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.

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