San Francisco Real Estate Trends for the SOMA, South Beach, Mission Bay & Yerba Buena Condo Market

The July 2011 Market Overview by the Paragon Real Estate Group

Generally speaking, monthly fluctuations up and down — especially of median price — are relatively meaningless unless continuing for an extended period of time. In real estate, the longer term trends, seen across a wide variety of statistical measurements, are the meaningful ones. This analysis, except where noted, does not include sales unreported to MLS, such as many of the new-development condo sales. 


Median Condo Sales Prices
For the past 2+ years, the median price of non-distress condos in the greater South of Market area of San Francisco has generally been oscillating between $625,000 and $700,000, while the median price for distress condos (bank-owned and short sales) has continued to decline. Median prices of condos of varied location, size, views and quality will naturally fluctuate up and down without being particularly meaningful as pertaining to changes in value — until the trend is consistent over the long term, minimally 3 to 4 quarters.

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Percent of Listings Accepting Offers
A good snapshot of supply and demand, though since this is only for sales reported to MLS, it does not include many new-development condo sales. The last 2 quarters have seen this percentage at its highest points in 3 years, reflecting strong buyer demand vs. a limited supply of condos for sale. The only period that comes close to this percentage of listings under contract (accepting offers) over the last 3 years was the run-up to the expiration of the double homebuyer tax credit last spring. The market typically slows down during the summer months — we shall see what happens this year.


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Average Dollar per Square Foot
Average dollar per square foot has been increasing for the last 2 quarters and is now at its highest level since 2008. It will be interesting to see if this trend continues in the second half of 2011.


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The New-Development Condo Market
The vast majority of new-condo construction over the past 15 years has been in this greater area. The 2008 financial crisis caused new condo construction to crash in SF, which has led to large declines in new-condo listings and sales. This has significant ramifications for the supply and demand dynamic and is a large factor in the heating up of the MLS resale market. Because of the time required for large new developments to be built, it will be years before this turns around.


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Months’ Supply of Inventory (MSI)
MSI has been bumping along in the range of 2 to 3.5 months of inventory since February, which is the lowest it has been here in years. The lower the MSI, the stronger the demand as compared to the supply of homes for sale. Please see the definition of MSI following the charts.


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Average Days on Market (DOM) Before Acceptance of Offer
Average DOM here is distorted by the fairly high percentage of distress-condo sales in these neighborhoods: distress transactions often fall through which significantly increases the overall average. Non-distress condos here generally have an average DOM of 60 to 80 days, and distress condos, 90 to 120 days. However, the most appealing listings often accept offers within the first 2 or 3 weeks of going on market.


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Total Condo Sales vs. Distress Condo Sales in the Greater SOMA Area
MLS condo sales in this area are at their highest number in the last 3 years — this market is cooking right now, especially with the influx of new high-tech buyers and the declining supply of new-development condos. The cross-hatched portion of each column shows the quantity of distress home sales within total sales — which is also increasing. However, distress condo sales are clustered generally in the lower price ranges (see median price chart above) and often in specific troubled buildings.


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Condo Sales $1,000,000 & Above
MLS sales of higher priced condos in these neighborhoods are at their highest level since 2008. Distress sales in the upper price ranges are very rare, as can be seen by the cross-hatched sections delineating such sales. In the city as a whole, the high-end home market has really been heating up. Again, this appears to be supercharged by new high-tech money.


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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 (except in the specific chart on the SF new-development condo market). 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.

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