No Falling Market This Fall

With September and October numbers in we have a much clearer picture of the Fall market - and predictions of a price decline have been proven false. The median price for all properties stands at $1,290,000, 7.6% higher than October 2015 and 13.6% higher than last month. Single family homes drove much of this price increase, rising by 12% year over year, to a median of $1,420,000. But condo/TIC/coop prices showed a respectable increase of 4.5% to a median price of $1,150,000. That median is $25,000 less than the market peak in June, so the small declines the last few months look like anomalies rather than a long-term trend.

The inventory of available properties remains slightly higher than last year (+1.6%) but showed a sharp decrease from September, even as compared to other years to account for seasonality. Single family home inventory was actually down 3.9% from last year, while apartment inventory, bolstered by the many new units on the market, was up by 5.2%. The months supply (the number of months it would take to sell off the available properties) declined from September to 2.7 months which is significantly higher than last year, but well below the standard tipping point between a seller's and buyer's market of 6 months. The time it takes to sell a property also declined, with October's median of 18 days lower than last October and only 3 days more than the lowest point we have seen in the last 10 years. So all the statistics indicate no bust but rather a robust real estate market.

The market for 2-4 unit buildings also improved in October. The median sale price increased to $1,937,500, up 12.3% from last October. The median days on market declined, from 33 days last year to 26 days this year indicating accelerating sales. And the supply of available properties declined 10% compared to last year. Keep in mind that small numbers of 2-4 unit sales skew these figures, as well as the fact that many sales of apartments buildings (and other commercial properties) are not reported through the MLS.

The city's different areas showed varying degrees of recovery, with the numbers not as dramatic as above due to the use of rolling three-month averages which mitigate the effects of small numbers of sales in some districts in any particular month. Six of the districts showed appreciation, led by District 1 (the Richmond) which surged 7.5% to $1,425,000. The Richmond thus regained its place as clearly preferred to its cross-park rival the Sunset where prices rose only 0.5% to $1,200,000 (after many months of big increases). Also up were: District 7 (Marina, Pac Hts), now at $1,865,000 and on the way to regaining much of the losses it suffered in the past few months; District 4 (west of Twin Peaks), up 4.6% to $1,442,500; District 10 (Excelsior, Portola, Bayview) up 4% to $810,000 and District 8 (downtown, Civic Center, Russian/Nob Hill) up 2.4% to $1,075,000.

The biggest decline this month was again in District 6 (Hayes Valley, Western Addition. Lower Pac Hts), where the median price stands at $1,150,000, down 11.5% from last year. District 9 (SOMA, Mission, Bernal, Potrero) also continued its downturn losing 9% to a median price of $1,050,000. Districts 3 and 5 in the southwest and central part of the city retracted 4.4% and 1.4% respectively. (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.)

Taken together, the picture is of a very strong market that "paused" in August and September, and went back to normal (for San Francisco) in October. With inventory remaining at a very low level, the local and national economy generally improving, employment at very high levels and insufficient new construction, the environment is conducive to additional price increases. That said, the market is continuing to absorb the rapid appreciation of the last few years. That, together with the uncertain direction that the new federal administration may take, may result in flattening or even decreases in some months and/or in some micro-markets over the coming year. 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

New Park! New Housing in Park!

A brand new park opened in Noe Valley this past month, giving the dense 24th Street commercial corridor a little breathing room. Taking over a parking lot, the new public area includes greenery, a children's play area and space for a farmer's market and other community events. But the most important part of the Noe Valley Town Square may be providing a place to sit, relax and meet a new neighbor.

Meanwhile on Mount Sutro, which is mostly covered by a large wild park on the steep hills above Clarendon Heights, Cole Valley and Forest Knolls, there is new life in the proposal to build a mini-city amongst the eucalyptus trees on the western slope. With housing on the site first proposed in 1963, this development has been a long time coming but now it is entitled and just looking for someone to buy the land (for $14 million) and build the 29 duplexes that would create a dense new neighborhood with fantastic views. Hopefully it will get off the ground soon and provide some relief to our housing crisis.  More details here and here.

Mortgage Interest Rates

Despite the talk of San Francisco's real estate market being dominated by all-cash purchases, across the country and here most people who buy a home finance the purchase. And even some of those "cash" purchases are not really; some people liquidate retirement funds or other assets temporarily to make the purchase and then obtain a loan soon after the close of escrow. So interest rates are critical to understanding the residential market.

In the last several years, mortgage rates have been very low - below 4% - helping people afford larger, more expensive homes. But it was not always this way. In 1981 the average rate was 16.63% and went over 18% for a few months. The difference in monthly payments can be extraordinary, especially in our high-priced market. On a $1,000,000 loan, an increase of one percentage point increases the payment by $600 on a standard 30-year fixed loan. As rates go up generally people can afford less and that can put a damper on prices. Of course, there are other factors that determine the mortgage payment - how much is the down payment, can the rate be decreased by paying "points," are there lower interest loans available such as adjustable loans, or can you pay interest only on the loan for a time. All of these are important considerations for home shoppers, of course. But they also are important for sellers, whose asset is affected by what the buyer pool can pay. I often provide referrals to mortgage brokers to talk through these issues with my clients.

So where are interest rates going in the next year? No one knows for sure but most people expect them to go up. This is because the Federal Reserve has signaled that it plans to increase the rate for bank-to-bank loans, perhaps in December. Increasing that rate does not directly increase mortgage rates but it generally does result in higher mortgage rates eventually. The big questions is when will mortgage rates go up and, probably more importantly, how fast and to what level? No one knows the answers to those questions either, but buyers who are considering a purchase should be wary that a wait may mean they cannot afford what is available to them now. And sellers should be cognizant of interest rate fluctuations as they may affect the market in positive and negative ways. For more information, look here, herehere and here.