When the media reports on the “Bay Area median home price,” it’s worth remembering that SF is a relatively small market compared to the big 3 counties.
Appreciation in Very Expensive Markets
Based on the calculations of an algorithm created to track long-term price changes, this next chart looks at percentage appreciation since 2012 in the most expensive markets of 5 Bay Area Counties. (In Marin, Tiburon, a very expensive, but not the most expensive market in the county, is graphed due to data issues.) This chart does not delineate prices, which vary hugely, only estimated percentage home price changes over time.
According to this algorithm, prices in these most expensive markets have generally declined from recent peaks in 2018.
Bay Area Ultra-Luxury Home Markets –
Active Listings vs. 12 Months Sales
SF has the third largest market for homes of $5,000,000+ in the Bay Area.
Market Dynamics & Seasonality –
New Listings & Price Reductions
The market is now deep into its seasonal plunge in activity, which hits its nadir in December. (This chart is updated through October. November saw its usual big drop in new listing activity.)
The percentage of listings reducing price in October – typically the peak month for price reductions – ticked up a little year over year, to its highest point since the recovery began in 2012.
Home Prices & Market Statistics by SF District
Median House Prices by Realtor District
As always, these prices should be considered very general approximations of prices in complex district markets containing homes of widely varying size and quality.
Median Condo Prices by Realtor District
Market Statistics by Realtor District
As mentioned in previous reports, market dynamics in San Francisco are often – but not always – separated by price segment as much as by neighborhood/district location. More expensive segments not unusually have somewhat softer supply and demand dynamics. However, District 5 – the greater Noe, Eureka & Cole Valleys district – one of the city’s more expensive districts, has been bucking that trend in 2019.
Districts dominated by condo sales also typically have softer dynamics than those dominated by house sales.
Using six-month-rolling figures for monthly median sales prices smooths out the often meaningless monthly fluctuations to illustrate broad, long-term appreciation trends with more clarity.
Home Sales Volume by Month
A crystal clear illustration of the role of seasonality in the SF real estate market. Starting in November activity begins to plunge towards the mid-winter nadir. Remember that November sales volumes mostly reflect October accepted-offer activity. Market activity hits bottom in December, which makes January the month with the lowest sales volume.
Home Sales & Median Prices by District
HOUSE Sales & Median Sales Prices
Note that districts often include neighborhoods of varying values and that the district median sales prices quoted reflect combined sales. Median prices are broad generalities useful for comparative values and home-price trends, but how they apply to any particular home is unknown without a specific comparative market analysis.
Median sales prices broken out by neighborhood, property type and bedroom count are also available upon request.
Condo, Co-op & TIC Sales by District
2-BR, 2-BA Condo Median Sales Prices
Luxury Home Sales
Sales of homes of $3 million and above in October were a little below the number in October 2018, but looking at September-October sales, there were gains over same-period sales in 2016, 2017 and 2018.
Sales vs. Listings for Sale by Price Segment
Market Dynamics by Property Type & Price Segment
Location is, of course, always important in real estate value – within the the city and within the neighborhood – but to a large degree, market dynamics within San Francisco are also determined by the property type and the price segment. And individual neighborhoods and districts will usually have homes in several or even all of the price segments broken out in the 3 charts below, with these segments seeing differing supply and demand conditions.
Generally speaking, demand is stronger and supply is lower (as compared to demand) for houses over condos. For both houses and condos, market dynamics are somewhat softer in the higher price segments, especially above the $3 million price threshold for condos, and in the $5 million+ price segment for houses.
People Moving in & out of CA in 2018
According to new census estimates, approx. 501,000 people from other states moved to CA in 2018, while 691,000 Californians relocated to other states – a net loss of 190,000. In addition, an estimated 284,000 foreign nationals moved into CA from outside the country. (Foreign out-migration numbers are not available.)
