State of the Market and MSI
March 21, 2010Current observations of the San Francisco residential real estate market (written on 3/21/2010):
1) Following the market crash of late ’08, confidence slowly began trickling back into the marketplace beginning in April 2009. Sales picked up through the summer and carried strong through the end of the year.
2) Many experts have called the “bottom”, but our view is that “bottom” takes place at different times for different price brackets. The low end of the market tends to feel the pain and hit bottom first, while the higher end of the market hangs on a little bit longer. Commercial lags everything, and may not hit bottom for a year or two.
3) The sentiment in today’s market is much better than around this time last year. Many new sales and pendings have led to the lowest MSI (months supply of inventory) on record in over two years. See the chart below:
Months Supply of Inventory (MSI) - Local vs National - click to enlarge
4) Current inventory levels are 17% less than this time last year. The lower MSI indicates stronger and improving market conditions (at least, if you’re a seller). Compared to national MSI levels, San Francisco’s market is significantly tighter (44% tighter to be exact).
5) There has been a 65% increase year over year in the number of homes in contract. This is a huge indication of the change in buyer confidence and sentiment from last year.
6) What lies ahead? We expect to see improving conditions over the year but nothing to write home about. It can’t get much worse than 2009, so there is only one way to go. Barring any dramatic news or crashes, the rebound should be slow and a little bumpy.
7) On a personal note, I have transacted 7 deals thus far in 2010, 3 of which were “multiple offer” situations. Springtime seems like it will get even more competitive, as the year usually gets off to a sluggish start (meaning less bidding wars).
For Sale - 1167 Bosworth - 25 disclosure packages handed out, 9 offers received, 1 winner.
Of worthy note, 1167 Bosworth sold for 1 million (listed at 995k) in 2004 right before the real estate bubble.