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The San Francisco Real Estate Market in Summer

August 2011 Update

As the world wrestles with debt crises, the San Francisco economy and home market continue to improve, at least for the time being. (Knock on wood.) According to the Center for Continuing Study of the California Economy, of the 28,800 jobs the state added in June, 12,800 were in just 5 Bay Area counties – many of them well-paying. The city and Bay Area have a number of major high-tech companies growing quickly and/or going public, creating a burst of brand new wealth. Since SF typically sees only 5000 to 7000 home sales per year, these changes can have an outsized impact on its real estate market.

San Francisco’s unemployment rate dropped from 10.1% in February to 8.4% in May; both residential and commercial rents are rising in the city; mortgage interest rates remain near historic lows; and we have a limited inventory of homes for sale when compared to strong buyer demand: all these factors appear to be applying upward pressure on prices. It’s still too soon to draw definitive conclusions about a market turnaround, but the S&P Case-Shiller Index for high-price-tier homes in the Bay Area (houses over $580,000) did show price increases in March, April and May (their latest report). Some pundits believe these increases are merely short-lived seasonal bumps, but considering the strength of our early-summer market — what we’re experiencing on the street and what’s showing up in the statistics — we suspect that is not the case.

Remember that San Francisco (as well as the Bay Area, state and country) is full of micro-climate home markets and these different markets can and do move in different directions or at different speeds.

Median Prices for 2-Bedroom Condos
This is a snapshot of median prices for 2 bedroom condos in a number of SF neighborhoods in selected years since year 2000, ending with year-to-date 2011. One can clearly see the peak period for values in 2007/ 2008, the large decline after September 2008, and the relative price stability in most neighborhoods in the last 18 to 30 months. Median prices often fluctuate up and down 3-5% without great significance. Consistent trends over the longer term are indicative of genuine changes in market values. For our detailed report on the SOMA/ South Beach/ Mission Bay condo market:
SOMA/South Beach Report

Average Dollar per Square Foot
Fluctuations of 1 to 2% are not particularly meaningful for a general statistic like this one – and indeed are more an indication of basic value stability than anything else. As with any general statistic, real market changes will show up consistently over the longer term. Some neighborhoods have been seeing monthly increases in average dollar per square foot figures since March or April, perhaps reflecting value increases in a strengthening market. For our detailed update on Realtor District 5 (the greater Noe/ Castro/ Haight area):
Noe Vly/ Castro/ Haight Market Report

S&P Case-Shiller Home Price Index
The Case-Shiller High Tier Price Index for May (published in late July) for the 5-county San Francisco Metro Statistical Area showed its third consecutive monthly increase. It is the “High Tier Price” Index that most applies to the city of SF itself with its high-priced housing inventory. Its latest price reading is now less than one half of one percent below that of January 2009. Considering the supply and demand dynamic in San Francisco this spring and early summer, it is quite possible, even likely, the Index will show further increases in its June and July reports. For more information about Case-Shiller:
Case-Shiller Index Deciphered

Percentage of Home Listings Accepting Offers
This chart shows how the market began to dramatically strengthen in early 2011. In July 2011, the percentage of listings going under contract was about 22%, a huge change from July of 2010, when the percentage was 15%.

Median House Sales Price
This chart clearly indicates how the regular, non-distress house market – where the median sales price is climbing (to $850,000 in July) – is distinct from the distress house (bank and short sales) market – where the median sales price is declining. Distress house sales are clustered in the city’s less affluent neighborhoods and at the lower price ranges, and are often actually in distressed condition: they generally do not affect values of non-distress houses in most other SF neighborhoods. And the current luxury home market in SF is another world altogether:
SF Luxury Home Market Report

Price Reductions, Time on Market, Sales Price
Most of the SF homes that sell, accept offers relatively quickly at a price very close to asking price. Those homes that go through 1 or more price reductions take much longer to accept offers and sell at a substantial discount to original list price. And a fair proportion of listings are withdrawn from the market without selling, typically due to being perceived as overpriced. Homes that are priced correctly right at the start, prepared carefully to show at their best, and marketed comprehensively typically achieve the highest sales prices in the shortest times.

How Buyers Find Homes
The large majority of buyers now find the home they purchase through their real estate agent or online (or most often, a combination of the two). Open houses and signage come a distant third, and newspapers and real estate magazines only play a tiny role. All of which is a huge change from the way it was only 10 years ago. Since most agents and buyers first evaluate a home from its photos, professional photography of a well-prepared home is critical. Then those photos must be used in effective broker-to-broker and online marketing campaigns — to get buyers and agents inside the property.

Renting vs. Buying
One of the standard ways to evaluate if a home market is valued correctly is to compare what it costs to rent a home versus to buy it. The Economist magazine, one of the earliest to predict the housing bubble, recently stated that based upon current rent vs. buy costs, U.S. homes are now slightly undervalued. In SF, rents have been climbing. This analysis compares the average asking rent for a 2 bedroom SF apartment ($3350 per Rentbits.com), to the median price for a 2 BR, 2 BA condo in Noe Valley ($850k). (There is a full report that accompanies these charts.) Calculations vary hugely depending on assumptions regarding down payment, mortgage rate, future inflation & appreciation, closing costs and other financial criteria. Perform your own calculations at:
Rent vs. Buy Calculator

Inventory of Homes for Sale
There were approximately 600 fewer listings for sale in the city during the month of July 2011 as compared to July 2010, yet unit sales were actually a bit higher and the number of listings which accepted offers was up about 20% from last year. Fewer listings but many more listings accepting offers = a much hotter market. Last year, the market went into a huge slowdown after the springtime double tax credit expiration — nothing comparable has occurred in 2011. Indeed, right now, the main thing holding back the market is simple lack of inventory.

Months’ Supply of Inventory (MSI)
Part and parcel of everything indicated in earlier charts also shows up in this supply and demand statistic. MSI is very, very low — as low as it has been years, since well before the peak of the bubble.

Average Days on Market (DOM)
Average DOM before acceptance of offer is as low as it was in the bubble years. Motivated buyers in a low-inventory market are snapping up attractive new listings quickly, often in multiple-offer situations. Note that this statistic is distorted by distress sales, which often have a very high DOM, by that minority percentage of listings that sell after multiple price reductions, and by deals that fall through after offer acceptance (the listings come back on market, but the DOM clock keeping ticking). Appealing, well-priced new listings often accept offers within 7 to 14 days of coming on market.

DISTRESS HOME SALE can be one of two things: the sale of a bank-owned property typically pursuant to a foreclosure (also called an REO sale), or a so-called short sale, in which the seller-owner must get lender approval for a “short” payoff, a reduction in the loan amounts due on the property in order for the sale to close. These 2 kinds of distress sale are actually different animals, though both can be long, tiresome endeavors to close because one is dealing with bank bureaucracies. (In 2010 in California, about 40% of short sales fell through without closing sale.) However, in an REO sale, the seller is the bank (which may own hundreds or thousands of these properties), the property often looks “distressed” and the bank has very limited disclosure responsibilities (which is a liability to buyers). In a short sale, the seller is usually the individual owner-occupier, the property condition is and shows much better, and full seller disclosure laws apply (the buyer knows more about what he or she is buying). Both types of distress sale can be very good deals for savvy buyers and indeed investors are buying many of the REO properties around the country. But there are potentially greater risks and almost always greater hassle factors involved.