The top states for out-migration are Texas, Arizona, Washington, Nevada & Oregon, states with high-tech centers of their own and/or no state income taxes, and/or significantly lower housing costs – thus attracting working residents, local businesses, and retirees. Updated Bay Area figures are not yet available, though migration trends here have generally paralleled state trends in recent years.
Sales Without Price Reductions & Withdrawn (No-Sale) Listings
The following 2 charts illustrate both year-over-year changes in market conditions and the role of seasonality within the calendar year.
Last year saw a big jump in the number of listings pulled off the market without selling in December – this was a particularly volatile time in financial markets and interest rates were relatively high. The situation with both of those factors has changed dramatically in 2019, but it is too early to see how that will affect the number of listings withdrawn in the last 2 months of this year.
Updated Market & Census Statistics, Home Prices & Appreciation Rates, Luxury Home Sales, Price Reductions, Employment & Interest Rates.
It will be another month before hard data on the autumn selling season begins to become available. In the meantime, below is a review of market trends and statistics through the third quarter. Note that September sales data mostly reflects market activity in August, a historically slow month.
Year-over-Year Q3 Comparisons – Q3 2016 – Q3 2019
Looking back over the Q3 statistics in the past 4 years, the San Francisco market has remained quite strong, though the number of sales has declined. The “IPO effect” may well be playing a role in keeping demand up, especially in the higher price segments where sales volumes have continued to increase.
Median House Sales Price – 3-Month Rolling Figures
Median house sales prices hit a new high in spring, though the year-over-year increase was relatively modest. However, many Bay Area Counties have seen small declines in median home sales prices over the last 4 quarters.
Year-over-Year, Quarterly Median House
Sales Price Percentage Change
Generally speaking, San Francisco is seeing significantly better year-over-year home price appreciation rates over the past 2 quarters than most Bay Area Counties, but the increases are well down from those seen during much of the recovery since 2012.
Median Condo Sales Price -3-Month Rolling Figures
Median condo sales prices have hit new highs, but the apples-to-apples appreciation issue is complicated by the thousands of new condos that have come on market, many of which have been at higher price points.
San Francisco Home Sales
by Price Segment & Bedroom Count
The most common sale in San Francisco is that of a 2-bedroom condo selling between $1,000,000 and $1,500,000. 2 & 3 bedroom condos now have higher median sales prices than 2 & 3 bedroom houses. This is due to 2 issues: 1) the tens of thousands of newly built, higher-price (often high-rise) condos coming on market in the last 15 years, and 2) condos are commonly found in more expensive neighborhoods than those where most house sales occur.
Updated Census Statistics
Underlying the real estate market are the changing details and circumstances of its population. At the end of September, the U.S. Census released its 2018 American Community Survey 1-year data estimates for a broad range of economic, social and demographic statistics. Below is a selection of survey insights into our community, plus 2 or 3 statistics from other sources. (You may want to expand this slide for easier reading.)
Luxury Home Sales
Sales Volumes & Price Reductions
Looking forward, October is typically both a big month for closed sales, reflecting the surge in deals after September’s big spike in new listings, as well as for price reductions, as sellers of unsold homes try to spark renewed buyer interest before the market slows in mid-November for the winter holidays.
Then in December, many sellers pull their unsold listings off the market altogether to wait for the market to wake up again in January-March. Of course, sales occur in every month of the year, and indeed, slower periods can be advantageous to buyers since competition for listings plunges.
SF Employment Trends
Behind the story of home price appreciation since 2000 are the ups and down in the number of employed residents. After a spectacular boom in job creation since 2010 – many of the jobs extremely well paid – the number has generally leveled off in the past year (according to the CA Employment Development Department).
Trends in Rents
The 2 big recent factors in rent rates have been changes in employment numbers, and the increase in the supply of apartments on the market due to the boom in rental unit construction (the first such boom in many decades). Economists believe there should be generally parallel trends in rents and ownership costs, those being the 2 housing options (besides living with one’s parents).
The dotted line delineates the approximate divergence in rents between a market rate unit and a rent-controlled apartment leased in 2010.
