Having hit a record $870,000 in May, the median price paid for a home in San Francisco ticked up 1.5 percent to $883,000 in June, up 23.8 percent year-over-year. As always, keep in mind that movement in the median sales price is a great measure of the market’s appetite and what’s in demand, but it’s not a great measure of actual appreciation despite what some headlines might say.
The recorded sale volume of homes in San Francisco continued to drop, however, falling 5.7 percent from May to 500 sales in June, down 24.7 percent year-over-year. The June sales volume in San Francisco has averaged 630 sales since 2004.
At the same time, the inventory level of single-family homes and condos for sale in San Francisco has ticked up over the past month (i.e., the supply of new listings is meeting the sales demand) and is down less than 10 percent year-over-year (i.e., a lack of inventory isn’t to blame for the sales decline).
For the greater Bay Area, recorded sales volume in June was down 9.4% on a year-over-year basis, down 7.5% from May while the recorded median sales price rose 6.9 percent to $555,000, up 33.1% year-over-year.
Foreclosure resales and short sales made up about 18 percent of the Bay Area market in June, down from 21 percent in May and 40.5 percent a year ago.
As always, keep in mind that DataQuick reports recorded sales which not only includes activity in new developments, but contracts that were signed (“sold”) months prior but are just now closing escrow (or being recorded) and any properties that were sold “off market.”
∙ Record Annual Gain for Bay Area Median As Sales Dip [DQNews]
∙ San Francisco Records A Record Median Home Price In May [SocketSite]
Not sure I see the relevance of the 835k any more now its been well blown past – perhaps more relevant was the cycles low in late 08/early 09 – seems to be around 560k, 55% or so ago..
Inventory -“down less than 10 percent year-over-year (i.e., a lack of inventory isn’t to blame for the sales decline).
Well, its partly to blame, surely..? It could easily account for around 1/2 of the sales decline, inventory per month (weeks?!) of sales must be remaining near record lows..
“As always, keep in mind that movement in the median sales price is a great measure of the market’s appetite”
agreed, but that was also the case back in, say mid 07.
The once oft quoted “better measure” of prices contines to increase as well though, has increased every month since February – though some levelling off into July – and is itself up around 50% from Feb 2002 values..
By once oft quoted better measure of prices I meant to clarify median per sq foot..sorry…
The authors of this blog correctly identified what’s behind the “rise” in prices – abnormally low supply.
wrath, why do you have “rise” in quotation marks?
I think the current situation is a direct AND indirect result of very high demand.
The direct effect is: anything available goes very quickly in general. Simple. Prices go up. Higher prices have brought out many sellers last year and now the potential supply has been depleted.
The indirect effect is a bit more pernicious: People are now backing off from selling because even if they get a good price, they have to join the huge crowd of bidders with no warranty to find another place in SF. It’s harder as well to put an offer with a contingency on the sale of your older place: your offer might not make it to the top of the heap with the all cash and no contingency buyers.
Even if you figure a way to live somewhere between your sale and your planned purchase, the market could have gained 5%+ while you blinked. Not a pretty scenario.
Also, many people living decently in SF feel they have arrived to their final destination. They’re helped by Prop 13 to stay put.
With betterment of economic conditions, job creation and fundamental shortage of housing what else can one expect?
May see one more month of these new records (well, records if you pretend inflation does not exist). Hecka-low rates prevailed when houses closed in June. Same for many closing in July as rates were locked in earlier. But those looking for loans starting about early June saw a really big spike in rates, spiking even higher by late June. Made everything about 10% more expensive, all else being equal, at the same sale price. That has dampened prices. Will show up in the data in two months, maybe a little next month.
Just so happens we sold our old place in late May after buying several months earlier (just try to buy a place with a sale contingency in SF). better to be lucky than good . . .
Seasonality will kick in after next month or two as well to agree there won’t be many more records set this year – but 2 or 3 is 2 or 3 more than I think anybody was predicting…
Seasonality will also make the effect of rate increases a little hard to determine, but there’s going to be something of an effect, natch.
Seems like the speed at which properties go under contract is not slowing down at all. They spent a couple of months painting this place and then a week or two staging it: http://www.2710pine.com/
Listed on Thursday and went pending on Saturday, before they even had a chance to hold the first open house. Must have been a good offer.
