The San Francisco housing market continued to show promising signs of recovery through October 2009. Pending single family home sales jumped to 271 homes in October 2009, which represents a 30% increase in the number of pending sales month over month and a 58% increase year over year. Although greater scrutiny in obtaining a mortgage is expected to extend the time between signed contracts and closings, the sharp rise in the number of homes under contract should lead to strong sales activity going forward.
The high level of home sales activity observed during the two previous quarters helped to reduce single family inventory levels to 639 homes on the market in October 2009, 200 fewer units on the market during the same month last year.
The jump in contract sales combined with the drop in active homes on the market brought the months supply of single-family home inventory to 2.4 in October 2009 from 4.9 the same time last year. This dramatic tightening in market conditions is encouraging and is a reflection of improvements to housing affordability driven by price adjustments and low interest rates.
Inventory levels fall while home prices at the lower-end of the market stabilize
The stabilization of home prices at the lower-end of the housing market combined with a more evenly distributed pattern of home sales activity across districts and price ranges resulted in a 3.4% month-to-month increase in the median single-family sales price to $760,000 in October 2009, marking a second consecutive month of increasing prices. In comparison to the same month the previous year, the median single-family sales price rose 3.3%, which was the first year-over-year increase since April 2008.
Although sales at the higher-end of the market have gained traction, lower-priced homes in District 10 (Bayview-Hunters Point, Visitation Valley, Portola, Excelsior, Crocker-Amazon) still account for more than one-fifth of all single family home sales during the month. Though relatively high, this is much improved from earlier in the year during which home sales in District 10 accounted for close to 40% of all sales activity in January 2009.
Despite high unemployment levels and continued job cuts, the extension, as well as expansion of federal programs should continue to promote housing demand. The First-Time (And Move-Up) Homebuyer Tax Credits extension and the increase in income limits from $75,000 to $125,000 for single-person households, and from $150,000 to $225,000 for married households should make the program marginally more valuable to buyers in San Francisco. However, the price limits of $800,000 excludes the higher-end of the San Francisco market. The Federal Reserve’s support of lower mortgage rates brought the 30-year fixed mortgage rate to 4.98% as of November 5, 2009. As a result of continued government intervention in the housing market, traditional supply/demand dynamics have shifted in this current environment, as tax credits and mortgage rate subsidization counter the negative effects of high unemployment levels and job market uncertainty.
The demand for condominium units continued to show signs of improvement into the last quarter of the year. Pending condominium sales nearly doubled from October of last year with 288 units under contract in October 2009. With more than 1,200 condominiums on the market in October of 2008, the dramatic price cuts and other incentives during the previous twelve-month period brought the condominium for-sale inventory to 998 units in October 2009.
As a result of these price reductions, the median condominium sales prices fell 9.2% from October 2008 to $640,000. Condominium sales in District 5 (Mission/Noe Valley/Castro/ Glen Park/Upper Market) and District 9 (South Beach/Potrero Hill/ Bernal Heights/ Mission Bay) still account for close to half of all condominium sales activity in the city.
Although inventory levels have retreated in recent months, the rising number of homes entering the early stages of foreclosure, as well as the existing shadow inventory might
continue to pose supply-side risks going forward. The concentration of job losses in white-collar employment sectors during the current down-cycle and the disproportionate
impact that this has had on the San Francisco economy increases the likelihood of pushing more distressed homeowners into foreclosure.
Data is as of the 10th of the month.
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