January 16, 2013

San Francisco Home Sales In December Hit An Eight-Year High

San Francisco Median Sales Price and Volume: December 2012 (www.SocketSite.com)

Recorded home sales volume in San Francisco rose 29.5% on a year-over-year basis last month, 646 recorded sales in December 2012 versus 499 sales in 2011, up 23.3% compared to the month prior and versus an average November to December gain of 3.7% since 2004. An average of 518 San Francisco homes have sold in December since 2004 when the recorded sales volume was 646 as well.

San Francisco's median sales price in December was $720,000, up 21.1% on a year-over-year basis, down 1.1% as compared to November in which the median was up 13.0% year-over-year.

For the greater Bay Area, recorded sales volume in December was up 4.5% on a year-over-year basis, up 7.3% from the month prior (7,832 recorded sales in December '12 versus 7,494 in December ’11 and 7,296 this past November). The recorded median sales price was up 32.0% year-over-year, up 1.1% month-over-month.

While last month’s sales count was the highest for any December since 8,372 were sold in 2006, it was still 9.0 percent below the 8,611 average for all Decembers since 1988. December sales have ranged from 5,065 in 2007 to 12,349 in 2003.
The number of homes sold for less than $500,000 decreased 12.6 percent year-over-year, while the number that sold for more than $500,000 shot up 61.2 percent, DataQuick reported.
Last month distressed property sales – the combination of foreclosure resales and “short sales” – made up 34.2 percent of the resale market. That was down from 35.5 percent in November and down from 52.4 percent a year ago.

At the extremes, while San Francisco recorded a 29.5% increase in sales volume (a gain of 147 transactions), Solano recorded a 14.6% drop in volume (a loss of 104 transactions) with a 19.6% increase in median sales price. The median sales price increased 28.8% in Contra Costa County, 10.2% in Napa.

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).

Rate of Recovery for Bay Area Real Estate Speeds Up [DQNews]
Recorded San Francisco Sales Volume Hits Six-Year Seasonal High [SocketSite]
San Francisco Sales Activity Ticks Up In December, Median Ticks Down [SocketSite]

First Published: January 16, 2013 11:00 AM

Comments from "Plugged In" Readers

Up, up, up and away it seems. Presumably inventory is keeping down. Too much money chasing too few properties inevitably leads to rising prices.

I beleve the median per sq foot - a much better indicator of prices - is up above 20% YOY as well.

That unseasonal November to December increase is a little crazy, too, especially when considering 5 Fridays the year prior to 4 this time around.

A nice way to end the year. It seems that anyone who bought in 2012 was not an IDIOT, after all.

Posted by: REpornaddict at January 16, 2013 11:24 AM

There's nothing much decent for sale these days and still a prety healthy demand.

I saw 2 houses in my neck of the woods sold this last month: one listed for 1.499M and selling for 1.93M (442-444 Noe) and another listed for 1.495M and selling for 1.87M (468 Noe).

Both open houses were hysterical, both houses were firm after roughly a week and sold in less than a month. Most likely no mortgage and probably very little in terms of contingencies. That's 25% and 29% overbids respectively and 25% more than a comparable 2006 sale I know of.

Maybe the askings were underpriced. Or maybe the sellers were as surprised as the neighbors who still have to make sense of all of this. Let the good times roll.

Posted by: lol at January 16, 2013 11:29 AM

Anyone seen tipster here lately? Anyone?

Posted by: Agent415 at January 16, 2013 12:41 PM

Let's not pretend that certain real estate firms/agents [don't] purposefully under-priced properties to create demand and publicity (both pre/post sale). It's an interesting strategy.

My long standing theory was that we would be flat through 2015/16. So far I'm wrong in the short run (the market is higher than I expected); and at a minimum my long term prediction of flat now as some cushion. I would be happy to be proven wrong. Pleasantly surprised we haven't seen rates creep up. Surprised also that we're not seeing more people "selling now to lock in the high prices" as many had touted in years gone.

