More signs of an extraordinary market: 90% of listings sold in April sold without any price reductions, at an average sales price 7.5% over list price. Huge demand is chasing a too-small supply of homes for sale.
The San Francisco Homes Market
Paragon’s May 2013 Snapshot
April’s market was basically more of the same of what we’ve been seeing for the last 12-16 months in San Francisco. Virtually all of our statistics are at historic or near-historic readings: number of homes for sale way down, months supply of inventory way down, percentage of listings accepting offers way up, days on market way down — all leading to overall house and condo median and average prices climbing to perhaps the highest points they’ve ever reached. We will add the usual caveat that no one or two months of data should be considered definitive until confirmed over the longer term: though there is no doubt that San Francisco is experiencing a red hot market, prices can fluctuate for various reasons, including seasonality.
We will have to wait and see if the current heights reached in home prices are the new baseline, a springtime blip, or a way station to even higher real estate values.
The small decline in the Index reading from December 2012 to January/February 2013 is due to seasonal market factors, not a decline in values, and occurs every year. Generally speaking, January and February sales reflect offers accepted in the holiday season period from Thanksgiving to early January, and since the higher end of the market tends to check out for this period, sales prices in the first 2 months of the year are typically lower. Based on the heat of the market since the year began, we expect to see a similar pop in C-S values in March and April that we have already seen in median sales prices.
Note: The numbers on the 2 charts below are based upon the January 2000 value of homes being calculated at 100. Thus the number 144 signifies a value 44% above that of January 2000; the number 184 signifies 84% above January 2000. However, a decline from 184 to 144 equals a 22% decline in value from one point to the other.
Before trying to apply Case-Shiller Index trends to specific cities, neighborhoods and homes — which can be deeply misleading — please read the explanation of how the Index works: http://www.paragon-re.com/Case_Shiller_Index_Deciphered_for_SF
San Francisco home values have significantly out-performed the overall Case-Shiller Index metro area over the past 12 to 18 months.
Updated numbers table and graph for houses in Noe & Eureka Valleys. Note that of the houses reporting square footage (which usually runs from 60%-75% of all sales), the average size dropped 12% in the 1st Quarter from 2012’s average size. This will typically affect dollar per square foot (increasing it, because smaller homes usually generate higher dollar per square foot values) as well as average sales price (lowering it because smaller houses sell for less). One quarter’s data is not definitive, though the trend upward is clear.
http://my.paragon-re.com/Docs/General/SixtyFortyImages/Noe_Eureka_SFD_Avgs_Numbers.jpg
http://my.paragon-re.com/Docs/General/SixtyFortyImages/Noe-Eureka_SFD_Avg-SP_DolSqFt_by_YEAR.jpg
Averages are very general statistics that may fluctuate for other reasons besides changes in value. There is no “average house” or “median house” consistent from year to year, of which sales can be annually compared to calculate exact changes in market values. Statistics are most useful for ascertaining market trends over the longer term.
The only way to assess the approximate fair market value of any particular house is by a comparative market analysis crafted to its particular – and in San Francisco, often relatively unique – specifications.
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, all things are rarely equal in SF 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. Exact location within a neighborhood, condition, curb appeal, amenities, parking, views, lot size & outdoor space all affect $/sqft home values.
All data is from sources deemed reliable, but may contain errors or omissions, and is subject to revision.
Updated numbers table and graph for houses in Noe & Eureka Valleys. Note that of the houses reporting square footage (which usually runs from 60%-75% of all sales), the average size dropped 12% in the 1st Quarter from 2012’s average size. This will typically affect dollar per square foot (increasing it, because smaller homes usually generate higher dollar per square foot values) as well as average sales price (lowering it because smaller houses sell for less). One quarter’s data is not definitive, though the trend upward is clear.
Averages are very general statistics that may fluctuate for other reasons besides changes in value. There is no “average house” or “median house” consistent from year to year, of which sales can be annually compared to calculate exact changes in market values. Statistics are most useful for ascertaining market trends over the longer term.
The only way to assess the approximate fair market value of any particular house is by a comparative market analysis crafted to its particular – and in San Francisco, often relatively unique – specifications.
DOLLAR PER SQUARE FOOT ($/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, all things are rarely equal in SF 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. Exact location within a neighborhood, condition, curb appeal, amenities, parking, views, lot size & outdoor space all affect $/sqft home values.
All data is from sources deemed reliable, but may contain errors or omissions, and is subject to revision.
The just released Case-Shiller Index reading for January for the high-tier price segment of the 5-county San Francisco Metro Statistical Area declined slightly from December. This reflects seasonal market issues, not a decline in values, and it occurs every year – indeed, the decline was smaller than what is typical.
