San Francisco Real Estate Market: “The Worst Is Behind Us”
Plucked straight from the source Market_Focus_Report_January_2011 (PDF):
San Francisco Home Sales Rise in 2010 but Opportunities Still Abound for Buyers
With prices discounted from previous highs and mortgage rates at less than 5 percent, opportunities still abound for buyers 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®.
The report cites two factors that convincingly signal a reversal in the direction of the San Francisco housing market: an improvement in the number of completed home sales in 2010, compared to 2009, and a continuation in December of the robust pending sales activity seen in the fourth quarter of last year.
According to Bruce Lyon, president of the San Francisco Association of REALTORS®, “The rise in pending sales activity in recent months, combined with a rebound in job growth and a modest level of newly constructed homes coming to market, indicate that the worst is behind us.”
Although the report concedes that the difficulty some homebuyers are still experiencing arranging for financing and the slow pace of job creation remain major concerns, the Rosen Consulting Group believes the overall economy is strengthening and that 2011 should be a year of robust economic recovery.
Closed and Pending Single-Family Home Sales Trend Upward
Following five consecutive months of year-over-year declines in single-family home sales, sales activity rose 4.4 percent in December 2010. Of the single-family homes sold, approximately 48 percent were homes priced at $700,000 or less. And, while sales trended upwards, the median sale price contracted by 4.1 percent year-over-year to $725,000. Following the trend seen in the fourth quarter, pending sales activity continued to rise, jumping 24 percent in December 2010.
For the year, the total number of single-family homes sales narrowly surpassed total home sales completed in the previous year, increasing to 2,295 sales in 2010 from 2,184 sales in 2009. Sales activity through 2010 was, for the most part, evenly distributed between the first and the second halves of the year with a noticeable concentration of home sales completed during the months leading to the expiration of the federal home buyer tax credit.
Pending Condominium Sales Increase 25 Percent Year-Over-Year
While single-family home sales in December 2010 edged upward year-over-year, condominium sales during the month continued to contract, falling by 20.4 percent . During the year, the median sales price declined by 2.9 percent to $630,000 in December 2010. Although the condominium market recovery fizzled through the second half of the year in reaction to the expiration of the federal tax credit and the growing uncertainty among buyers, a 24.6 percent rise in pending sales activity seen in December validates the expectations of the Rosen Consulting Group that a rebound in condominium sales will occur in 2011.
The total number of condominium sales rose in 2010, surpassing the previous year’s level. Despite the added incentive of the federal tax credit, condominium sales in 2010 remained well below the 3,000-plus condominium sales seen annually during the years preceeding the onset of the recession.
While distressed properties sales will continue to effect pricing into 2011, the area’s level of distressed homeowners is mild relative to other metropolitan areas across the State and the country. The number of borrowers holding underwater mortgages in the San Francisco metropolitan area declined to 9.5 percent in the third quarter of 2010 from 10.5 percent in the third quarter of 2009, signaling that the pace of troubled mortgages in the market is slowing.
While decade-low affordability levels and low mortgage rates incentivize home buying, stringent mortgage financing requirements combined with stretched household finances keep many home buyers out of the market. With limited supply-side pressure in the market, as employment levels rebound at an accelerated pace through the coming year and demand from both first-time and move-up buyers returns, the Rosen Consulting Group believes that the San Francisco housing market will improve at an equally impressive pace.
–Market_Focus_Report_January_2011 (PDF) [Rosen Consulting]