September Case-Shiller – San Francisco Clearly On A Plateau

The S&P Case-Shiller Index for the San Francisco Metro Area covers the house markets of 5 Bay Area counties, divided into 3 price tiers, each constituting one third of unit sales. Most of San Francisco’s, Marin’s and Central Contra Costa’s house sales are in the “high price tier”, so that is where we focus most of our attention.” The Index is published 2 months after the month in question and reflects a 3-month rolling average, so it will always reflect the market of some months ago.

The Index for September 2015 was released yesterday. In 2014, after a torrid spring selling season, the market plateaued during the summer and autumn, and a similar trend has been developing in 2015 as well, after its own white hot spring.

The 5 counties in our Case-Shiller Metro Statistical Area are San Francisco, Marin, San Mateo, Alameda and Contra Costa. (And we believe the Index generally applies to the other Bay Area counties as well.) Needless to say, there are many different real estate markets found in such a broad region, and it’s fair to say that the city of San Francisco’s market has generally out-performed the general metro-area market.

The first three charts illustrate the price recovery of the Bay Area high-price-tier home market over the past year and since 2012 began, when the market recovery really started in earnest. In 2012, 2013, 2014 and now 2015, home prices have dramatically surged in the spring (often then plateauing or even ticking down a little in the following seasons). The surges in prices that have occurred in the spring selling seasons reflect frenzied markets of huge buyer demand, historically low interest rates and extremely low inventory. In San Francisco itself, it was further exacerbated by a rapidly expanding population and the high-tech-fueled explosion of new, highly-paid employment and new wealth creation.

For more regarding how seasonality affects real estate: Seasonality & the Real Estate Market . Short-term and especially monthly fluctuations are common and much less meaningful than longer term trends.

Case-Shiller Index numbers all reflect home prices as compared to the home price of January 2000, which has been designated with a value of 100. Thus, a reading of 217 signifies home prices 117% above the price of January 2000.

Short-Term Trends: 12 Months & Since Market Recovery Began in 2012

This chart below highlights the seasonal nature of home price appreciation over the past 4 years.

High Price Tier vs. Low Price Tier Appreciation, 2012 to Present

The more affluent neighborhoods led the city and the Bay Area out of recession in 2012, surging quickly, while the lower priced tier, still trying to recover from the huge distressed property/foreclosure crisis, lagged well behind. That dynamic shifted: the low-price tier caught up in 2013-2014, and now in 2015 the lower priced segment of the Bay Area homes market has started outperforming more expensive homes in overall appreciation rates (as measured by appreciation occurring over the 2000 to 2015 time frame). This is a recent phenomenon and we’ll have to wait to see if this dynamic continues.

Longer-Term Trends & Cycles

The two charts below reflect what has occurred in the longer term (for the high-price tier that applies best to San Francisco and Marin counties), showing the cycle of recession, recovery, bubble, decline/recession since 1996, and since 1988. Note that, past cycle changes will always look smaller than more recent cycles because the prices are so much higher now; if the chart reflected only percentage changes between points, the difference in the scale of cycles would not look so dramatic.

Different Bubbles, Crashes & Recoveries

This next 3 charts compare the 3 different price tiers since 1988. The low-price-tier’s bubble was much more inflated, fantastically inflated, by the subprime lending fiasco – an absurd 170% appreciation over 6 years – which led to a much greater crash (foreclosure/distressed property crisis) than the other two price tiers. All 3 tiers have been undergoing dramatic recoveries, but because the bubbles of the low and middle tiers were greater, their recoveries leave them at different places as compared to higher priced homes. The mid-price-tier is just now back to its previous peak values, but the low-price-tier is still well below its artificially inflated peak value of 2006. It may be a long time before the low-price-tier of houses regains its previous peak. The high-price-tier, with a much smaller bubble, and little affected by distressed property sales, has now significantly exceeded its previous peak values of 2007. Most neighborhoods in the city of San Francisco itself have now surpassed previous peak values by very substantial margins.

It’s interesting to note that despite the different scales of their bubbles, crashes and recoveries, all three price tiers now basically show the same overall appreciation rate when compared to year 2000. As of September 2015, Case-Shiller puts all 3 price tiers at 117% – 122% over year 2000 prices. Relatively recently, the low-price tier has overtaken the high-price tier in this measurement of overall appreciation in the past 15 years.

Different counties, cities and neighborhoods in the Bay Area are dominated by different price tiers though, generally speaking, you will find all 3 tiers represented in different degrees in each county. Bay Area counties such as Alameda, Contra Costa, Napa, Sonoma and Solano have large percentages of their markets dominated by low-price tier homes (though, again, all tiers are represented to greater or lesser degrees). San Francisco, Marin, Central Contra Costa, San Mateo and Santa Clara counties are generally mid and high-price tier markets, and sometimes very high priced indeed. Generally speaking, the higher the price, the smaller the bubble and crash, and the greater the recovery as compared to previous peak values.