From January 2012 to January 2013, the Index indicates an 11% increase in house values for this segment of the metro area market. However, the real estate market of the city of San Francisco itself has outperformed the general market of the 5-county metro area. And due to its methodology, the Index is 4 to 7 months behind what is currently occurring in the market. In a quickly appreciating market, that can be a long period of time.
http://my.paragon-re.com/Docs/General/SixtyFortyImages/Case-Shiller_High-Tier_2011.jpg
http://my.paragon-re.com/Docs/General/SixtyFortyImages/Case-Shiller_HT_1996-2011.jpg
Our full report on the Case-Shiller Index is here: http://www.paragon-re.com/Case_Shiller_Index_Deciphered_for_SF
The San Francisco Metro Area Apartment Building Market
The Reis Reports Update Provided by the Paragon Real Estate Group
for the Metro Area of San Francisco, Marin & San Mateo Counties.
MARKET OVERVIEW: The economy of the West Bay area of metro San Francisco (aka the San Francisco Metropolitan Division) had one of the most dynamic economies in the country in 2012, and is attracting more people from across the globe than its housing market can accommodate. “Having left the heavy-lifting to technology companies until early this year, San Francisco’s non-tech employers are playing a growing role in the city’s labor recovery,” Bloomberg News reported.
The dollar value of qualifying single-property apartment sales in San Francisco in 2012 was $879.2 million in 176 deals according to Reis Transaction Analytics. For the fourth quarter of 2012 Reis reports 57 deals for $253.3 million at a mean price of $230,512 per unit. A shortage of properties for sale is holding back deal volume, as demand is enormous.
The 136,650-unit market-rate investment grade San Francisco apartment market features low and falling vacancies and high and rapidly rising rents. “The San Francisco apartment market is exceptionally active,” according to Western Real Estate Business. “It features extremely low vacancies, rapidly rising rents, and tremendous demand for a very limited inventory of assets.”
OCCUPANCY: The fourth quarter 2012 vacancy rate is just 3.2% according to Reis. The rate is already lower than the 3.6% in 2008 (the low of the previous cycle), but above the 1.2% rate recorded for 2000 at the height of the dotcom boom.
RENTS
“San Francisco leads the region with an average rent of $2,741 per month,” according to our source. “This number has increased by 5.8% over the past year and 22.4% over the last 24 months. San Mateo County follows with a current average asking rate of $2,128 (up 11.6% in the past 12 months and 26.2% over the past two years).”
“Asking rents continue to soar, despite rent control laws in San Francisco,” according to Western Real Estate Business. While perhaps suppressing overall rents, of course, rent control increases the rent of the market-rate units tracked by Reis by locking up apartments and narrowing the housing stock available to meet new demand. Reis predicts another year of strong rent gains in 2013, followed by moderating but still solid gains thereafter. Reis predicts rent gains will be in the vicinity of 5% in 2013.
SUPPLY AND DEMAND: The broader Bay Area is on the brink of a new supply boom, according to Cassidy Turley. “There were 5,300 new multifamily units delivered in 2012 and we are currently tracking another 19,000 units in the development pipeline. San Francisco and Santa Clara Counties are the epicenter of this growth, though we are also seeing development levels quickly rising in the East Bay.”
Whatever level of new supply is added, and many of the huge-development units referenced above could be 10 years or more away from completion, Reis predicts it will be quickly snapped up. With modest deviations, net absorption is expected to match up with new availability through 2017, keeping the vacancy rate very low.
SELECTED SUBMARKET SNAPSHOTS
The 15,771-unit Civic Center/Downtown submarket has a fourth quarter 2012 vacancy rate of 3.7% and an average asking rent of $1,596 per month. The Civic Center/Downtown submarket led the rest in units sold in 2012 at 1,065, and dollar value of sales at $148 million.
In the 8,084-unit Marina/Pacific Heights submarket, the fourth quarter vacancy rate is reported by Reis at 2.1%, the lowest in San Francisco proper, with an average asking rent at $2,348 per month. Among submarkets with substantial sales volumes, Marina/Pacific Heights leads in price per unit at $378,532.
The 15,692-unit South of Market (SoMa) submarket has a vacancy rate of 4.3%, highest among the submarkets (though hardly high), and an average asking rent of $2,485 per month, the second highest market-wide. Out of 544 condominium units completed in the West Bay market in 2012, 473 were in SoMa.
The 8,381-unit North Marin submarket has a vacancy rate of just 1.6%, and an average asking rent of $1,601 per month according to Reis.
For the 10,639-unit South San Mateo submarket, Reis reports a vacancy rate of 1.9%, second lowest among the submarkets, and an average asking rent of $1,740 per month. This submarket is near booming Silicon Valley.
