San Francisco Neighborhood Home Prices Continue to Break Records

————————————————————Median Sales Prices; Luxury Home Sales; Housing Affordability Index;
Home Values by Neighborhood; Investment Real Estate; New Development

May 2015, Paragon Real Estate GroupAdjusting your screen-view to zoom 125% or 150% will make the charts easier to read.

Median House & Condo Sales Prices 

 

 

As the 2015 market has accelerated, median home sales prices have been hitting new highs in neighborhoods across San Francisco. Link to San Francisco Neighborhood Map————————————————————Home Price Appreciation 

 

 

 

The chart above graphs monthly house and condo median price appreciation in the city since the market recovery began in early 2012. The 2 charts below are snapshots of changes in median sales prices in a sampling of 6 different SF neighborhoods from early 2013 to early 2015, one for houses and one for 2-bedroom condos. (The 2015 prices in these charts below may vary from those earlier in this report, because slightly different parameters were used.)Median Price Changes, 2013 – 2015Bayview, Bernal Heights & Glen Park HousesHayes Valley, Inner Mission, South Beach 2-Bedroom Condos

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Luxury Home Sales

High-end home sales continue to hit new highs in San Francisco: Last spring was the hottest on record; spring 2015 is blowing through last year’s numbers. The chart above is from our updated luxury report, which can be found here:
SF Luxury Home Market Report

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Housing Affordability Index

This CAR Housing Affordability Index (HAI) is calculated using median sales price, household income, interest rates and other financial criteria to determine the percentage of local households which can afford to buy a median priced home. At 12% to 14%, San Francisco and San Mateo have very low affordability readings in comparison to other places – the Index reading is now 23% for the general Bay Area, 34% for CA (house market), and 61% for the U.S..

Affordability calculations are a complex and nuanced issue, especially in San Francisco*. However, one can’t argue with the general trend lines. When the market heats up and prices rise, affordability goes down; when the market goes into a recession (or crashes), affordability bounces up. If affordability declines beyond a certain point, it may become an indicator of an overvalued real estate market. As of Q1 2015, SF’s Index reading is still a little above the historic lows it hit in 2001 and 2007, but please see the footnote for special SF factors.

Changes in mortgage interest rates, in particular, can quickly and significantly affect affordability. Currently, as of May 2015, interest rates are a little above the historic low hit in 2013, but still far below the rates in 2006 – 2008, when they averaged in the 6% to 6.5% range. “Experts” have had a very difficult time correctly predicting interest rate movements in recent years.

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New Listings & Buyer Demand

The above chart illustrates the seasonal ebb and flow of the market as new listings come on the market and buyers react by putting properties under contract. Spring is typically the biggest selling season of the year, followed by a large spike in autumn. Market activity usually slows in summer and plunges during the winter holiday season.

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Multi-Unit & Investment Real Estate

The two charts below are from our recently issued reports on the multi-unit building market, the first on properties of 2 to 4 units, and the second on larger apartment buildings of 5+ units. The second chart illustrates the parallels between rents and home prices in counties around the Bay Area. Regarding affordability: If someone’s choice is between paying a very high rent or buying an expensive home at today’s low interest rates and with all the tax advantages of homeownership, buying is typically the much better option financially over the longer term. But the devil is always in the details.

The full reports can be found here:

SF 2-4 Unit Building Market

Bay Area 5+ Unit Apartment Market

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Housing Inventory & New Home Construction

The first chart below and the map following it depict the current boom in new-home construction and the districts where new development is clustered. The second chart illustrates the growth of the condominium segment of the city’s housing inventory via both construction and conversion.(A lot more is coming.) The new-home development situation in San Francisco is fascinating – and a fierce political issue.

Our full report on the topic is here: Paragon Housing & Construction Report

New home development often goes through gigantic boom and bust cycles. What complicates the issue for SF developers is that from start to finish, from creating plans for city review to completing construction, the process can easily take 4 to 6 years. Right now, both residential and commercial developers are making enormous bets on a long, sustained, up cycle in the SF economy and real estate market.

New residential construction is heavily concentrated around the Market Street corridor, the Van Ness corridor just north of Market, and in the large quadrant of the city that lies to the southeast of Market. This is due to the availability of large, previously commercial/industrial-use lots that can be changed to residential use, and the zoning that allows for large – sometimes very large – projects to be constructed in these areas.

Though only about 40 years old, the condo sales market in the city is now larger than the house market. And 99% of all new construction being built for sale consists of new and usually high-end condos.

* A few “peculiarities” that may skew the housing affordability calculation in San Francisco are: 1) the city has an abnormally high percentage of single-resident households, 38%, which affects median household income figures, 2) unlike most counties, the majority of SF residents are tenants not owners, and the greater part of those are under rent control, and 3) the SF market is currently being fueled in no small part by large numbers of people moving into the city for very well-paid jobs and by the big surge in new-wealth creation occurring in the Bay Area.Short-term median prices may fluctuate due to a number of different factors, including seasonality, inventory available to purchase, interest rates and significant changes in the luxury and new-home segments of the market.Longer-term trends are always more meaningful than short-term ups and downs.These analyses were made in good faith with data from sources deemed reliable, but they may contain errors and are subject to revision. Statistics are generalities and how they apply to any specific property is unknown without a tailored comparative market analysis. Sales statistics of one month generally reflect offersnegotiated 4 – 6 weeks earlier, i.e. they are a month or so behind what’s actually occurring in the market as buyers and sellers make deals. All numbers should be considered approximate.Please contact us with any questions or concerns.© 2015 Paragon Real Estate Group