MEDIAN SALES PRICE is that price at which half the sales occur for more and half for less. It can be, and often is, affected by other factors besides changes in market values, such as short-term or seasonal changes in inventory or buying trends. Though often quoted in the media as such, the median sales price is NOT like the price for a share of stock, i.e. a definitive reflection of value and changes in value, and monthly fluctuations are generally meaningless. If market values are truly changing, the median price will consistently rise or sink over a longer term than just 2 or 3 months, and also be supported by other supply and demand statistical trends.

DAYS ON MARKET (DOM) are the number of days between a listing going on market and accepting an offer. The lower the average days on market figure, typically the stronger the buyer demand and the hotter the market.

MONTHS SUPPLY OF INVENTORY (MSI) reflects the number of months it would take to sell the existing inventory of homes for sale at current market conditions. The lower the MSI, the stronger the demand as compared to the supply and the hotter the market. Typically, below 3-4 months of inventory is considered a “Seller’s market”, 4-6 months a relatively balanced market, and 7 months and above, a “Buyer’s market.”

DOLLAR PER SQUARE FOOT ($/sqft) is based upon the home’s interior living space and does not include garages, unfinished attics and basements, rooms built without permit, lot size, or patios and decks — though all these can still add value to a home. These figures are usually derived from appraisals or tax records, but are sometimes unreliable or unreported altogether. All things being equal, a house will sell for a higher dollar per square foot than a condo (due to land value), a condo higher than a TIC (quality of title), and a TIC higher than a multi-unit building (quality of use). Everything being equal, a smaller home will sell for a higher $/sqft than a larger one. (However, things are rarely equal in real estate.) There are often surprisingly wide variations of value within neighborhoods and averages may be distorted by one or two sales substantially higher or lower than the norm, especially when the total number of sales is small. Location, condition, amenities, parking, views, lot size & outdoor space all affect $/sqft home values. Typically, the highest dollar per square foot figures in San Francisco are achieved by penthouse condos with utterly spectacular views in prestige buildings.

SAN FRANCISCO REALTOR DISTRICTS

District 1: Sea Cliff, Lake Street, Richmond (Inner, Central, Outer), Jordan Park/Laurel Heights, Lone Mountain

District 2: Sunset & Parkside (Inner, Central, Outer), Golden Gate Heights

District 3: Lake Shore, Lakeside, Merced Manor, Merced Heights, Ingleside, Ingleside Heights, Oceanview

District 4: St. Francis Wood, Forest Hill, West Portal, Forest Knolls, Diamond Heights, Midtown Terrace, Miraloma Park, Sunnyside, Balboa Terrace, Ingleside Terrace, Mt. Davidson Manor, Sherwood Forest, Monterey Heights, Westwood Highlands

District 5: Noe Valley, Eureka Valley (Castro, Liberty Hill), Cole Valley, Glen Park, Corona Heights, Clarendon Heights, Ashbury Heights, Buena Vista Park, Haight Ashbury, Duboce Triangle, Twin Peaks, Mission Dolores, Parnassus Heights

District 6: Hayes Valley, North of Panhandle (NOPA), Alamo Square, Western Addition, Anza Vista, Lower Pacific Heights

District 7: Pacific Heights, Presidio Heights, Cow Hollow, Marina

District 8: Russian Hill, Nob Hill, Telegraph Hill, North Beach, Financial District, North Waterfront, Downtown, Van Ness/ Civic Center, Tenderloin

District 9: SOMA, South Beach, Mission Bay, Potrero Hill, Dogpatch, Bernal Heights, Inner Mission, Yerba Buena

District 10: Bayview, Bayview Heights, Excelsior, Portola, Visitacion Valley, Silver Terrace, Mission Terrace, Crocker Amazon, Outer Mission

Some Realtor districts contain neighborhoods that are relatively homogeneous in general home values, such as districts 5 and 7, and others contain neighborhoods of wildly different values, such as district 8 which includes both Russian Hill and the Tenderloin.

The San Francisco Real Estate Market 

2nd Quarter: Highest Buyer Demand in Years

The Paragon July 2011 Quarterly Update

As shown in the charts below, by virtually every statistical measure of supply and demand and value, the real estate market in San Francisco strengthened in the 2nd quarter, and by some measurements dramatically so.  

Paragon is celebrating its 7th anniversary, and if you can forgive us some horn tooting, we are now the 3rd largest brokerage in the city – and closing in on #2. In the past 6 months, our overall percentage market share increased over 25% (and for homes over $2m, over 40%). According to Real Trends 500, we are #5 in the nation in average sales per agent. And for the past two years, of the 10 largest SF brokerages, we have the highest average Sales-Price-to-Original-List-Price percentage and the lowest average Days-on-Market figure when acting as listing agent.

Percentage of Home Listings Accepting Offers

This is one of the purest measurements of buyer demand vs. the supply of homes for sale, and for every home type in San Francisco, the 2nd quarter showed the highest percentage of listings accepting offers in over 3 years. In May and June, 20% more listings went under contract (accepted offers) over last year, with 15% fewer listings for sale — a huge shift in the supply and demand dynamic.

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The S&P Case-Shiller Index
Based upon media reports of the C-S Index, one might be forgiven for thinking the San Francisco market is crashing, but that is not the case. First of all, they report the WRONG Index for the city of San Francisco, and then they usually sensationalize monthly fluctuations. Below is a chart of the longterm performance of the C-S “High Tier” Price Index most applicable to SF itself, showing a very small decline over the past 26 months. Though not shown in this chart,  the Index ticked up in March and April (the latest published) and is likely to show further increases in May and June.

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Average Dollar per Square Foot
Houses, condos and 2-4 unit buildings all recorded increases in the average dollar per square figure in the 2nd quarter. Since closed sales lag market activity (offer acceptance) by 4 to 8 weeks, and offer acceptance activity was so strong in May and June, it will be interesting to see if this trend continues in the third quarter.

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SF Median House Sales Price

The median price for non-distress house sales is up to within a percent or two of the average for the past 2+ years, while distress house prices have been generally declining. Distress house sales are concentrated in the less affluent neighborhoods, at the lower price ranges, and generally do not significantly impact values in most SF neighborhoods. Median sales can be and often is affected by other factors besides changes in values. For example, there is almost always a decline in the 1st quarter of the year, which reflects not a decline in value, but holiday market dynamics, mid-November to mid-January.

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SF Median Condo Sales Price
The 2nd quarter saw the highest median sales price for non-distress condos (by a tad) since 2008, while the median for distress condos continues to decline. The chief market analyst for Moody’s recently pointed out that though distress sales are pulling down overall median prices, the values for non-distress homes have NOT been declining.

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SF Homes for Sale

The inventory of homes for sale is far below that of previous years at the same time of year. The main thing holding back unit sales right now is the low supply of inventory. High demand plus low inventory will typically exert an upward pressure on values over time.

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Average Days on Market (DOM)

The lower the average days on market before acceptance of offer, the faster buyers are snapping up new listings and the hotter the market. The average DOM is now the lowest in years for the 3 main home types in San Francisco.

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Months’ Supply of Inventory (MSI)
The lower the MSI, the stronger the buyer demand is as compared to the supply of homes for sale. For the past few months, MSI for all SF home types has been bumping along at its lowest level in years. Houses and condos are in what would typically be called “Seller’s Market” territory.

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Expired/Withdrawn vs. Sold Listings
The ratio of those listings that expire or are withdrawn from the market (without selling) to those listings that do sell is at its lowest in over 3 years – another indicator of high buyer demand. Roughly, speaking, for every 2 listings that closed escrow in the 2nd quarter, 1 listing expired or was withdrawn — typically due to being perceived as overpriced. Looked at another way, about a third of listings expired or were withdrawn, though many are or will be re-listed (at a lower price) and then sold.

