March 2019

February was a relatively quiet month for real estate. The outlook for the year ahead though, as discussed below, signals many exciting developments in the local market. It should be noted, even with the slowness typical for this time of year, the US stock markets have risen in both January and February. In fact, the S&P 500 has gained in 2 months what it usually does in a full year. We know that a rising stock market boosts consumer confidence. This increased feeling of wealth could propel people’s interest in real estate.

30-year fixed mortgage rates have ticked down about 15 basis points, which is good news for buyers and sellers. On March 10th, the Federal Reserve stated rates are appropriate at current levels. Media outlets afterwards reported that rates may rise one more time in 2019. This relatively stable interest rate environment is beneficial to buyers and sellers helping preserve purchasing power through 2020.

As is all the craze in local news, it’s worth noting that several established San Francisco-based start-ups will IPO in 2019. Lyft is leading the pack and by the end of 2019, the IPOs of Airbnb, Instacart, Lyft, Palantir, Pinterest, Postmates, Slack, and Uber will create approximately 5,000-10,000 new millionaires in the city. This influx of liquid wealth will mostly affect the luxury housing and condo markets. Overall, the median housing prices in San Francisco and the surrounding metropolitan area will likely trend back towards peak levels last seen in February 2017.
 

 
While Median Single Family Home prices in San Francisco are still climbing (+10% Y-o-Y), February 2018 saw the highest median house prices ever at $1.7 million; February 2019 median home prices are 11% lower than peak at $1.52 million. Sales price and price per square foot have trended upward since the beginning of the housing recovery in January 2012, but have slowed marginally since 2015. It’s important to see the forest through the trees here and focus less on individual months. A 10% return over a 12-month period is quite good. With the probable increase in demand coming later in the year, the growth rate should continue steadily, though perhaps not at the 20-25% level.

Number of New Listings

12-Month Rolling

Number of Sold Listings
12-Month Rolling

New listings for single family homes have steadily decreased since 2010. The seasonality that can still be seen with the new condo listings is imperceptible in single family homes. From January 2012 to February 2019, new listings for SFH has decreased 19% while the number of sold SFHs has decreased by 9%, clearly showing that demand is outstripping supply. Over the same time period, condos are different only in that more condos are coming to market – a 9% increase. However, the number of condos sold has increased by 23%, again, showing the demand in San Francisco. In the Bay Area, low supply is the primary driver of price increases. The only way to make any headway in the supply/demand imbalance is new construction, more specifically, new condo construction. And San Francisco has been notoriously slow in embracing new construction.

With future tech IPOs and stable interest rates, demand could increase significantly throughout the year. We are excited to see what unfolds. Demand is already high and inventory is tight, especially for single family homes, so the median price of homes should remain solid.

As always, we will continue to share our findings on the market that we think are relevant. We hope you find this information interesting. If you, or anyone you know, have questions on the real estate market, or are just curious about what home-improvement projects provide the biggest bang for the buck, we’re always just a phone call away (415-595-7661).
Cheers,
Ron

 

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