Nooshi Naderi | 3 Years into the Recovery: San Francisco Real Estate as 2015 Begins
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3 Years into the Recovery: San Francisco Real Estate as 2015 Begins

Posted by NooshiAdmin in Blog, Newsletter 06 Jan 2015

San Francisco Real Estate Cycles, 1984 – 2014

1984-Present_Appreciation-Cycles_Percentages

Case-Shiller_Simpl-Percentages

The 2 charts above look at the last 30 years of real estate cycles, and also compare percentage appreciation during the first 3 years of recent market recoveries (the light blue columns in the 2nd chart). Appreciation since 2012 has occurred somewhat faster than the other recoveries since 1980, but it is also coming off a much larger crash than earlier cycles. Typically, recoveries, and the upswings in appreciation they engender, have lasted 5 to 7 years – which is no guarantee how our current cycle will play out.

The chart below graphs the quarterly path of median house price appreciation in San Francisco since 2012, illustrating shorter-term seasonal cycles. Condo prices in the city followed a similar trajectory, though at somewhat lower values: In the latest quarter, the median condo sales price was just the tiniest bit under $1 million.

1-15_Seasonality_SF-Median-Price_SFD

Neighborhood Affordability
Below are 2 of 12 charts in our updated analysis of What Costs How Much Where in San Francisco. These are meant as a general guide for buyers as to where to find the greatest choice of home listings in their price range – and to open up neighborhood options they perhaps hadn’t been aware of.

2014_House-Sales_Up-to-1m 2014_SF-Condo-Sales_1m-1499k

San Francisco’s Luxury Home Market

Over the past 3 years, the luxury home market has outperformed the overall market as wealth dramatically surged in the Bay Area. In the last 15 years or so, the high-end market segment has been spreading from the classic, northern prestige neighborhoods – such as Sea Cliff, Pacific Heights, Russian Hill – to other districts of the city, such as those surrounding South Beach and Noe Valley.

2014_SF-Condo-Sales_1500k-plus 2014_SF-House-Sales_2m-plus Lux-Homes_Units_Sold_by_YEAR

New Construction in San Francisco
These 2 charts are from our San Francisco Development Report, excerpting the highlights of the SF Planning Department’s new Pipeline Report of residential and commercial real estate projects. Almost 7,000 residential units (sale, rental and social-project) and several million square feet of new commercial space are currently under construction in the city, with much more coming in the next few years (absent some large, negative economic event occurring).

Adding large quantities of new inventory should eventually affect the recent, high-appreciation dynamic for both sale and rental markets in the city, but so far, population, employment, wealth and buyer demand has continued to outpace supply. Also, the great majority of new-home construction intended for sale is for high-end, ultra-modern condos costing $1000 – and sometimes much more – per square foot, so how that surge in inventory will affect other segments of the SF market – such as for houses or Edwardian condos – is unclear.

12-14_New-Homes-Pipeline_from-Planning 12-14_Residential-Pipeline-by-District

How the Bay Area Spends its Money
On a lighter note, and to take a brief break from real estate, these two charts, which we’ve just added to our recent Bay Area Demographics Report, compare how we spend our money as compared to national averages.

12-14_SF-LESS-Spending-vs-National-Average 12-14_SF-MORE-Spending-vs-National-Average

Months Supply of Inventory (MSI)
Low inventory remains a huge issue in the San Francisco market. Typically, the year begins with the lowest number of listings, which then gradually increases into spring. In the past 3 years, buyers have woken up from the holidays much more quickly than sellers have put their homes on the market. This set the stage for the city’s early spring market frenzies in 2012, 2013 and 2014. In the second half of 2014, home prices plateaued or even dropped a little in the more expensive housing segments, while continuing to tick up in more affordable areas.

What 2015 has in store for the market will become clearer in the next few months.

For-Sale_during-Month-SF_4-types MSI-SFD-Condo-Co-op

Mortgage Interest Rates
One of the big factors underlying the market’s strength in recent years has been extraordinarily low interest rates, which have a tremendous effect on the ongoing, monthly cost of housing. In 2010, pundits almost universally predicted interest rates would rebound to 6% or higher, but instead rates dropped until hitting a low point in mid-2013 of about 3.5%. After fluctuating up and down a bit since, interest rates at the start of 2015 were somewhat below 4% – incredibly low by any historical standard.

Average_30-Year_Mortgage-Rates

All data from sources deemed reliable, but may contain errors and is subject to revision. Statistics are generalities and how they apply to any specific property is unknown without a tailored comparative market analysis. All numbers should be considered approximate. Please contact us with any questions or concerns.

© 2015 Paragon Real Estate Group