11 Oct San Francisco Bay Area Luxury House Real Estate Market Report
Here we are, already halfway through the fall selling season. Fall is typically a busy time, and this year is no exception – the market has continued to be hot throughout 2017, and it’s not letting up.
Here in the office, we are taking full advantage of this trend and it’s been going very well – everything we’ve listed this past month has sold within 5-7 days. Generally, I like to have a 2-week marketing period for each listing, and there are pros and cons to waiting, but this year we’ve decided to move a bit faster with our sellers and it’s really paid off. We’ve managed to capture buyers before they lose interest and we’ve gotten very big numbers for our sellers.
This month’s newsletter is our yearly Luxury Edition, where we focus on San Francisco’s luxury market. “Luxury” is defined as $3M and above; “Ultra-Luxury” is any property that is $5M and above.
As you’ll see in the charts below, the luxury market peaked in summer of 2016, but by all measures, it’s still very strong. My prediction is that this cycle will continue for a couple more years. This upward trend can be affected by many factors, however, and it’s difficult to predict. For instance, a war in North Korea could have a negative impact, while a large company going public (such as Uber or Lyft, which are rumored to go soon) could cause home values to rise 20-30%. If only we had a crystal ball!
I invite you to take a few minutes to read through the attached newsletter, as there’s a lot of great information in there. Feel free to reach out to me anytime – I’m never too busy for conversation or an intro to someone you know looking to buy or sell, and I’m always here for you guys. I hope you’re doing well and let’s chat soon!
Happy autumn season!
& The Krishnan Team
Luxury House Market Report
Autumn 2017 Report
The autumn selling season is a big one for the San Francisco luxury house market: Last September saw a record-breaking spike in new listings hitting the market, leading to a similar spike in October sales. It will be a couple months before we begin to get definitive statistics on listing and sales activity in September and October 2017, but in the meantime, we can review the market conditions and trends as they have developed over recent years. This report will pay particular attention to the different neighborhood markets within SF.
We typically use $3,000,000 as the price threshold for the luxury house market in San Francisco: That approximately defines the top 10% of the market. The ultra-luxury segment starts at $5 million, which constitutes the top 2.5% of sales. Of course, what one gets in the different neighborhoods for the same price can vary dramatically: A fixer-upper in Presidio Heights may go for the same price as a large, gracious mansion in St. Francis Wood in move-in condition. In real estate, the devil is always in the details.
Overview: Listing & Sales Activity
As of mid-month, 29 new luxury house listings priced at $3m+ have come on the SF market since the beginning of September, so it looks like it may be another big month for new listing activity. Of those 29, 4 had already accepted offers by 9/15/17.
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 a damper on luxury home sales: Chinese stock market turmoil, the crash in oil prices, Brexit, large U.S. stock market swings, as well as an apparent cooling in our high-tech boom, all injected uncertainty into financial and our luxury real estate markets. Furthermore, Bay Area high-tech IPOs, which had created a stupendous amount of new wealth since 2011, basically dried up – and newly rich or further enrichened buyers have played a big role in demand.
These changes in the economic environment caused the SF luxury home market to cool in autumn 2015. Generally speaking, the segment most affected was the market for re-sale luxury condos, particularly in those districts where big, new-construction, projects are concentrated. There has been very little new, luxury house construction in the city – only about 8 to 10 per year built since 2000 (as opposed to many thousands of new condos), which is one reason the SF house segment has generally been stronger than that for condos.
Then in October 2016, after a sudden huge surge in listings, SF luxury house sales hit a new high in sales volume, and in June 2017, the luxury condo market suddenly hit a new high as well. However, neither segment is as strong, as measured by standard market metrics, as it was during the 2014 to mid-2015 peak of market heat. Many of the statistics in this report reflect a similar trend: The market getting increasingly hotter 2012 through mid-2015, cooling from autumn 2015 through most of 2016 (during substantial financial market and political volatility), and then strengthening again in late 2016 and 2017. Now we are waiting to see how the autumn 2017 luxury home market shakes out.
Overview: Dollar per Square Foot Values
Overview: Average Days on Market
Overview: Months Supply of Inventory
San Francisco Luxury House Market
by Neighborhood & District
Median Sales Prices & Avg. Dollar per Square
Foot Values by District
Luxury House Listings & Sales Volumes by District
In the past 6 years, the Noe, Eureka & Cole Valleys district has seen very considerable growth in the luxury house segment. To a large degree, this shift began in the last few years of the previous millennium, when the dotcom boom suddenly erupted. Among other issues, the recent high-tech booms have somewhat changed the demographics of Bay Area wealth and of the SF luxury home buyer, and the lower-key neighborhood ambiance many younger, newly affluent buyers prefer. Another factor is that this district is much closer to highways south to the peninsula and the head offices of many high-tech giants than the wealthy northern neighborhoods. All in all, it constitutes a totally different choice from neighborhoods like Pacific Heights and Russian Hill, and from the newer, luxury high-rise condos of South Beach-SoMa, each of which appeals to a different, but substantial segment of buyers.
Top Luxury House Districts: Months Supply of Inventory
Top Luxury House Districts: % of Sales Accepting Offers within 30 Days
Top Luxury House Districts: % of Sales over List Price
Top Luxury House Districts: Listings Taken Off Market without Selling
Ultra-Luxury House Sales in San Francisco
The Top 2.5% of Sales, $5m+
The most expensive house sales are clustered in the Pacific & Presidio Heights district, with typically a handful-plus sales each in the Russian, Nob & Telegraph Hills district and the Noe, Eureka & Cole Valleys district (which includes Ashbury Heights and Buena Vista Park). Every now and then a huge Alamo Square mansion will sell in this price range. Russian Hill and Sea Cliff have very few house sales in any given year, but they sometimes sell for prices well over $10m.
Please let us know if you have questions or we can be of assistance in any other way.
It is impossible to know how median and average value statistics apply to any particular home without a specific, tailored, comparative market analysis. In real estate, the devil is always in the details. 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. Longer term trends are much more meaningful than short-term.