15 May The San Francisco Luxury Home Real Estate Market Report
including over 3 dozen custom chart analyses
In this report, various price thresholds will be used for the luxury home designation – from $1.5m to $2m for condos, and from $2m to $3m for houses – depending on when the chart was first created, if different property types are being combined, or simply to look at the high-end market from slightly different angles. If the luxury segment is defined by the top 10% of sales, then the threshold in San Francisco for houses is now approximately $3 million, and for condos, about $1.85 million. However, due to the essential relation of location to value, $3 million might buy you a large, gracious house in one neighborhood, and an uninhabitable fixer-upper in another. As always in real estate, the devil is in the details.
We are currently defining the ultra-luxury market at houses over $5 million, and condos and co-ops over $3 million – these constitute about 2.5% of their respective segments.
San Francisco Luxury Houses – Annual Sales
San Francisco Luxury Condos, Co-ops & TICs – Annual Sales
If you wish, you may skip our summary and jump to additional
graphed analyses further below.
The luxury real estate market is impacted by a number of factors: positively, by improvement in general economic conditions and confidence, highly-paid employment and population growth, and especially, by the creation of new wealth in large quantities. All these elements were dynamically present in the Bay Area from 2012 through mid-2015. Then significant economic and political volatility put down a damper, pretty much across the board. Chinese stock market turmoil, the crash in oil prices, Brexit, the U.S. presidential election, as well as an apparent cooling in our high-tech boom, all injected uncertainty into financial markets and our local luxury real estate market. Furthermore, Bay Area high-tech IPOs, which had created a stupendous amount of new wealth since 2011, basically dried up – and newly rich or substantially enrichened buyers had played a big role in demand. All this was accompanied by a surge in the construction of new, luxury condo projects in San Francisco, producing a considerable increase in supply, just as demand appeared to be softening.
The luxury market began to cool in autumn 2015, with significant, but not cataclysmic adjustments in the standard measures of supply and demand. (The most affordable house segments around the Bay Area continued to be very hot.) Generally speaking, most affected over the past 20 months was the market for re-sale luxury condos, particularly in those districts where big, new-construction projects are concentrated. Their sales appreciably decreased, with some decline in values. It is hard to get definitive data on new-project sales activity, but it is believed to have softened as well with the increase in competitive listings.
However, there has been nothing approximating a crash and, all in all, demand held up quite well considering all the circumstances at play. So far, price declines have been relatively minor; there was no falloff in high-end house sales, in fact those selling for $3m+ hit a new peak last October. And some smaller and medium-sized luxury condo projects in the Pacific Heights district have been seeing brisk sales at very high prices, this being a highly prestigious area where new construction is relatively rare. So far, spring 2017 has proven to be a stronger market than 2016: We will know more after the 2nd quarter data comes in July.
The biggest change in the luxury home market has been the dramatic 47% year-over-year drop in luxury condo sales reported to MLS in the greater South Beach/ SoMa/ Yerba Buena district, even as listing inventory there has hit new highs. This is the area where new high-rise luxury projects continue to come on market, and, to some degree, they may be cannibalizing MLS sales in the resale market. It is also where the unfortunate issues at the Millennium Tower (slightly sinking and tilting; multiple lawsuits) are being extensively reported upon. Even though the Millennium’s construction-issue circumstances are unique to itself, it may be that the negative publicity is making affluent buyers more cautious about buying in the surrounding area.
Even with some cooling in the high-tech boom and the dearth of new IPOs, the local economy persists as the envy of the world, and an astonishing amount of wealth yet remains in the Bay Area. If local companies such as Uber, Airbnb, Pinterest and Palantir go public, it could recharge demand as the new-wealth machine starts minting new millionaires once again. On the other hand, how the foreign luxury home buyer will react to political changes both here and abroad is uncertain. For that matter, with all the wildly moving parts currently in local, national and international politics and economics, it is difficult to make predictions with any sense of certainty. However, Ted Egan, chief economist for the city of San Francisco, puts the odds of a new recession at 10% or less.
San Francisco Luxury Home Sales
Months Supply of Inventory: 3 San Francisco Districts
with the Most Luxury Condo Sales
Ultra-Luxury Home Sales in San Francisco
The Top 2.5% of Sales
Era of Construction
Luxury Houses and Luxury Condos & Co-ops
The majority of SF luxury houses was built before 1920 and the great majority before 1940. New house construction in the city occurs predominantly at the high end, but the actual numbers of new houses built in any given year are very low. For luxury and ultra-luxury condos, newer and brand-new condos – high-rises in the South Beach area, and, lately, large projects in Pacific Heights – are a very big component of the market, with more large, very expensive projects planned.
Average Dollar per Square Foot Values
Average dollar per square foot values ticked down in 2016 for both high-end houses and condos after years of appreciation, but still remain historically high. Of sales reported to MLS, 10 houses and 34 condos and co-ops sold for over $2000 per square foot; 6 sales reported values over $3000 per square foot. These sales were concentrated in the Pacific Heights district, Russian & Nob Hills, and South Beach & Yerba Buena.
Average dollar per square foot values should always be considered gross generalizations, since there is such a wide variety of homes of differing locations, sizes, conditions, eras of construction, views, lot sizes, and so on. Square footage can also be measured in different ways and not all sales even report square footage.
Seasonal New Listing & Accepted Offer Activity
The luxury home market in San Francisco is extremely seasonal: Activity climbs through spring, slows in summer, spikes in the short autumn selling season, and then plunges during the mid-winter holidays. Among other things, the seasonality of this segment significantly affects overall monthly and quarterly median sales prices in the city as the number of expensive home sales ebbs and flows so dramatically.
As noted at the beginning of this report, the price thresholds for the luxury home designation sometimes vary from chart to chart, for the reasons previously mentioned.
