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Seasonality in the San Francisco Homes Market

13 Jan 2015 Posted by NooshiAdmin in Blog, Market News

Seasonality typically affects inventory levels, buyer demand and median home prices, often in significant ways – as is illustrated in the following charts. However, it is not theonly factor affecting market conditions and trends – general economic conditions and financial market movements, new construction projects coming on market, significant changes in interest rates, local stock market IPOs, natural and political events, and other factors can and do impact the market as well, sometimes quite suddenly. It should also be noted that new listings and new sales occur every month of the year – and sometimes, depending on prevailing market conditions and the specific property, buying or selling during the slower periods can be the smart strategy.

Because there are typically summer and winter slowdowns, it’s difficult to come to definitive conclusions about the condition and direction of the market during July/August, and December/January. One really has to wait for the autumn market to begin in mid-September with the typical surge of new listings, or the spring market to begin in late February/March to get a sense of the ongoing dynamics of supply and demand, and how it will affect home price movements.

The devil’s always in the details, and the details of the market change constantly. Still, there is a typical ebb and flow to the level of activity in the market that correlate with seasonality, and that is what this report explores from a variety of angles.

Without inventory and buyers wanting to purchase, there is no market. These first 4 charts show the classic effects of seasonality on supply and demand.

Inventory

Seasonality_New-Listings

Seasonality_Listings-For-Sale

Buyer Demand

Seasonality_Listings-Accepting-Offers

Seasonality_Percentage-Under-Contract

As seen in this next chart, the higher-price end of the market is usually more affected by seasonality that the general market. Among other effects, this will usually raise the median sales price during the peak spring and autumn selling periods, and lower them in the slower periods of summer and mid-winter (as delineated in the final chart).

Note: In the chart, the changes up and down in sales are plotted based upon the sales of January 2013 equaling a base line of 100. This is a very approximate illustration, because of other factors that affect the analysis, though we do believe it reflects the market reality.

Seasonality_Lux-vs-General-Market

These final 2 charts illustrate both the rapidly appreciating real estate market since 2012 and the shorter term ups and downs that seasonality can play in median home prices. For the last few years, spring has been the season of the greatest market frenzy, which shows up in Sales Price to List Price ratios and median price jumps. Of course, in an appreciating or depreciating market, there are usually other factors impacting median sales prices beside seasonality – as always, what is most meaningful is the longer term trend in home prices, not short-term fluctuations.

SP-OP_All-SF-Sales_by-Month

Seasonality_Median-SFD-Price

Fluctuations in median sales prices are not unusual and these fluctuations can occur for other reasons besides changes in value, such as seasonality; inventory available to purchase; availability of financing; changes in buyer profile; and changes in the distressed and luxury segments. How these statistics apply to any particular property is unknown without a specific comparative market analysis. All data from sources deemed reliable, but may contain errors and is subject to revision.

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

06 Jan 2015 Posted by NooshiAdmin in Blog, Newsletter

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

Marin Napa Sonoma Real Estate Report

03 Jan 2015 Posted by NooshiAdmin in Blog, Market News, Newsletter

North Bay Home Sales, Values & Appreciation

1 2 3 4 5 6 7 8 9 10

The North Bay Luxury Home Market

11 12 13

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Real Estate Cycles

The chart below illustrates in a simplified manner the market cycles of the past 30+ years. It is based on the S&P Case-Shiller Index pertaining to Bay Area “high-price tier” homes, the segment which dominates the Marin County market. The Napa and Sonoma cycles were similar except for the magnitudes of the recent subprime bubble, crash and recovery – all of which were bigger than Marin’s.

We are approximately 3 years into the current recovery. Since the 1980’s, recoveries have typically lasted 5 to 7 years before peaking – which isn’t necessarily how this cycle will play out.

 

14

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North Bay Home Sales by Property Type

15

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Sales with and without Price Reductions

Those North Bay listings that sold without price reductions sold relatively quickly and averaged a sales price within 1% of asking price. Those listings that went through one or more price reductions saw large discounts off original list price and, on average, took 67 to 81 days longer to sell.And a good percentage of listings didn’t sell at all.

Even in a strong market, correct pricing, preparation and marketing remain vitally important to achieve the best possible result when selling one’s home.

 

1617

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Months Supply of Inventory

The supply and demand dynamic continues to favor sellers, which, of course, has been the primary factor behind home-price appreciation.

 

18

Mortgage Interest Rates

19

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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.

20 21

Please call or email if you have any questions or comments regarding these analyses.