Posted by: eddy at January 16, 2013 12:54 PM

rates may "creep" but that's about it. as for future price predictions - I doubt anyone saw this coming - but the market remains insane after 2 full weeks into the new year. offer deadlines with crazy over bidding, or pre-emptive often off market deals also with crazy offer prices. Nothing will quell this except supply.

I keep hearing supply is coming, but so far it hasn't. We're WAY under-supplied still, hence the craziness. The ONLY reason a seller should wait to sell is if they think prices will keep going up, but my guess is that once supply does hit, the market will calm down and we'll be in for a flat market with these new highs firmly in place. So if you look at the chart above - we're experiencing 2004 early '05 all over again. A huge bump in prices followed by a bumpy but largely flat 2 year period. If you bought in early 2004 with a crazy over asking bid, you won regardless of when you sold. If you bought later in the cycle the market downturn slammed you if you had to sell any time up until.... well, today. My guess is there are a lot of would-be sellers who have been waiting for this day - ideally they want another 5% or 6% appreciation so they get their transaction costs covered. So.... that's a long way of saying that there is pent up supply that has just been waiting for this market and another 5+% market. So that is going to put a cap on prices btwn here and plus-5%. Beyond 2 years I won't bother to predict - other than Johnny's fear mongering about a debt/interest rate crisis is 100% not going to happen.

Posted by: hangemhi at January 16, 2013 1:13 PM

@ Eddy: I really don't see how it matters if an agent prices a property "low" or high. And if that brings in more buzz, so what? That's their job.

And IMO, the bottom line is that if the property sells for what the owner is ASKING or MORE, what is the problem?

Someone, a buyer, wanted that particular property and they were willing to pay over asking. That's the free market working.

Posted by: futurist at January 16, 2013 1:17 PM

We both know that the subject of intentionally underpricing properties is/was a hot topic on here. The fact is that a few agents listed properties well below market and then touted the fact they the house received dozens of offers. I have no issues with this tactic and generally don't care. These tactics do tend to produce better than market results IMO, but its risky; and a little self serving on the part of the agents.

More importantly, the buzz around these few high profile cases actually lessens / cheapens the impact of very real, and impressive, situations where homes priced fairly also go over asking and receive multiple bids.

In any event, its a subtle point and one I'm not really all that concerned about in the grand scheme.

@hangemhi, good points. I remain unconvinced that there is a large contingent of SFHs pent up. Maybe a bunch of "median" stock; but even fixers are selling at crazyt highs. There was a fixed on Clay St by Alta Plaza that went way over and sold for near $1k psf. Literally needs to be gutted. Condo's on the other hand may certainly experience a rush to the exit as some people who bought, fell underwater, and recovered may not have the stomach to go through that again if they can get out even, or a little up.

Posted by: eddy at January 16, 2013 1:34 PM

I agree for the most part.

But I certainly have no idea what the definition of "fairly priced" really means. Does anyone really know? I fail to see how underpricing can really cheapen/lessen other transactions.

It just takes one buyer and one seller to agree, and the deal is done.

Posted by: futurist at January 16, 2013 2:27 PM

The market is quite hot right now…arguably overheated. Unfortunately for many, rent prices are probably even more overheated. I recently had my condo, which was purchased in 2006, appraised at 10-15% OVER my original purchase price. This was based on 5 comps including one in the same building. While, I do not expect this trend to continue, I think the turnaround in SF has for all intents and purposes happened. All numbers coming out seem to support that. I also am in no hurry to sell my condo, and in fact – I just locked in a great rate on a 15 year refi. There must be many people thinking the same thing given the low inventory levels.

The demise of Tipster is pretty funny. He was starting to get more animated in his responses as it became more clear that he was on the wrong side of the RE argument, and then he just completely disappeared. I’m guessing he still lurks from time to time, so hopefully he decides to actually make a post again one day :-)

Posted by: Lance at January 16, 2013 2:37 PM

The 2 examples I gave were priced at a reasonable asking I think, maybe slightly under what the sellers expected. As a comp there's a house on the same side that sold for 1.5M 6 years ago. Very similar house (actually better in my view). 25% over that price means we could be over 2007-2008 prices in this area by 10 to 15%.