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SF Luxury Home Sales

Luxury home sales are climbing rapidly and the percentage of luxury home listings going under contract (accepting offers) is at its highest level since 2008. For luxury homes over $2,000,000 (not broken out in this chart), the percentage is actually higher than at the peak of the market in 2008. New high-tech money, in particular, has been pouring into this market recently, and right now it is hard to envision a reversal of this trend in the near future. We will be issuing our newsletter dedicated to the luxury home market in the next few weeks.

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Homes Lost to Foreclosure

A clear graphic of how little the city has been impacted by foreclosures when compared to other California and Bay Area counties.

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SF Distress Sales by Price Range
Distress home sales have had a huge impact on some of the less affluent neighborhoods in SF and at the lowest price ranges, but usually no significant impact on the majority of home values in the city’s more affluent central and northern neighborhoods, which make up 8 out of SF’s 10 Realtor districts. The median house price in these 8 districts in the 2nd quarter was $851,000, and for condos and co-ops, $695,000. As a percentage of total home sales, distress sales declined from an all-time peak of 23% in the 1st quarter to a relatively normal 16% in the 2nd.

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In real estate, longer term trends across a variety of statistical measurements are the meaningful ones — which is what we try to provide in our analyses. The fluctuations of monthly statistics — often quoted in news articles — are, sadly, virtually meaningless (but can make dramatic, if often misleading headlines).

Statistics are generalities, subject to fluctuation due to a variety of reasons. All information herein is derived from sources deemed reliable, but may contain errors and omissions, and is not warranted. Sales not reported to MLS are not included in this analysis. We can supply the raw data behind any of our charts, if you are so interested.

June 2011 Update: High Demand + Low Supply = A Strong May Market

Last year, in May of 2010, the market began its hangover from the exuberance of the double-tax credit rush (which expired in April 2010), a hangover that generally continued through summer of 2010. In contrast, in San Francisco, May of 2011 continued the dynamic of strong buyer demand and limited inventory that began earlier this year. May’s accepted offer activity was up over 25% compared to May of 2010, with an inventory of homes for sale that was 11% below last year’s. Distress-home sales in the city, which climbed to their highest levels ever in early 2011 (and hammered the overall median price), declined significantly in April and May.

Median sales prices and average dollar per square foot figures in SF climbed significantly in the last 2-3 months — which, to some degree, is what one would typically expect from our supply and demand situation. We will have to wait to see if these trends continue or are simply normal (and relatively meaningless) statistical fluctuations.

SF unit home sales are up about 4% YTD over 2010 — without any tax credits — but more importantly, the strong demand that collapsed last year after April shows no sign yet of collapsing this year.

According to the Case-Shiller Index, prices for the 5-county San Francisco “Metro Area”, declined 5% from March 2010 to March 2011 (the latest C-S data available), but in the city itself, and certainly in its better neighborhoods, we are not generally seeing the value declines that appear to be occurring elsewhere. This may be because of our unique circumstances: being a financial center, high affluence and education, comparatively low foreclosure rates, the resurgence of high-paying high-tech employment in the Bay Area (and new IPO money), the lack of room to expand and/or simply being one of the most appealing and beautiful cities of the world.

It will be interesting to see what the summer holds, but right now, neither the statistics nor the view from the street currently supports the view of a declining-value market in San Francisco.

MEDIAN SALES PRICE is that price at which half the sales occur for more and half for less. It can be, and often is, affected by other factors besides changes in market values, such as short-term or seasonal changes in inventory or buying trends. If market values are truly changing, the median price will consistently rise or sink over a longer term than just 2 or 3 months.

Statistics are generalities, subject to fluctuation due to a variety of reasons. All information herein is derived from sources deemed reliable, but may contain errors and omissions, and is not warranted. Sales not reported to MLS are not included in this analysis.


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SF Homes Accepting Offers
In April of 2010, buyers rushed to take advantage of last year’s double tax credit — and then business slumped. This year, the strong market that began in the spring has continued in May. Even if we calculate that 6% of the accepted offers now showing for May ultimately fall through, the year over year increase in deal-making is over 25%. With significantly lower inventory than last year.


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SF Home Sales by Price Range
The big increase has been in the number of lower-priced home sales. To a large degree, this is a function of the surge in distress-home sales in the first 3 months of 2011. Which has since tapered off.


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Inventory of Homes for Sale
The first chart graphs the number of new listings coming on market by month: May 2011 had 12% fewer new listings than May 2010, which has a large impact on the market. The second chart graphs the total number of home listings available for sale within a given month: inventory this spring has been well below the levels of 2010. May of 2011 had over 300 fewer listings on the market than May 2010, and yet the number of accepted offers this year was much higher.


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SF Median House Sales Price
This chart shows the median house sales price by quarter over the past 3 years by distress house sales, regular (non-distress) houses, and all house sales. In SF, the distress house market and the regular house market are generally two different markets: different price ranges, often different neighborhoods and condition, different buyers. The median sales price plunged in January and February because distress home sales soared as a percentage of sales, and the higher end market usually shuts down for the holidays (affecting closed sales in January/ February). In March, the median sales price for regular homes started to bounce back, which accelerated in April and May. We are still well below peak values in 2007 – 2008. Though things look positive, it is much too early to draw definitive conclusions about value trends: median prices often jump up and down without any great significance to values.


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SF Median Condo Sales Price
While the median sales price for distress-sale condos has continued to decline, the median sales price for regular condos has bounced up dramatically over the past couple months, and is now higher than it has been in years. Whether this is a temporary anomaly or the beginning of a trend is unknown at this point. There has been a large squeeze on the inventory of condos for sale as the remaining new condo developments have sold out (and not been replaced by new developments). We are still well below peak values in 2007 – 2008.


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Average Dollar per Square Foot
One can assess value not only through median prices (which can be affected by other things besides changes in value) but by what buyers pay on a dollar per square foot basis. In the last couple months, the average dollar per square foot has increased for houses, condos and 2-4 unit buildings. (TICs are not included because the sales data rarely contains their square footage.) The fact that all these property types are showing parallel increases may indicate a market trend toward higher values — which is typical of the combination of high demand and limited inventory — but it is too early to tell.


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Percent of SF House & Condo Listings Accepting Offers
This chart clearly shows the dynamic of strong buyer demand and low inventory. A much higher percentage of house and condo listings have been going under contract (accepting offers) in the last 3-4 months than at any time in the past year.


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Average Days on Market (DOM) & Months’ Supply of Inventory (MSI)
The top chart shows the average number of days between a house or condo listing going on market and accepting an offer (for those homes accepting offers). The lower chart graphs MSI: how long it would take to sell the existing inventory of houses and condos for sale at existing market conditions. As a buyer demand heats up, one expects to see that properties are accepting offers more quickly and that the months’ supply of inventory is decreasing. That is what we’ve been seeing in San Francisco since spring began: in each case, the statistic is lower or about as low as it has been for the past 2 years.


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SF Luxury Home Sales
In this chart, a luxury home is a house, condo or TIC selling for $1,500,000 or more.


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SF Unit Home Sales since 1994
After the years of decline, the number of home sales in SF started to recover in 2010 and 2011 from their low points in 2009. The exception is in TIC sales, which have continued to decline due to issues with financing, tenant eviction and condo conversion.