It was attractively priced but not without its warts (2 units down likely not legal) – will be interesting to see where this closes at. Will also be interesting to see where the one down the street closes at – listed at $3.65m on Pine and went pending, may be a new record for the street.
You actually sold a place in this market, anon, yet you’re talking about interest rates as driver? A contingency is a contingency. Financing, inspections, what have you. Cash sales are driving this market, full stop.
First, I am not sure rates will keep climbing. After all the current rate spike was mostly a market gut reaction to Bernanke’s comments about the pace of the current QE. Now that he’s partially backed-off from his original opinion, the rationale behind higher rates is not as strong as it was just 3 weeks ago.
Rates and SF RE? Well, many buyers are still using mortgages. They’re part of the buyer pool and will most likely eventually purchase. This means they have an influence, even if today these buyers are secondary to all cash buyers in some markets. This means that some of them being mechanically priced out by higher rates will have some influence on sales volume and ultimately price.
Say you are in a seller’s market. You have 20 buyers, 5 of them all cash, fighting for 10 properties. If rates go up and price out 1/2 of the buyers with mortgages, you’re left with a more limited buyer pool and a lesser seller market.
But it would take a much higher rate increase to really change the current imbalanced ecosystem. 5%? 5.5%? Also, very high rents make buying still attractive to people who need financing.
I agree, I believe rates have peaked and will start dropping again. As you say Bernanke has backed off and the drop in rates can already be seen, most clearly in the 5 year ARM, but even the 30 year fixed is slightly lower than it was last week. It will probably drop more slowly than it rose, and I doubt it will get as low as it was.
The recent run-up in rates will certainly have some impact for exactly the reasons you describe, but I think it will only slow the rise, rather than reverse it, especially as it appears rates will stay low for the foreseeable future.
On top of that I believe we are starting to see buyer fatigue, with people dropping out after losing numerous bidding wars. I only have anecdotal evidence, but I have a couple friends that were trying to buy over the last 6 months or so and they’ve both recently dropped out.
On the other hand, the data I’m able to find indicates that it’s still cheaper to buy than rent in SF, so I think there’s still decent room for growth in prices, but that is very dependent on interest rates.
My interpretation is a continued growth in prices, but probably quite a bit slower.
“You actually sold a place in this market, anon, yet you’re talking about interest rates as driver?”
Yep, closed at the end of May, and the ridiculous low rates were plainly the driver on price. Two highest bids were at 20% down and 10% down. Did not get a single cash offer (out of 8 bids). Both of the top 2 offers, which were way above listing and way above the third highest (and the top offer was way higher than the second) waived all contingencies. So no inspection, no nothing. Yes, waiving the financing contingency when you need financing is not worth much as the buyer can always back out and just have to eat the 3% down, but a “cash” buyer can do the same. Took 28 days to close, a little longer than expected because banks are pretty strict these days, especially with jumbo loans. I’m pretty confident we cleared about $75,000 – $100,000 more than we would today because of the record low rates in May, which reflects the difference in the sale price to end up with the same monthly payment at today’s rates. Can’t know for sure (unless we were to try to sell an identical place today) but we’ll see when the data come out over the next few months.
The lower sales volume simply confirms that the market is easing, although it’s still a great time to be a seller in SF (just not as great as two months ago). That said, I agree with lol that rates are unlikely to move much for a while, and I’m certainly not predicting a price crash like in 2008, just that prices will pull back a very small bit.
“I’m pretty confident we cleared about $75,000 – $100,000 more than we would today because of the record low rates in May”
I’m certainly not predicting a price crash like in 2008, just that prices will pull back a very small bit.”
100k is quite a chunk though – not sure how much your place was, but it’s 10% of a 1m place which is presumably around where you’re at – as you mentioned above 10% is how much more expensive things are now with new rates etc.
To me, the 10% or so you think they’re fallen to this point, plus presumably some further impact and falls you said you expect to see over next few months adds up to more than “a very small bit” but I may be wrong, or misinterpreting..
Nothing is 75k to 100k cheaper right now than it was in May, and the low inventory has to do with sellers’ inability to “trade up,” not market easing imo. But thanks for the backstory. Without getting into specifics, what sort of property did you sell? And did you trade up, or rent?
