San Francisco Luxury Home Market Report

In this report, we will define luxury homes in San Francisco as houses, condos, co-ops and TICs selling for $2,000,000 or more. Homes selling in this price range currently make up a little more than 10% of the SF residential market; those selling for $5,000,000 and above constitute about 1% of the city’s home sales.

In the past 12 months, 671 home sales of $2m+ above (414 houses, 220 condos, 23 co-ops, 14 TICs), and 67 sales of $5m+ (56 houses, 7 condos, 3 co-ops, 1 TIC) were reported to San Francisco MLS.

San Francisco Luxury Home Sales by Month
March 2015 saw the highest monthly number of luxury home sales in San Francisco’s history. Typically, this segment of the market doesn’t really hit its stride until April and May, which may indicate that spring 2015 is going to be very active.

Not shown on the chart, but if we compared our recent market with the previous peak of the market prior to the 2008 crash, home sales of $2m+ have more than doubled: Part of this speaks to the surge in affluence in the Bay Area, and part of it is due to recent home price appreciation.

1

Median Sales Prices
for San Francisco Luxury Homes
As seen below, the Pacific & Presidio Heights neighborhoods still rule the roost for highest home prices. Part of this is pure location, but this is also an area where one finds very large houses, true mansions, and that naturally affects sales prices as well. Many of the runners up in this chart are very small markets, i.e. the number of luxury house sales can average less than 1 or 2 per month in Sea Cliff, Russian & Telegraph Hills, Jordan Park, Lower Pacific Heights and St. Francis Wood.

For buyers of larger houses, the greater St. Francis Wood-Forest Hill area offers comparably large and elegant homes, often on larger lots, at significantly lower dollar-per-square-foot prices. (See the following section below the next chart.) And many of the large, gracious, 3 to 5 bedroom Edwardians found in Inner/Central Richmond and Inner Sunset now sell for over $2m, but usually at lower prices than in the Lake Street and Cole Valley neighborhoods nearby.

2

Average Dollar per Square Foot Values
for San Francisco Luxury Homes
Average dollar per square foot is a very general statistic, but this chart gives an idea of the extraordinary values now being achieved by San Francisco luxury properties in different neighborhoods of the city. The new, ultra-luxury, high-amenity, high-rise condo buildings of the South Beach/ Yerba Buena district now generate the highest average values: Think large, gorgeous, high-floor units with staggering views.

Some homes are selling far beyond the average values seen here: A 15,000 square foot penthouse in South Beach is now on the market at $3000 per square foot, and a Pacific Heights penthouse of 5400 square feet reportedly just sold off-MLS for over $5000 per square foot, an all-time high in the city.

3

Shifts in Gravity
This chart tracks changes in percentage luxury-home market share by different districts of the city, and it illustrates a slow shifting of the market. The swath of established, prestige, northern neighborhoods running from Sea Cliff and Lake Street through Pacific & Presidio Heights to Russian & Nob Hills has historically utterly dominated high-end home sales. This area will always be highly prized and valued – it’s full of beautiful streets, homes, views and commercial districts – but now luxury sales are increasing much more rapidly in places like the Noe, Eureka and Cole Valleys district, and for luxury condos, the greater South Beach, Yerba Buena and Mission Bay district.

Part of the reason is proximity to where high-tech workers work in San Francisco and on the peninsula; another part is that many of the newly wealthy are relatively young and prefer a different neighborhood ambiance; and last but not least, the vast majority of new luxury condo construction is occurring in the quadrant of the city near to and southeast from Market Street. There is very little new housing construction occurring on the north side of the city.

4

Not included in the chart above, but over the 7-year period, home sales of $2m+ also increased in the Richmond/Lone Mountain neighborhoods from 1.5% to 3% of total luxury home sales, and from 0% to 2% of sales in Inner Sunset.

Sales Prices to List Prices, Days on Market & Price Reductions
93% of Q1 SF luxury home sales sold without prior price reductions, averaging 7% above asking price and a very low 25 days on market: Indications of a strong, competitive market. However, this housing segment is also one prone to overpricing by sellers and listing agents, sometimes egregiously so: Of the 73 active $2m+ listings on the market as of 4/15/15, 51 have been on the market for 50 to 505 days. So buyers are snapping up many new luxury listings very quickly, but ignoring many others until price reduced (or simply withdrawn from the market).

Last but not least, it should also be remembered that the more expensive the home, the smaller the pool of qualified, prospective buyers: Sometimes, it simply takes longer to find the right one for a particular property, especially if it’s a little outside of the norm in some way.

