Inside San Francisco Real Estate

About six weeks ago we wrote about our observations that the high end of the market is hurting while the low end is experiencing a mini-boom.  We now have more evidence that this trend is taking place.

Terradatum, a company that crunches and publishes real estate statistics, puts together a list of spreadsheets and sends it out to the SFAR (San Francisco Association of Realtors) each month.  We borrowed some data from Terradatum’s most recent email blast and built our own graph.  We were interested in seeing how San Francisco’s housing market has changed over the past two years.

How badly is the luxury market hurting?

First, we took the median list price for single family homes in the City and plotted the monthly points over the past two years.  Then we took the median sales prices for single family homes in the City and plotted those monthly points over the past two years.  The results were pretty nifty.  Not only did we find a trend, but we actually identified the cross-over point… the point in time where the luxury market started to recede and the low end of the market began to pack more oomph.

Median Asking vs Median Selling Prices (click to enlarge)

• You’ll see that prior to September 2008, median sales prices for homes in San Francisco consistently rode above their asking prices.  Careful, because this is not to say that homes were selling $100K or more than their asking prices prior to September 2008.  Rather, this meant that the median was carried largely by homes on the high end versus what was listed on the open market.
• Today we see that median sales prices are considerably lower than asking prices.  This tells us that the batch of homes now selling in the marketplace is largely made up of the lower end homes.  Luxury homes are sitting on the market and buyers are having trouble financing the fancy homes.
• You’ll also notice that the last data point shows that list prices have shot up in the past month.  We believe this is because more luxury homes are hitting the market (while fewer sell).  We expect this trend to continue, as we feel the luxury market still has a considerable amount of time left before stabilization occurs.
• September 2008 shows us the cross-over point.  Prior to putting this chart together, we had guessed it was October 2008.  It’s nice to see something more concrete.
• All of this concurs with our theory that the high end of the market lags the low end.  So if you own high end real estate, always pay attention to what’s going on in the low end of the market, because it will soon be your fate.  Thankfully by following the low end, you’ll have a leading indicator, a time buffer, and be able to make  informed decisions as a result.
• The low end of the market is where we see the most action taking place at this point in time.  It reacted to the downturn first, and it looks like it’s going to be the first to stabilize (we believe stabilization is occurring now).

Final Thoughts:

The info here is compelling.  We’re always looking for leading indicators so we can predict the market.  Based on all our past research and experience, we’ve noticed that the high end lags the low end.  Put another check in that box for this particular analysis.

It is unclear when the high end will stabilize.  It could be later this year or sometime in 2010.  A lot depends on the stock market, the job market, and inflation.  We’ll of course have our eyes open, reporting on what’s going on, and looking for the opportunities in the data.  After all, that’s the whole purpose of analysis… to find opportunities.  If you follow the market closely, we’d love to hear your comments below.

For more articles analyzing the San Francisco market as a whole, click HERE.