Mortgage Interest Rates
A year ago, many experts predicted that interest rates in 2019 would average in the 5.5% range, but they plummeted instead, a major dynamic in this year’s market. Buyers generally saw big drops in homeownership costs as compared to late 2018. If you are already a homeowner, depending on when you purchased your home, you might want to investigate the option of refinancing your mortgage with a new, long-term, fixed-rate loan. Note: Historically, it has been very difficult to predict interest rate movements.
Neighborhood House & Condo Prices; Short-Term & Long-Term Appreciation Trends; Population Migration In & Out of the City.
After the heat of the spring market, activity typically slows down markedly in July and August. In September, listings start pouring on the market again to fuel the relatively short autumn selling season – in fact, September is typically the single month with the highest number of new listings. Autumn is also a very important time for the luxury home market – luxury house sales often peak for the year in October.
What occurs in the next 2 months, before the mid-winter holiday doldrums begin, will be the next major indicator of market conditions and direction.
Migration: People Moving In & Out
of San Francisco
Using new U.S. Census estimates released 8/29/19, this chart attempts to identify U.S. counties, states and international regions with the highest number of residents migrating to and from our county. In the Bay Area, there is a general trend outward from more expensive to more affordable places, while in-bound migration is deeply affected not only by exchanges between Bay Area counties, but people arriving from other parts of the state, country and world. Areas often have large two-way exchanges of residents.
Foreign in-migration is a huge issue in SF and the Bay Area, but it will be another year before any impact of new U.S. immigration policy on foreign in-migration in 2018 shows up in census numbers. The census estimates foreign in-migration in this analysis, but not foreign out-migration.
Short-Term & Long-Term Trends
in Median Home Prices
San Francisco is out-performing the Bay Area – most of the other counties have seen 3% to 5% declines in median home prices since peaking in spring 2018, while the city saw a new monthly peak in June and a new quarterly peak in Q2. It has been suggested that the differentiating factor in SF has been the high number of large, local, high-tech IPOs occurring this year since early spring.
In the next chart, the 2019 YTD median sales prices should be considered preliminary until full year data is in. Note that it is more difficult to compare annual median condo prices on an apples-to-apples basis because of the huge number of new construction condos – many at higher prices – coming on market in the last few years. Comparing 2019 YTD to 2018, the median house sales price is about the same, even though new monthly and quarterly peaks were hit year to date.
Supply & Demand Dynamics since 2005
The chart below compares supply, the number of active listings on the market, with demand, as measured by the number of sales. This is a 12-month-rolling graph that smooths out normal monthly fluctuations to provide clearer historical trend lines.
San Francisco Home Prices & Appreciation
by Neighborhood & District
The next long series of charts and tables looks first at house prices by neighborhood, and then at condo and co-op prices. We’ll start with our neighborhood/ Realtor District map for easy reference.
San Francisco Median House Sales Prices
by District & Neighborhood
San Francisco Median Condo Sales Prices
by District & Neighborhood
Sales & Values by District and Price Segment, Special Circumstance Sales, Market Seasonality, the Luxury Home Market & Foreign Buyers. The May Case-Shiller Home Price Index was released in late July for the 5-county SF metro area. This chart illustrates the difference in appreciation rates between the Bay Area (higher price markets) and the entire country. Case-Shiller does not use median sales prices but its own algorithm to calculate appreciation. January 2000 home price = 100; 250 = a home price 150% above that of Jan. 2000.
Needless to say, there are many factors behind home sales and values in different communities. Home size is one of them, and median sales prices are not apples to apples comparisons: For example, in Pacific Heights, the average house size is over 4000 square feet, while in Sunnyside, it runs about 1500 square feet.
Note that it is not uncommon for median sales prices to peak for the year in Q2.
Market Dynamics by Realtor District
Q2 is commonly the hottest market of the calendar year, and the statistics below generally reflect a very strong spring 2019 market.
