San Francisco Real Estate Agent
San Francisco Real Estate Agent
“As one of the Bay Area’s largest construction firms, Webcor Builders provides a handy barometer of the region’s economic vitality.
The San Francisco company’s workforce, which topped 2,200 in 2008, has shrunk to about 1,200. But this year it plans to add about 500 workers, primarily skilled union tradespeople – many of the same folks who’ve been languishing on unemployment since the housing collapse and economic downturn began several years ago.
“Bottom line, 2012 will be a good year,” said Webcor CEO Andy Ball. “We had some economic recovery in 2011 but didn’t see the benefits of it. We started hiring within the past six months and definitely will continue to add jobs.”
Local companies across a range of industries sound a similar refrain: They are cautiously optimistic about this year’s economic prospects. And economists concur that the Bay Area is likely to experience moderate growth that outpaces that of the state and the nation – particularly good news, given Friday’s report of 200,000 jobs created in December nationally.”
“Overall for the Bay Area, I expect continued progress, somewhat faster than we saw in 2011,” said Jon Haveman, chief economist at the Bay Area Council. “It’s going to be uneven as it has been for at least the past year. There’s nothing out there that shows the economy ready to roar back again – except in the tech sector, which is booming.”
But this year, technology’s rising tide could boost other industries.
“The recovery will broaden a bit in 2012; it was narrowly concentrated in technology in 2011,” said Stephen Levy, director of the Center for Continuing Study of the California Economy. “The tech surge is so large that the income generated there will spread to other sectors. That’s traditionally what happens once your leading growth sector gets going fast enough.”
The SF Controller’s Office just released their “Economic Barometer” report for October. As seen below, on almost all criteria the trend is marked “positive.” Of course, the significant exception in the report is “Median Home Sales Price,” the outlook of which they mark as “negative” because it went down by 2.6% year over year. But the change in median sales price is more a factor of buying trends/ seller motivation/ inventory trends, than it is an indication of any decline in value in the majority of our neighborhoods. Indeed, some of our neighborhoods are showing distinct, if preliminary, signs of increases in value.
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The full report is here: http://www.sfcontroller.org/Modules/ShowDocument.aspx?documentid=2822. You can download the PDF file if you like.
At its Tuesday meeting, the Federal Reserve reaffirmed its pledge to keep interest rates low and opted to not take any new measures to bolster the economy, saying the economy has already been showing signs of “expanding moderately.” The economy has shown some improvement in employment and consumer spending in recent weeks. However, the Fed cautioned at Tuesday’s meeting that the “housing sector remains depressed.”
In reaffirming a pledge it first issued in August, the Fed said the federal funds rate — which serves as a benchmark rate for many types of loans, including mortgages — will remain near zero until mid-2013. The Fed said it will continue with plans to move $400 billion of its bond portfolio into longer-term securities, which ultimately could send long-term interest rates even lower.
Overall, the Fed said the economy has steadily been showing signs of improvement and is on track to post its strongest gains of the year in the final months of 2011. But the Fed said that the European debt crisis will continue to pose a major threat to recovery with “strains in global financial markets continue to pose significant downside risks.”
Source: “U.S. Fed Leaves Rate Unchanged, Says Economy Expanding Moderately,” Bloomberg News (Dec. 13, 2011)
These are a few excerpts from a rather long article in November 5th edition of The Economist, “Housing and the Economy: Rising from the Ruins”. It joins what seems to be a growing, but certainly not universal consensus (per the recent JP Morgan and Hanley Wood analyses) that even nationally – much less San Francisco, which has been performing much better than most markets – speaking to a turning point has been reached in the housing market: prices have bottomed out, buy vs rent calculations have improved dramatically, virtually no new housing having been built (even as population grows), a light discerned at the end of the tunnel on the foreclosure crisis, and so on.
The Economist was virtually the first major business publication to foresee the housing bubble (actually years in advance per their world home values index), and is not known for starry-eyed optimism or boosterism regarding housing markets.
“There are two things everyone knows about American economic recoveries. The first is that the housing sector traditionally leads the economy out of recession. The second is that there is no chance of the housing sector leading the present economy anywhere, except deeper into the mire….Home prices languish near post-bubble lows, over 30% below peak….Housing markets are far from healthy. Yet current pessimism seems overdone. A turnaround in sales, prices and construction may be closer than many imagine.