Remember that if a price drops by 50%, then it must go up by 100% to make up the loss: loss percentages and gain percentages are not created equal.

The numbers in the charts refer to January Case-Shiller Index readings, except for the last as labeled..

Low-Price Tier Homes: Under $587,000 as of 9/15

Huge subprime bubble (170% appreciation, 2000 – 2006) & huge crash (60% decline, 2008 – 2011). Strong recovery but still well below 2006-07 peak values.

Mid-Price Tier Homes: $587,000 to $950,000 as of 9/15

Smaller bubble (119% appreciation, 2000 – 2006) and crash (42% decline) than low-price tier. As of July 2015, a strong recovery has put it back up to its previous 2006 peak.

High-Price Tier Homes: Over $950,000 as of 9/15

84% appreciation, 2000 – 2007, and 25% decline, peak to bottom.
Now climbing well above previous 2007 peak values.

In San Francisco, where many neighborhoods vastly exceed the initial price threshold for the high-price tier, declines from peak values in 2007 in those more expensive neighborhoods typically ran 15% – 20%, and appreciation over previous peak value has also exceeded the high-price tier norm.

San Francisco, Marin and Central Contra Costa

And then looking just at the city of San Francisco itself, which has, generally speaking, among the highest home prices in the 5-county metro area (and the country): many of its neighborhoods are now blowing past previous peak values. Note that this chart has more recent price appreciation data than available in the Case-Shiller Indices. This chart shows both house and condo values, while the C-S charts used above are for house sales only. Median prices are affected by other factors besides changes in values, including seasonality, new construction projects hitting the market, inventory available to purchase, and significant changes in the distressed and luxury home segments.

Marin County

Central Contra Costa County

And this chart for the Noe and Eureka Valleys neighborhoods of San Francisco shows the explosive recovery seen in many of the city’s neighborhoods, pushing home values far above those of 2007. Noe and Eureka Valleys have become particularly prized by the high-tech buyer segment and the effect on prices has been astonishing.

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New Case-Shiller suggests another hot spring

The most recent (sorry for delay) Case-Shiller Home Price Index reports for the Bay Area reflect what appears to be the very beginning of another strong Spring market. All home price tiers saw spikes to either their highest points since 2007 (low and mid-price tiers), or their highest point ever (high-price tier). What we are seeing on the ground in the hurly-burly of current deal-making leads us to believe that the next 2 to 3 months of C-S Index reports will show further home-price increases.

For the past 3 years, the spring selling seasons have seen the most significant jumps in appreciation as surging buyer demand has competed for a severely inadequate supply of homes for sale.

Our full, updated report is online here.

Here are a few charts from our report, reflecting the “high price tier” of homes, which best applies to the San Francisco, Central & Southern Marin and San Mateo markets. Charts illustrating the low and mid-price tiers can be found online.

The past 12 months: case-shiller_1-year

Since the recovery began in 2012: Case-Shiller_High-Tier_2011

Longer-term view: Case-Shiller_from_1990

More Stats & Numbers (more than you could ever need) [theFrontSteps.com]
Recent Listings [theFrontSteps.com]
Press [theFrontSteps.com]
Why You Should Stage Your Home To Sell [theFrontSteps.com]

S&P Case-Shiller Home Price Index – San Francisco

Updated S&P Case-Shiller Home Price Index for San Francisco Metro Area
(Illustrative charts can be found further down within this report.)

The Case-Shiller Index for the San Francisco Metro Area covers the house markets of 5 Bay Area counties, divided into 3 price tiers, each constituting one third of unit sales. Most of the San Francisco’s and Marin’s house sales are in the “high price tier”, so that is where we focus most of our attention.” The Index is published 2 months after the month in question and reflects a 3-month rolling average, so it will always reflect the market of some months ago. The Index for December was released on the last Tuesday of February.

The 5 counties in our Case-Shiller Metro Statistical Area are San Francisco, Marin, San Mateo, Alameda and Contra Costa. Needless to say, there are many different real estate markets found in such a broad region, and it’s probably fair to say that the city of San Francisco’s market has generally out-performed the general metro-area market.

The first two charts illustrate the price recovery of the Bay Area high-price-tier home market over the past year and since 2012 began, when the market recovery really started in earnest. In 2012, 2013 and 2014, home prices surged in the spring and then plateaued in the summer-autumn. The surge in prices that occurred in spring of 2013 was particularly dramatic, reflecting a frenzied market of huge buyer demand, historically low interest rates, increasing consumer confidence and extremely low inventory. In San Francisco itself, it was further exacerbated by an expanding population and the high-tech-fueled explosion of new wealth. The market then calmed down somewhat in the second half of 2013, but then heated up yet again in early 2014. In fact, the spring 2014 market was, if anything, even more ferocious than the previous year (at least in San Francisco).