Another bit of data. A house physically between the 2 I quoted, 464 Noe, was for sale 2 years ago for 1.439M and was reduced to 1.295M before being pulled from the market with no taker. Similar house with similar square footage, parking, roughly in the same shape. At that time, very little was selling.

Posted by: lol at January 16, 2013 2:42 PM

Our friend the tipster isn't going anywhere. I suspect that he will walk these halls for as long as they are up. I miss all the old character(s).

Some habits are hard to shake. Heck, I still type SF into the challenge question below each post on instinct. :)

Posted by: eddy at January 16, 2013 2:43 PM

The agent doesn't decide the listing price, the seller does. The agent may suggest listing for less than the seller really wants for the place and if the seller would like to sell quickly then he/she will go along. There's nothing mysterious or sinister in that strategy and I fail to see why it's a hot-button issue. As if any seller has a vested interest in skewing the statistics.

It's most common for properties that are right on the edge of common search ranges. If you're looking to get $1.1M for your house then you'll list it at $999K to make sure people with a search range up to $1M see it and come to the open house. If you're looking to get $930K then you probably don't have as much to gain by listing it at $829K.

If "underpriced" listings are particularly common right now (I'm not saying they are) then that could be because the SF market is a trade-up market right now. Most sellers are selling their home to buy a new home so they don't want it sitting on the market for 6 months.

Posted by: formidable doer of the nasty at January 16, 2013 2:52 PM

I don't think that the objection to underpricing has to do with fairness in the ultimate sales price nor the effect on other sales. Rather the problem is with wasting other people's time to participate in a circus.

Savvy agents will advise their clients to bid a realistic price or not at all. But not all buyers have savvy agents and even a knowledgeable agent cannot prevent an naive and overeager buyer from placing an overbid that is under what the seller will accept. That wastes the buyer's and their agent's time while helping the seller with a bidding war and providing fodder for the real estate hype machine.

Posted by: The Milkshake of Despair at January 16, 2013 2:57 PM

About tipster, he's more and more needed I think. He would make a great case that the current run up is not sustainable in regard to levels of income and historical interest rates.

But to do that he'd have to acknowledge that the bottom DID actually happen. It's easier said than done. 2 years of denial will leave a mark.

I had to eat some crow for breakfast, lunch and dinner in 2010 before I switched positions and did my purchase late that year. So glad I did.

(I also find myself typing SF in the challenge question now and then)

Posted by: lol at January 16, 2013 3:06 PM

Magnifique!

Le San Francisco tres chic!

Je suis buying chez moi all week!

Posted by: lemomdufutbol at January 16, 2013 4:48 PM

Actually, never mind the 8 year (December) high. Sales look higher than they have been IN ANY MONTH since 2007, and possibly even 2006.

That's utterly crazy, given (a) Its December sales and (b) the (lack) of inventory.

Le Freak Tres chic indeed

Posted by: REpornaddict at January 16, 2013 5:13 PM

lol - you and a couple of others (can't remember who) get major props for switching from bear to bull and announcing it here in real time.

i was going to write predictions in some thread 12 months ago and if i recall my thoughts i would have been grossly wrong. record low interest rates, tons of cash on the sidelines, spiking rents, tech jobs, and a rising stock market led to a 2012 in SF real estate i didn't see coming. so we'll see if i'm any better with my 2013 prediction of some more run up to come - another 5% maybe, followed by a lot more inventory (it can't get worse with less than 400 mls listings of homes to tic's) and a solid but flat market for a couple of years. i see a stock market correction at some point this year - possibly a nasty one if we get one final burst to 1600 or better on the S&P. If the boom/bust in stocks happens then we definitely get the additional 5% in SFRE early this year, then a definite breather before the stock market recovers and RE buyers with the same conditions mentioned above get back to buying.

ps - "giants" should be changed to "niners" if they win the SB.

Posted by: hangemhi at January 16, 2013 5:26 PM

I am not venturing into specific predictions.

