Appreciation and Depreciation in SF since 1995

Posted by Leslie Bauer on Wednesday, May 27th, 2009 at 11:55am.

Appreciation & Depreciation
of San Francisco Homes since 1995

Below, median sales prices are calculated for 2-bedroom condos, 3-bedroom houses and 2-bedroom TICs in a number of SF neighborhoods over a variety of periods beginning with 1995 -- when the last, great Sellers' market began -- and ending with the six months following the financial market meltdown in September 2008. (Its effect began to show up in mid-October sales.) Median price is a relatively crude statistical generality - especially in SF with its huge variety in property type, size, condition, curb appeal and architectural style - but it can be useful in assessing macro trends in the market. However, remember: for a specific home, only a specific market analysis is truly pertinent.

Since October 15th, year over year, the number of sales has dropped 20% for houses, 35% for condos, 53% for TICs and 46% for 2-4 unit buildings. But that masks significant changes in buying trends: the number of houses sold below $1,000,000 actually increased 4%, while sales of more expensive houses plunged over 50%. People are generally buying smaller, less expensive homes, and then, only those that stand out as excellent values. Less appealing homes - which still sold in earlier years (virtually everything sold during the boom years) - are not getting reflected in the current figures.

Some of the more affluent neighborhoods had too few sales to be statistically meaningful. For example, in the last 6 months, all of Pacific & Presidio Heights, Cow Hollow and the Marina had only 19 house sales, of all sizes and prices. St. Francis Wood had only 6 and Sea Cliff only 4. Roughly 50 - 70% of buyers of upper-end homes - who would typically be considered "willing and able" - can no longer get better financing rates without very large down payments. When that changes, we'll be better able to assess values in that market segment. In the meantime, it is dominated by buyers with lots of cash.

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Further analyses of percentage changes in median and average prices, and dollars per square foot can be found here:

  • Percentage Declines Analysis

    Signs of Life

    In recent weeks, the number of listings accepting offers has increased substantially, while the number of price reductions and expired and withdrawn listings - though still high by historical standards - has decreased significantly. Months-supply-of-inventory (MSI), an indicator of seller supply and buyer demand, has also declined. (The higher the MSI, the greater the buyer advantage.) Whether this will prove to be the beginning of a durable resurgence for SF real estate or simply a springtime bounce, it is too soon to tell.

    The area where most house sales are now occurring is Realtor District 10 (Bayview-Portola-Excelsior). Then comes District 2 (Sunset-Parkside), District 5 (Noe-Castro-Haight) and Bernal Heights. District 10, with the greatest number of foreclosure sales, has been hardest hit by price declines, and has roughly as many sales as Districts 2 and 5 combined - so it has had a massive impact on overall median price in SF. (Which is one reason why the overall city median home price is virtually worthless as an indicator of changes in market values.)

    Most condo sales are occurring in South Beach-SOMA, then District 5 (Noe-Castro-Haight), and then District 7 (Pacific Heights-Cow Hollow-Marina). These numbers don't include new development sales unreported to MLS - which would greatly increase the South Beach-SOMA sales numbers. The new developments are doing everything they can to move inventory right now.

    Foreclosure Sales Update

    Since mid-October 2008, 17% of house sales and 6% of condo sales in San Francisco have been REO (bank-owned) homes. The median sales price of an REO house during this period has been relatively stable at about $500,000; the median sales price for an REO condo has been $432,000. 78% of REO house sales have occurred in the less affluent south/southeast part of the city, stretching from Bayview to Oceanview. 85% of REO condo sales have been in the neighborhoods stretching south from SOMA along the east side of the city down to Bayview and across to Oceanview. The greater part of the city - northern, central and western neighborhoods - continues to be relatively unaffected by foreclosure sales.

    Renting versus Buying

    Due to price declines, tax benefits and exceedingly low interest rates, the Rent versus Buy equation - which went badly out of whack during the runaway Sellers' market - has been coming much more into balance. Here is a sample calculation comparing paying $2600 rent with purchasing a $650,000 home. Since any calculation depends on one's assumptions regarding inflation, appreciation, interest rates, down payment, term of ownership, and so forth, please feel free to use the calculator referenced to perform your own calculation.

  • Sample Rent vs. Buy Calculation
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