5

Luxury Home Sales by Bay Area County
Santa Clara County has by far the biggest luxury home segment in the Bay Area for two reasons: 1) Silicon Valley wealth, and 2) its population and housing market is well over twice the size of San Francisco’s, in an area 27 times larger.

Of San Francisco’s home sales of $2m+ in Q1 2015, 43% were condos, co-ops and TICs. SF is the only Bay Area county where luxury condos and co-ops play a significant (and increasing) role in the market. Less than a handful sold in all the other counties combined.

6

For your convenience, below is a map of San Francisco neighborhoods and a breakdown of neighborhoods in each Realtor district.

San_Francisco_Neighborhood_Map
These analyses pertain to sales reported to MLS: off-MLS sales and new project condo sales unreported to MLS are not included.

All data from sources deemed reliable, but may contain errors and is subject to revision. Statistics are generalities and how they apply to any specific property is unknown without a tailored comparative market analysis. Outlier sales that would distort the statistics were deleted from the analysis when identified. All numbers should be considered approximate.

© 2015 Paragon Real Estate Group

From our NorCal network : The Artisan Group

40694792_3_1429149794

774 Fair Oaks Dr
Alamo, CA 94507
Offered at $1,700,000

For more information about this property or a referral to other areas of Northern California, please contact me.From our NorCal network : The Artisan Group

First Quarter 2015 Update: The San Francisco Real Estate Market

San Francisco Home Value Appreciation

Median-Price_SF_SFD-Condo-Combined_by-Qtr

The chart above illustrates the continued march upward of median home sales prices in San Francisco. However, if we separate out house from condo sales, an interesting trend appears: The median house sales price basically stayed flat from Q4 2014 to Q1 2015, but the median condo sales price jumped from $995,000 to $1,080,000. Drilling down further, the median sales price for SF 3-bedroom houses in Q1 was $1,200,000; for 2-bedroom condos, it was $1,199,000, i.e. effectively the same. Much of this is due to the fact that the greatest number of houses in the city exists in the less expensive western and southern neighborhoods, while 1) condos are mostly found in more expensive areas, and 2) new home construction in San Francisco for the last 10 years has been dominated by very high-end condo projects. That trend is only accelerating in the current building boom.

This is illustrated below in a comparison of house and condo average dollar-per-square-foot values in the first quarters of 2008 – 2015. For the first time, overall SF condo sales just hit an astounding average of $1000 per square foot. Much of this increase is being fueled by recently built condos selling for far higher figures.

Avg-DolSqFt_SFD-vs-Condo_Q-1-2008_to-Present

More Affordable Neighborhoods Take Off

When the SF market recovery began in 2012, the more affluent neighborhoods led the way in rapid home-price appreciation, but in 2014, the more affordable neighborhoods took the lead. Of course, there are few places outside San Francisco where houses of $1.2 million would constitute the “affordable” segment of the market, but as median house prices in the greater Noe, Eureka & Cole Valleys area accelerated over $2 million (and over $4 million in the Pacific Heights-Marina district), buyers started to fan out, desperately looking for less expensive options. That sparked increased competition and the chart below illustrates the resulting year-over-year appreciation rates in some of those neighborhoods.

This is not to suggest that the higher-end house markets in the city are languishing. That is not the case – the markets are crazy there too – but generally speaking, recent appreciation rates have not been as robust as in less costly neighborhoods. Information on home prices around the city can be found here: SF Neighborhood Values.

Q1-14_to_Q1-15_SFD-Price-Appreciation_by-Neighborhood

Statistics are generalities that can be affected by various factors, and different baskets of unique homes sell in different quarters. And different statistics can disagree: For example, as seen above, Bernal Heights, which has been white hot, saw year over year median price appreciation of 10%, but its average dollar-per-square-foot value jumped 19%. Consider these statistics to be general indicators instead of precise measurements of changes in home values.

Sales Prices, Price Reductions and Days on Market

Further indications of the heat of our market: The vast majority of sales in March sold very quickly, without going through a price reduction, and averaging a whopping 10% over asking price. That relatively small percentage of listings that went through price reductions prior to sale took 3 times longer to sell at a significant discount to original list price. And, of course, not every home sells: If a property is deemed significantly overpriced, buyers typically ignore it and, unless price reduced, the listing will ultimately be withdrawn from the market. A hot market doesn’t imply buyers will pay any price that pops into a seller’s head (though sometimes it may seem so).