Simply that we are well into the structural recovery and confidence is stronger by the day. Housing money will go into the economy and this will certainly help reinforce the recovery in other sectors. We could be in for a surprise in terms of growth. After all in retrospect 2010-2012 could now be seen as a mirror the 1992-1995 years where people took a while to accept good times were coming back. If I am correct, it's all good.

RE-wise, good areas in SF that have been hit by giddy buyers of late will overflow into the surroundings as it has already started doing. This will move prices higher overall.

Posted by: lol at January 16, 2013 5:50 PM

I'll make a prediction.

All shall be as Ben Bernanke wills it to be. (At least as long as Uncle Hu and Mrs. Watanabe say its ok.)

Posted by: diemos at January 16, 2013 6:04 PM

The rent story is a huge part of this- at least for the people I know who are buying or trying to buy. A greater percentage of the city is getting more and more "locked up" in rentals. i.e. if during other times, people who are in their rentals ten or more years might say that they can't afford to move, now pretty much everyone-- even those who moved into a new lease eighteen months ago-- says they can't afford to move. Thus it becomes self-reinforcing as more and more rentals get locked up thus decreasing inventory-- a vicious circle.

People seem to be comparing rent prices off of craigslist if they moved, vs mortgage payments at current rates post tax deductions etc. They are not worried about losses in the future as SF has held up well and they are just making the comparison pretty literally between one monthly payment and another. And in this light, expensive doesn't look so expensive.

Maybe this is short-term thinking, but I don't see any catalyst on the horizon that would change it. I guess if it held up for the long-term, we would see an aging demographic in the city. What % of renters could afford to rent their place today and what % of owners could afford their place today.

Posted by: nanon at January 16, 2013 9:40 PM

The low supply is a bit puzzling to me. I would expect more places coming onto the market. I know in my complex of 72 units up until about a year ago there had always been 1-3 places that were being listed at any one time with most not selling and getting pulled back off the market only to relist in a couple months. Only 1-2 actual sold between late 2010 and the end of 2011 (one 2BD unit and one 3BD unit). Now there hasn't been a place listed or sold for almost a year. Our complex has several unique factors that make it hard to compare our prices with nearby units so I'm really hoping someone puts a place up for sale soon so I can get a more accurate estimate of what my place is worth.

Posted by: Rillion at January 17, 2013 9:28 AM

Actually just did some more research on my complex and in the last three years, three units sold, all in 2011, so no sales in 2010 or 2012 and nothing currently listed for sale. Based on the 2BD that sold, prices would need to have risen 23% since 3/11 for me to be back to even on my 2007 purchase.

Posted by: Rillion at January 17, 2013 9:38 AM

The spring will tell us if some supply is coming back.

The key about SF is that it's a desirable city with a good economy and obsolete housing rules.

People who have been there a while (more than 2 years for tenants, more than 5 for owners) don't want to leave and often cannot. Those who purchased cheaply are "trapped" by both artificially low property taxes and the fact that it's very hard to move up if your income hasn't followed RE prices.

Just like tenants are trapped by rent control, owners have no incentive to sell, aside from a one-time cash out but little option but to move out.

Posted by: lol at January 17, 2013 10:27 AM

Don't worry, I am going to bring 2 rental units to the market soon as well as a SFH in the summer, so that should help with the supply tremendously.

Posted by: sparky*b at January 17, 2013 10:47 AM

@sparky*b, Whatever you do, don't change that color scheme. Talk about potential -- condo conversion would be a slam dunk (and with a little luck, a lot split). You're agent really knows how to find 'em.

Posted by: EBGuy at January 17, 2013 12:09 PM

I want to believe in this housing recovery as much as anyone. but the bubbling exuberance I detect in the above posts has me concerned about a short term top.

Posted by: fancy rental at January 17, 2013 10:24 PM

What do you mean by "short term top"?

Posted by: sparky*b at January 18, 2013 8:39 AM

Just a guess but it seems to me short term top is pretty self explanatory. That these recent gains will not last long and that the market will cool off again and prices will decline. But that in the long term prices will be rise. This isn't the type of market where you would be able to buy a place and flip it in a year or two (without renovations) and make a profit.

