

  2. Posted by [sforthright]

    I just saw a house I was looking at sell after 2 days in market. 10-15% above asking still seems the norm for many SFH.

    I’m honestly afraid to jump in. What if I regret not waiting? What if I haven’t seen enough houses? Never thought it would be this hard.

    • Posted by SocketSite

      Keep in mind that “over asking” sales are primarily a function of pricing, not the market per se. And the average sale price per square foot for sub-$2M homes in San Francisco has actually dropped over the past six months (and year).

    • Posted by hy

      Why not just wait then? Prices may or may not drop, but it is highly unlikely that prices will start going up anytime soon. My guess is it will be at least 2-3 years before that happens.

      The other thing to consider is if this is your primary residence, in the long term, price doesn’t really matter that much. Price appreciation can only be realized if you relocate or downsize. And if the price goes down, as long as you can afford the monthly payments, inflation/appreciation will eventually catch up. It is the real estate investors that really need to be careful. They tend to be highly leveraged, and bad market timing can wipe out a portfolio.

    • Posted by 1031 Exchange

      In this market, you can afford to be selective and wait until you find something you really like. Like hy mentioned, we probably won’t see prices start going up anytime soon. It’s not worth settling for something that will cost a lot in the future to remodel unless you see yourself in that house long term. Watch houses currently out of your price range drop in price to possibly score a deal.

      I think the market will be in this state of limbo until we get the long term effects of remote working materializes which won’t be for another year (at least) when offices open up again. We have a lot of people working remote now given the office closures due to COVID, but we probably won’t know the long term effects until offices open up and policies are finalized. Also, the Feds will be keeping rates near zero through 2023, so mortgage rates won’t change much in the next few years.

      It’s a weird market for houses–based on what I’m seeing on Zillow, there are ~640 listings <$1M, and only 66 are SFH. Certainly less since there are some Mira and Dogpatch units incorrectly classified as houses. Once you take off any houses on market for over 90 days (there's probably a reason why they haven't moved), there's only 41. Anything that's nice sells within a month most likely driven by apartment dwellers or condo owners moving into SFH. It looks a little better once you look at $1.25M and consider that a lot are priced optimistically and there is some room to negotiate down a bit.

      • Posted by sforthright

        Thanks for the good comments all. This is my first home purchase and will be primary residence. With homes only being on the market for two weeks, it’s proving tough for me to decide if I should pull the trigger on a given house or just wait for something with zero, or fewer, cons.

        I’m looking in the <1.5M range where it feels like any given house has at least one major compromise.

        • Posted by ST

          If you are looking at locations such as Noe or Pac height etc, under $1.5M in single family home goes very fast and often over asking by a significant amount.

          Going by what happened in the last cycle, you will have the most choices when the inventory is the highest, before price hits the bottom. By the time price hits the bottom, inventory is usually lower too, especially in more desirable locations.

          So you might want to bake this into your considerations, as you wait for prices to drop more.

          • Posted by SocketSite

            There have been around 10 percent more sub-$1.5 million single-family home sales in San Francisco over the past year versus the year before.

            But it’s true, a single-family home that was priced at a third of a neighborhood’s average would tend to move rather quickly and for “over asking” as well.

            And when actual inventory levels are (way) up, buyers do have more choice and leverage. But inventory levels don’t tend to drop, or start moving up, such as back in 2015, until the market has already started to turn.

          • Posted by Ohlone Californio

            Respectfully, there is no such thing as a sub 1.5M SFR in Pacific Heights. And if you look at the ones in Noe Valley they are either very small or a total fixer or both.

  3. Posted by John

    Any thoughts on the 1BR condo market? I’m seeing things in Lower Pac Heights/South Beach/North Beach start to dip down into the $600K-$750K range on Zillow. I bought something in NC to live near family during COVID but plan to return next summer and hopefully buy something in SF.

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