A few different looks at what has happened to San Francisco median homes sales prices over the last 20 years, and over the past 6 months. As you can see, there has been quite a bounce up since the new year began -- which seems to parallel the surge in buyer demand and the decline in inventory available to purchase that SF has experienced in 2012. April in particular saw a huge jump in median sales price -- the highest since the double tax credit rush of April 2010 -- but we will have to wait for future months' readings to see if that jump was an anomaly or a true reflection of increasing home prices in the city.  

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.

For our complete report:

[More]

The new Case-Shiller Index report for October was just released. Many news articles are trumpeting that prices declined in “19 out of 20 US Metro Areas,” however while the aggregate Index for the 5-County San Francisco Metro Statistical Area did indeed decline very slightly in October (by about half of one percent), the Case-Shiller High Tier Price Index for the SF Metro Area, which is the Index which best applies to the city of San Francisco itself actually ticked up a little in October.   The Case-Shiller High Tier Index applies to house sales of about $600,000 and above. In the 8 northern and central districts of the city, the median house sales price for non-distress houses is well over $800,000. Indeed, if there was an “Upper High Tier Index” for SF alone, I suspect we would see an even larger uptick in prices. It’s been very consistent in the city, Bay Area, state and country that lower price homes have been affected much more negatively than higher price homes.   As always, our full article on Case-Shiller is here: http://www.paragon-re.com/postings/Case_Shiller_San_Francisco_MSA.html   For the record, tiny monthly fluctuations must be considered within any reasonable margin of error and are essentially meaningless. What is important is the consistent, longer-term trend.          

This is a surprisingly well written, even-handed CNBC article by Albert Bozzo about what’s going on, factoring in many of the issues pertinent to the real estate market: the economy, foreclosures, employment, location, input from a variety of pundits, dissenting opinions, and so on. Here is its beginning, but it’s worth reading the full article:

“After half a decade of withering sales and slumping prices, there are strong and diverse signs that the single-family housing market is poised for a rebound. In some metropolitan areas, the market has bottomed, with both sales and prices on the rise and foreclosures on the decline.

This contrarian — and largely overlooked — thesis flies in the face of the persistent gloom that has nagged the industry since 2007, when the subprime crisis flared.

Industry analysts and players cite a number of reasons — some traditional (employment), others unique to the post-credit bubble era (foreclosures) — for the long-awaited sea change. An analysis of industry and government data also support the forecast."

For the full excerpt and link to the article: [More]

In a world where market ups and downs are blared out every minute, often with great hysteria, it’s useful to pull back and look at the home market from a wider perspective. The longer time period and larger number of sales make statistics more reliable and less confused by normal, relatively meaningless fluctuations. The longer term also provides a valuable overview for an investment typically held for 5 to 10 years and often longer.

The UCLA Anderson Home Price Forecast, which has been bearish for years, has suddenly turned bullish and is now predicting a 50% gain in California median home prices over the next 6 years. (They are not the only pundits turning optimistic.) If that turns out to be true – of course, studies have found that “pundit” forecasts are about as reliable as coin tosses – that would make 2011 somewhat analogous to 1995. In 1996, after a big market drop and then years of market-value doldrums, appreciation started to pick up again. And anyone who purchased in 1992-1995 soon looked like a genius, as values then doubled by 2000.

For the complete report with charts:
[More]

This article from The Economist joins a growing chorus of recent analyses predicting a national turnaround in real estate (albeit with a number of qualifiers of things that could yet go wrong):

“There are two things everyone knows about American economic recoveries. The first is that the housing sector traditionally leads the economy out of recession. The second is that there is no chance of the housing sector leading the present economy anywhere, except deeper into the mire….Home prices languish near post-bubble lows, over 30% below peak….Housing markets are far from healthy. Yet current pessimism seems overdone [and] a turnaround in sales, prices and construction may be closer than many imagine."

To read more of the excerpt from this article: [More]

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.

For the complete report with market charts: [More]

We are often asked why our analyses seem so out of whack from media reports, so much more positive than the general drumbeat of doom. There are several reasons: the media usually deals with more general data (national, state, Bay Area) while we focus on the city of San Francisco itself or even its specific neighborhoods (which of themselves are often very different markets); there is also the grievous lack of context in the media (a polite way of saying that they often don’t know what they’re talking about); and their unfortunate preference for bad news. But perhaps the biggest reason is that San Francisco and to some extent, much of the Bay Area, is simply an exceptional market. Though subject to the greater economic conditions other places are, the city is often not as negatively impacted to begin with and then recovers sooner.

For the complete market report and 11 statistical charts: [More]

Chief economist -Wells Fargo John Silvia (formerly chief economist for the Senate Banking Committee). Quote provided by the San Francisco Chamber of Commerce:

“San Francisco is becoming more like London / Paris and a lot less like Denver…It's a city that doesn't add a lot of people, but the people it's adding to the metropolitan area are very well-paid people…The city will grow good paying jobs in health care, education, leisure, hospitality and information technology, which will cause property values and rents in San Francisco to go up.“
[More]

The S&P Case-Shiller Index for July, released today 9/27, indicated the 5th consecutive increase in “high tier” house values in the 5-county San Francisco Metro Statistical Area. The majority of SF’s houses qualify as high tier (over $601,000); in the 8 northern and central Realtor districts, almost 90% of SF house sales qualify as high tier. (For all price tiers, the aggregate C-S Index had its 4th consecutive increase in values in July.)

To review the charts: [More]