The potential for a strong housing recovery lies in the depths of the bust… [which] dragged new construction to unprecedented depths. At the current rate, fewer homes will be added to the housing stock this year than in any year since records began in 1968. America therefore has only a minor problem of excess housing supply…Rental markets…look far stronger…Vacancy rates in some cities are strikingly low…[for instance] 3.6% in San Francisco—which translates into rising rents…Rising rents help housing markets heal…by encouraging renters to consider buying…Rental market strength is also rousing a long-dormant building industry. New housing starts rose 15% from August to September…
The convalescence [of the housing market] may be complicated…Yet once the housing sector finds its footing it may quickly gain momentum…Such hopes for housing would smack of an effort to reanimate a corpse, had the bust not so far outpaced the boom. But a turnaround now seems probable on many measures.”
Market Dynamics by week for the past 6 months through October 23, 2011 for San Francisco houses, condos, TICs and 2-4 unit buildings.
Listings Accepting Offers: The week ending 10/23/11 had 155 listings accepting offers, but that number will go down as some of these deals fall through – probably to the low 140’s. Still, that is well above the 100 listings that accepted offers in the corresponding week in 2010.
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New Listings Coming on Market: The number of new listings since Labor Day has been well below the number last year. Insufficient new inventory is not meeting buyer demand.
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Listings for Sale: Inventory continues to decline and still reflects the situation for much of this year. Inventory is very low. At this time last year, there were almost 700 more listings on the market. On a percentage basis there were over 35% more listings on the market.
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Percentage of Listings Accepting Offers (going under contract): the percentage for the week ending 10/23/11 will probably decline to somewhere in the 7.7% range from the 8.4% showing today as it is adjusted for deals that fall through. Still, that would be among the highest rates we’ve seen in many years – last year at this time, the percentage was about 4%. Strong demand + very low inventory = very high percentage of listings accepting offers.
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Median House Sales Price: Weekly fluctuations in median price are not particularly meaningful, but for what it’s worth, the last 3 weeks have been above and sometime far above the average median for the past 6 months ($712,000). The week ending 10/23/11 saw a median house price of $749,000; the week before saw $841,000. (But frankly, we prefer to look at median prices for entire quarters or longer periods, as opposed to individual weeks.)
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Units Sold: Last year, reflecting the huge burst of new inventory in mid-September, the week corresponding to last week saw a huge burst of closed sales (150 closings). That compares to a number for the week ending 10/23/11 that will probably end up in the mid-nineties when all sales are entered into the system. Low inventory is certainly constraining the number of sales, and appraisal issues are probably increasing the number of deals that fall through now.
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Expired/ Withdrawn Listings: For about every 2 listings that sell, another listing expires or is withdrawn without selling, usually due to being perceived as overpriced. Many of these expired listings will be eventually re-listed at a lower price and ultimately sold – though they probably would have sold for more money if more aggressively priced to begin with.
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Dr. David Kelly is the Chief Market Strategist for J.P. Morgan Funds, and David M. Lebovitz is a Market Analyst on the J.P. Morgan Funds U.S. Market Strategy Team. They’ve just issued a 12-page report on the US housing market, titled ” Housing: A time to buy.” Below is an excerpt from the report’s Foreword:
“With the debt crisis in Europe still unresolved and economic growth in the U.S. sluggish, the capital markets continue to exhibit elevated volatility. However, this does not mean that no investment opportunities exist. Although the U.S. housing market remains extremely depressed, we believe that given current valuations and demographic dynamics, now may be the time to consider an investment in housing.
Few financial manias in history have had as devastating an economic impact as the American real estate bubble of the 2000s. From soaring boom to dismal and continuing bust, it has shipwrecked the financial plans of millions of American families, led to an absolute collapse in the construction industry and, through the magic of modern financial leverage, led to the biggest global recession since World War II. A few years ago, most Americans believed that there was no better long-term investment than owning your own home. Today, many regard home ownership as a financial ball and chain.
But while the change in attitudes has been dramatic, so has the change in the numbers themselves. Years of falling prices and falling mortgage rates have made home buying more affordable than it has been in decades. Moreover, home prices look downright cheap, not only from the perspective of mortgage rates and income, but also relative to the cost of renting or the cost of constructing a new home.