After the feverish spring market of 2014, home prices in the high-price tier flattened and then ticked down a little, while more affordable home segments continued to tick up. It’s not unusual for the market to cool off and plateau during the summer months. The Case-Shiller Index reports released at the end of December, January and February reflect the autumn selling season, which starts after Labor Day. (Note that transactions negotiated in September generally start closing in October.) According to the Index, Bay Area home prices ticked up in the 3 months at the end of 2014 by about 1%, plus or minus depending on price tier — i.e. prices remained basically flat. Note that small monthly fluctuations are not particularly meaningful until substantiated over a longer term.

We are currently waiting to see what the spring market of 2015 will be like, but initial indications point to another feverish market of extremely low supply against highly competitive buyer demand.

For more regarding how seasonality affects real estate: Seasonality & the Real Estate Market. (You can also subscribe to my newsletter)

Case-Shiller Index numbers all reflect home prices as compared to the home price of January 2000, which has been designated with a value of 100. Thus, a reading of 199 signifies home prices 99% above those of January 2000.

Short-Term Trends: 12 Months & Since Market Recovery Began in 2012
bay_area_home_appreciation

bay_area_market

Longer-Term Trends & Cycles

The third and fourths charts below reflect what has occurred in the longer term (for the high-price tier that applies best to San Francisco and Marin counties), showing the cycle of recession, recovery, bubble, decline/recession since 1996, and since 1988. Note that, past cycle changes will always look smaller than more recent cycles because the prices are so much higher now; if the chart reflected only percentage changes between points, the difference in the scale of cycles would not look so dramatic.

high_tier

real_estate_cycles

Different Bubbles, Crashes & Recoveries

The previous post I had a few months ago shows the 2014 reading for each tier, refer to January 2014 and May 2014. We will update this chart in late March 2015 when the January 2015 Index is released, so stay tuned!

December Case-Shiller Index For San Francisco/Bay Area

The December Case-Shiller Index was released today, still generally reflecting the plateauing of home values from the end of the 2014 spring market through the end of the year. Preliminary indications point to another feverish spring market in 2015, which typically translates into another burst of home price appreciation.

These 2 charts reflect the “high-price tier” of Bay Area house markets, which generally reflects most of the San Francisco, Marin and San Mateo markets.

bay_area_home_appreciation

real_estate_cycles

For a detailed look at the S&P Case-Shiller Home Price Index report published by Paragon Real Estate Group, click here.

June Case-Shiller Index – High-Tier Home Prices Begin To Plateau For Summer

The Case-Shiller Index for the San Francisco Metro Area covers the house markets of 5 Bay Area counties, divided into 3 price tiers, each constituting one third of unit sales. Most of San Francisco’s, Marin’s and San Mateo’s house sales are in the “high price tier”, so that is where we focus most of our attention. The Index is published 2 months after the month in question and reflects a 3-month rolling average, so it will always reflect the market of some months ago. June’s Index was just recently released.

The 5 counties in our Case-Shiller Metro Statistical Area are San Francisco, Marin, San Mateo, Alameda and Contra Costa. Needless to say, there are many different real estate markets found in such a broad region, and it’s probably fair to say that the city of San Francisco’s market has generally out-performed the general metro area market.

Typically, the market cools off and plateaus for the summer months and that is what we are starting to see in the new Case-Shiller numbers for June. The next big indication of market conditions and trends will come after the autumn selling season begins in mid-September: That is typically when there is a large surge in new listings and buyer demand picks up again until the holiday slow-down begins in mid-November. It is difficult to make definitive statements about the market during the summer and mid-winter holidays because the market almost always slows substantially during these times.

The high-price home segment for the SF Metro area saw no significant change from May to June, though the low and mid-price segments both ticked up by a percentage point or two. Short-term fluctuations are much less meaningful than longer-term trends.

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To learn more about Seasonality & The San Francisco Real Estate Market, check out my most recent issue of sfnewsletter by clicking that link.

As always, if you have any questions, you should know where to find me by now.

Seasonality & The San Francisco Real Estate Market [sfnewsletter]

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Case-Shiller: New Jump In Bay Area Home Prices

The new S&P Case-Shiller Home Price Index for April 2014 came out today and it showed another bump in home prices for the 5-county San Francisco Metro Statistical Area. For homes in the upper tier of home values – as most of San Francisco’s are – prices are up approximately 17% in the past 12 months and up 41% since the recovery began in early 2012.

Based upon what we are seeing on the ground in the market, we expect another bump in the May Index, which will come out at the end of July.

image001 image002 image004Be sure to check back on theFrontSteps for future reports as well as all the good stuff you’ve come to love from us – including the top 10 Overbids of the Week, which will come out tomorrow.

USA is through to the next round!!  (Sorry if you had it recorded and I just spoiled.)

Bubble Pop?

It doesn’t take a rocket scientist to see the pattern here:

Case-Shiller_Simplified_from-1984 copy

When will this recent frenzy of overbids, multiple offers, and crazy price appreciation end? Will it end? Will it pop or just fizzle? Will you get out “on top”?

I’ve said it before, and I’ll say it again…if you’re on the fence about selling, you might want to seriously consider getting off that rickety old fence.