SP-OP_DOM_by-Month

Factors behind the Low Supply of Homes for Sale

Lately, there have been many articles about the reasons why sellers aren’t selling, which is supposedly the main cause of the market’s drastically low inventory situation. What is rarely mentioned is that by far the biggest factor behind declining inventory is not that sellers aren’t selling, but simply the greatly increased demand over the past 3 years. The number of sales in 2014 was actually about average for the last 15 years. Mostly, it was the competition among greater numbers of buyers that shrunk the supply of homes for sale at any given time.

Below is Slide 3 of three charts from our full report (The Real Story behind Low Inventory). It shows how inventory declines as buyer demand increases, even if the number of new listings coming on market doesn’t fall. Please see the full analysis for our complete reasoning, as well as a list of other subsidiary factors.

The simplified, sample illustration below uses actual data pertaining to buyer demand in the city over recent years, but assumes that the number of new listings stays steady at 600 per month.

Inventory_FS-Illustration_Slide-3

Comparing Bay Area County Markets

These 3 analyses are excerpted from our recent article, Taking the Temperatures of Bay Area Real Estate Markets. The full report includes 5 other charts, all of them fascinating.

Bay-Area_DOM_by-County Bay-Area_Increase_in_Employment Bay-Area_Median-SFD-Condo_Sales-Price-by-County

These analyses were made in good faith with data from sources deemed reliable, but they may contain errors and are subject to revision. Statistics are generalities and how they apply to any specific property is unknown without a tailored comparative market analysis. Sales statistics of one month generally reflect offers negotiated 4 – 6 weeks earlier, i.e. they are a month or so behind what’s actually occurring in the market as buyers and sellers make deals. All numbers should be considered approximate.

The Story behind San Francisco’s “Extremely Low Inventory” (It’s not because no one is selling)

First some context: For the last 15 years, the number of MLS home sales in San Francisco has ranged from 4663 in 2009 to 7887 in 2004, with an average of 6115 per year. In 2014, MLS sales numbered 6120. Sales outside of MLS have increased as the market has become hotter (for both legitimate and not-so-good reasons), and non-MLS new-condo sales have also increased. These 2 categories of sales would swell the 2014 total.

From another angle, studies have estimated that on average about 5% of U.S. owner-occupier homeowners sell annually. According to the census, there are approximately 125,000 owner-occupied housing units in SF: 5% would equal 6250 home re-sales per year. Sales of tenant-occupied homes and new construction condos would be additional.
The numbers of new listings and home sales in San Francisco are certainly lower than expected in such a hot market and some of the subsidiary reasons are discussed at the end of this analysis. However, as seen above, annual sales numbers are not wildly out of whack from historical trends.

The principal factor behind the perception of drastically low inventory is simply hugely increased demand: Over the past 5 years, the city’s population and employment rolls have soared, while new housing construction has not remotely kept pace. Higher demand means homes sell more quickly, which then shrinks the number of listings on the market at any given time (which is really how we perceive supply). An analogy: The water hole (of listings for sale), fed by a relatively constant stream (of new listings coming on market), still gets significantly diminished as more people drink from it.

Below are 3 charts illustrating the issue. The first two, regarding days-on-market and percentage of listings accepting offers, are based on actual SF market statistics. The third chart is a sample illustration of the effect of increasing demand on the supply of homes for sale, even if the number of new listings coming on market doesn’t decline.

Chart 1: New listings are selling much faster.

1

Chart 2: The percentage of listings selling each quarter has significantly increased.

2

Chart 3 (sample illustration): Higher demand – even with a constant number of new listings coming on market – dramatically decreases the inventory of homes for sale at any given time.

3

There certainly are other, distinctive factors exacerbating our low inventory market:

1) As noted earlier, with the frenzied market, more sales have been occurring off-MLS, and these homes don’t show up as new listings in the public inventory for sale. (The Pros & Cons of Off-MLS Listings)

2) Annual sales of TIC units and 2-4 unit buildings have plunged in the last 7 years by over 500 sales, a substantial drop in an overall market of San Francisco’s size. This is probably due mostly to changes in SF tenant eviction and condo conversion laws. (Note: TIC units are a property type found virtually no place else but the city.)

3) With extremely high rental rates and extremely low mortgage interest rates, a small but growing percentage of homeowners, who typically would have sold their homes, are renting them out instead – and the Airbnb vacation-rental phenomenon (with even higher rent rates) can only be adding to this. (Renting vs. Selling One’s Home)

4) Unless they’re moving out of the area, some potential sellers are daunted by the challenge of finding new homes under existing market conditions and are simply staying put until things calm down.

