The luxury home segment in San Francisco makes up about 10% of the overall home market in the city (by unit sales; more by dollar volume). One of the most interesting dynamics playing out right now in the SF luxury home market is the large increase in high-tech industry buyers with huge sums of new money at their disposal. Their presence is strongly impacting the market, especially in certain neighborhoods they've deemed most appealing. We expect this influx of new, wealthy buyers to continue throughout 2012 in the Bay Area. And, of course, as general economic conditions and confidence improves, we expect that this market segment will become increasingly active and competitive.

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District 5 soared in value between 1996 and 2008 and was one of the last districts to peak in value before the financial markets meltdown in September 2008. Values then fell 15% to 20% very quickly and then stabilized in 2009 and 2010. With the surge in high-tech buyers in 2011, many of whom wish to be close to highways to the peninsula -- and love the lifestyle and ambiance of District 5 neighborhoods and its commercial districts -- activity in this district picked up dramatically.


Now in 2012, the competition between qualified, motivated buyers here has become ferocious: inventory is very low, certainly not enough to satisfy buyer demand, and many of the listings are selling very quickly in multiple-offer, competitive-bidding situations. This is exerting considerable upward pressure on prices.


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Several times in the past 25-odd years, the San Francisco real estate market has turned up or down quickly and dramatically: in the mid-eighties – up; early nineties – down; 1996 – up (and up and up, except for the dotcom hiccup); 2008 – way down; and now, we believe we are seeing another big, dramatic recovery in our homes market.

By virtually every statistical measure of supply and demand, the city’s market is experiencing major acceleration. Multiple-offer situations have hit levels not seen in years and this is putting strong upward pressure on values in many of San Francisco’s neighborhoods. The more affluent areas of the city – never much impacted by distress sales and now highly sought after by buyers – are leading the recovery. [More]

The San Francisco Luxury Home Market A Market Trends Overview by the Paragon Real Estate Group The luxury home segment in San Francisco makes up about 10% of the overall home market in the city (by unit sales; more by dollar volume). One of the most interesting dynamics playing out right now in the SF luxury home market is the large increase of high-tech industry buyers with huge sums of new money at their disposal. Their presence is strongly impacting the market, especially in certain neighborhoods they’ve deemed most appealing for a variety of reasons. We expect this influx of new wealthy buyers to continue throughout 2012 as further IPOs occur in the Bay Area. ****************************** San Francisco Luxury Homes: Percentage of Listings Accepting Offers This statistic is one of the clearest expressions of buyer demand vs. inventory of luxury homes for sale. Three of the last 4 quarters rank as the highest percentages since the peak of the market in 2007-2008. The decline in the 3rd quarter of 2011 was probably due to the heightened sense of crisis over the summer regarding the national debt limit increase and the Euro Zone debt crisis -- both of these bringing up fears of national defaults. Typically, we've found that the wealthiest are those most psychologically sensitive to these financial-markets events. Percentage of Listings Accepting Offers by WEEK for 6 Months ending February 5, 2012 Look how demand in the SF luxury home market blasted off in the beginning of 2012. Sales Price to List Price Percentage, Days on Market, Price Reductions & Expired Listings Most of the luxury homes that do sell, sell quickly at very close to asking price. Those going through price reductions spend a much longer time on market and sell at an average discount of 18% off original list price. And many listings still expire without selling, usually because the market deems them overpriced. San Francisco Luxury House & Condo Sales San Francisco Luxury Homes: Average Dollar per Square Foot Dollar per square foot values, even in the high-end, vary widely from neighborhood to neighborhood. The absolute highest are typically paid for luxury condos in prestige buildings with staggering views. Remember that short-term fluctuations are relatively meaningless -- they occur naturally since the "basket" of homes sold varies from month to month, quarter to quarter. In 2011, one Pacific Heights mansion sold for $29.5 million at almost $3000 per square foot, but that must be considered an “outlier” even for prestige luxury homes. Longer-Term Trends in Values Sometimes it's useful to take a step back and look at longer term trends. These charts delineate average sales price (which is different from median sales price) and average dollar per square foot by neighborhood, by year, going back to 1995. Annual statistics are typically more reliable and meaningful than quarterly or monthly stats, because the body of data is so much larger and the normal fluctuations of smaller time periods get flattened out. Even then, some of these neighborhoods do not have that many sales and of the sales, many do not report square footage -- thus these statistics must be considered generalities with a fairly large margin of error. Luxury Home Sales by San Francisco Realtor District The older prestige neighborhoods running across the north of the city from Sea Cliff through Pacific Heights to Russian & Telegraph Hills still dominate sales, but high-end sales in the greater Noe Valley/ Castro/ Haight Ashbury district have soared since the late nineties, and luxury condos in new developments in South Beach, SOMA and Yerba Buena are also a major part of this market now. St. Francis Woods has been an enclave for sales of big houses for quite some time. Largest San Francisco Home Sales by Neighborhood Inventory of SF Luxury Homes for Sale Inventory declines rapidly as the holiday season begins. The high-end market usually, to a large degree, hibernates between Thanksgiving and mid-January and then starts to pick up again. San Francisco Luxury Homes: Months Supply of Inventory (MSI) ****************************** MEDIAN SALES PRICE is that price at which half the sales occur for more and half for less. It can be, and often is, affected by other factors besides changes in market values, such as short-term or seasonal changes in inventory or buying trends. Though often quoted in the media as such, the median sales price is NOT like the price for a share of stock, i.e. a definitive reflection of value and changes in value, and monthly fluctuations are generally meaningless. If market values are truly changing, the median price will consistently rise or sink over a longer term than just 2 or 3 months, and also be supported by other supply and demand statistical trends. AVERAGE SALES PRICE is calculated by adding up all the sales prices and dividing by the number of sales. It is different from median sales price, but like medians, averages can be affected by other factors besides changes in value. For example, averages may be distorted by a few sales that are abnormally high or low, especially when the number of sales is low. DAYS ON MARKET (DOM) are the number of days between a listing going on market and accepting an offer. The lower the average days on market figure, typically the stronger the buyer demand and the hotter the market. MONTHS SUPPLY OF INVENTORY (MSI) reflects the number of months it would take to sell the existing inventory of homes for sale at current market conditions. The lower the MSI, the stronger the demand as compared to the supply and the hotter the market. Typically, below 3-4 months of inventory is considered a "Seller's market", 4-6 months a relatively balanced market, and 7 months and above, a "Buyer's market." DOLLAR PER SQUARE FOOT ($/sqft) is based upon the home’s interior living space and does not include garages, unfinished attics and basements, rooms built without permit, lot size, or patios and decks -- though all these can still add value to a home. These figures are usually derived from appraisals or tax records, but are sometimes unreliable or unreported altogether. All things being equal, a house will sell for a higher dollar per square foot than a condo (due to land value), a condo higher than a TIC (quality of title), and a TIC higher than a multi-unit building (quality of use). Everything being equal, a smaller home will sell for a higher $/sqft than a larger one. (However, things are rarely equal in real estate.) There are often surprisingly wide variations of value within neighborhoods and averages may be distorted by one or two sales substantially higher or lower than the norm, especially when the total number of sales is small. Location, condition, amenities, parking, views, lot size & outdoor space all affect $/sqft home values. Typically, the highest dollar per square foot figures in San Francisco are achieved by penthouse condos with utterly spectacular views in prestige buildings. Median and average statistics are generalities subject to fluctuation due to a variety of reasons (besides changes in value): how they apply to any specific property is unknown. Averages may be distorted by one or two sales substantially higher or lower than the norm, especially when sample size is small. Sales not reported to MLS – such as many new-development condo sales -- are not included in this analysis. All figures should be considered approximate and are derived from sources deemed reliable, but may contain errors and omissions, and not warranted. We are happy to provide or direct you to the original data upon which each chart is based.