Home Sales by Price Range
Of homes selling for under $1,000,000, over 80% were condos, co-ops and TICs, and most of those were smaller units.
Tenants, Fixer-Uppers, Homes without Parking, Homes with Golden Gate Bridge Views
Market Seasonality: The Autumn Spike,
Then the Winter Doldrums
Though spring is the biggest overall selling season in San Francisco, the single month with the highest number of new listings is typically September. This big surge fuels the relatively short autumn selling season – highlighted by the dramatic spike in sales in October. In November, activity begins to plunge for the mid-winter holidays – though homes continue to sell in every season.
Seasonality: New Listings by Month
New Listings – Long-Term Trends,
12-Month Rolling Figures
Seasonality: Listings Going into Contract
Higher-Price Home Sales
The central greater Noe-Eureka-Cole Valleys district now has the highest number of home sales over $2 million, but the northern Pacific Heights-Cow Hollow district dominates sales of $5 million and above.
The SF luxury home market is even more dramatically driven by seasonality than the general market. September often sees a tremendous burst of new listings. October is sometimes the single month with the most luxury house sales.
Long-Term Appreciation Trends by District
Though prices vary, appreciation trend lines since the recovery began in 2012 are often relatively similar.
In the next chart, we combine house sales across the swathe of older, prestige neighborhoods that run across the north of the city – generally speaking, a region of larger houses and higher prices. (Putting them on the chart above would flatten the other trend lines due to issues of scale.) None of these neighborhoods have that many sales – and some have very, very few – so we combine them to increase statistical reliability. Though they are all high-price, prices do vary considerably between them.
Median Two-Bedroom Condo Prices
by Realtor District
There is significantly less variation in condo prices in most of the neighborhoods of SF than there is with houses. Much of this has to do with all the new construction that has occurred in the last 20 years. Probably the greatest differences in condo values are between those on lower floors and those on higher floors of new luxury high-rises.
Percentage of Sales Selling for Over List Price
by Property Type
Median Percentage of Sales Price to List Price
by Property Type
Foreign National Home Buying Tumbles
According to a new report by the National Association of Realtors – based on a survey of its member agents – the purchase of U.S. homes by foreign nationals plunged in the 12 months through March 2019. The drop was particularly steep for Chinese nationals, for whom California (and the Bay Area, in particular) has been the top destination.
Stock Market Hits New High
The last 12 months have been an extremely dramatic time for financial markets as illustrated below. The alternating confidence and fear generated by its swings have been considerable factors in Bay Area real estate markets. A parallel dynamic has occurred with the swings in interest rates.
The spring burst in high-tech IPOs in San Francisco also played a role in the heat of the Q2 market.
High stock markets, low interest rates, surging luxury home sales, limited inventory, a spring full of unicorn IPOs, and San Francisco – once again -hits new highs in median home sales prices.
July 2019 Update
After 2 quarters of no or negative year-over-year home price appreciation, a confluence of positive economic factors sent San Francisco median home sales prices to new peaks in Q2. On a quarterly basis, the median house sales price hit $1,700,000 – $80,000 above the previous peak in Q2 2018 – powered by a monthly high of $1,770,000 achieved in June. For condos, the new quarterly median price peak was $1,250,00 – slightly above last year’s $1,235,000 – fueled by a new monthly high of $1,300,000 in June.
The market typically slows down significantly in San Francisco for the summer holidays through August before picking up again in September for a busy, though relatively short autumn selling season running through mid-November.
Median Home Sales Price Trends
Sales & Prices by Property Type & Bedroom Count
Average Dollar per Square Foot Analyses
San Francisco Luxury Home Sales
Hit New Peaks in Q2 2019
The first chart below breaks out luxury homes as defined by houses selling for $3 million and above, and condos, co-ops and TICs selling for $2 million or more.
The second chart looks at all home sales of $5 million plus.
