As your local real estate experts, we feel it’s our duty to give you, our valued client, all the information you need to better understand the complex San Francisco Bay real estate market. Whether you’re buying or selling, we want to make sure you have the best, most pertinent information, so we’ve put together this monthly analysis breaking down specifics about the market. It’s all part of our mission to give you the very best in personalized service.

We would love to know what you think!

Anthony Navarro, DRE #01491847

February was a relatively quiet month for real estate. The outlook for the year ahead though, as discussed below, signals many exciting developments in the local market. It should be noted, even with the slowness typical for this time of year, the US stock markets have risen in both January and February. In fact, the S&P 500 has gained in 2 months what it usually does in a full year. We know that a rising stock market boosts consumer confidence. This increased feeling of wealth could propel people’s interest real estate.

30-year fixed mortgage rates have ticked down about 15 basis points, which is good news for buyers and sellers. On March 10th, the Federal Reserve stated rates are appropriate at current levels. Media outlets afterwards reported that rates may rise one more time in 2019. This relatively stable interest rate environment is beneficial to buyers and sellers helping preserve purchasing power through 2020.

It’s worth noting that several established San Francisco-based start-ups will IPO in 2019. Lyft is leading the pack and by the end of 2019, the IPOs of Airbnb, Instacart, Lyft, Palantir, Pinterest, Postmates, Slack, and Uber will create approximately 5,000-10,000 new millionaires in the city. This influx of liquid wealth will mostly affect the luxury housing and condo markets. Overall, the median housing prices in San Francisco and the surrounding metropolitan area will likely trend back towards peak levels last seen in February 2017.

 

We know that a rising stock market boosts consumer confidence. This increased feeling of wealth could propel people’s interest real estate.

 

San Francisco County Median Sale Price and Price per Square Foot
12-Month Rolling

 

While Median Single Family Home prices in San Francisco are still climbing (+10% Y-o-Y), February 2018 saw the highest median house prices ever at $1.7 million; February 2019 median home prices are 11% lower than peak at $1.52 million. Sales price and price per square foot have trended upward since the beginning of the housing recovery in January 2012 but have slowed marginally since 2015. It’s important to see the forest through the trees here and focus less on individual months. A 10% return over a 12-month period is quite good. With the probable increase in demand coming later in the year, the growth rate will continue steadily though not at the 20-25% level.

Looking at longer-term trends, we can see that price appreciation is slowing to more reasonable levels. Booms do tend to taper if not outright bust. Luckily, indications of the latter are nowhere to be seen, and we are entering into a real estate growth rate more in line with historic levels. Buyers and Sellers may want to temper their expectations going forward and not expect housing prices to double every six years. However, a healthy return on investment will continue.

As stated earlier, interest rate hikes are looking less likely in 2019. At the end of 2018, prime 30-year mortgage rates were around 4.5% with the rates expected to rise to 5.5% over 2019; even with those expectations, mortgage rates decreased 15 basis points during the first two months. The Fed seems more hesitant to raise rates due to economic uncertainty. As mentioned last month, a 1% increase in mortgage rates from 4.5% to 5.5% actually increases the monthly mortgage payment by 12%. Interest rates remaining at current levels gives buyers the ability to get more for their money than if interest rates rose.

 

3 and 12 Month Rolling Days on Market

 

As we go through the winter months, Days on Market is beginning to tick up, more so with condos than Single Family Homes (SFH). Unlike SFH, more condos are coming to market. As you can see in the charts below, the number of new condo listings has remained steady and has slightly risen while SFH listings have decreased consistently over the last four years. Single Family DOM stayed consistently low throughout 2018, which continued into the new year. SFH have a supply problem. The quantity of SFHs are relatively fixed in San Francisco and demand has stayed consistently high. This mix creates a favorable environment for sellers looking for quick sales and benefiting from ever increasing prices. 

Condo DOM did rise higher but not outside of statistical norms. Days on Market is not particularly high for this time of year but is, of course, something to keep an eye on. Inventory remains tight and demand continues to outpace supply.

Number of New Listings

12-Month Rolling

Number of Sold Listings
12-Month Rolling

New listings for single family homes have steadily decreased since 2010. The seasonality that can still be seen with the new condo listings is imperceptible in single family homes. From January 2012 to February 2019, new listings for SFH has decreased 19% while the number of sold SFHs has decreased by 9%, clearly showing that demand is outstripping supply. Over the same time period, condos are different only in that more condos are coming to market – a 9% increase. However, the number of condos sold has increased by 23%, again, showing the demand in San Francisco. In the Bay Area, low supply is the primary driver of price increases. The only way to make any headway in the supply/demand imbalance is new construction, more specifically, new condo construction.

In the Bay Area, low supply is the primary driver of price increases. The only way to make any headway in the supply/demand imbalance is new construction, more specifically, new condo construction.

Bay Area Median Price Values

Broadly, the Bay Area median home price has leveled out over the last few months. San Mateo and San Francisco lead the pack.

Median Sold Price of Existing Single-Family Homes

Case-Shiller High, Mid, and Low
Tier – San Francisco Price Index

Case-Shiller High, Mid, and Low
Tier – San Francisco Price Index

Gray shading indicates economic recession.
Because most homes sold in San Francisco are in the top third of home sale prices in the Bay Area, the High Tier Index is most appropriate for San Francisco County. Across the board, we are seeing the market pull back a little. The pullback isn’t out of the ordinary and a bounce is expected as we head into the prime selling season.

Number of Sold Luxury Residence

12-Month Rolling

The number of luxury homes sold has begun to level out in San Francisco. Nationally, luxury housing is projected to slow. The new millionaires that come out of the 2019 IPOs may cause the luxury market to tick up marginally in 2019-2020 in the Bay Area.

Cool Winter, Hot Summer

The market has been cooling off for the first couple months of 2019, but with the strong stock performance, future tech IPOs, and stable interest rates demand could increase significantly throughout the year. We are excited to see what unfolds. Demand is already high and inventory is tight, especially for single family homes, so even if the median price of homes drops a little more, they will rebound quickly. 

The coming months are shaping up to be quite interesting. Those considering buying or selling know the value of experience. Whether it’s personally or professionally, creating value is what our agents are known for. Our agents have years of knowledge navigating many types of market conditions. We cannot stress the importance of pairing with an agent that understands the nuances of the San Francisco real estate market. We are here to serve you.

Current, In Contract & Coming Soon at Harper:

-1404 Crespi Drive, Pacifica – CURRENT
– 2695 23rd Avenue – CURRENT
– 246-256 Bemis Street – CURRENT
– 94 Thrift Street – CURRENT 
– 93 Onondaga Avenue – IN CONTRACT
– 3550 Carter Drive, Unit 137, South SF – COMING SOON
-179 San Carlos Street, Unit 1 – COMING SOON 
-250 Sunshine Drive, Pacifica – COMING SOON 
– 1235 Homewood Avenue, San Mateo – COMING SOON

Interested in hearing more? Reach out!

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