Recorded home sales volume in San Francisco increased 7.1% on a year-over-year basis last month (333 recorded sales in January 2011 versus 311 sales in January 2010), down 32.2% as compared to the month prior (which was down 1.6% on a year-over-year basis) and versus a 15% year-over-year increase in listed sales volume.
For context, January sales figures for San Francisco from 2004 to 2009 were 558 (2004), 469 (2005), 369 (2006), 402 (2007), 293 (2008), and 229 (2009). On average, from 2005 to 2010 sales volume has declined 34.7% from December to January.
San Francisco’s median sales price in January was $590,250, down 6.2% compared to January ’10 ($629,000) and down 4.3% compared to the month prior.
For the greater Bay Area, recorded sales volume in January was up 2.3% on a year-over-year basis, down 30.8% from the month prior (4,966 recorded sales in January ’11 versus 4,853 in January ’10 and 7,178 in December ’10) as the recorded median sales price dropped 3.4% on a year-over-year basis and 9.9% month-over-month.
Foreclosure resales – homes that had been foreclosed on in the prior 12 months – rose in January to 34.7 percent of the Bay Area’s resale market – the highest since last February. Foreclosure resales have risen or stayed the same for six consecutive months. January’s figure was up from 30.1 percent in December but down from 36.3 percent in January 2010. Foreclosure resales peaked at 52.0 percent in February 2009. The monthly average for foreclosure resales over the past 15 years is about 9 percent.
Last month 29.8 percent of all sales were for $500,000 or more, down from a revised 34.3 percent in December and the lowest since 27.0 percent in April 2009. The all-time low was January 2009, when 22.7 percent of sales crossed that threshold. Over the past decade, a monthly average of 44.9 percent of homes sold for $500,000 or more.
At the extremes, Solano county recorded a 3.0% drop in sales volume (a loss of 14 transactions) on a 9.5% decline in median sales price while San Mateo recorded a 4.8% increase in sales volume (17 transactions) on a 12.9% decrease in median price for the second month in a row.
As always, keep in mind that DataQuick reports recorded sales which not only includes activity in new developments, but contracts that were signed (“sold”) many months or even years prior and are just now closing escrow (or being recorded).
∙ Slow 2011 Start for Bay Area Housing Market [DQNews]
∙ SF Listed Sales Volume Up 15% In January Driven By Low-Cost Areas [SocketSite]
∙ San Francisco Recorded Sales Activity Down 1.6% YOY In December [SocketSite]
∙ San Francisco Recorded Sales Activity In January: Up 35.8% YOY [SocketSite]
∙ San Francisco Recorded Sales Activity Down 17.8% YOY In November [SocketSite]
∙ San Francisco Bucks CA Foreclosure Trends, But Not In A Good Way [SocketSite]
The ed. is right to highlight the sales volume for the past several years. The continuing low sales volume is a (the?) key metric to watch here. 2006 saw sales volume really start to fall in SF from the prior several years, and that was the precursor to the large price declines that followed (starting in late 2006 for lower-end nabes and about a year later for the rest). When sales volume picks back up to about those 2006 levels, that should be roughly the turning point where we return to a sellers’ market – i.e. demand is back – and prices start to rise again.
I don’t see this happening any time soon. Probably several more years unless there is some new shock that really hits prices and they cliffdive to the bottom rather than continue the 5-10%/yr decline trend. But this is the one key indicator to watch if you’re looking for the turnaround and you want to ignore the many, many other market measures out there.
“2006 saw sales volume really start to fall in SF from the prior several years, and that was the precursor to the large price declines that followed (starting in late 2006 for lower-end nabes and about a year later for the res”
Stark nonsense from somebody whose comments should be deleted more often than not. That’s what you’re hanging your hat on?
No. More like another quick aside from somebody with zilch invested.
Prices rose for 2 1/2 years after 2006, while volume shrank. You keep on acting like this is a balanced marketplace. It is not. 2006 saw the inexpensive parts of town very active and at their peak pricing. The end. This market is not a balanced market.
Right, prices peaked in late 2006 in the inexpensive parts of town and started falling shortly after. Prices peaked around late 2007 in the nicer parts of town and started falling shortly after. You’re pretending to argue with me while saying the exact same thing. Or are you really claiming that prices in D10 continued to rise until mid-2008?
In housing markets, big sales volume declines lead big price declines by about a year or two. Same lag on the flip side with rising volumes and prices.