Selected Supply & Demand Statistics
Average days on market – all sales (chart 1), then broken out by property type and price segment (chart 2). Changing a pattern seen in recent years, Q2 2019 often saw the strongest buyer demand in higher price segments, instead of the more affordable price ranges.
Sales price to original list price percentages by property type and price segment – these statistics generally mirror those seen above in the days on market analysis. Some of these percentages are stupendously high, reflecting torrid bidding competitions between buyers for appealing new listings.
Percentage of Listings Accepting Offers
(i.e. Going into Contract)
Percentage of Active Listings
with 1 or More Price Reductions
The effect of over-pricing – as signified by price reductions prior to sale – on the average sales price to list price percentage, average days on market, and average dollar per square foot values.
Mortgage Interest Rate Trends since 1981
San Francisco Bay Area Home Prices
by City, Town & Selected City Neighborhoods
Below is a look at the past 30+ years of San Francisco Bay Area real estate boom and bust cycles. Financial-market cycles have been around for hundreds of years, from the Dutch tulip mania of the 1600’s through today’s speculative frenzy in digital-currencies. While future cycles will vary in their details, the causes, effects and trend lines are often quite similar. Looking at cycles gives us more context to how the market works over time and where it may be going — much more than dwelling in the immediacy of the present with excitable pronouncements of “The market’s crashing and won’t recover in our lifetimes!” or “The market’s crazy hot and the only place it can go is up!”
Note: Most of these charts generally apply to higher-priced Bay Area housing markets, such as those found in much of San Francisco, Marin, Central Contra Costa (Lamorinda & Diablo Valley) and San Mateo Counties. (Different market price segments had bubbles, crashes – or adjustments – and recoveries of differing magnitudes in the last cycle, which is addressed at the end of this report.)
Regardless of how recent cycles have played out, it is vital to understand how extremely difficult it is to predict when different parts of a cycle will begin or end. Case in point: In late 2015, when financial markets entered into a period of volatility, IPO activity stopped in its tracks, and high-tech hiring slowed, a well-respected Berkeley economist prophesied there would soon be “blood in the streets” of San Francisco: Median SF house prices have gone up over 20% since then. Boom times can go on much longer than expected, or get second winds. Even when the financial markets enter a period of “irrational exuberance,” that period can go on longer than seems possible, with huge jumps in home and/or stock values.
On the other hand, negative shocks can appear with startling suddenness, triggered by unexpected economic, political or even ecological events that hammer confidence. This leads to other market dominoes falling, the reversal of positive trends in growth, investment and employment, which then balloons into a period of decline, recession, stagnation. These negative adjustments can be of varying scale, in the nature of a crash or bubble popping, the slow deflation of an over-pumped football, or a combination of the two.
Going back thousands or even tens of thousands of years, human beings have tried to predict the future, and whether using priests, oracles, astrologers, pundits, economists, analysts or “experts” of every stripe – and currently having their “authoritative” forecasts headlined every day in the media – we show no aptitude as a species for having the ability to do so with any accuracy. We can’t even remember the mistakes of the recent past – which is one reason why we don’t seem to be able to escape cycles – much less foretell what’s going to happen tomorrow.
Confidence plays an enormous role in financial and real estate markets, and in every period of irrational exuberance, there are many who vociferously argue that the exuberance is NOT irrational. Unfortunately, it can be very challenging to determine the point at which rational confidence shifts into irrational exuberance, but when irrational exuberance abruptly shifts into fear, a stampede for the exits can follow – as an old English saying puts it: “They run all away, and cry, ‘the devil take the hindmost’.” In retrospect, the duration of periods of irrational exuberance, when market gains often accelerate into the stratosphere, seems utterly incomprehensible. Such are the pleasures of hindsight.
All the major recessions in the Bay Area in recent decades have been tied to national or international economic crises, which can take a wide variety of forms. Absent a natural disaster, it is unlikely that a sudden, major, negative, market adjustment (or “crash”) would occur due simply to local issues. However, local issues could certainly lead to less dramatic market adjustments, or exacerbate a downturn caused by a macro-economic event. The SF earthquake of 1989 intensified the national recession that began at that time; our greater exposure to dotcom start-ups did the same with the national dotcom-bubble/Nasdaq crash.