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New-Condo Construction & Sales
With the financial blow-up of 2008, new condo construction declined hugely, which, of course, led to the large decline in new development condos on the market. This is another factor of decreased inventory available for buyers to purchase. Since large developments take years from breaking ground to going on market, no significant reversal of the recent decline in new-condo inventory is expected soon.


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SF Distress-Home Listings & Sales
Distress home listings peaked at the end of last year, which created a peak in the number of sales in early 2011. (Distress sales often take much longer to close than regular sales due to issues with bank bureaucracy.) The surge in low-end distress home sales in early 2011 depressed the city’s overall median sales price (while not necessarily affecting values). However, for the time being, both the numbers of distress home listings and sales have declined markedly from their peaks.


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Home Sales & Distress Sales as Percentage of Total Sales
The number of closed sales in May 2011 was lower than that of May 2010, mostly due to the frenzy of buyer activity in April 2010 to qualify for the double tax credit. The lower hash-marked areas delineate the number of distress sales, and the percentages at the top of the bars show the percentage of distress home sales as a percentage of total sales. These percentages peaked in early 2011 (again, hammering the overall median sales price) but have since declined significantly in April and May. Overall unit sales of all SF homes are up about 4% YTD as compared to 2010 – with no tax credit and significantly lower inventory of homes available to purchase.


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SF Distress House Sales by Realtor District
Though distress house sales (bank-owned properties and short sales) can now be found throughout the city, the large majority continue to be located in the two, less affluent, southern border districts running from Bayview to Oceanview (which have been hammered by foreclosures). In many of the other districts, distress house sales as a percentage of sales is too low to impact the values in those areas. The median price for distress house sales in the city typically runs in the $450,000 to $500,000 range.


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SF Distress Condo Sales by Realtor District
Distress condo sales can be found throughout the city, but are clustered in the greater SOMA/ South Beach area, where most of the huge new condo developments were built in the last 10 years. Distress condo sales are generally at the lower end of prices.


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Interest Rates (from Bankrate.com)
Interest rates have been declining again recently and are incredibly low by any historical standard.

Who’s Right about the San Francisco Home Market?

Is It Strengthening or Declining?

Some of our readers have been understandably confused between the bad news reported elsewhere and our recent reports of a strengthening market in San Francisco. Besides the possibility of specific agendas, there are some legitimate reasons behind the apparent disconnect:

  • Much of the data reported elsewhere, such as the Case-Shiller Index, is for the San Francisco “metro area” comprised of 5 or more counties. We focus only on the city and county of San Francisco, which is its own, specific market (or actually its own specific collection of neighborhood markets).
  • Our data is typically 2 to 4 months ahead of that reported elsewhere. When the media is headlining the median sales price or Case-Shiller Index for February (reflecting accepted-offer activity in December and January), we have market data straight from MLS for April, both for closed sales and newly accepted offers (which is the most current market data available). When a market starts to heat up, as ours has in 2011, we are well ahead of the news curve.
  • Instead of comparing a single statistic, say one month’s median sales price to another’s (last month’s, last year’s, peak values in 2007/ 2008), to make a dramatic statement, we try to show the larger picture using 7 to 10 statistical measures over the longer term, in order to show trends beyond normal and relatively meaningless monthly fluctuations. (Median prices may, but actual market values don’t jump up, down, up, down significantly by month.)
  • All our data comes directly from the Multiple Listing Service and Broker Metrics, and we can provide the hard data behind all our charts.

    As illustrated below, indications continue of strong buyer demand amid a limited supply of homes for sale: as mentioned before, this typically does not result in a decline in values. In unit sales, the SF home market is up YTD about 5% over 2010 and up 7% in accepted offer activity — with an inventory of home listings that is 16% below last year’s (on April 30) and without the double homebuyer tax credit which fueled last spring’s surge.

    Whether this active real estate market will continue is unknown, but current signs are positive.

  • MEDIAN SALES PRICE is that price at which half the sales occur for more and half for less. It can be, and often is, affected by other factors besides changes in market values, such as short-term or seasonal changes in inventory or buying trends (as happened in January and February). If market values are truly changing, the median price will consistently rise or sink over a longer term than just 2 or 3 months.
  • DAYS ON MARKET (DOM) are the number of days between a listing going on market and accepting an offer. Averages can get pulled out of whack by a few sales where the days on market were very high, and also by agents who don’t report their accepted offers in a timely manner. What’s important is the trend. The lower the average DOM, the hotter the market.
  • MONTHS SUPPLY OF INVENTORY (MSI) reflects the number of months it would take to sell the existing inventory of homes for sale at current market conditions. The lower the MSI, the stronger the market.
  • Statistics are generalities, subject to fluctuation due to a variety of reasons. All information herein is derived from sources deemed reliable, but may contain errors and omissions, and is not warranted. Sales not reported to MLS are not included in this analysis. All numbers should be considered approximate.

    April Overview
    Of the SF houses and condos that sold in April, 71% accepted offers relatively quickly and averaged a sales price that was 99.6% of asking price. Many sold with multiple offers. This reflects a buyer pool jumping all over houses deemed appealing and reasonably priced. The remaining 29% that sold had 1 or more price reductions, took much longer to sell, and closed at a significant discount to original asking price. And for every 2 listings that sold, one listing expired without selling, typically due to being perceived as overpriced. Buyer demand is strong, but they’re not buying everything.

    Paragon Real Estate Group
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    Median Sales Prices for SF Houses
    This chart shows the overall house median sales price over the past 18 months (red line), the median just for distressed houses (blue), and the median just for regular, non-distressed house sales (green). Even as distressed house median price fell in the last 2 months, the median price for regular houses has increased for the past 3 (to its second highest point in 18 months). Why the plunge in January? Holiday season dynamics: the high-end market closed down in late November/ December, resulting in fewer high-end sales in early 2011. At the same time, there was a surge in distress home sales, especially as a percentage of sales. Fewer high-end sales and more low-end sales = lower median price, which then corrected as the 2011 market began. In many ways, the distress and non-distress home markets are different markets: different price points, often different neighborhoods, in different condition. Note that even as the median for regular house sales increased in April, the overall median was pulled down by the number and price point of distress sales.

    Paragon Real Estate Group
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    Median Sales Prices for SF Condos
    We see a similar situation with condo sales in the city: a declining median sales price in early 2011 mostly due to holiday season inventory and buying dynamics, mostly unrelated to values, then self corrects as the market gets back to normal.

    Paragon Real Estate Group
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    Overall SF Median Home Sales Price
    This chart looks back over the past 25 months at how the overall median sales price for SF homes (houses, condos & TICs) jogs up and down naturally without great implications for market values. The average median sales price for the entire 25 months was $688,000; in April 2011, it was $695,000; two years ago, it was $684,000. The media gets excited by monthly changes in median price, but when one steps back, one sees a remarkably stable market. And though the median fell more than usual in this past January and February, a decline is actually common for January and February (due to holiday market dynamics). The decline was a bit more dramatic this year due to an increase in low-end distress home sales. When market values really start to definitively change, either up or down, it will be reflected consistently over a longer term than just 1, 2 or 3 months.

    Paragon Real Estate Group
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    Average Dollar per Square Foot
    These charts show the average dollar per square foot for sold SF houses (top) and sold SF condos (bottom) over the past 13 months. Again, we see the average naturally jogs up and down. It’s simply that in different months, different homes sell at different prices and different dollar per square foot figures. Changes in market values will be signified by consistent changes over longer periods than 1 to 3 months.

