Fall Market Provides Mixed Messages

The Fall market is now at its peak. We will see how it plays out this month and next, but September numbers provide a mixed picture. Certainly the market is not the extreme seller's market it was last year, but cries of a bubble bursting are not borne out by the statistics. The median sales price for all residential properties in San Francisco of $1,120,000 is still up year over year although by only 1.1%. But the divergence between single family homes and apartments is now quite clear. Homes are at a median of $1,216,875 which is 5.4% above last year's median. But condos/TICs/coops declined in value, standing now at $1,012,500 a decrease of 2.6% from last September. Other statistics show the same difference, with inventory down 1% for single family homes but up 6.6% for apartments. And the months supply (the number of months it would take to sell off the available properties) is up only 4.2% for single family homes, but up 14.8% for apartments. Nevertheless, this is still a seller's market with overall supply at 2.8 months and 3.1 months for apartments; the standard tipping point between a seller's and buyer's market is 6 months and we are still well away from that.

My explanation for the divergence is that there is almost nowhere in San Francisco to put a new house (except by replacing an existing one) so supply is static. Not true of condos which are being built as the city increases density. But no one should take that analysis too far. If there was a "glut" of new apartments they would be falling in price dramatically, but they are just edging down after several years of massive appreciation.

Looking at other numbers solidifies the view that the market is not as super-heated as last year, but hardly collapsing either. New listings are down 7.3% and would normally be expected to increase if property owners felt that the market peak had been reached or a decrease in prices was imminent. The median number of days on the market is way up to 28 days, which is over 40% higher than last year. But again this is more a reflection of the hyperactive market of last year; 28 days is still below the national average of 36 days (in July, the last month national averages are available) and the national figure is considered very low. Finally, the median percent of list price properties receive is down 6.6% to 104%. Thus, even after the run-up of the past few years, the average homebuyer is still overbidding. It's still a great time to sell, but buyers now can have more confidence in the correct sales price after reviewing comparable sales with their agent.

2-4 unit building median sales prices decreased significantly in September, down 19% to $1,280,000. But days on market changed little, from 33 days last year to 30 days this year. Perhaps more telling, sellers have not decided to divest; inventory is 18% lower than last year. Keep in mind that small numbers of 2-4 unit sales skew these figures, as well as the fact that many sales are not reported through the MLS.

As always, the state of the market in the city's different neighborhoods varies substantially. Only three districts saw increases. District 7 (Marina, Pac Hts), after a steep decline since May 2016's median of $2,100,000 is now at $1,550,000. That figure is an increase of 3.3% from last year, so it appears the northside is in no danger of falling behind any other area. District 2 (Sunset) and 10 (Bayview, Excelsior, Portola), by contrast continued a steady appreciation, up 3.6% and 3.3% respectively to $1,243,000 and $803,000. If the Sunset continues at this rate it will soon be the same as District 1 (the Richmond), traditionally the preferred area across the park; District 1 was down 1.1% to $1,375,000.

The big losers this month were District 6 (Hayes Valley, Western Addition. Lower Pac. Hts.), down 18.2% to $1,060,000, District 8 (Civic Center, Downtown, Russian/Nob Hills), down 12.7% to $960,000 and District 9 (SOMA, Mission, Bernal, Potrero), down 10.3% to $1,031,000. District 3 around Lake Merced in the southeast corner and District 4 west of Twin Peaks changed little (down 1.7% and 0.2% respectively). Finally, the second most expensive area, District 5 (Castro, Haight, Noe Valley), slipped by 6.3% to $1,452,000 and is now almost the same price as District 4 after a wide divergence beginning in the Spring. (All district statistics are rolling 3 month averages to mitigate for small numbers of sales in any particular month, with percentage changes year over year.)

Summing it up, it appears that the Fall market is consistent with a stabilization of prices at levels perhaps slightly below the peak reached this past Spring. Of course, outside factors, including November's elections, the direction of interest rates, and the economy as a whole could trigger another run-up this coming Spring or a prolongation of the "plateau" phase we appear to be in now. At any rate, the statistics give little credence to some sort of impending real estate crash in San Francisco. As always, the advice of a full-time agent who is in the market every day all day is essential. If you are wondering how much your property might sell for now or next Spring, or if you are thinking of buying and wondering if you should wait, give me a call to discuss. More statistics, updated constantly, are at www.danslaughtersf.com.

