My friends over at Trulia asked me to share this report with all of you. Before you dive into it, it’s important to note, according to my numbers, research, and data, Trulia calculations in this article are pretty far off the mark, and a damn good reason why you should always contact a real estate professional in your area before making ANY decisions on whether to buy/sell based on online listing calculations and valuations. You need boots on the ground. That said, have a read, as despite the ridiculously low (some would argue affordable) prices mentioned below, there is some great info to be digested if you’re in the market now, or might be in the future.
In today’s tight housing market, affordable homes are more of a scarcity than their luxury counterparts. Starter home inventory is critically low, especially in a hot market like San Francisco where everyone wants a piece of the pie.
According to Trulia’s Market Mismatch, a score given to each metro area that reflects the difference between price point search demand and corresponding availability, starter and trade-up homes comprise just 45.8 percent of available listings nationwide. Yet, 60.5 percent of all home searches are for homes in the starter and trade-up home categories. Essentially, there are fewer options for the increasing number of first and second-time home buyers, leading to greater demand which tends to boost home prices in the process. Meanwhile, premium home buyers see a 14.7 percentage point excess of listings compared to demand.
First-time home buyers in San Francisco may be at a slight disadvantage, but preparing for the road ahead helps ensure you can transition into homeownership seamlessly. Consider the current prices and inventory in the San Francisco metro area – and what to expect when starting your home search this year.
What’s a San Francisco Starter Home Cost?
Per Trulia’s latest Inventory and Price Watch Report, the median home price in San Francisco is $778,667 [Editor’s note: I’m not quite sure where they got this number, as our reports for median single family homes run closer to $1,350,000…but let’s roll with it.]. For trade-up buyers considering San Francisco real estate, the median list price is $1.17 million. Luxury home buyers face a median list price of slightly under $2.7 million.
In the third quarter of 2017, there were 230 starter homes, 215 trade-up homes and 417 premium homes available for sale. Starter and trade-up listings comprised 26.7 percent and 25 percent of market share, respectively. Premium homes, on the other hand, made up almost half of all for-sale listings during the quarter.
Not only do they have the most options, premium home buyers spend the smallest share of their income on home purchases at a healthy 30.9 percent. Trade-up and starter home buyers spend drastically more of their income, 62.4 percent or more, mostly due to exorbitant home prices in the area. Given how far San Franciscans stretch their wallets to afford home-ownership, it’s best to contact a mortgage professional to determine how much a home purchase will cost now and in the long run.
When to Find the Best Deal
Bearing in mind the steep costs of San Francisco homeownership, timing your first-time home search based on market trends is imperative, especially if you’re looking to buy in a popular neighborhood. Take Historic Russian Hill homes, which could cost somewhere around the neighborhood median price of $1.65 million. Even a modern condo in SoMa, a slightly less expensive community closer to the urban core, might cost upwards of $800,000, which is the current median price for a one-bedroom home.
When it comes to inventory, San Francisco starter homes are most plentiful at the end of the year. On average, first-time buyers benefit from 33.7 percent more starter home listings in San Francisco in the fourth quarter compared to the first quarter of the year. Simply put, more inventory gives buyers better bargaining power and the ability to find the right place in a reasonable time frame. Heightened supply also tends to help home prices soften, but the impact is not immediate. This is likely why San Francisco starter homes wind up 8.7 percent less expensive in the beginning of the year – just a few months after inventory peaks – than they are in the third quarter.
Assume the home search process takes at least a month or two. That means first-time home buyers who search when inventory is highest at the end of the year could theoretically put in offers at the beginning of next year, when list prices are lowest.
Based on the data, now is a great time for San Francisco home buyers to get serious about their search, especially with potential mortgage interest rate hikes forthcoming next year. To discuss the benefits of owning your own home in San Francisco along with listings currently available in your price range, contact San Francisco Realtor Alexander Clark today.
Jennifer Riner is a real estate marketing professional whose work has been featured on Zillow, Forbes, Inman News, and more…and I thank her for this post.
As mentioned above, this is a great article with a lot of great info, and should be one of many pieces of the puzzle when considering the best time for you to buy or sell in and around the San Francisco / Bay Area.
Pray for snow!