    Paragon Real Estate Group
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    Listings Accepting Offers
    The upper chart tracks the number of SF home listings accepting offers over the past 25 months; the lower tracks the percentage of listings accepting offers (going under contract). Accepted offer activity is the most current statistic available as to the heat of the market. Last spring, the March and April market was super-charged by the double tax credit expiring on 4/30/10 (the market then crashed in May), but this spring it’s just as strong, with no tax credit, and reduced inventory. As a percentage of listings going under contract, the last 3 months are as strong or stronger as any in years. At this point, we see no signs of it declining significantly in May 2011. (Knock on wood)

    Paragon Real Estate Group
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    Homes $1,000,000 & Above
    The top chart shows half the reason why the median sales price plunged in January and February: there were simply drastically fewer high-end home sales closing (a not unusual dynamic reflecting the holiday season market). In February, per the lower chart, the number of high-end SF homes accepting offers rebounded (and has stayed high), which began to be reflected in March’s sales numbers. There is a 4 to 8 week lag between accepted offers and closed sales. Low inventory is an issue for higher-end home listings as well: it is currently 26% below last year’s inventory.

    Paragon Real Estate Group
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    Homes for Sale
    The dark red columns show the number of listings active at any time during the month; the pink columns show those active on the last day of the month. Inventory has remained low this spring, especially when compared to buyer demand. The number of active SF listings on April 30th was 16% below that one year earlier. The number of city home sales would almost certainly be higher if the inventory of homes for sale wasn’t so constrained. This has also led to a more competitive environment for motivated buyers considering appealing, well-priced homes.

    Paragon Real Estate Group
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    Months Supply of Inventory (MSI)
    (For houses and condos) High demand/low inventory means very low MSI statistics. It is as low as it has been in years, certainly since the market adjustment that occurred in September 2008. (The low April 2010 MSI reflects the frenzy to get offers accepted before the double tax credit expired on 4/30/10.) The lower the MSI, the stronger the market. Typically, under 3 months of inventory would be considered a “seller’s market.”

    Paragon Real Estate Group
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    Average Days on Market (DOM)
    One more statistic indicating a market heating up. April’s days-on-market figure for San Francisco houses and condos accepting offers is well below any for the year prior.

    Paragon Real Estate Group
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    Distress Home Sales (REO & Short Sales)
    As a percentage of sales (not shown in these charts), SF distress home sales (bank-owned and short sales) soared in January and February to their highest levels ever (24% and 26% respectively). This is another reason why the overall median sales price plunged in these months. However, in March the percentage declined to 21%, and in April still further to 18%. In the charts below, we see that the absolute number of city distress sales hit its high mark in March before dropping significantly in April. The number of active distress listings has been declining since November, but compared to regular homes, these listings take much longer to work their way from active to under contract to close of escrow. Because dealing with banks on these deals is about the most complicated and aggravating experience in real estate. (A lot of these deals fall though.)

    Paragon Real Estate Group
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    Distress House Sales by Neighborhood
    There are two types of distress sales, the bank-owned sale typically pursuant to a foreclosure (often in distressed condition) and short sales, where lender has to agree to a reduction on the mortgage owed for the sale to close (usually not in distressed condition). In the chart below, the red and dark gray portions of each column indicate the respective numbers of distress house sales and regular home sales by neighborhood. Districts 10 & 3, running across the southern boundary of the city, Bayview to Oceanview, make up 60% of all distress house sales (135 in 6 months). In all other areas, the percentage of distress house sales is much less and they have had much less impact (or even no impact) on general values.

    Paragon Real Estate Group
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    Distress Condo Sales by Neighborhood
    The red and dark gray portions reflect the numbers of distress and regular condo sales respectively. The area hit most dramatically by distress condo sales is the greater South of Market area (in District 9), where most of the big new condo developments went up in recent years. There were 98 distress condo sales there in 6 months, making up almost 50% of the city’s total. Many of the other neighborhoods with large numbers of condo sales were barely affected by bank-owned and short sales.

    Paragon Real Estate Group
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    Mortgage Rates
    As seen in this 3-month chart of 30-year mortgage rates from Bankrate.com, interest rates have been declining recently and continue to be at historically extremely low levels. This has a huge impact on the cost of home ownership.

    Paragon Real Estate Group
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    Home-Buyer Demand Kicks into a Higher Gear April 2011 – Update on San Francisco Real Estate

    Case-Shiller Index results for January have recently been published with news of a continuing fall in home values in the United States and most of its metropolitan areas. According to Case-Shiller, home values in the San Francisco Metro Area (5 counties with wildly different markets) have continued to fall – the kicker being that C-S determined the total decline over the past 12 months to be a whopping 1.7%. (January sales reflect accepted-offer activity in November-December, so the data is already 3-5 months old.)

    Even the most competent and experienced agent, concentrating on a single market area, seeing virtually every home available and sold, would be hard pressed to estimate the fair market value of any given house – what one reasonably knowledgeable, willing and able buyer would pay for it – within less than a 5% range of value. To those of us in the market day in and day out, prices have appeared relatively stable in San Francisco over the past 20 – 24 months (ever since the big decline of late 2008/ early 2009). It also appears that the employment situation is improving and that optimism regarding the general direction of the economy is growing, which if true, and if it continues, will play a large role in future market conditions.

    It may be that home values are falling in the country, state and greater Bay Area – that is beyond our competence to assess – but in San Francisco, 2011 has seen a surge in home-buying demand, and a resultant change in the supply and demand equation. If it continues, it is unlikely to result in a further decline in values. Indeed, the recent changes in market dynamics would typically start to produce an upward pressure on prices. There are many reasons why we do not expect a “double dip” in San Francisco values, reasons which were explored in last month’s market update. Time will tell what the future holds – price declines, increases, stability – but in the meantime, here is a look at recent activity.

    Statistics are generalities, subject to fluctuation due to a variety of reasons. Sales not reported to MLS are not included in this analysis. All information herein is derived from sources deemed reliable, but may contain errors and omissions, and is not warranted. All numbers should be considered approximate.

    SF Homes Accepting Offers
    The number of listings accepting offers in March dramatically accelerated and was comparable to the activity in April 2010, when buyers rushed to take advantage of the double US and CA home-buying tax credits. And if inventory was higher, the number of accepted offers would almost certainly have been higher as well. Even if we adjust March’s figure down by 5-6% to reflect deals that will fall out of escrow in future weeks, it was still the second strongest month in terms of listings going into contract in well over 2 years – with lower inventory, no tax credits and a very large number of rainy days.

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    Percentage of SF Listings Accepting Offers (by Month)
    Over a 2-year period: high buyer demand plus relatively low inventory gave March a very high percentage of home listings accepting offers. March’s figure may be adjusted down by 3 – 4 percentage points to compensate for deals that will fall through in coming weeks, but it would still remain among the highest percentages of recent years.

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    Percentage of SF Listings Accepting Offers (by Quarter)
    Over a 3-year period: The first quarter of 2011 achieved the highest percentage of home listings accepting offers in 3 years, exceeding even spring 2008, when the market in many of SF’s neighborhoods was still peaking.

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    SF Homes for Sale
    Though beginning to climb, the inventory of homes for sale in the city remains relatively low, especially as compared to demand. We will see if early spring sees the typical surge in new listings. If it does, it will probably feed a further increase in sales.