Traded up. Bought an SFR last fall – market was competitive, but not nearly like this Spring; we ended up being the only bidder on the place (4BR in D5) and got it at a decent price, I’m fairly certain, because it turned out we had a lot of friends in common with the sellers. Held on to both places for a while (complicated, family member stayed in the old place for a little while) as we debated whether to sell it or rent it out. When we saw things in the neighborhood selling for crazy prices in March, we decided to sell our old 2BR flat (a condo) because it made no sense financially at the prices we were expecting to hold onto it and be landlords. We priced it high (I thought) and it ended up selling for more than 150k over listing. Made me feel sick, to be honest, that someone was paying that much, but it passed!
I agree with the cheerleaders that the SF market is very strong for sellers. It’s not just SF, same is true everywhere (could make a way bigger killing in, say, Sacramento, selling a place you bought in 2009). My only point is that the main driver of the craziness has been ridiculously low rates – got us to pay more when we bought (heck, I doubt we would have qualified for the same size loan at today’s rates) and there is no doubt it resulted in a far higher selling price for our place.
grimrepa, I do think some super hot sales, like ours, would see a 10% price reduction today. Our old neighborhood just happens to have really taken off this year for some reason. SF-wide the easing from higher rates is far less significant.
Thanks for the details anon! I have an additional question, did you take the 10% down offer or 20%? I didn’t think 10% down was even available these days…
Personally I think interest rates are a very important factor, but rents are a somewhat close second. Even at current higher rates, it’s about break-even on rent vs. buy, at least based on the data I’ve looked at.
Took the 20% offer (was the highest). The 10% down offer included financing from Schwab – bidder had a lot in his Schwab account but wanted to finance as much as he could (because rates were so low!), and Schwab will finance 90% for good customers.
Believe me, I know first hand how out of control the sellers’ market was (and maybe still is – I’m out of the game now, forever hopefully). Just a kibbitzer now.
A 10% fall since May is quite some collapse!!
Presumably you think the value of your new, bigger more expensive place has fallen by 10% since May as well though because I think your new neighbourhood (d5) must have taken off at least as well if notbetter than your old…?
“A 10% fall since May is quite some collapse!!”
There’s no case to be made that could support such a statement. The trend is going the other way. Heh.
“Presumably you think the value of your new, bigger more expensive place has fallen by 10% since May as well”
Maybe, but I couldn’t care less! Not selling for decades, and locked in a 30-year jumbo loan at 3.7% (and the stock market, where I’ve parked the money I otherwise would have put into the house, is up about 23% since we bought — not bad!)
And, I did not say the market is down 10%. I said I’m fairly confident we’d fetch about 10% less on the sale of our place compared to a couple months ago, given the specifics of that one transaction and the high bid that was an extreme outlier. And no, D5 is stodgier and has definitely not taken off like our old neighborhood. Now stop bothering me with your petty jealousies as I need to get back to counting all the money I’ve made in my two savvy real estate deals . . .
“Now stop bothering me with your petty jealousies as I need to get back to counting all the money I’ve made in my two savvy real estate deals . . ”
Gladly. I’ve made my points, and it’s pretty clear who the petty one is from the crowing tone of your last reply.
Thanks for the discussion!
There is little doubt the rate has a very real impact on what specific people will pay. Debatable whether or not your 20% down buyer would have been particarily sensitive to the issue. It only matters what the highest bidder pays. Cash buyers or those looking to max their borrowing to benefit from low rates don’t focus on the buying power of low rates. With the market up and performing like it has there are plenty of people who will choose to keep as much of their savings in the equities market. Once the pool of buyers who are less rate sensitive are exhausted in SF than we will see more beta in this regard. There are lots of people waiting in NYC for this to happen and I wouldn’t be holding my breath here in San Francosco.
The SF bubble from pre 2010 seems fueled by “buyers” who over committed themselves and drove the buyers with true buying capacity to “overpay”. Those that got the margin call, and there were plenty (divis/pacific), lost big. Those that could hold on are getting bailed out. But not many of those who were underwater are choosing to sell. But I bet they sleep better an night. The maket now is more “true” in its price rationale. However, the low inventory is serving as a quasi-proxy for the fake buying power of pre 2010 bubble environment.
IMO
Adam, what percentage of the 500 units sold were sold for cash?