A Wild Ride for SF Real Estate Mid-Year 2018 Report

10 Jul A Wild Ride for SF Real Estate Mid-Year 2018 Report

Hi All,

Happy Summer! We are back from my hometown visit to Missouri, where the kids caught some fish, rode four-wheelers and played in the pool with their cousins. It was a whirlwind, but they had a blast while catching up with my family. The Fourth of July in the Midwest is the best. To be honest, I’m always a little apprehensive about going home because I have such a big family and as much as I love them, sometimes there are extra “fireworks”. But, I’m happy to report that we all managed to be kind to each other the whole trip.

Now on to real estate… At the height of the last market cycle, we had 4,000 homes available to purchase. This number has been decreasing since, and at any given time fluctuates between 2,500-2,700. This means that, despite the new tax bill and rising interest rates, the average price of a Single Family Home in SF rose an astounding $200K in the last calendar year – one of the biggest increases that SF has ever seen.

However, we are still managing to get buyers into contract. This summer has been easier than in all of 2018, which is often the case. The problem is that many buyers slip into a strange groupthinksituation, believing that because home prices are getting a bit softer, they should wait to purchase, which is unfortunate. They think the market might fall at any moment, and end up waiting until it gets super competitive again. We coach our clients into not falling into these traps!

Thank you all so much for your support during another record-breaking year! Seventy-six percent of our business comes from people we know, and we feel so honored to have such great clients and friends advocating for us. I hope you are able to make some great memories this summer with your family and friends.

(415) 846-4571
A Wild Ride for SF Real Estate
Mid-Year 2018 Report
By any measure, the heat of the San Francisco market in the first half of 2018 has been among the most blistering ever. Probably only 3 or 4 other periods over the past 50 years have seen a comparable intensity of buyer demand vis a vis the supply of listing inventory available to purchase. This despite both significant increases in interest rates and changes in federal tax law severely limiting the deductibility of mortgage interest and property tax costs. As mentioned before, the market is particularly ferocious in the lower and middle-price segments of house sales.

Annual Dollar Value Appreciation 

Appreciation is typically viewed through the lens of percentage changes, but looking at the actual increase in dollars paid for a median-priced home is perhaps more visceral. These two charts below measure dollar increases in annual median sales prices for houses and then condos. The last columns in each chart measure 2018 YTD median sales price increases against the 2017 median sales price. (The links illustrate the traditional percentage changes.)  Comparing the first half of 2018 to 2017, the median house sales price in San Francisco increased by an astounding $205,000 (per sales reported by 7/3/18). For condos, the increase was also very substantial, at about $71,000.
It is not a given that the second half of the year will see home price appreciation at similar rates: Prices could increase further, or they might plateau or even tick down instead. (As can be seen above, home prices can go down as well as up, though longer-term trends have always been positive.) For the last 7 years, spring has typically been the most feverish selling season of the year and has often provided most of the appreciation occurring in the full year.  Median sales prices are often affected by other factors besides changes in fair  market value, such as changes in inventory, new home sales or luxury home sales. 

San Francisco Home Price Map 
We just updated our interactive map of median house and condo sales prices for the 70-odd San Francisco neighborhoods, reflecting the last 12 months sales reported to MLS. It can be accessed by clicking on this link: What Costs How Much Where in San Francisco.

  Market Dynamics Statistics 
The decline in new listings, especially of houses, has been a critical factor in the upward pressure on prices. 
As houses have become the scarce resource in the SF market,  overbidding percentages have gone into the stratosphere (though strategic underpricing has also played a role). 
New lows in average days-on-market since the 2012 recovery began: Listings have been snapped up faster than at any time in the past 7 years. 
Market activity typically starts slowing significantly in July
before spiking up again in the short autumn selling season.
San Francisco Luxury Home Sales
as reported to MLS 
The second quarter of 2018 saw the highest quarterly number of SF homes selling for $2 million and above: When late-reported sales are entered into MLS, we expect the total to be over 320 for the 3-month period, far exceeding the previous high of 267 sales in Q2 2017. However, looking at higher-priced sales of $3m+, Q2 2018 is just a handful of transactions ahead of the Q2 2015 total of 97.
The luxury home market is even more intensely seasonal
in its dynamics than the general market.
Luxury condo sales in San Francisco hit a new high in May 2018.
(Sales reported to MLS: new project sales would increase these numbers.)
For the last few years, luxury house sales have more often peaked in October.
Neighborhood Home Prices & Trends
Below are a few of the many new charts and tables from our updated report on neighborhood sales and values (What Costs How Much Where in San Francisco).
Where Best to Look in Your Price Range
District Overview Appreciation Trends
Median sales price appreciation in the four biggest districts for house sales by the quantity of sales.  (Note: districts contain a multitude of neighborhoods.)
 Median price appreciation for 2-bedroom condos and co-ops
in the 5 biggest condo-sales districts bynumber of sales.
The San Francisco Building Boom 
Approximately 68,000 housing units are now in the SF new construction pipeline. Virtually all of them are apartments or condos: New house construction is minimal in the city, and has been so for over 50 years. Condos, new and resale, are now the dominant property type in market sales volume.  Just because a project is in the pipeline does not guarantee it will be built as planned. Plans are constantly being added, changed and abandoned. New housing construction is extremely sensitive to changes in economic conditions.
All our previous market reports can be found here