San Francisco Real Estate Market Continues in Positive Direction, Although Some Postpone Purchase Decisions
SAN FRANCISCO, CA, November 15, 2010 – Stabilized home pricing across most price segments, healthy pending sales activity, and rising confidence among sellers signals a continuation of the positive, though slow, shift in San Francisco’s housing market, according to the latest Market Focus report published by the Rosen Consulting Group and the San Francisco Association of REALTORS®. Despite the positive outlook, the report cautions that headwinds from slow job growth and lingering, troubled mortgages could delay a stronger market recovery for the city.
But John Lee, president of the San Francisco Association of REALTORS®, believes that higher housing affordability and the low-interest rate environment still make this an ideal time for financially-stable households, with a long-term perspective on the market, to purchase a home.
Pending Sales Remain Stable
The report indicates that during the second half of the year, the elimination of government incentives and weak job growth continued to test the strength of the housing market’s recovery in San Francisco.
In October 2010, the single-family median sale price declined by 3.0 percent year-over-year to $735,000, while completed single-family home sales fell 18.8 percent during the month. Approximately 44 percent of all completed sales in October 2010 were for single-family homes priced less than $700,000; in October 2007, homes in this price segment represented approximately 23 percent of all completed sales.
Despite the drop in completions, pending sales activity remained relatively stable, with a total of 238 pending sales in October 2010—just a 2.1 percent drop from October 2009. At the same time, inventory levels continued to rise, jumping 26.7 percent in October 2010 to 807 active homes on the market at the end of the month.
The months of supply inventory at the current monthly contract sales rate stood at 3.4 months of supply, an increase from 2.6 months of supply in October 2009 but a decline in comparison to recent months. By price segment, the months of supply inventory for single-family homes priced less than $1.2 million stood at 3.3 months, while homes priced greater than $1.2 million improved to 3.9 months from 4.8 months in October 2009.
Median Condominium Sale Price Rises by 7.8 Percent
Although inventory levels have risen in recent months, the condominium market continued to make headway in October—slowly absorbing the over-supply of condominium units added to the market during the real estate construction boom.
During the month, the median condominium sales price rose by 7.8 percent from October 2009 to $690,000. However, year-over-year completed home sales declined for a fourth consecutive month, totaling 185 sales—an 18.1 percent drop from October 2009.
Driven by the slowdown in closed sales, the number of active condominium units on the market rose 10.6 percent from the same period last year to 1,164 units. The report states that the rapid pace of sales activity in the market during the first half of the year, fueled by the expired tax credit, which pulled forward condominium sales, was a contributing factor to the lull in sales activity, seen during recent periods.
Despite the pullback in completed sales, pending sales activity remained stable, slowing by just 2.0 percent year-over-year, with 240 condominium contract sales in October 2010. The stability in pending sales activity during this period points to stronger closed sales activity in the coming months relative to the months immediately following the expiration of the tax credit.
At the current contract sales rate, the months of supply inventory reached 4.9 months, up from 4.3 months in October 2010. While the months of supply of condominiums priced less than $500,000 remained steady at 2.8 months, units priced between $500,000 and $900,000 rose to 4.9 months from 4.1 months, and for luxury units priced more than $900,000, the months of supply inventory rose to 5.1 months from 4.4 months in October 2009.
“Despite fluctuations in the data, the housing market’s recovery is well underway in San Francisco. The market’s supply-constrained environment, diverse economic base, and concentration of companies in emerging technology sectors, which continue to lead job growth in the market, place the city’s housing market in a position to recover from the residential real estate correction at an accelerated pace in comparison to the other major housing markets across the country,” says Lee.