POLITICAL: “San Francisco could soon be home to some of the tiniest apartments in the country: studios for up to two people that include a bathroom, kitchen, and a living area measuring 10 feet by 15 feet,” according to the Associated Press. “The Board of Supervisors approved legislation allowing construction of up to 375 micro units measuring a minimum of 220-square feet.
“Back from the graveyard of dead 2010 ballot proposals is a plan that would compel owners of ‘soft-story’ buildings to retrofit them for earthquake safety by 2020,” Curbed SF reported. “San Francisco’s Board of Supes will revisit the issue, which would apparently apply only to wood-frame buildings built before 1978, with at least three stories.
The December report of the Case-Shiller Index for the 5-County SF Metro Area was released today, showing its 10th consecutive increase. In the high-tier-price index, which applies to the city better than their other indexes, but still understates the increases we’ve seen here, C-S shows a 9% increase in prices in the past 12 months, December 2011 to December 2012. Again, the real estate market of the city of San Francisco itself has outperformed the general market of the 5-county metro area.
http://my.paragon-re.com/Docs/General/SixtyFortyImages/Case-Shiller_High-Tier_2011.jpg
http://my.paragon-re.com/Docs/General/SixtyFortyImages/Case-Shiller_HT_1996-2011.jpg
Our full report on the Case-Shiller Index is here: http://www.paragon-re.com/Case_Shiller_Index_Deciphered_for_SF
The South of Market (SoMa), South Beach, Yerba Buena
& Mission Bay Condo Market
The Paragon Market Report
More condos sell in San Francisco’s South of Market (SoMa), South Beach, Yerba Buena and Mission Bay neighborhoods than anyplace else in the city: This is where by far the greatest number of new condos has been built in the last 20 years. The market here heated up very rapidly in 2012, especially as the number of brand new condos on the market has dwindled (contributing to the severe inventory crunch). This area is one of the world centers for high-tech and bio-tech businesses and homebuyers, and the ferocious demand competing for the very limited inventory have caused prices to jump dramatically.
Luxury condos here, in high prestige buildings, typically with spectacular views, sell for among the highest dollar per square foot values in the city. The largest sale reported to MLS in 2012 was $7,850,000 for a unit at the Millennium.
Since opening our doors in 2004, Paragon has represented buyers and sellers in over 775 transactions totaling almost $700 million in sales in these neighborhoods. We’ve closed more than 170 sales of $1,000,000 plus, and almost two dozen of $2,000,000 or more. This is an area we know and love well.
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Sales by Price Range
Long-Term Trends in Values
The following charts track average sales price and average dollar per square foot for non-distressed condo sales by year since 1995, specifically for the South Beach/Yerba Buena and SoMa neighborhoods. Remember that average sales price is different from median sales price (which is used more often), but is just another way to look at long-term market trends.
Here, we’ve limited the analyses to sales under $1,800,000: though this area has a large luxury component, the very high-end sales generally distort the averages for the vast majority of sales.
Sales Over, Under and At List Price
As the market gets hotter, the percentage of listings selling for over asking price increases.
Median Sales Price Trends for 2-Bedroom Condos
A comparison of Median Price trends for 2-BR condos in 5 of the city’s neighborhoods. All 5 have been showing median price appreciation, but none more so than the South Beach and Yerba Buena neighborhoods.
Number of Listings Sold
Very strong unit sales numbers in recent quarters and they would have been significantly higher if there were more listings available to buy. Distressed condo sales are rapidly declining as the market recovery has gained momentum.
Percentage of Listings Accepting Offers
An excellent statistic for measuring buyer demand against supply of inventory. The percentage is now at the highest point in memory.
Condos for Sale
The inventory of condos listed for sale through MLS is far below that of previous years and is seriously inadequate to meet market demand.
The New-Development Condo Market
The vast majority of new-condo construction over the past 15 years has been in this greater area: it’s been estimated that over 10,000 were built here in the first 10 years of the century. The 2008 financial crisis caused new condo construction to crash in SF, which led to large declines in new-condo listings and sales. Now, new construction is recovering in a big way — many big new projects are planned by some very well-known developers — but it will probably take about 2 years, more or less, before we see a large quantity of newly built condos coming on the market.
Months Supply of Inventory (MSI)
The lower the MSI, the stronger the demand as compared to the supply of homes for sale. MSI readings this low — below 2 months – is considered to be indicative of a strong “Seller’s Market.”
Condo Sales $1,000,000 & Above
The number of condos selling for $1m and above is at its highest point in years: Sales increased in the 4th quarter even as inventory fell. Demand for higher-end condos in the best buildings is quite competitive now.
