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.
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.
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.
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!