I certainly wouldn’t call it “stark nonsense” to posit a relationship between demand and pricing. But I also don’t quite think that pricing will just follow volume. Both supply and demand have price elasticity. For the demand side there can be quite a brick wall when financing terms are tight.
Consider the $70 median HH income in SF. Were prices to drop to $210, you could see huge volume as many sellers would be underwater at this price thus prone to walk and much of the renting population would be an eligible buyer at this price.
Or were 90% of SF homeowners to win the lottery and pay off their mortgages and have cash to spare, then they may be unwilling to sell at even a very high price. Volume would fall, but a small number of bidders bidding on a smaller number of properties could shoot up prices.
Regardless of the exact time it takes to reach the Moraga BART station, I do think that tipster has a very good point about how substitutes can impact effective supply and/or demand.
There are many many different markets in the Bay Area, just like there are many markets in SF. They don’t all walk in lockstep. Sometimes they’re disconnected. Sometimes they don’t even start to make sense.
If the tech industry produced 1000 new millionaires overnight (like Google a few years back), and the market these guys were attracted to had only 200 properties in stock for the year, you’d see pretty stupid things happen, like $1M Noe tear-downs.
Same thing on the other end. Say you’re in Stockton and the pool of credit worthy candidates is 1000 and you have 10,000 properties to move, then you’ll have a crash in prices. Stockton has lost 70% since the top (not 50%). Some people in SF might consider to buy a rental property in Stockton if the price was just too low, but they wouldn’t live there for many reasons.
Why do people keep bringing up Stockton? Don’t they know SF is different??
@realtor.ed — While I do think that supply constrained markets like SF exhibit fundamental differences from “flatland” markets where the ease of new construction will make it hard for prices to grow much faster then the marginal cost of construction over the long term, this difference does not necessarily imply a good outcome for SF at all times.
Specifically about the once “immune” Seattle, but referencing the BA:
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“Two local economists were quoted all but guaranteeing that Seattle was immune “if history is any indication.” A market-risk index from PMI Mortgage Insurance gave the odds of Seattle prices dropping at a negligible 11 percent.
These days, the mood here is chastened when not downright fatalistic. If a recovery depends on a belief in better times, that seems a long way off.
When we last listed the price-to-rent ratios in major metropolitan areas, Seattle’s was near the top of the list. Only in the Bay Area of Northern California and in Honolulu were house prices higher, relative to rents.
A sky-high price-to-rent ratio is perhaps the single best sign that an area is in a housing bubble. Real-estate agents, homeowners and even home buyers can tell a lot of stories to justify the bubble — stories about central cities or good school districts being immune to bubbles — but eventually people will realize that renting is a much better deal and more will do so.
There is no such thing as a market price that cannot fall.”
http://economix.blogs.nytimes.com/2011/02/14/seattles-foreseeable-housing-bust/
The market has fallen, tc-sf. The problem with you and your colleagues is that you speak from a perspective of an inevitable full reverse eventuality. It is always as if SF has not / is not changing. Certain thresholds were breached. Will they really never reoccur ? Because they continue to happen almost daily. The 2M Potrero hill home. Unheard of in 2005. The 3M Noe house. Scarcely existed in 2006. Bernal @ 1.3 and up, relatively commonplace now. So much of what is said on here is rooted in SOMA condo building spree + D10 overexuberance. Again, the market is quite down. But don’t argue “every market is vulnerable” when you mean “a full reversal is going to occur.”
These days, the mood here is chastened when not downright fatalistic.
Sell hope, buy despair.
@anon – I’ve often heard the meme that SF (or other areas) are different and thus immune to housing declines. While Relator Ed above did not explicitly draw this implication, I wished to make it explicit that while I *do* think SF is different, as I explain above, I don’t believe that this difference should imply an immunity to price declines. The NYT article presented is very much in line with my views.
I would agree that vulnerability to a decline, which as you point out is actually happening, is not the same as the inevitability of a full reversal. But I do believe that supply constrained markets like SF can experience more volatility, i.e. higher highs and lower lows, then Flatland markets.
Additionally, while few things are inevitable, we can at least look at what is most probable. While I wouldn’t go so far as the NYT article and say that price/rent is the single most important factor, I do think that the most probable outcome is a reversion to the mean for price/rent and/or price/income.
Taking this further, I find it useful to avoid “anchoring” on recent prices and thinking about changes in terms of “decline from peak”, rather taking a reversion of price to rent and income as a baseline, looking at potential changes that would alter this balance.