It seems to be part of the human condition that financial and real estate markets go in cycles. What’s interesting is that when the cycle is on the upswing or a bubble is inflating, how vociferous the opinions are that the upswing will never end; and how after the crash, how many then insist, often with great virulence, that the markets will never improve again in our lifetimes. We see variations of this forecasting certitude constantly from those emotionally or financially invested in a certain viewpoint, not to mention bloggers and media with infinite white space to fill – and, of course, real estate agents often do this as well. However, most of the time, one must simply wait and see how the cycles turn in their own time and circumstances, and turning points are best perceived in retrospect

All this leads to our point: absent some new natural or economic disaster – which is certainly possible – it appears that San Francisco real estate began turning the corner on the latest down cycle in 2011. For our complete update: [More]

So far, 55 sales of houses, condos, co-ops and TICs with a sales price of $1,500,000 have been reported to San Francisco MLS. That would make it one of the top two totals in the past 2 years. March 2011 had 55 as well, and March 2010 had 57 sales. But since some sales are often reported late in the weeks after a month's end, November's tally may well go a little higher.

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This view point is echoed by the latest Hanley Wood analysis, “Intel for a Changing Market,” which using data and projections from the Bureau of Labor Statistics, Moody Analytics, FHFA and the National Association of Realtors, predicts an accelerating recovery in employment and median household income in the Bay Area in 2012 through 2015; that national home prices have hit bottom and are beginning a recovery; and that new home sales in the Bay Area will start improving significantly in 2012.


We don’t know what the future holds, but certain signs point to a recovery in process: rising rents in the city; incredibly low interest rates, which impact the ongoing cost of housing enormously; increasing high-tech and bio-tech employment in the Bay Area; the beginning of an upswing in the Case-Shiller Index; and strong buyer demand and low inventory of homes for sale since the beginning of 2011. Of course, national and international economic conditions are still uncertain and fragile, and some pundits predict further declines. But if current circumstances continue, this might indeed turn out to be a very good time to buy, comparable to the early 1990’s when the market went through another huge correction, a flat lining in values that lasted several years, and then a return to significant appreciation. As always, it is up to you to come to your own conclusions.

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It's not unusual for the high-end home market to slow down during the summer months, just as it does to a greater degree during the holiday season from mid-November to mid-January. However, this year, though 3rd quarter activity was generally comparable to last year's, considering how hot the second quarter of 2011 had been, the luxury house and condo market slowed down more than expected. This is probably due to the extreme volatility in the financial markets and the huge concerns regarding the European debt crisis experienced over the summer. More than other market segments, the buyers and sellers of luxury homes are keenly attuned to such events and have a tendency to put large, new financial endeavors on hold while waiting for things to shake out or stabilize.

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Luxury home sales in San Francisco have always been clustered in the traditional, northern, prestige neighborhoods running from Sea Cliff to Pacific Heights to Telegraph Hill, as well as in the St. Francis Wood enclave. In the past 12 years, these have been joined in a big way by the Noe Valley-Castro-Haight Ashbury district; by luxury condos in South Beach-SOMA; and to a lesser degree, by Potrero Hill’s north slope...

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