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    Months Supply of Inventory (MSI)
    MSI measures how long it would take to sell the current inventory of homes for sale at current rates of market activity. The lower the MSI: the higher the demand and the stronger the market. March 2011 saw the lowest MSI in well over 2 years. For houses, the strongest market segment, the MSI was a very low 2.2 months; for condos, 2.4 months, for TICs and 2-4 unit buildings, 4 months and 3.9 months respectively. For distress home sales (bank-owned properties and short sales), the MSI was an incredibly low 1.8 months (but these deals have a high fall-through rate). An MSI under 3 months would typically be considered a “sellers’ market.”

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    Average Days on Market (DOM)
    Average days-on-market measures the number of days between going on market and acceptance of offer (for those listings that accept offers). It is a blend of those homes that sell relatively quickly (actually the majority of sales) and those that go through multiple price reductions to ultimately sell after months on the market (which raises the average significantly). Average DOM in March was as low as it has been for years.

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    SF Home Sales
    The number of sales usually falls dramatically in January and February, reflecting the holiday season slow-down in listing and buyer activity. (Sales are 4-8 weeks behind accepted-offer activity.) March began to reflect the acceleration in the market that began in mid January.

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    Median Sales Price for SF HOUSES
    January and February usually show a big drop in median price, again reflecting the changed dynamics one sees during the holiday season (the higher end of the market checks out and distress sales increase as a percentage of sales due to ordinary sellers pulling their homes off the market). In March, there was an increase in the median sales price of SF houses to $768,000 – higher than the average median of $734,000 over the past 13 months – reflecting offers accepted in mid-January and later. If we strip out distress sales, March’s median house sales price rises to $840,000. Remember: monthly fluctuations in median price are generally meaningless – until one sees an established trend up or down over an extended period of time.

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    Average Dollar per Square Foot for Condos Sold
    Jogging up and down over the past 2 years, but reflecting a basic stability. March 2011 increased over the previous 3 months and at $611/sqft was a tad over the average of $599/sqft for the past 25 months. The median condo sales price in March was $635,000, which is a mix of the median price for distress condo sales ($390,000) and the median price for regular condo sales ($725,000). Again, monthly fluctuations are generally meaningless until reflected in an established trend over an extended period of time.

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    SF Luxury Homes Accepting Offers
    The luxury home market, defined in this chart as homes $1,500,000 and above, also accelerated in February and March. The months’ supply of inventory for luxury homes was a very low 2.7 months in March.

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    SF Distress Home Sales
    March saw an increase in the number of distress homes – bank-owned properties and short sales – to its highest level ever, adding up to about 20% of total sales. Distress sales often take much, much longer to close – and indeed, probably about 25 – 30% of accepted offers on distress home listings fall out of escrow and never close at all due to their difficulties – so a fair number of these sales probably went into escrow in late 2010. Though distress sales now occur everywhere in the city, they continue to be clustered in the less affluent neighborhoods and the lower price ranges. So far, they have not affected the market dynamics of many of the more affluent areas of the city. Of the 94 distress sales in March, 39 were houses and 49 were condos, with the remainder being 2-4 unit buildings. San Francisco still has a much lower rate of foreclosures and distress sales than California or the greater Bay Area.

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    Distress Home Listings Accepting Offers
    The deal fall-through rate is much higher for distress home transactions, so the number for March – a very high 150 units – will certainly decline over the coming weeks, but March still showed a large acceleration of distress home deals going into contract. Even more interesting is that the median LIST price of distress homes accepting offers fell dramatically in March to $389,000 – a huge drop from any of the last 24 months (18% below February’s) – while the median list price for non-distress homes ticked UP to its second highest point in 10 months. The SF markets for distress and non-distress homes seem to be going in different directions, an unusual disconnect – and it may simply be a temporary anomaly. In any case, March’s surge in distress home listings going into contract appears to have been powered by very, very low list prices.

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    Median Sales Price: Distress vs. Non-Distress Listings
    The hash-marked bars show the median price of distress home sales, and the solid bars, the median price of regular home sales. Not to overstate it, but In some ways these are 2 different markets with a separate group of buyers willing to deal with the aggravation, condition, and to some degree, location, of distress home sales in order to get a deal. Interestingly, there has been a general trend downward in the median price for distress home sales recently – $450,000 in March – and a mild trend upward in the median price for non-distress homes ($771,000 in March). Not enough to make a concrete determination of trends yet. Distress home sales play a significant role in pulling down the overall median sales price (for ALL sales), and yet in many areas of the city, typically the more affluent neighborhoods, distress sales are not at this time a significant percentage of transactions.

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    Mortgage Rates
    In this 3-year chart from Bankrate.com, one sees the increase from the historic lows of last autumn, however rates are still very low as compared to any year prior to 2009.

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    A double dip for San Francisco real estate?

    Note: You may skip the analysis below and jump straight to the market dynamics charts following.

    For the past 2 years, new predictions for additional, significant (10-30%) price declines – the so-called double-dip in home values – have been made on an almost weekly basis. The reasons: turmoil in financial markets, foreclosures, shadow inventory, debt crises, jobs, China, oil, the groundhog saw its shadow. For many of these pundits, analysts and bloggers, the market is always bad and about to get worse. Good stuff for headlines. Frankly, it’s a little disturbing how many people take pleasure in, even gloat over, the idea of everything always getting worse. (See the comments section on any online real estate article.)

    That is not to say they’re never right, much less those real estate agents who believe it’s always “the best time to buy.or sell.” What’s missing most often from the articles, blogs and predictions is context; in-depth market expertise; and understanding of location, inventory, seasonality and how buying trends can change (without necessarily affecting values). Instead, typically a single statistic, poorly understood, is seized upon to trumpet a conclusive unified theory of US, California, Bay Area or SF markets.

    What will happen tomorrow in the San Francisco home market? Don’t know. Has there been a significant decrease in values since prices stabilized after the big decline of late 2008? No. Is a double-dip possible? Yes, the future is full of unknowns.

    But is a double-dip likely?

    Ever since the large drop from 2007-2008 peak values – 15% – 25% in most of the city’s neighborhoods – median prices in SF have been generally stable: indeed, median prices for both houses and condos in 2009 vs. 2010 were virtually unchanged. Which suggests we may have hit the bottom of this cycle. Also, San Francisco, especially its better neighborhoods, has a miniscule rate of foreclosures when compared to the state and Bay Area overall. Though some of our least affluent neighborhoods were badly hit, the predicted tsunami of foreclosures never arrived, and it seems unlikely to show up now.

    MONTHLY FLUCTUATIONS IN MEDIAN PRICE ARE MEANINGLESS.

    Even in a stable market, median prices will jog up and down by 1-5%, because there are a number of factors besides value which affect them in the short term. It is what occurs consistently over the longer term that indicates a verified market trend. The computer generated algorithm one constantly hears about, the Case-Shiller index, may be the best available, but is still a very blunt analytical tool for something as diverse as the values of specific (relatively unique) homes in specific (relatively unique) locations. Yet it’s treated as a precision measurement – “According to Case-Shiller, home values fell [exactly] 3.7% last month” – when, at minimum, a 5% +/- margin of error should be assumed.

    Consider this: the Case-Shiller index for the “San Francisco Metro Area” comprises 5 counties, encompassing wildly different markets from Pacific Heights to Martinez, Hillsborough to the Tenderloin, areas with 50%+ foreclosure rates and those with less than 3%, but every month, a percentage change calculated to one tenth of one percent is delivered as generally applicable to all.

    To be repeated endlessly in articles and blogs as gospel truth.

    If the market is indeed strengthening, instead of being on the cusp of another crash, what might be the reasons?

