It’s June and that means the start of a new market summer and the end of spring. How did the spring market turn out and what you can expect over the summer? Which neighborhoods are the hottest and which are the coolest?
30-year-loan interest rates hovered around 7% in May and early June, which many buyers and sellers have clearly come to accept as the new normal. (And an estimated 30% to 40% of national homebuyers have been paying all cash.) Stock markets once again hit new all-time highs, with substantial effect on household wealth. It is not unusual for home listing and sales activity to slow in summer.
Interest rates are the highest we’ve seen in 23 years, and buyers honestly seem to have adjusted to this new normal, according to the Fed’s latest report. It sounds like interest rates are going to stay higher for longer than initially anticipated. They said they are going to pause rate cuts for the foreseeable future.
That said, inflation was down to its lowest point in two years and things are continuing to move in the right direction. So maybe, just maybe, if we have a few good more months of this, we could see a rate cut in September, just in time for our fall market.
The long and short of it, though, is that I don’t think that we’re going to see significant decreases in interest rates possibly for a year or two. You don’t want to pay that high rate. Well, you’re not alone.
Just buy your house in cash. Nationwide, more than 30 to 40% of buyers are buying in cash. And we are seeing similar numbers of cash buyers in San Francisco. Unlike previously, when cash offers were more the norm for mostly luxury properties over $5 million. We’re actually seeing these cash offers across all price points.
In other news, the stock market is surging and it’s at its highest level in 25 years. As you’re probably aware, a thriving stock market translates very well into Bay Area, real estate. Why not trade in some of that stock for an asset that you can actually live in and enjoy?
Now, what do you need to know about buying a house in the summertime? Summertime is a time for rest, relaxation, vacation, and sometimes buying a house. The truth is that in many price points in San Francisco, people vacation during the summer. These vacations are largely influenced by school schedules.
Those with kids cannot take long international vacations at any other time of year. It shouldn’t mean softer prices across the board. But we are going to see some softness in some properties.
Should you cancel your trip to Italy so that you don’t miss a whole bunch of homes that are possibly for sale this summer? Probably not. Things are going to be a little bit slow and there’s going to be a lot of talk about a slowdown.
How do I know this? I’m old. The conversation has always been the same every single year. And there’s going to be fewer people around, which means less competition for those of you who want to list. And there’s also going to be less competition on offers. Generally, this is going to create a nice equilibrium that’s going to lean a little bit in the direction of softness, depending on the desirability of the home.
The spring has been really solid and honestly, in San Francisco, spring is always good for real estate. The sales volume was up 12% over last year. And of the listings that were for sale on June 1st, 27% of them were single family homes and 73% were condos.
This is the same thing that we’ve actually been seeing for the last several years. It’s in large part due to the amount of inventory available. There are triple the number of condos for sale versus single family homes.
And that’s mostly because condos are small and people are needing to move out of them because they’re too tight, despite possibly wanting to really keep and hold on to that very low interest rate forever. People in larger homes don’t have to compromise as much on space, and many of them are not feeling super incentivized to sell. The luxury market, what’s happening there between five and 10 million seems to have nicely recovered from last year, with sales up over 62% from last spring.
The highest number of overbids are occurring in the Sunset/Parkside neighborhoods, followed by Miraloma Park, West Portal, and the Richmond District. These areas are experiencing heightened demand, making them key spots for competitive bidding wars.
What neighborhoods had the most home sales in the last 12 months?
#1 Sunset Park Side and Golden Gate Park selling 17% over list price. And they also had one of the lowest days on market with 23 days.
#2  Richmond, Lake Street and Jordan Park areas selling 11% over asking. Also with 23 days on market.
#3 Bayview, Excelsior, Crocker Amazon, there were lots of homes selling there, but not as high of over bids at about 7.5% over asking.
#4 Forest Hill, Miraloma and West Portal were selling 13% over list price, and they also had one of the lowest days on market at 23 days.
#5 Eureka Valley, Cole Valley and Glen Park, all with a high sales volume with an average overbid of 8% over list price. And these neighborhoods, what you are going to see is a lot of times lower pricing strategies and that’s going to make the prices go up over a list price. It doesn’t necessarily mean that people are paying 8% to 17% over the market value.
The areas with the least amount were Russian Hill, Nob Hill, Telegraph Hill, Pacific Heights, Cow Hollow and the Marina. And again, we’re going to see more transparent pricing in these areas.
And it’s also influenced a bit by the fact that a lot of the luxury homes are sold in those areas. And often those are priced with aggressively high prices, often intentionally so that buyers can make a deal and make something come together by bidding the price a little bit lower.