Fluctuations in median sales prices and average dollar per square foot values are not unusual and these fluctuations can occur for other reasons besides changes in value, such as seasonality; inventory available to purchase; availability of financing; changes in buyer profile; and changes in the distressed and luxury segments. How these statistics apply to any particular property is unknown without a specific comparative market analysis. All data from sources deemed reliable, but may contain errors and is subject to revision.

© 2015 Paragon Real Estate Group

New Case-Shiller: Bay Area Home Prices Tick Up a Little

31 Dec 2014 Posted by NooshiAdmin in Blog, Market Conditions, Market News

After the feverish spring 2014 market, home prices in the high-price tier – which applies best to San Francisco and Marin counties – flattened and then ticked down a little, while more affordable home segments continued to tick up: It’s not unusual for the market to cool off and plateau during the summer months. The October 2014 Case-Shiller Index just released (on December 30), begins to reflect the autumn selling season, which starts after Labor Day: The market typically begins to heat up again in autumn. (Note that transactions negotiated in September generally start closing in October.)

According to the newest Index, all Bay Area home price segments ticked up in October by about 1%, plus or minus depending on segment. Note that small monthly fluctuations are not particularly meaningful until substantiated over a longer term.

This chart tracks the high-tier-price market since the recovery began in 2012 using Case-Shiller data. The C-S numbers refer to a January 2000 value of “100”, thus 198 signifies a value 98% higher than that of January 2000.

image002

This chart below looks at the last 3 market cycles:

image006

And this chart show median San Francisco house and condo sales prices by quarter (reflecting sales reported by 12/26/14, so it contains newer data than Case-Shiller):

image009

San Francisco New Construction/Development Report

22 Dec 2014 Posted by NooshiAdmin in Blog, Market Conditions

Highlights from the Q3 2014 Pipeline Report by the SF Planning Department

December 2014, compiled by Paragon Real Estate Group

On December 19th, the San Francisco Planning Department issued its excellent Q3 2014 Pipeline Report, which tracks new residential and commercial development in the city. There is a wealth of data within its 36 pages: Below is simply an excerpt of some highlights.

The Pipeline includes projects in every stage of the approvals, permits and construction process, and being listed in the pipeline doesn’t indicate when or even if the project will be completed. Changes and additions to the pipeline occur on an ongoing basis: Indeed, it seems rarely a day goes by nowadays without a big new project being announced. Last but not least, changes in economic and political circumstances can suddenly and dramatically impact new development plans and construction.

  • 50,600 residential units are in the current pipeline, including condos, houses and apartments, as well as affordable and social-project housing. Houses constitute far less than 1% of the total units. (There are currently approximately 381,000 housing units in San Francisco, per 2013 U.S. Census data.)
  • 18,700,000 square feet of commercial space are in the pipeline, including office, retail, medical, hotel, cultural, institutional and educational uses. 12 million of the square footage in the pipeline are for office use. (As of 2013, there were approximately 75.6 million square feet of office space in the city.)
  • 3090 residential units and 280,000 square feet of commercial space have been added in the past 4 quarters. “The median time to completion for these projects from the first filing was 43 months.” For smaller projects of less than 10,000 square feet, the median time dropped to 30 months.
  • 6700 new residential units and 5,400,000 square feet of commercial space are currently under construction.
  • Approximately 25,800 of the pipeline’s residential units are comprised of the Bayview/Hunter’s Point/Candlestick, Park Merced and Treasure Island projects. “Full realization of the projects will be decades into the future.” The Bayview/Candlestick and Treasure Island developments are situated on parcels designated as “Public Land.”
  • Not counting the 3 big projects mentioned above, the great majority of both residential and commercial pipeline projects are currently clustered in the greater South Beach/South of Market/Mission Bay area, the Market Street corridor, the Potrero Hill/Dogpatch area, and the Mission.
  • Approximately 800,000 square feet of manufacturing, distribution and repair use space would be lost in the course of existing pipeline development, to be replaced by housing or other commercial uses.

The full Planning Department Pipeline Report can be downloaded here. There’s also a nifty interactive map illustrating projects in the pipeline. Our sincere gratitude to Aksel Olsen and Teresa Ojeda of the SF Planning Department for compiling this useful and comprehensive report.


The first and third charts below come straight from the Planning Department Pipeline Report. We created the two district-breakdown charts to separate out residential and commercial projects and to reflect more common neighborhood and district names as used in the real estate business (but even then, the names should be considered gross generalizations). And we added a snapshot of the Planning Department map to give an idea of the number of development projects in the city.

This snapshot from the interactive map on the Planning Department’s Pipeline report webpage indicates current projects in the greater South Beach/South of Market/Mission Bay district, Hayes Valley and the Market Street corridor.


*All information included herein is from sources deemed reliable, but may contain errors and is subject to revision.