Perhaps I'm reading too much into the comment because I believe it matches my thinking. I think we are likely to have another recession in the next year which will cause the market to cool off again. So I would not be surprised if this spring had strong RE sales but then started cooling off in the fall and prices being down yoy in 2014. By the second half of the decade though its probably that we'd be back to small yoy gains.

Posted by: Rillion at January 18, 2013 9:03 AM

Your description is much more informative. I wasn't trying to call it out as wrong or anything (as it's an opinion). I just wanted to know if "top" meant bubble pop or plateau and if "short term" was 1 year, 3 mo. or 4 year.

Posted by: sparky*b at January 18, 2013 9:50 AM

It's very hard to fathom the current froth, but I llok at it this way:

1 - NATIONALLY

The previous bubble came from easy money and future prospects in population/economical growth. It led to a run up in price that motivated overbuilding.

Then almost nothing was built for 5 years, while the population kept increasing. We churned through overhanging inventory. That inventory has now been almost all absorbed and growth is back. It will support housing.

2 - LOCALLY

Specific local laws (renter protection, prop 13, very strict zoning laws) restricted supply during the boom years, exacerbating the national trend during the bubble years.

The same rules delayed the correction by 2 years but it finally happened in 2008-2009. We had our own inventory to churn through.

The overhanging inventory disappeared at the turn of 2011/2012. Fundamentals in SF are excellent, with job growth, population growth and overall increasing incomes and many individual success stories coming to maturity.

I do not see what national event could make these fundamentals change dramatically. Europe has managed its debt crisis very well. The national deficit is quickly coming down. We have stronger leadership in DC. Growth is back. It's not perfect but it never is.

We could see a plateau happening this year or next year, but the truth about SF is that it is continuing its historical transformation into a talent magnet which usually transforms into high housing costs when supply is constrained.

Good times. Embrace them.

Posted by: lol at January 18, 2013 10:43 AM

The reasons I am more pessemistic over the short-term 1-2 years, are mainly due to Federal government action/inaction. I do not Republicans in Congress will continue to keep backing down/postponing the big fight over cutting spending. This is going to eventually result in a government shutdown or the sesquestor and its large cuts kicking in. While Europe has managed its debt crisis fairly well, such that it has not provided the negative shock to the economy that some feared, we will not be able to look to Europe to provide growth is the US economy turns negative due to the fighting in DC. Same with Asia. I believe the chances of a negative economic shock coming out of China are higher then the chances of China spurring the global economic upward.

Meanwhile the US remains in its liquidity trap such that it cannot tolerate increases in interest rates or inflation (since inflation would require investors demand higher interest rates). So even if something were out there providing more growth in the economy, the Fed would have to act quickly to slow the economy back down. Which means the Fed is going to have to walk a very fine line.

Locally I do expect SF RE to perform a bit better then the national average, mainly due to local supply (constrained by space/nimbys/cost) and demand (helped by an economy that is doing better then the national and state averages).

Of course I've been wrong on the timing of this so far and sold off half my equities in late november, partially missing a nice little market rally since then.

Posted by: Rillion at January 18, 2013 11:37 AM

Rillion, very good arguments.

A few comments: Fed geniuses would probably delay their rate increases if inflation were to start picking up. Extra growth (3%+) compounded with moderate but sustained (3-4%) inflation would be the best scenario I think. Growth + inflation would mean extra income and a mechanically lowered deficit. At the same time, the total debt burden compared to GDP would also be lowered, improving the overall debt situation.

The question remaining is whether investors in US debt would flee to the exit if that happened. This is the famous "confidence fairy" Paul Krugman so skillfully and rightfully shot down.
It didn't happen during the Great Recession. It didn't happen when we were downgraded. We're still the safest bet in town, borrowing at rock bottom rates today.

Growth, even with inflation, would only reinforce that status. Investors can take a year or 2 of measured inflation until the Fed decides to increase rates.

The US, in the next 2-3 years, could perfectly be in the position of being a major source of global growth. It has happened many times before.

But maybe all of this is just wishful thinking from my part.

Posted by: lol at January 18, 2013 12:31 PM

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