Market Cycles: Simplified Overviews
Up, Down, Flat, Up, Down, Flat…(Repeat)
The chart below graphs ups and downs by percentage changes in home prices at each turning point.
Smoothing out the bumps delivers the simplified overview above for the past 30 years.
Whatever the phase of the cycle, up or down, while it is going on people think it will last forever. Going up, “The world is different now, the rules have changed, and there’s no reason why the up-cycle can’t continue indefinitely.” And then when the market turns and goes down: “Homeownership has always been a terrible investment and the market probably won’t recover for decades” (or even “in our lifetimes” as one Nobel-Prize-winning economist said in 2012). But the economy mends, the population grows, people start families, inflation builds up over the years, and repressed demand of those who want to own their own homes builds up. In the early eighties, mid-nineties and in 2012, after about 4 years of a recessionary housing market, this repressed demand jumped back in (or “explodes” might be a good description) and prices started to rise again. (The dotcom bubble adjustment caused no lasting recession in home values.)
The nature of cycles is to keep turning.
All bubbles are ultimately based on irrational exuberance, runaway greed, criminal behavior or, not uncommonly, all three mashed together. Whether exemplified by junk bonds, stock market hysteria, gorging on untenable levels of debt, a corporate ponzi-scheme mentality, an abandonment of reasonable risk assessment, and/or incomprehensible or dishonest financial engineering, the bubble is relentlessly pumped bigger and tighter. And since human beings appear utterly unable or unwilling to learn the lessons of past cycles, it is kind of like the movie “Groundhog Day,” except that in the movie at least, Bill Murray actually grew wiser over time.
The 2008 crash was truly abnormal in its scale, and much greater than other downturns going back to the Great Depression. The 2005-2007 bubble was fueled by home buying and refinancing with unaffordable amounts of debt on a staggering level, promoted by predatory lending practices, promises of endless appreciation, and an abysmal decline in underwriting standards – and then eagerly facilitated by smug, rapacious, Wall Street flimflammery and self-abasing credit ratings agencies. Millions came to own homes they could never afford to pay for and the rot was distributed throughout the financial system. The market adjustments of the early 1990’s and early-2000’s saw declines in Bay Area home values in the range of 10% to 11%, which were bad enough, but nothing compared to the terrible 2008 – 2011 declines of 20% to 60%.
This is important context when contemplating the next adjustment: It doesn’t have to be a devastating crash. It can be more like some air being let out of an over-pressurized tire instead of a blowout on the highway at high speed. It depends on many different factors.
This Recovery vs. Previous Recoveries
The gold columns above chart the appreciation of past recoveries from the beginning of the recovery to peak value for each cycle (except for the latest cycle, for which the peak has not yet been defined), and the red bars delineate the percentage declines from those peaks, pursuant to the market adjustments that occurred. As always, note that market appreciation and depreciation rates can vary widely by county, community and neighborhood.
Over the past 30+ years, the period between a recovery beginning and a bubble popping (or a lesser adjustment occurring) has run 5 to 7 years. We are currently about 5 years into the current recovery, which started in early 2012 (in San Francisco; later in outlying Bay Area counties). Periods of market recession/doldrums following the popping of a bubble have typically lasted about 3-4 years. (The 2001 dotcom bubble/ 9-11 crisis drop being the exception.) Generally speaking, within about 2-3 years of a new recovery commencing, previous peak values (i.e. those at the height of the previous bubble) are re-attained — among other reasons, there is the recapture of inflation during the doldrums years. In this current recovery, those homes hit hardest by the subprime loan crisis — typically housing at the lowest end of the price scale in the less affluent neighborhoods, which experienced by far the biggest bubble and biggest crash — are appreciating quickly now, and just beginning to re-attain previous peak values. However, communities with higher priced homes — such as in San Francisco, Marin, San Mateo and Central Contra Costa Counties (Diablo Valley & Lamorinda) — have surged well past their previous peaks.