Meanwhile, continued population growth, combined with lender and borrower caution, has increased pent-up demand. While the inventory of homes both on the market and in foreclosure remains high, minimal home building over the past three years is gradually eating into this stockpile, a process that could quickly accelerate with any pickup in demand. Home prices play a crucial role in determining household wealth and shaping consumer confidence. In addition, any revival in home building could provide a much-needed boost to overall economic growth and employment. However, beyond the implications for the macroeconomy and financial markets, the numbers on housing have an important message for American families today, and particularly younger families setting out on life’s great adventure: Five years ago, at the peak of the home-buying euphoria, it was emphatically a time to rent. Today, when home ownership is depreciated more than ever before, the numbers tell us it is a time to buy.”
A market trends overview by the Paragon Real Estate Group
for San Francisco Home Sales of $1,500,000 & Above
October 2011 Update
It’s not unusual for the high-end home market to slow down during the summer months, just as it does to a greater degree during the holiday season from mid-November to mid-January. However, this year, though 3rd quarter activity was generally comparable to last year’s, considering how hot the second quarter of 2011 had been, the luxury house and condo market slowed down more than expected. This is probably due to the extreme volatility in the financial markets and the huge concerns regarding the European debt crisis experienced over the summer. More than other market segments, the buyers and sellers of luxury homes are keenly attuned to such events and have a tendency to put large, new financial endeavors on hold while waiting for things to shake out or stabilize.
It is also true that in the spring, it appeared that high-tech IPOs would continue to create large amounts of new wealth in the Bay Area, and many of these IPOs have since been put on hold. Presumably, this is a temporary situation.
Even with the cooling off from the very hot second quarter, strong demand remains for the best properties — best location, pride of ownership, well prepared for showing and well priced. Activity did pick up in the latter part of September, which may signal the beginning of a strong fourth quarter.
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Sales Price to List Price Percentage, Days on Market,
Price Reductions & Expired Listings
Most of the luxury homes that do sell, sell quickly at very close to asking price. Those going through price reductions spend a much longer time on market and sell at an average discount of 18% off original list price. And many listings still expire without selling, usually because the market deems them overpriced.
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Luxury House & Condo Sales
Sales in the third quarter fell substantially from the second quarter — a not uncommon drop from spring to summer sales seasons. The number of sales was comparable to third quarter results in recent years. Sales close 4-8 weeks after offers are accepted.
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Listings Accepting Offers
While comparable to the 3rd quarters of 2010 and 2009, there was a large drop in both the number and percentage of luxury home listings accepting offers when compared to the second quarter of 2011, when we hit the highest points since 2008. Activity did pick up in the three weeks ending October 9th — those were the most active three weeks for luxury homes accepting offers since May.
This chart shows accepted offers by quarter.
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This chart shows the percentage of listings accepting offers by quarter.
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And this chart shows listings accepting offers by WEEK, from May through October 9th. One can see the pick up in activity that started in mid-September after a very slow August. This is the most current information we have regarding the heat of the market.
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Average Dollar per Square Foot
Dollar per square foot values, even in the high-end, vary widely from neighborhood to neighborhood. The absolute highest are typically paid for luxury condos in prestige buildings with staggering views. Remember that short-term fluctuations are relatively meaningless — they occur naturally since the “basket” of homes sold varies from month to month, quarter to quarter.
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Luxury Home Sales by San Francisco Realtor District
The older prestige neighborhoods running across the north of the city from Sea Cliff through Pacific Heights to Russian & Telegraph Hills still dominate sales, but high-end sales in the greater Noe Valley/ Castro/ Haight Ashbury district have soared since the late nineties, and luxury condos in new developments in South Beach, SOMA and Yerba Buena are also a major part of this market now. St. Francis Woods has been an enclave for sales of big houses for quite some time.
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Inventory of Luxury Homes for Sale
The number of new luxury home listings ticked up in September from the summer months, but was still well below that of September 2010. The same was true for overall inventory of high-end homes for sale.
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Months’ Supply of Inventory (MSI)
While not historically high at over 4 months of inventory, the MSI for luxury homes is running higher than that for all SF houses and condos, which in September was under 3 months (which is considered very low). Still luxury home MSI this past September dropped from the summer months and was well below that of September 2010. We expect it to drop further in October.
