2017 - Slow Start, Big Bang End

2017 was an interesting year for San Francisco real estate. We began with a slow Spring selling season. Prices, especially for condominiums, moderated and overall sales were very low. But the Summer brought new optimism and a charge to the market and by the Fall, we were at new record prices with no end in sight. Did the uncertainty brought about by the 2016 election flatten sales, especially in the apartment market which is heavily influenced by investors? There is no way to be sure, but life has a way of taking over from any shock as people make the changes they need because of a growing family, new job or retirement. So what are the numbers for 2017?

2017 gave us a new all-time high median sale price of $1,325,000. To put that in perspective, at the end of 2014, when the current run up had already been surging for three years, we were under $1 million. So the last three years have seen a 30% jump in prices with about 8% of that in 2017. Single family homes outperformed the rest of the market, hitting a new record median price (in October) of $1,575,000. Condo/TIC/coops showed improvement over the year (with a new record high in November of $1,245,000), but closed in December at a median of $1,132,000 which nevertheless is a 12% increase from last December's very low post-election number. Looking more expansively at the entire year's sales, the trend line is very clear. San Francisco's steep run up from 2012 through 2015 became shallower (but still steadily up) at the end of 2015 and then again steeply climbed in the second half of 2017. We see no sign of any downturn and the Spring market should be at least steady, if not another boom.

Other indicators are consistent. Inventory (active listings) always trends sharply down as the Fall progresses, but in December 2017 hit a new record low of only 406 properties on the market, almost 40% lower than last year. Looking at the long-term trend line, the steep decline in inventory that began in 2011 saw a bit of relief this year and last, but we are certainly still in a very low inventory market. Days on market was in the same territory all year (below 20 days) as the lowest point ever in 2015. The number of properties selling over the list price hit a low in January 2017 of 48%, lower than at any point since 2012. Similarly, the median percentage overbid (0%) in January was at a 5 year low. But both numbers recovered during the year to about 65% selling over list and a median overbid of about 5%.

2-4 unit buildings, like single family homes, outperformed the rest of the market. Although rental rates were flat or even slightly down, the median price was up 9% over 2016, landing at $1,794,000. That's an increase in square foot price of $50. About the same number of buildings changed hands (524 versus 510 last year) but they did so quicker - the median time on market now stands at 28 days versus 32 in 2016. (Keep in mind that small numbers of 2-4 unit sales can skew these figures, as well as the fact that many sales of apartment buildings (and other commercial properties) are not reported through the MLS.)

The statistics for residential sales show a clear pattern that the continuing high demand from new jobs and a surging economy coupled with historically low supply (despite all the new condos being built) will keep price pressure on for the foreseeable future. That said, the huge run up since 2011 must be absorbed and it is good that price increases have moderated so that the city has a chance to get its equilibrium back and (hopefully) make the infrastructure and political decisions necessary to make a livable, workable city for the future. 

If you are interested in the value of your property or the one you want, give me a call so I can analyze your specific situation and use my experience and skills for you.

Year End Market Summary by District

San Francisco is a city of neighborhoods and the market in 2017 was different in every one. The real estate map is divided geographically into 10 districts, each with from 4 to as many as 16 subdistricts. Some of the subdistricts are too small for meaningful statistical analysis in a year, but we can tell some interesting market moves by looking at a few.

First, the bigger districts to give us an overall idea of the neighborhood trends (some information about neighborhoods is in the next article). Despite the media's intense focus on new wealth pouring into the city, the long-time king of the market remained old-money District 7 (Pac Hts, Marina) with a median price surge of 10.9% to place it at a median price of over $2 million - that is more than $400,000 more than the next closest area. But District 7 was not the winner percentage-wise. That title goes to District 8 (Civic Center, Russian/Nob/Telegraph Hill) which shot up 20.5% to $1,190,000 in 2017. That number is misleading, however, because District 8 was way down in 2016. The other big increases were in District 4 (west of Twin Peaks) - median of $1,555,000, District 6 (NOPA, Hayes Valley, Lower Pac Hts) - median of $1,295,000 and District 10 (Excelsior, Portola, Bayview) - median of $950,000; all up 15%.

The middle of the pack, in terms of appreciation, were District 9 (Mission, SOMA, Bernal) which hit $1,185,000 (up 12.9%), and District 2 (Sunset) with a median price of $1,340,000, an increase of 11.7%. Next below those two, both up about 3%, were District 5 (Noe, Castro, Haight) which increased 3.6% to $1,600,000 (second highest in the city) and District 3 (Stonestown, Oceanview) which was up 2.7% to $1,130,000 and the second lowest. The only district to fail to appreciate in 2017 was District 1 (Richmond) which was completely flat and closed at a median price of $1,500,000.

Comparing the trend lines over a 3 year period tells some interesting stories. Although District 7 on the northside held onto it's top position, neighboring District 1 (Richmond) fell from it's normal third place position and is now below District 4 by $55,000. Similarly, District 8, the other northside area, fell below District 6 by $100,000 as District 6's Hayes Valley and NOPA have risen in value relative to Russian Hill and North Beach. Finally, District 9 which has, since 2014, generally been above District 8 and keeping pace with District 6 now is below both. This may be because of the downward price pressure from new condo construction, which is overwhelmingly in District 9.

What does all this tell us? That there is no such thing as "everything is much more expensive" or "the whole city's market is slowing down." The old adage "location, location, location" applies here as it does everywhere else, so it's important to look at each neighborhood and have an experienced agent's knowledge of the current trends in the ones you are interest in. I'm always happy to discuss, give me a call. (All district statistics are three month rolling averages, to mitigate for low numbers of sales.)

Individual Neighborhood Markets

There are 88 subdistricts in our fair city, far too many to consider them all in this newsletter. But we can glean useful knowledge from looking at a few of them. Consider the Central Sunset and the Central Richmond, right across the park from each other. Both showed healthy gains in 2017 with the former advancing 8.7% to $1,360,000 median sales price and the latter up 16.6% to $1,545,000. What's amazing about this is that the Central Richmond advanced far more than District 1 as a whole, which was flat overall in 2017. I would attribute this to the predominance of single family houses in the Central Richmond; homes have outpaced condos and TICs all year and those in the Central Richmond remain relatively affordable compared to almost anywhere else except the southern reaches of the city. District 2 as a whole was up 11.7% so the Central Sunset kept pace essentially. The Central Sunset failed to advance faster then its inner and outer neighbors (as in the Richmond) perhaps because the entire district in which it sits has seen heavy appreciation in the past several years pulling everything up equally.

Another example shows the importance of looking closely at statistics. District 8 as a whole was up more than any other area last year, +20.5%. But the North Waterfront sank almost 12%. So where was the appreciation? Some very expensive sales in Telegraph Hill and the Financial District pushed those areas into 70% appreciation territory. Does that mean that the values in those areas almost doubled last year? Of course not; but it highlights the value of looking very closely at statistics and being careful to use them as a general guide, not as a substitute for home-specific analysis.

The type of property being sold also matters. In Eureka Valley/Castro overall prices were essentially flat, but single families rocketed up 25% to a median of $2,705,000. By contrast, in Noe Valley the difference in price appreciation was moderated; homes were up only 4.5% to $2,300,000 while apartments gained 9.2% to $1,420,000. This divergence between the two sides of the hill might have something to do with the relatively large number of moderately priced apartments in the Castro, as opposed to Noe Valley where almost all apartments are relatively large converted flats.

Our diverse neighborhoods, separated by hills, freeways, and commuter routes create a complex market requiring a lot of on-the-ground knowledge to assess value. Trust in a real estate professional to analyze your home or the one you want.