Inventory of Active listed single-family homes, condos, and TICs in San Francisco fell 8.6% over the past two weeks (versus an average of 11% over the same time two weeks in 2006 and 2007) but is now running 33.3% higher on a year-over-year basis (up 4.9% over the past two weeks).
At the same time, listed sales activity is down dramatically on a year-over-year basis. And once again, it’s another new record with respect to the percentage of listings that have undergone at least one price reduction (currently 44.7% of all listings versus 31.6% at the same time in 2007 and 29.3% in 2006).
The standard SocketSite Listed Inventory footnote: Keep in mind that our listed inventory count does not include listings in any stage of contract (even those which are simply contingent) nor does it include listings for multi-family properties (unless the units are individually listed).
∙ SocketSite’s San Francisco Listed Housing Update: 11/17/08 [SocketSite]
∙ Early San Francisco Sales Numbers For November: Down Almost 50% [SocketSite]
I noticed that several listings were “withdrawn” over the last week. My guess is that sellers don’t want to go through the hassle of open houses during the holidays. Or maybe they fear too few buyers, so what’s the point of being on the market? Then inventory picks up again after the Super Bowl. This seems to be how seasonality usually works, right?
Are there other reasons homes are being taken off the market right now?
If I were a seller–a motivated, not a make-me-move seller–I’d keep my house on the market, because who knows where the Dow will be trading come February? It could be at 6,000 or 12,000 or someplace in between.
Every listing is different. There are hardly any buyers in the winter, so it doesn’t matter much either way. Pulling a listing off gives the opportunity to address physical issues like leaks or legal ones like leans so that the listing will be that much better when it is renewed. Most of these properties haven’t sold yet in part because they have some open issues to resolve, and of course sellers fret about even price reductions. At this point keeping it on the market might be the best option, but there are many other factors to take into account.
Typo: “Leans” are physical things too; “Liens” are the legal issues properties may have.
Wowsers – listings about 10% above last year at the end of October, ~33% above last year at the end of November … any guesses for end of Dec? I’m thinking … 65% or so?
What is striking is that there still are over 400 more units on the market this year than last year, which is the same number of total November sales on a good year (2004).
What this means, “I donno,” but it is worth mentioning…
I think, Pumpkin Patch, that the significance of your observation is that the units on the margin (i.e. the relatively small number of sales as compared to total SF units) drove the price up in the bubble years, and the increase in offerings of those marginal units will have, and is having, a similarly strong downward drag on prices. What was the number of November sales — about 200? That would put SF at 8 months of inventory, well over double last year. What might seem like a non-monumental increase in inventory and decline in sales (roughly plus 30% and minus 50% respectively) has a huge impact on months-of-supply and prices. This chart, reflecting supply, is big, and the note on lower sales, reflecting demand, is even bigger. Put the two together and you have serious price declines, as reflected in the record numbers of reductions.
The months of inventory seems like a good indicator of the softness of the market. I’m wondering if it makes sense to go further and make an estimate of the carrying costs and/or exposure to declines.
Take the inventory, multiply by median price (of the listed units, if available), times carrying rate (I think I’ve seen 7% p.a. used elsewhere here, between mortgage and taxes seems reasonable), times number of months (should that be months of inventory, or half that as the average time-on-market?).
Something like that, tracked over time woudl give some indication of the “motivatedness” of the sellers in the market overall.
This weekend, I walked through one of the “new” developments that fairly recently started moving in tentants. I found myself asking how much longer these developers can sit on so many unsold units before they dramatically lower the prices. I think buyers can sit on the sidelines a lot longer than sellers can carry these costs. I believe another leg down in prices will happen when the SOMA/South Beach/Dogpatch etc. condos reach a tipping point of fire sale pricing.
mktwatcher, there are no new developments in south beach. However I think it will be interesting to closely watch sales at Infinity II for example.
Certainly the next six months will be a fantastic time to buy, particularly from a developer that has a lot of inventory to unload in a short period of time. Am curious to see how many of these units are destined for the rental pool, and if some develoments like Infinity II will go all-rental and wait some years to sell the units.
By the way, to those who occasionally check in with Calculated Risk, Tanta passed away over the weekend. She was a brilliant teacher and had a wonderful and perceptive mind on many of the subjects that we regularly discuss on this site. I can honestly say that I learned more from her about all things related to lending and real estate during the last couple of years than from all other sources combined. She was quite a remarkable person and will be missed.
Ouch! that’s the second time I’ve been called out for not knowing South Beach. I’ll promise not to mention it any more when I mean the area around the ball park.
Aren’t the infiniti Towers in South beach?
Agreed with you on Tanta, Trip.
Regarding inventory, I expect a large build in early 2009 while sales continue to stagnate and prices (finally) post material drops, even in nicer parts of the city. In other words, no spring bounce.
Market psychology has changed dramatically since September. Add to that today’s proclamation that our potential recession is now official, plus all the layoffs slated for 2009. It’s hard to imagine any scenario where home prices don’t fall next year (aside from the occasional trophy home that some monied spendthrift must have). And if rents start falling as well….
It has been a very long time since I posted but this subject got me out of hiding with another prediction (since I am pretty good at these things)
Aside from the rate cut coming, (.25) and the dow slipping below 7500 (Q1 2009), I will go out on a limb and say that thanks to Father Time, the SFAR will finally lose the inventory ghosting battle that they have pulled off in The City for ohh so long… Look for a 20% price correction for The City leveling off in Q2 2010. Also look for the lending markets to finally loosen up in Q4 2009.
This is a BEST CASE scenario for everyone reading..
It can become quite worse(no chance of better) and all bets are off if some critical incident were to take place anytime between now and then. (Terrorist attack on US soil, substantial Gov’t failure, Intl incident involving Middle East or China)
My advice to buyers: Be Patient!
As usual I will gladly back up my prediction with a friendly (for charity) wager…