Updated S&P Case-Shiller Home Price Index for San Francisco Metro Area
The Case-Shiller Index for
the San Francisco Metro Area covers the house markets of 5 Bay Area counties,
divided into 3 price tiers, each constituting one third of unit sales. Most of
the city of San Francisco’s house sales are in the “high price tier", so that is where we focus most of our attention.” The Index
is published 2 months after the month in question and reflects a 3-month
rolling average, so it will always reflect the market of some months ago. January's Index is released on the last Tuesday of March.
The 5 counties in our Case-Shiller Metro Statistical Area are San Francisco, Marin, San Mateo, Alameda and Contra Costa. Needless to say, there are a lot of different real estate markets found in such a broad region.
The first two charts illustrate
the price recovery of the Bay Area high-price-tier home market over the past year and since 2012 began, when the market recovery really started in earnest. In both 2012 and 2013, home prices surged in the spring and
then plateaued in the summer-autumn. The surge in prices that occurred in
spring of 2013 was particularly dramatic, reflecting a frenzied market of huge
buyer demand, historically low interest rates, increasing consumer confidence
and extremely low inventory. In San Francisco itself, it was further
exacerbated by the high-tech-fueled explosion of new wealth. The market then calmed down somewhat, but is now starting to heat up again due to a very high demand/ very low supply dynamic.
Case-Shiller Index numbers
all reflect home prices as compared to the home price of January 2000,
which has been designated with a value of 100. Thus, a reading of 184 signifies
home prices 84% above those of January 2000.
The third and fourths charts below reflect what has occurred in the longer term, showing the cycle of recession, recovery, bubble, decline/recession since 1996, and since 1988. Note that, past cycle changes will always look smaller than more recent cycles because the prices are so much higher now; if the chart reflected only percentage changes between points, the difference in the scale of cycles would not look so dramatic.
This next chart compares the
3 different price tiers since 2000 (updated through 12/13: January 2014 saw further increases as reflected in the charts above). The low-price-tier’s bubble was much more
inflated by the subprime lending fiasco – an absurd 176% appreciation over 6
years – which led to a much greater crash (foreclosure crisis) than the other two price tiers. All 3
tiers have been undergoing dramatic recoveries, but because the bubbles of the
low and middle tiers were greater, their recoveries leave them well below their
artificially inflated peak values of 2006. It may be a long time before the
low-price-tier of houses regains its previous peak values. The high-price-tier,
with a much smaller bubble, and little affected by distressed property sales,
is now pretty much back to its previous peak of 2007. Most
neighborhoods in the city of San Francisco have now surpassed previous peak values, some of them by substantial margins.
It’s interesting to note that
despite the different scales of their bubbles, crashes and recoveries, all
three price tiers now have similar overall appreciation rates when compared to
year 2000: ranging from 72% for the low-tier, to 80% to 83% appreciation for the
mid and high tiers, over the past 13 years. The gap is relatively small and has
been converging in recent months.
Different counties, cities and neighborhoods in the Bay Area are dominated by different price tiers.
Remember that if a price drops
by 50%, then it must go up by 100% to make up the loss: loss percentages and
gain percentages are not created equal.
And then looking just at the city of San Francisco itself, which has, generally speaking, among the highest home prices in the 5-county metro area (and the country): many of its neighborhoods are now blowing past previous peak values. Note that this chart has more recent price appreciation data than available in the Case-Shiller Indices. This chart shows both house and condo values, while the C-S charts used above are for house sales only. Median prices are affected by other factors besides changes in values, including seasonality, new constructions, inventory available to purchase, and significant changes in the distressed and luxury home segments. Short-term fluctuations are less meaningful than longer term trends.
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. All numbers should be considered approximate.
© 2014 Paragon Real Estate Group