A long-term view since 2006
Listings Accepting Offers by Month
Market Dynamics Analyses
In many of the following graphs, the cooling of the luxury market in the city in 2016 is illustrated. The changes are significant, but should not be overstated: The market cooled from being characterized by overheated demand and inadequate supply, to something approaching a more normal balance between buyer and seller. So far, there has been neither a crash in demand nor in prices.
by Year and by Month
Comparing Q1 2017 Median Sales Prices,
List (Asking) Prices & Expired Listing Prices
Sales Prices to List Prices
by Year and by Month
Sales Price to List Price Percentage:
Listings Selling Within 30 Days (i.e. Quickly)
Percentage of Listings Selling Within 30 Days
Percentage of Listings Selling Over List Price
Average Days on Market
Pricing, Overpricing & Expired Listings
The luxury market has always been more prone to egregious overpricing than the general market: Perhaps this simply goes along with fabulous homes in high prestige locations, but it sometimes results in price reductions in the multi-millions. As the market frenzy has cooled, pricing correctly has become ever more important: Overpricing often has significant negative ramifications for sellers, including the possibility of no sale occurring at all – something occurring with greater frequency. As the supply and demand dynamic has shifted, buyers are competing less, negotiating more aggressively, and walking away from listings they see as significantly overpriced.
Quarterly & Annually
Luxury House Sales
With and Without Price Reductions
Luxury Condo Sales
With and Without Price Reductions
Luxury Markets in Selected San Francisco Districts
Pacific Heights & Pacific Heights-Marina District
Russian, Nob & Telegraph Hills
Luxury Condo Sales
Noe, Eureka & Cole Valleys District
South Beach, Yerba Buena, Mission Bay, SoMa
Luxury Condo Sales
St. Francis Wood
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These analyses were made in good faith with data from sources deemed reliable, but may contain errors and are subject to revision. It is not our intent to convince you of a particular position, but to attempt to provide straightforward data and analysis, so you can make your own informed decisions. Median and average statistics are enormous generalities: There are hundreds of different markets in San Francisco and the Bay Area, each with its own unique dynamics. Median prices and average dollar per square foot values can be and often are affected by other factors besides changes in fair market value.
for San Francisco Homes, $2 Million & Above
The bar charts compare year-over-year data, going back 2 years, for the latest month. The line charts track monthly data over a period of 3 to 5 years. Note that it can take 7 to 15 days after a month’s end for agents to enter in transaction data pertinent to the month in question, so statistics for the latest month can sometimes change significantly as this data is added to calculations.
Seasonality can play a significant role in many real estate statistics as the market ebbs and flows during active and less active sales seasons. Typically, the market is most active in the spring and fall, and slower in the summer and, especially, the mid-winter holidays. The luxury home market is even more deeply affected by seasonality than the general market.
To keep things simple, we have, rather arbitrarily, designated homes of $2 million and above as luxury homes. The threshold should be higher for houses (probably in the $2.5m to $3m range), and somewhat lower than $2m for condos, but then we couldn’t get both property types on the same charts. (Stock co-ops and TICs, much smaller market segments, are not included in these calculations.) Needless to say, what one gets for one’s money in different neighborhoods varies enormously. Statistics are generalities, most useful for illustrating general market trends.
It may take these auto-updating charts a few moments to load onto the webpage.
September is usually the single biggest month for new high-end home listings.
Spring is typically the most active season for new listings.
New listing activity plunges during the mid-summer and mid-winter holidays.
Total Number of Active Listings for Sale at End of Month
Number of Listings Accepting Offers during Month
Number of Sales, by Month
Closed sales typically reflect accepted-offer activity in the previous month or so.
Percentage of Listings Selling for over Final Asking Price, by Month
It is typically buyer competition for new listings that generates sales prices over list prices.
Median Percentage of Final List Price Achieved on Sale
Over 100% signifies overbidding. Well over 100% means a very hot, competitive market.
Under 100% signifies more aggressive buyer negotiation.
Median Dollar per Square Foot (upon Sale)
3-Month Rolling Average
Many of the condos selling for over $2m really belong to the “ultra-luxury” class: gorgeous,
high-floor units with staggering views, in very prestigious areas and buildings. Generally
speaking, such units achieve the highest dollar per square foot values in San Francisco.
Months Supply of Inventory (MSI), by Month
This MSI calculation compares the number of active listings at the end
of the month with the number of accepted offers over the previous 12 months.
The lower the MSI, the greater the buyer demand as compared
to the inventory of listings available to buy.
Median Days on Market before Acceptance of Offer
3-Month Rolling Average
This statistic only reflects those listings that do indeed sell, i.e.
generally speaking, those that the market deems most attractive and well priced.
Definitions: Confusingly, different analytical systems sometimes define (or calculate) certain common statistics – such as Months Supply of Inventory, Days on Market, and Dollar per Square Foot values – in different ways, which, of course, will yield different results. Which is why looking at trends is typically the best use of general statistics. The charts above were generated using the Infosparks system (we also sometimes use Broker Metrics or MLS generated statistics), and the parameters for its calculations can be found here: Infosparks statistical methods defined
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It is the relationship between supply and demand that defines the state of the market. Looking at one statistic such as the number of sales, without comparing it to how many listings were available to purchase, may give a distorted view of market conditions. Some statistics, such as months supply of inventory take both supply and demand into account. Last but not least, short-term statistics sometimes fluctuate without great meaningfulness – longer-term trends are always most meaningful.
Sales data usually reflects market activity, i.e. when a new listing comes on market and offers are negotiated, occurring 4 to 8 weeks before the sale date. Thus, for example, sales in June mostly reflect new listings and offers negotiated in late April and May.