The severe lack of homes priced under $2MM kept the lid on sales volume growth, but certainly did not diminish demand, while homes over $2MM saw a more favorable quarter when compared to last year. Q1 is one quarter with the least number of closed sales, so too much should not be made of its data. A much better assessment of the direction of the 2017 market will be possible after Q2 data is in: March-June is usually the most active selling season of the year. Buyers in the lower end often competed for a property, while higher end buyers were active but not as anxious to commit.
The median sales price for a single family home plateaued at $1.28MM, essentially unchanged from Q1 last year. For condominiums, a year-over-year increase of 4% brought the median sales price to $1.15MM. (Historically, it is not unusual for Q1 median prices to drop from Q4 due to seasonal reasons, mainly the characteristic big slowdown of luxury home sales in mid-winter.)
Demand for the City's real estate should continue to be fueled by steady job and income growth, and possible interest rate hikes from their historical lows may entice buyers to act.
We enter the 2nd Q 2017 with a picture of annual activity. For clarity and meaningfulness, we much prefer annual trend analyses, with their much bigger data sets, which allows us to stand back to see the broader view of what is happening in the market, instead of getting obsessed by what happens to be in front of our shoe. Looking at annual trends, virtually all the market statistics illustrate the same general conclusion: The market became progressively stronger coming out of the 2009-2011 housing recession; the frenzy peaked in 2015; and the market cooled a bit in 2016, condos more so than houses. This is a generalization of the macro-trend: Different market segments have been going in somewhat different directions in the City. Even with some cooling, the overbidding on appealing new listings has remained robust, though underpricing has also become a more prevalent strategy. The more affordable house market in the city has remained remarkably hot.
Rents peaked in 2015 and have dropped by a small percentage, and remain nationally high. Supply has increased dramatically in new construction.
Generally speaking, the luxury market has cooled more than the more affordable segments, and the luxury condo market has cooled more than the luxury house market. This is mostly due to the recent surge of new-construction luxury condos onto the market in the city.
BUYERS. In many ways this slowing market is a nice breather after the wildly overheated selling seasons of the last 4 years. With listing inventory up, buyers are finding they can take their time. Some homes are being passed over altogether; the number of listings that expired without selling rose by over 50%. If you have been waiting to buy, the time has arrived. Interest rates are inching up. Be prepared to compete with tech innovators, finance or tech executives, global families seeking safe harbor investments, or empty nesters returning to the City. Your lender relationship and being ready to act immediately are crucial. Buy for the long term: 5+ years. San Francisco was effected by the Great Recession for 3 years, so it seems that 5 years is a safe time frame to hold a property until its value returns, if and when the next adjustment occurs.
SELLERS. We are still pricing slightly under expected selling price, in the hopes of attracting more than 1 offer. Generally speaking, the market for more affordable homes is stronger than for luxury properties; demand for houses exceeds condos. Areas with a high concentration of new construction also have a weaker demand (SOMA, South Beach). San Francisco remains a strong attraction for technology companies who recruit and hire employees with the desire and resources to live in the City. Along with the traditional needs of existing residents, 2nd home buyers, and investors, ongoing demand is fueled. Ours is a global market, especially for those homes that have been recently renovated and in move-in-condition.
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