This does not mean that these recently recurring time periods necessarily reflect some natural law in housing market cycles, or that they can be relied upon to predict the future. Real estate markets can be affected by a bewildering number of local, national and international economic, political and even natural-event factors that are exceedingly difficult or even impossible to predict with any accuracy.
As long as one doesn’t have to sell during a down cycle, Bay Area homeownership has almost always been a good or even spectacular investment (though admittedly if one does have to sell at the bottom of the market, the results can be very painful). This is due to the ability to finance one’s purchase (and refinance when rates drop), tax benefits, the gradual pay-off of the mortgage (the “forced savings” effect), inflation and long-term appreciation trends. The best way to overcome cycles is to buy a home for the longer term, one whose monthly cost is readily affordable for you, ideally using a long-term, fixed-rate loan.
In the 2 charts below tracking the S&P Case-Shiller Home Price Index for the 5-County San Francisco Metro Area, the data points refer to home values as a percentage of those in January 2000. January 2000 equals 100 on the trend line: 66 means prices were 34% below those in January 2000; 250 signifies prices 150% higher.
1983 through 1995
(After Recession) Boom, Decline, Doldrums
In the above chart, the country is just coming out of the late seventies, early eighties recession featuring terrible inflation, stagnant economy (“stagflation”) and incredibly high interest rates (hitting 18%). As the economy recovered, the housing market started to appreciate and this surge in values began to accelerate deeper into the decade. Over 6 years, the market appreciated about 100%. Finally, the late eighties “Greed is good!” version of irrational exuberance — junk bonds, stock market swindles, the Savings & Loan implosion, as well as the late 1989 earthquake here in the Bay Area — ended the party.
Recession arrived, home prices sank about 11%, sales activity plunged and the market stayed basically flat for 4 to 5 years. Still, even after the decline, home values were 70% higher than when the boom began in 1984.
1996 to Present
(After Recession) Boom, Bubble, Crash, Doldrums, Recovery
This next cycle looks similar but elongated. In 1996, after years of recession, the market suddenly took off and continued to accelerate til 2001. The dotcom bubble pop and September 2001 attacks created a market hiccup (a short-term 10% decline, but only for high-price tier houses, and for condos), but then the subprime and refinance insanity, degraded loan underwriting standards, mortgage securitization, and claims that real estate values never decline, super-charged a housing bubble. Overall, from 1996 to 2006/2008, the market went through an astounding period of appreciation. (Different areas hit peak values at times from 2006 to early 2008.) The air started to go out of some markets in 2006-2007, and in September 2008 came the financial markets crash.
Across the country, home values typically fell 20% to 60%, peak to bottom, depending on the area and how badly it was affected by foreclosures — most of San Francisco, with relatively few foreclosures, got off comparatively lightly with declines in the 15% to 25% range. The least affluent areas got hammered hardest by distressed sales and price declines; the most affluent were usually least affected. Then the market stayed flat for about 4 years, albeit with a few short-term fluctuations. Tied to a rapidly recovering economy, supply and demand dynamics began to significantly change in San Francisco in mid-2011, leading to the market recovery of 2012.
The Recovery since 2012 (per Case-Shiller)
This chart above looks specifically at home price appreciation since 2012 when the current market recovery began. Generally speaking, the spring selling seasons have seen the most dramatic surges in appreciation. It’s not unusual for appreciation to slow or flatten in the second half of the year.
Short-Term Changes – last 13 to 14 months
Short-Term Trends by Price Segment (Tier)
In late 2015 and 2016, the greatest pressure of buyer demand started moving to more affordable home segments, as seen in this following chart. In summer 2018, trends started to change, trending down. Then in early 2019, they started to spike up again.
