Inventory Appears to Have Peaked, Reductions Still on the RiseOctober 3, 2022
Driven by a slowdown in new listing activity versus an uptick in the pace of sales, the net number of homes on the market in San Francisco, which is currently 20 percent higher than at the same time last year and 45 percent higher than prior to the pandemic, appears to have likely peaked for the year.
At the same time, the percentage of homes on the market in San Francisco with an asking price that has been reduced at least once, which typically peaks in November or December, has ticked up another percentage point to 31 percent, which is eleven (11) points higher than at the same time last year and nearly double the percentage in October of 2019, with the average asking price per square foot of the homes on the market in San Francisco having just dropped back under $1,000 per square foot and trending down.
Comments from Plugged-In Readers
Inherited properties at play.
If the mortgage is in the mid 2s% – 4% apr range, then staying put for a while is probably a fairly logical choice for a sizeable portion of homeowners / borrowers.
That’s certainly true, unless there’s an unexpected change in employment/income, family size, health or other need to relocate or concerns with respect to a potential loss of equity for “a while” (or perhaps longer if [they] do).
Over 20,000 homes traded hands in San Francisco from 2008-2011, despite the poor market conditions and popular notion that nobody would sell unless they had to at the time.
Right. Normal reasons to sell are always in play. But the 2020 – late winter 2021 pandemic market looks more like fall 2008-2011 than this current one, colored as it is by the Fed’s movements. I just had a look at 2019 8/15-10/6. This year has been similar and perhaps slightly better than that year’s month and a half or so. Do people remember fall 2019 as a particularly tough market? I think they don’t. Well 2022 is up a handful of SFR sales, and up in price over 2019. And it’s down a few condo sales but up in price over 2019. That’s mid August to present amid all sorts of “the sky is falling” real estate press mind you.
Unfortunately, we’re currently closer to 2005/2006 than 2008 in terms of the market cycle and the full impact of rising rates which has yet to be felt. If we recall correctly, 2005/2006 was a wildly popular time to deride all sorts of “the sky is falling” and “doom and gloom” coverage in the press. And while 2019 wasn’t a particularly weak market, if that’s the new benchmark, would that be up or down from the “late 2020 – spring 2022 market runup” and trend?
Predicting the future now, are we? Asymmetry as indicator, insertion of terms like “benchmark,” snide derision of “late 2020 to spring 2022” runup fact, insertion of a rising 2005/2006, no notice of 2007 being a banner year for local real state. Somehow you’d seek to link the sub-prime crisis with today, as well. I’m not having it. But yes, 2019 was not a particularly weak market.
Or as it would appear you wrote in 2008: “Scare tactics are dead. San Francisco never really took a price hit and it won’t, either.” Which brings us back to the current market and dynamics at hand…
How generous of you, fanboy. Oh? indeed, 14+ hoary years ago? do tell. Some of us live and learn along this pathway of life. Others stay in a lane which speaks of both market correction and market collapse with the exact same language.
We’re not sure how clicking our commenter history button makes us fanboys, but we do appreciate you having continued to plug in over the past 15 years! Which brings us back to the current market, past lessons that we hope have since been learned, and what the past portends going forward.
Home prices were rising fast in 2005 and continuing until late 2006. Prices are now declining. So I don’t see how today is anything like 2005-06. Next year will be interesting. Economy is very strong (see today’s job report), bank balance sheets are strong, supply chain issues have eased, inflation remains but appears to be falling quickly. Fed is just cooling an old-fashioned hot economy at this point, and I hope they don’t overshoot. But much tighter money and rising rates have hammered the debt and equities markets, and home prices and rents are coming down after rocketing up the last couple of years. I’m predicting a soft landing in the U.S. (more like hoping, although I would bet on it), but the strong dollar is hammering the rest of the world, made worse by Russia, etc. Looks like we’re starting to see a freeze-up in housing; sellers unwilling to sell because they’d have to then buy at a much higher mortgage rate, and buyers unwilling to buy with prices still high and borrowing rates making things even more unaffordable. Those who MUST sell are going to have to accept lower prices. The markets, and even the Fed, are looking at much lower inflation and rates in about 2 years, and we’ll see if that pans out. If I were looking to buy, I’d wait a year as I don’t see prices increasing before then and further declines are more likely. We could easily see Case Shiller down 10-20% from the peak. Not a big deal to anyone who bought before 2020. But the present situation is nothing like 2008-09 where housing was dumped on the market by millions who walked away from underwater mortgages with 50%+ price declines in some areas. Those hoping for a dangerous financial crisis like that are odd IMHO (and they’ll be disappointed).
As we’ve outlined numerous times in the past, and foreshadowed prior to it having actually occurred, with sales (i.e., demand and a leading indicator of market strength) trending down in 2005, the Great Recession era downturn in values started in mid-2006, which is when the southern neighborhoods peaked and the “doom and gloom” / “bubblehead” barbs started ramping up. The middle-tier neighborhoods then peaked in early 2007, followed by the top-tier areas in the first half of 2008.
The downturn then lasted through early 2012, at least for the residential market and at which point property values in San Francisco had dropped around 20 percent on average, 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 – across the board.
As always, our primary focus is on market directionality and turning points; we’re not big on people trying to assume or apply a “technical analysis” without an understanding of the underlying trends; and taking exception with “others” or “those” who are projecting a “collapse” or “crisis” are typically emblematic of strawman attacks. All of which brings us back to the trends at hand…
Seems like a good time to say “Buy Now Or Be Priced Out Forever!”
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