5) A sizeable percentage of our new (mostly very high-end) condos are being purchased as second homes by the locally affluent or as investments by foreign buyers. These non-resident buyers add to demand and help soak up supply, and for a number of reasons, may not sell as often as typical homeowners.

In many counties other than San Francisco, the big decline in distressed property sales has affected inventory and sales.

The factors above are all probably diminishing listing inventory to greater or lesser degrees, but ultimately, it’s not that the annual number of new listings – i.e. the number of homeowners selling – is so drastically low by historical measures. It’s the relationship between supply and demand that fundamentally determines market conditions, and for the last 3 years, a relatively stable supply has become terribly inadequate to a dramatically escalating demand.

This, of course, is the classic dynamic which puts upward pressure on home prices.

These analyses were made in good faith with data from sources deemed reliable, but they may contain errors and are subject to revision. All numbers should be considered approximate. Please contact us with any questions or concerns.

From our NorCal network : The Artisan Group

4836707

2200 Lands End
Glenbrook NV, 89413
Offered at $6,300,000

For more information about this property or a referral to other areas of Northern California, please contact me.From our NorCal network : The Artisan Group

From our NorCal network : The Artisan Group

4199850

5555 Eastlake Blvd.
Carson City, NV
Offered at $4,495,000

For more information about this property or a referral to other areas of Northern California, please contact me.

Taking the Temperatures of Bay Area Real Estate Markets

Across the Bay Area, how many listings sell without price reductions, how quickly do they sell, and at what percentage of asking price? What role does employment play in the real estate market? Which are the biggest and smallest county markets, and how do prices and rents compare?

The white-hot – some would say overheated – core of the Bay Area homes market is San Francisco and Silicon Valley, and the heat radiates out from there, diminishing as one gets further away. This core is defined by the incredible strength of the economy, much of it supercharged by the high-tech boom. However, there are also cultural and lifestyle factors, as well as what might be called the creativity/innovation-cluster effect, all of which have almost gravitational attractions. Indeed, San Francisco is almost a perfect example of the “super city” concept, drawing in people from all over the country and the world like a giant magnet.

Because it’s close and a (relatively) easy commute to these areas, and so affordable by comparison, Alameda County (which includes Oakland) is also crazy hot. Marin has a strong market but is less feverish, firstly because getting to Silicon Valley isn’t as easy – one has to fight one’s way across the whole city to get to Highways 101 and 280 south – secondly, because it’s a very wealthy and expensive county, so it doesn’t offer quite the attraction of big home price discounts, and perhaps thirdly, because Marin has the highest median age in the Bay Area (45 years), and much of the high-tech employment boom is characterized by (pre-family forming) youth who prefer a more urban environment.

As one gets further north, east and south of the inner core, the markets become less overheated: It’s not that these markets are weak – in fact, some are quite hot and they’ve all been strengthening for the last 3 years. It’s simply that they’re not characterized by a feeding frenzy of almost overwhelming demand meeting limited inventory. Except for sellers eager to maximize their homes’ sales prices, that’s not necessarily a bad thing.

It should be noted that many of the charts below reflect February sales data. Generally speaking, Bay Area markets have become significantly hotter as the calendar gets deeper into prime spring selling season.

Most of these charts speak for themselves, so we’ve kept commentary to a minimum.

1

2

3

As an illustration of perhaps the Bay Area’s most important market dynamic, this chart below delineates new job creation over the past 6 years. In San Francisco, for example, there are over 95,000 more employed residents than in 2009, and according to the San Francisco Business Times (3/6/15), there are currently 8600 unfilled software engineer positions in the city. During the same 6-year period, approximately 10,000 new housing units were built in the city. That ratio of new employment to new housing equals a desperately competitive housing market.

4

5

6

7

8

Other factors play important roles in the Bay Area markets – such as affluence and education levels – and many of these are assessed on a county by county basis in our 2014 report on San Francisco Bay Area Demographics.

And updated maps of comparative home values around the Bay Area can be found here:Bay Area Home Price Maps

San Francisco Farmers’ Markets



From our NorCal network : The Artisan Group

290507

1131 Fallen Leaf Rd
South Lake Tahoe, 96150
Offered at $7,995,000

For more information about this property or a referral to other areas of Northern California, please contact me.

10 Factors Behind the San Francisco Real Estate Market [INFOGRAPHIC]