      1. A growing suspicion that, 2 ½ years after the crash, the SF market has bottomed out price wise. If true, that makes it an excellent time to invest. 

      2. Indications that consumer optimism about the economy has finally turned a corner. Nothing impacts market dynamics more.

      3. Very low interest rates that have recently started to rise. (Very motivating for buyers.)

      4. Reduced inventory: among other things, the city’s flood of new condo units over the past decade is slowing to a trickle, and that will not change for years.

      5. An influx of young, new buyers, from Bay Area companies such as facebook, Google, Apple, Twitter and Zynga, who strongly desire to live in San Francisco. And who suddenly have a lot of money.

      6. The stock market: SF buyers are relatively affluent (by necessity considering our prices); when the stock market climbs considerably, as it has, they benefit most.

      7. That old canard: San Francisco is one of the most beautiful cities in the world. It is only 7 miles by 7 miles and cannot grow larger. SF is the center for flourishing high-tech, biotech and financial industries in one of the most educated and affluent areas on the planet. Our market has always been different: it usually declines last and recovers first.

     

    Statistics without informed context are worthless. (“There are 3 kinds of lies: lies, damned lies and statistics.”) Below are charts of market activity in San Francisco, as reported to MLS, within the context of longer term trends. They look at the SF home market by 9 different statistical parameters. The median price charts and the distress sales chart show long term stability. Every single one of the other market dynamics charts describes a strengthening market.

    Still, predicting the future is tricky. And it’s still too early to identify a lasting, definitive trend. As always, it is up to you to reach your own conclusions and act accordingly.

    Statistics are generalities, subject to fluctuation due to a variety of reasons. Sales not reported to MLS are not included in this analysis. All information herein is derived from sources deemed reliable, but may contain errors and omissions, and is not warranted.

    Paragon Real Estate Group
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    Percent of SF Listings Accepting Offers
    Due to strong buyer demand and relatively low inventory levels, February saw the highest percentage of listings accepting offers in years. This chart is for SF house and condo sales.

    Paragon Real Estate Group
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    Months’ Supply of Inventory (MSI)
    Months’ Supply of Inventory measures how long it would take to sell the existing inventory of homes for sale at current rates of activity. The lower the MSI, the stronger the market. This chart measures MSI for SF houses and condos. At 2.6 months of inventory, February 2011 saw the lowest MSI in years.

    Paragon Real Estate Group
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    SF Homes for Sale
    The number of homes for sale remains relatively low even for February.

    Paragon Real Estate Group
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    New Listings Coming on Market
    The number of new listings coming on market remains relatively low.

    Paragon Real Estate Group
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    Average Days on Market
    Days on market measures how long it takes a listing to accept an offer. The average is often distorted by a relatively small percentage of listings that take a very long time to sell. Over 60% of SF home listings accepting offers actually do so within 7 to 30 days. In any case, February’s figure was among the lowest in the past 2 years.

    Paragon Real Estate Group
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    Distress Home Sales
    This chart shows the number of bank-owned sales and short sales of SF condos and houses. For the past 20 months that number has generally fluctuated between about 60 and 70, and has shown no signs of dramatically increasing. Most of these sales occur in the lower price ranges and often in the least affluent neighborhoods — hit hardest by foreclosures. The more affluent SF neighborhoods have not been significantly affected by distress sales.

    Paragon Real Estate Group
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    Median Sales Prices for 2-3 BR Houses
    This chart shows the median sales price for 2 & 3 bedroom houses in SF, by quarter, over the past 3 years. After the big decline of late 2008/ early 2009, the median price has stayed within about a 5% margin for 7 quarters. The median for the 4th quarter of 2010 was virtually the same as that of 3 other quarters, with the other 3 a bit up or down. The chart shows a remarkable stability in median sales price over a long term period of sales.

    Paragon Real Estate Group
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    Median Sales Prices for 2 BR Condos
    The same median sales price stability shown in the previous chart for SF houses also shows up for 2 bedroom condos in San Francisco. Again, the big decline in late 2008, and the relatively minor ups and down since. The median price in the 4th quarter of 2010 was virtually the same as 3 other quarters, with the other 4 quarters being slightly lower.

    Paragon Real Estate Group
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    Sales Price to Original List Price by Price Reductions
    The darker bars show the percentage of sales price to original list price of houses that accepted offers without a price reduction. These homes typically sold quickly and, on average, for a tiny bit over the asking price. This reflects the majority of houses accepting offers in any given month. The lighter lines show the discount to original list price when a property stays on the market longer and goes through one or more price reductions. Typically, another 30 – 40% of listings expire without selling due to being perceived as overpriced.

    What Costs How Much Where in San Francisco

    Low, High & Median Sales Prices & Average Dollar per Square Foot
    By Neighborhood, Property Type & Bedroom Count
    2/16/10 – 2/15/11

    The charts below track San Francisco MLS home sales by price, size and average dollar per square foot ($/sq.ft.) for the year ending February 15th. Only homes listed as having at least 1 parking space are included.

    Within the charts, neighborhoods are listed by median sales price. “Avg Sq.Ft.” signifies the average size in square feet for all those units that reported square footage. If a price is followed by a “k” it references thousands of dollars; if followed by an “m”, it signifies millions of dollars. “REO” refers to the sale of bank-owned properties (typically pursuant to foreclosure).

    See the notes below the charts for important context to the analysis. Depending on your screen settings you may wish to adjust your viewing “zoom level” to below 100%.

    * San Francisco TIC sales have been dramatically affected in the last few years by changes in financing conditions and condo conversion rules. Recently, more TIC listings expire without selling than actually sell. The TICs that do sell are generally perceived as particularly excellent values when compared to condos of similar size, location and quality. That is, a TIC usually has to stand out as a great value to attract attention from buyers, and the TICs sold are cherry-picked from the general inventory. Because the number of sales is low in the TIC chart, the resulting statistics are less reliable as indicators of general trends or comparative neighborhood values. TIC listings commonly do not publish square footage figures, so no $/sq.ft. analysis is possible.

    The MEDIAN SALES PRICE is that price at which half the properties sold for more and half for less. It may be affected by “unusual” events or by changes in buying trends, as well as by changes in value.

    Low Price & High Price are self-explanatory, but the low price might be for a property that needs significant work just to be habitable. Within a single neighborhood, it is possible for the low and high prices to be millions of dollars apart – the difference between a small, distressed, bank-owned 2-bedroom condo and a large, pristine 2-bedroom penthouse with spectacular views.

    DOLLAR PER SQUARE FOOT is based upon the home’s interior living space and does not include garages, storage, unfinished attics and basements; rooms and apartments built without permit; decks, patios or yards. These figures are typically derived from appraisals or tax records, but can be unreliable, measured in different ways, or unreported altogether: thus consider square footage and $/sq.ft. figures to be very general approximations. All things being equal, a house will have a higher dollar per square foot than a condo (because of land value), a condo will have a higher $/sq.ft. than a TIC (quality of title), and a TIC’s will be higher than a multi-unit building’s (quality of use). All things being equal, a smaller home will have a higher $/sq.ft. than a larger one.

    The AVERAGE SIZE of homes of the same bedroom count may vary widely by neighborhood: for example, the average size of a 4-bedroom house in Pacific Heights is 38% larger than one in Noe Valley; and the average of a Marina 2-bedroom condo is 25% larger than one in South Beach. Besides the affluence factor, the era and style of construction often play large roles in these disparities.

    Some neighborhoods are well known for having additional ROOMS BUILT WITHOUT PERMIT, such as the classic 1940′s Sunset house with “bedrooms” and baths built out behind the garage. These additions often add value, but being unpermitted are not reflected in $/sq.ft. figures.