Downtown Skyline Goes Up and Out

Like it or not, San Francisco's skyline is going up as relentless demand for both housing and office space drives construction of new and taller towers. Nowhere is this more striking than around the Transbay Transit Center, but there are exciting developments elsewhere in the city as well.

In the Transbay area, the city's tallest building is now the Salesforce Tower, surpassing the 853 foot Transamerica Pyramid this month and slated to top out at 970 feet. Nearby, also under construction, is the tallest residential building 181 Fremont with a two story open-air terrace and ultra-luxury condos perched on the top 17 floors. Several other interesting buildings, including ones by famed architects Jean Gang, OMA and Foster & Partners are planned. Especially when viewed from the east, like on the Bay Bridge, this group of buildings, together with those completing the high-rise residential neighborhood on Rincon Hill, make San Francisco's downtown skyline much broader and taller and turn the Financial District into a backdrop. 

The other major architectural cluster is at Van Ness and Market, where four tall towers are planned, one on each corner. Although plans are still preliminary and the city is considering up-zoning the parcels further to allow even higher buildings, Skidmore, Owings & Merrill have proposed a 39-story tower with glass-covered "wings" flanking a vertical void running all the way up the side of the building. One of the other parcels is city-owned and currently for sale, while the other awaits the closure of teh Honda dealership now occupying the site. Finally, Norwegian starchitects Snøhetta plant to complete in 2019 a 39-story tower at One Oak Street with a dramatic horizontal "cut" in its rounded facade. Of course, San Francisco already has a Snøhetta building, the addition to SFMOMA that opened earlier this year to rave reviews, so let us hope this new tower is just as great. If these projects come to fruition, they will add thousands of residents to the area, and extend Manhattan-style densification to the edge of the Upper Market/Octavia area and Hayes Valley.

With the intense community input all projects receive in our city, it can be hard to get interesting buildings up, because controversy usually means delay and more expense. So we end up with "safer" buildings (which, as everywhere, also are generally more cost-effective for developers because unusual design requires new constructions methods and additional risk). But these new proposals promise to enliven our city with new urban areas, new outlooks and, hopefully, a more beautiful city that serves all its residents well.  More details herehere and here.

Our Unique Geology

We live in a beautiful city, surrounded by hills and water. But with that topography comes risk. We have all had relatives or friends say "aren't you afraid of earthquakes" seemingly oblivious to the hazards they face at home including tornados, hurricanes, blizzards, and ice storms. So what do we do about our particular risks? Residential real estate transactions in California include a natural hazards report that gives all parties notice of the major hazards, and it's a good idea to have some sense of what those are while recognizing that absolute certainty is not achievable.

Earthquakes can cause damage anywhere in the Bay Area, but some areas are more prone to damage than others. In an effort to assess the relative risk, many consult faultline maps and liquefaction zone maps. The hazard reports buyers and sellers receive identify areas prone to landslides (generally, any area on a steep hill) and liquefaction (generally, areas built on landfill or other unstable soil). But these maps and reports do not take into account the strength of the building being considered or the particular geology of the site. So, for example, a hillside built on solid granite bedrock would generally be more stable than one built on an old dump, but both would be deemed landslide risks because they are steep.

Another concern, especially with rising sea levels attributable to global warming, is the risk of tsunamis or less catastrophic flooding. Most of San Francisco is up well above sea level, but certain parts of the city near the shoreline are susceptible. Maps of the worst areas - which are estimates of where there is risk, not where there is certainty, of water intrusion may be helpful.

All hazard disclosures should be considered general guides, not a real assessment of the particular risk of an individual property. For the risk averse, building and geologic inspections and earthquake and flood insurance are available. (But note that many condominium buildings do not have earthquake insurance and an individual unit owner would not be able to obtain it without the HOA -- all the owners -- agreeing). With the exception of the building inspection, which is fairly standard in San Francisco, especially for single family homes and small buildings, these assessment and mitigation measures are expensive and most homeowners do not pursue them. An experienced agent can help you talk through the issues but, like all risks in life, there will never be a complete answer. Consider that driving a car runs the risk of an accident, but most people do not stop driving, instead opting for safety features and insurance to mitigate the risk of, but not eliminate, a bad outcome. Natural hazards are the same and, no matter where you live, come with the territory. For general information, look herehere and here.