Distressed Condo Listings & Sales in the Greater SoMa Area
Because so many large developments were built here in the last 15 years, this area had more distressed condo sales (bank-owned property sales and short sales) than any other area of the city. However, the number of distressed listings and sales has been rapidly declining with the market turnaround and looks to disappear completely in the near future.
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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.
AVERAGE SALES PRICE is calculated by adding up all the sales prices and dividing by the number of sales. It is different from median sales price, but like medians, averages can be affected by other factors besides changes in value. For example, averages may be distorted by a few sales that are abnormally high or low, especially when the number of sales is low.
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 Residential Market Trends
Realtor District 5: Noe Valley/ Castro/ Cole Valley
A market overview for Noe Valley, Eureka Valley (including the Castro), Dolores Heights,
Cole Valley, Mission Dolores, Haight Ashbury, Ashbury Heights, Clarendon Heights,
Parnassus Heights, Corona Heights, Glen Park, Twin Peaks & the Duboce Triangle
Below are a variety of charts detailing market conditions and trends in the neighborhoods of San Francisco’s central Realtor District 5. District 5 is one of the more homogeneous districts in San Francisco in terms of property values, but still any analysis of an area with so many properties of different type, location, condition and quality can only be a very general overview. Changes in general statistics do not constitute exact measures of changes in values: what’s important are the trends.
District 5 real estate soared in value between 1996 and 2008 and was one of the last districts to peak in value before the market meltdown in September 2008. Values then fell 15% to 20% very quickly, stabilized in 2009 and 2010 and finally started to turn around in 2011. In 2012, the competition between buyers became ferocious for a very low inventory of homes for sale, with many listings selling very quickly in multiple-offer bidding situations. This is still the case as 2013 begins. Due to this dynamic, values here have been rapidly climbing.
Since opening our doors in 2004, Paragon has represented buyers and sellers in over 1500
transactions totaling $1.7 billion in sales in District 5, making us 1 of the top 2 brokers in
these neighborhoods we know and love so well.
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Statistics can be affected by many factors besides changes in value, including seasonality, inventory supply, buyer trends, a few very large sales, the quality of the data reported, financing conditions and distressed sales.
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.
AVERAGE SALES PRICE is calculated by adding up all the sales prices and dividing by the number of sales. It is different from median sales price, but like medians, averages can be affected by other factors besides changes in value. For example, averages may be distorted by a few sales that are abnormally high or low, especially when the number of sales is low.
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.
The Case-Shiller Index just released their November report, which is reflected in the two charts below. Remember that this is for the top third of sales price-wise in the 5-county San Francisco “metro statistical area.” The city of San Francisco has recovered more quickly and dramatically than the 5-county area as a whole.
Each month, Case-Shiller recalculates the price ranges of the low, middle and top tiers (thirds) of sales by the number of units sold. One indication of what has happened over the past year is that in December of 2011, the top third (“High-Tier”) of sales started at a sales price of $573,000; in November 2012, the top third of sales started at $685,000.
http://my.paragon-re.com/Docs/General/SixtyFortyImages/Case-Shiller_High-Tier_2011.jpg
http://my.paragon-re.com/Docs/General/SixtyFortyImages/Case-Shiller_from_1990.jpg
Our in-depth analysis of the Case-Shiller Index can be found online here: http://www.paragon-re.com/Case_Shiller_Index_Deciphered_for_SF
Mansions, Penthouses, Foreclosures & Fixer-Uppers
What San Francisco Home-Buyers Bought in 2012
Of all the homes purchased in San Francisco in 2012:
• How many had Golden Gate Bridge views? Or ocean views?
• How many were Victorian, Edwardian or Art Deco?
• How many had solar heating, elevators, pools or doorpersons?
• How many were bank sales, probate sales or short sales?
• What neighborhoods had the most sales over $5,000,000?
For our annual special report, we data-mined all of 2012′s MLS sales.
We hope you find the results as interesting as we did.
For updated information on home values and market conditions,
use our link to “Market Dynamics Charts” at the bottom of this newsletter.
January 2013
Overall median and average prices only give so much insight into the mix of homes sold in a particular area of the city, so these charts delineate the actual quantity of sales in specific price ranges within Realtor districts and neighborhoods around San Francisco. If you’re looking to buy, it will give you a better idea of the number of purchase options within your price range in the areas you’re considering. If you looking to sell, you’ll understand better where your home and its asking price would fall within the general curve of values in your neighborhood.
Please note that within a single Realtor district are often located multiple neighborhoods of widely different home values.
This is for the high-price-tier index for the 5 county San Francisco Metro Statistical Area (MSA). The home values of the city of San Francisco itself (not reflected on the two charts below) went up more in run up to the financial markets crash of 2008, then declined less with the crash and now is recovering more quickly in 2012, than the entire 5 county MSA market.