Although you would probably consider it a “bear” result for price/rent to revert to pre-bubble trend. SF was able to function just fine pre-bubble and while not inevitable, I would consider this a neutral result.
Regarding D10/SOMA, this site seems to feature quite a wide range of property locations and types.
Whatever tc_sf’s “colleagues” might argue, I’ve always doubted we’ll go back to 1996 prices for the reasons fluj notes, that much of the city is just nicer than it was before. However, there is a tendency to point to the bubble itself to overstate the fundamental changes, which were very significant from the mid-90s until about 2001, and not that much in the ’00s. It is true that few high-priced homes sold in some neighborhoods before 2005. But there have also been few after the bubble pop. I.e. it was the bubble that drove high prices more than any gentrification.
Take Bernal. Of over-$1.4mm houses (I use that instead of 1.3 b/c redfin and cleanoffer don’t offer a 1.3 break), we had:
2004 1 sale
2005 3 sales
2006 3 sales
2007 4 sales
2008 2 sales
2009 None
2010 None
2011 None
Same thing in, say, the Bayview. No over-$750k places before the bubble and Lots and lots of them during it. Gentrification? Maybe, but there have been no such sales in the last 3 years.
I’d also note that except for considering the inflation hedge aspect, which may or may not be significant, on potential ROI with a fixed rate loan, I generally find real (inflation adjusted) prices more significant then nominal prices.
If the value of a dollar declines by 30%, the fact that the price of a house measured in dollars goes up by 30% should be taken as a baseline.
This site certainly does feature a wide range. Check out the Redfin links that posters use to try to make arguments, though. Or the “don’t use median” people who, um, use median when it suits them.
I chose 1.3 off the top of my head. Probably shoulda said 1.2. You crunched 1.4. Typical.
Hee hee, fluj, you are good for a smile. I actually agreed with you! Although I pointed out how you are misreading the bubble sales as indicating more than a bubble. You talked about how the proof of big gentrification changes is shown that “certain thresholds were breached,” and I used something consistent with that (available to me and actually better because they were nearer the “threshold”) to show how you are misreading things. And then you say “well, I should have used something that was hundreds of thousands of dollars below those “thresholds” that were critical to my point!
So, okay, some quantum of less expensive home sales is now proof that more expensive home sales are here to stay!
Note that my use of the $70k median HH income was a hypothetical and generally in support of your position questioning a direct link between volume and pricing. Additionally it was used correctly to compare incomes and prices in the same hypothetical time period.
The median is a tool. Consider a person who tries to use a hammer to remove a lightbulb. While this makes him look the fool, it does not change the usefulness of the hammer for its proper purpose.
Redfin has a nice UI and I haven’t noticed any material differences in Redfin listings vs other sources. I’m not sure what the issue is with people using Redfin links.
“I generally find real (inflation adjusted) prices more significant then nominal prices. ”
I agree with that. Generally in housing busts, there is often a nominal decrease followed by a slow real decrease via flat prices. I haven’t seen a reason for this time to be different yet, other than perhaps larger amounts of government stimulus.
As for the other stuff, I know you’ll find handwavy arguments to the contrary, but nothing backed up by much. Some commenters here do not believe a substitution effect exists in SF at all.
“The 3M Noe house. Scarcely existed in 2006”
And quite literally true. There’s no doubt that the quality of product on the market has increased through redevelopment. But that should not be confused with appreciation.
How does what you just said differ from appreciation, neighborhood wise ?
“How does what you just said differ from appreciation, neighborhood wise ?”
As first brought up in the beginning of this thread, supply and pricing need not move in tandem. In particular if supply was created in excess of demand, then this would be expected to apply downward pressure on pricing.
During the dot.com boom a great deal of fiber capacity was built, far better then any that had existed previously, but so much of it was built that pricing for data transfer crashed.
On the positive side, while the bottom is good, you don’t need the bottom. Find a property you like and wait until they are bleeding and hurting. Then make an offer that is realistic, but at the same time downright insulting. This might not work the first time, but that is no matter. Rinse, repeat, reap.
“How does what you just said differ from appreciation, neighborhood wise ?”
Yes, if your neighbor’s house improves from a ramshackle dump to to a brand new home, a little of that rubs off.
There’s a difference between appreciation and improvement. Both cause average prices to rise though the $3M Noe house was always a product of massive investment and improvement.