    Many aspects of value cannot be adequately reflected in general statistics: curb appeal, age, condition, views, amenities, outdoor space, “bonus” rooms, parking, quality of location within the neighborhood, and so forth. Thus, how these statistics apply to any particular home is unknown.

    In real estate, the devil’s always in the details.

    February 2011 Newsletter

    SF House & Condo Listings Accepting Offers
    Activity by Week: sales activity really picked up since mid-January, with the last week of the month showing the highest number of accepted offers of any week in the past 6 months. In number of listings accepting offers, the full month of January 2011 was up 28% from January of 2010 and up 76% from January 2009 (the market’s nadir). 2010 Overview Analysis

    Paragon Real Estate Group
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    Percentage of House & Condo Listings Accepting Offers
    Charted by Week: With buyer demand increasing and relatively low inventory levels, the last week of January saw a spectacular rise in the percentage of listings accepting offers in San Francisco.

    Paragon Real Estate Group
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    SF Home Listings for Sale
    The dark red columns show the number of listings for sale at any time during the month; the lighter columns show the number of active listings on the LAST day of the month. Except for December 2010 and December 2009, January 31st saw the lowest number of active listings on the market for the last 25 months. (This chart shows the last 13 months.) Inventory levels should climb dramatically as we move toward spring.

    Paragon Real Estate Group
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    SF New House & Condo Listings
    Charted by Week: new listings have been arriving on market in relatively moderate numbers, especially as compared to the beginning of the autumn 2010 season in mid-September. It appears that the number of new listings is not currently meeting buyer demand.

    Paragon Real Estate Group
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    SF Median Home Sales Price
    For houses, condos, TICs by Month: as is typical in January, the median home price dropped. This is for 2 main reasons: firstly, for whatever reasons, a greater percentage of buyers of more expensive homes check out once the holiday season begins in mid-late November, and this affects the median sales price for the subsequent months of closings. Secondly, while many sellers pull their listings from the market for the holidays, banks do not: bank-owned home sales thus climb as a percentage of sales, and since bank-owned sales are heavily clustered at the lower price points, that drags the median price as well. January’s median sales price was virtually the same as in January 2010, which is in keeping with the overall stability of median prices in the City over the past 7 quarters. Indeed, despite jogging up and down on a monthly basis, comparing 2010 with 2009, the overall median sales prices for both houses and condos in SF were virtually unchanged. More on SF Median Prices

    Paragon Real Estate Group
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    Months’ Supply of Inventory (MSI)
    For SF Houses & Condos by Month: except for April 2010 (with its tax credit crush of sales), the MSI in January was the lowest for the last 13 months, and signficantly below the level of January 2010. If we look at just houses, the strongest selling property type, the MSI drops to a very low 2.8 months of inventory. MSI for bank-owned and short sale homes in SF dropped to an even lower 2 months of inventory, signaling a very hot market for these typically lower-end “distress sale” homes.

    Paragon Real Estate Group
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    SF Distress Home Unit Sales
    (By Month) In this chart, distress sales are defined as both bank-owned (REO) property sales and short sales (the lender must agree to a reduced payment on the outstanding loan for the sale to close), though one should note that these are somewhat different animals. In short sales, the seller still lives in the home and it usually does not look “distressed” as is often the case with bank-owned homes. (Short sales can be very time consuming and aggravating, due to the requirement for lender approval.) The monthly number of distress sales has stayed relatively stable in 2010, and though this January’s number was higher than that of January 2010, as a percentage of total sales it was virtually unchanged year over year. As seen in a later chart, distress sales are mostly clustered in the lower price ranges of home sales in the City.

    Paragon Real Estate Group
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    Percentage of Distress Sales by District
    The top chart shows the percentage of distress sales (both REO & short sales) by quarter in the less affluent Realtor districts of 3 & 10 (Bayview across to Oceanview), while the lower chart shows the percentage of such sales in the affluent districts of 5 (Noe/ Castro/ Haight) and 7 (Pacific Heights/ Marina). The cross-hatched portion of the column reflects the number of distress sales. In SF, the whole phenomenon of distress sales largely began in late 2008/ early 2009. As one can see, the less affluent districts 3 & 10 have been hugely affected, with the percentage of distress sales running 38% – 45% in the past 4 quarters. The more affluent districts 5 & 7 have been relatively unaffected by distress sales, with the percentage usually running in the 3 – 6% range (and those predominately in the lowest price ranges for homes in those neighborhoods). In both charts, the percentage of distress sales in the 4th quarter of 2010 was the lowest for the year.

    Paragon Real Estate Group
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    2010 Bank-Owned (REO) Home Sales by Price Range
    In 2010, homes below $650,000 were much more dramatically affected by foreclosures and the resulting bank-owned home sales than those at the higher price ranges. Under $650,000, the percentage of REO sales is 29% for houses (and then, mostly in the less affluent areas of the city), and 13% for condos. Once above $650,000, the percentage drops to a relatively negligible 3-4% of sales. Above $1 million, it falls to well below 2%, not enough to impact values in these price ranges and the neighborhoods one finds them.

    Paragon Real Estate Group
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    Median Price for SF Distress Sale Homes
    Reflecting the fact that most distress sales (both REO & short sales) occur at the lower price ranges, the median price for such sales in the City has been generally running in the $450,000 to $500,000 range, well below the overall median sales price for SF homes (approximately $700,000 when including distress sales; approximately $750,000 when not).

    Paragon Real Estate Group
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    Homes Sold vs. Listings Expired or Withdrawn
    The green bars delineate closed sales per month and the purple bars delineate listings expired and withdrawn. While the market has definitely heated up since mid-September, a large number of listings still expire or are withdrawn without selling, typically due to being perceived as overpriced. (December is usually the peak month for expired/ withdrawn listings.) If not priced fairly, as defined by the market, the home typically won’t sell, or even attract offers.

    Paragon Real Estate Group
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    Mortgage Rates
    For the past 12 months per Bankrate.com: interest rates have been climbing since their incredible lows in October, though they remain low by historic standards and are roughly comparable to where they stood 8-10 months ago. Many pundits believe rates will continue to increase in 2011. Rate increases could affect the market in two totally different ways: buyers may pull out of the market as the cost of home buying increases, or buyers may rush into the market having come to the conclusion that prices have bottomed out, and they best move quickly before interest rates climb further. Needless to say, interest rates can affect the cost of home ownership very significantly (unless one is paying all cash): an increase of 1 percentage point is roughly comparable to paying a 10% higher purchase price.

    Paragon Real Estate Group
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    Mortgage Rates since 1971
    Here’s a good chart to put into context the recent rise in rates since last October.

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    Weekly Market Charts

    These charts track activity by week for the past 6 months through January 16, 2011 for SFDs, Condos, TICs & 2-4 Unit Buildings. The market is starting to wake up after the holidays.

    New Listings: Starting to accelerate after the big slow-down of late December.
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    Listings For Sale: Increasing slowly but still very low by general standards.
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    Listings Accepting Offers: Accelerating as the market warms up.
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    Percentage of Listings Accepting Offers: On a percentage basis, we’re back up over 5% (per week), which is among the highest percentages of the past 6 months. Of course, this is a function of both buyer demand (increasing) and inventory available (increasing, but still very low).
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    Interest Rate Chart from Bankrate.com: rates have significantly climbed from their 40-year lows, but at under 5% are still very low by historical standards.
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