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Average Days on Market (DOM) Before Acceptance of Offer
Average DOM is about as low as it has been since 2008. Those luxury homes that are selling are selling relatively quickly.
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Luxury Home Sales vs. Listings Expired or Withdrawn
It’s not unusual for the number of expired listings to jump during the summer months and that is what happened in the third quarter. Still the third quarter 2011 had a much lower percentage of expired listings than the third quarters of 2010 and 2009.
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Unit Sales of Homes of $2,000,000 and Above
The second quarter saw a big jump to sales levels not seen since 2008, but in the third quarter sales dropped back to a more normal number. Paragon’s percentage market share in the $2m+ home segment increased by 50% year over year, and after 7 years in business, Paragon is now 1 of the 4 top brokerages for luxury home sales in the city.
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MEDIAN SALES PRICE is that price at which half the sales occur for more and half for less. It can be, and often is, affected by other factors besides changes in market values, such as short-term or seasonal changes in inventory or buying trends. Though often quoted in the media as such, the median sales price is NOT like the price for a share of stock, i.e. a definitive reflection of value and changes in value, and monthly fluctuations are generally meaningless. If market values are truly changing, the median price will consistently rise or sink over a longer term than just 2 or 3 months, and also be supported by other supply and demand statistical trends.
DAYS ON MARKET (DOM) are the number of days between a listing going on market and accepting an offer. The lower the average days on market figure, typically the stronger the buyer demand and the hotter the market.
MONTHS SUPPLY OF INVENTORY (MSI) reflects the number of months it would take to sell the existing inventory of homes for sale at current market conditions. The lower the MSI, the stronger the demand as compared to the supply and the hotter the market. Typically, below 3-4 months of inventory is considered a “Seller’s market”, 4-6 months a relatively balanced market, and 7 months and above, a “Buyer’s market.”
DOLLAR PER SQUARE FOOT ($/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.
Median and average statistics are generalities subject to fluctuation due to a variety of reasons (besides changes in value): how they apply to any specific property is unknown. Averages may be distorted by one or two sales substantially higher or lower than the norm, especially when sample size is small. Sales not reported to MLS – such as many new-development condo sales — are not included in this analysis. All figures should be considered approximate and are derived from sources deemed reliable, but may contain errors and omissions, and not warranted. We are happy to provide or direct you to the original data upon which each chart is based.
For the sale of San Francisco houses, condos, TICs and 2-4 unit buildings by week through 9/25/11, as reported to MLS.
Units For Sale: There were about 275 fewer homes (about 13% fewer) for sale in the week ending 9/25/11 as there were a year ago. Inventory remains very low, especially as compared to buyer demand.
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New Listings: The number of new listings coming on the market so far in September 2011 is down a whopping 29% from last year: over 250 fewer new listings this year. This is putting a large crunch on the market as compared to last year.
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Units Accepting Offers: The number of homes accepting offers in week ending 9/25/11 was up about 10% from last year. Inventory down, the number of new listings way down, but homes going under contract going up = a significantly stronger market.
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Percentage of Listings Accepting Offers: A relatively pure statistic of supply and demand. Last year, the percentage was 5% for the week ending 9/25/11; this year it’s about 7% (a historically very high percentage).
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Listings Expiring or Withdrawn from Market: very low.
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Listings Closing Escrow (Sold): September sales reflect July and August accepted-offer activity. September 2011 is running about the same as last year – albeit with much lower inventory levels. If inventory was higher, both the number of listings accepting offers and listings closing escrow would certainly be higher. Historically, closed sales should start picking up in the next couple weeks.
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“Although the U.S. housing market continues to struggle, many local markets are doing significantly better than the country as a whole, with some places virtually missing the housing bust altogether.
While shifts in home values are important in any market, it’s important for sellers to determine the length of time a property can expect to be on the market before it will be sold. The faster that homes sell, the faster an inventory backlog can be cleared, suggesting heightened demand and an upward trajectory in prices. Additionally, if a home is on the market for an extended period of time, it may may turn off prospective buyers and force sellers to accept less-favorable offers.
To find the cities where this trend is the most extreme, real estate website Zillow.com analyzed the numbers to identify the cities where homes sell the fastest, according to the median number of days on the market. The numbers presented here are representative of home sales between mid-April and mid-July 2011.”
Click here to read the rest of the article.
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