The Panorama: From the late 1980’s to Present
S&P Case-Shiller Index, 5-County SF Metro Area
In the chart below showing percentage year-over-year changes, each January percentage change mostly reflects the market in the previous year, i.e. the January 2002 percentage decline reflects the change in 2001 after the dotcom bubble popped.
Comparing San Francisco vs. United States
Home Price Appreciation Trends since 1987
Really quite similar except for the 1989 earthquake, the dotcom phenomenon, and the recent Bay Area high-tech boom. Of course, the huge difference is in the median house sales prices: The city’s is now over 5 times higher than the national median price.
San Francisco Median Sales Price Appreciation
The charts below look at median sales price movements in San Francisco County itself over the shorter and longer terms. These do not correlate exactly with Case-Shiller – firstly because C-S tracks a “metro area” of 5 Bay Area counties, and secondly, because C-S uses its own proprietary algorithm and not median sales prices. Median sales prices are often affected by other factors besides changes in fair market value (such as significant changes in the distressed, luxury and new-construction market segments; seasonality; buyer profile; and so on).
The Current Recovery: 2012 – Present
In 2011, San Francisco began to show signs of perking up. An improving economy, soaring rents, low interest rates and growing buyer demand coupled with a low inventory of listings began to put upward pressure on prices. In 2012, as in 1996, the market abruptly grew frenzied with competitive bidding. The city’s affluent neighborhoods led the recovery, and those considered particularly desirable by newly wealthy, high-tech workers showed the largest gains. However, virtually the entire city soon followed to experience similar rapid price appreciation.
San Francisco median home sales prices increased dramatically in 2012, 2013, 2014, and then again in the first half of 2015. In 2016, the SF market clearly cooled compared to the competitive frenzies of previous spring selling seasons, but in 2017 and so far, in early 2018, the market came roaring back again for perhaps its hottest market since 2000. In summer 2018, things cooled down significantly through the end of the year – this coincided with extremely volatile stock markets and sharply rising interest rates. The spring 2019 has been strong, but not as hot as spring 2018. So far, as of April 2019, median prices have not surpassed the highs hit in 2018.
Median Sales Price Changes – Longer-Term: 1993 – Present
Comparing San Francisco, California & National
Median Price Appreciation
Since 2012, San Francisco has been out-performing the overall state and national markets.
San Francisco Rents
Besides, home prices, home rental rates are major indicators of what is occurring with housing costs and the local economy. If anything, rents have appreciated even more extremely than home prices in San Francisco (and other areas of the Bay Area) – and, of course, renters get no advantages from low interest rates, multiple tax deductions and advantages, or home-price appreciation over time. One classic indicator of an overpriced home market is when prices outpace rents. Recent changes to federal income tax laws limiting the deductibility of state and local taxes (such as property taxes) has played a part in changing the balance between the two.
It’s interesting to note that SF rents actually dropped much further after the dotcom bubble burst than after the 2008 financial markets crash, though the latter was a much more destructive economic event. It suggests that local rents may be more affected by the simple ebb and flow of high-tech hiring and employment than by other macro-economic issues, such as stock market changes. If one loses one’s job and the likelihood of finding another in the area plunges, it may be an immediate imperative to move to a less expensive rental area (pressuring rents lower); if one’s net worth plunges with a stock market crash, one may no longer afford to buy a home (pressuring home prices lower). This is an oversimplification, but may still go some ways to explaining the different scale of reaction by purchase and rental markets to different macro-economic events.
After peaking in 2015, the SF rental market definitely cooled in 2016, with supply increasing significantly with new construction, demand softening (as the high-tech boom temporarily cooled), and rents beginning to decline, especially at the high end. SF asking rents dropped around 8 – 10% from their peaks in 2015. In 2018, some signs of recovery showed up.
The monthly fluctuations in consumer confidence reported on in the media are relatively meaningless and without context, but longer-term movements are much more meaningful to overall economic trends. Psychology – confidence, optimism, fear, pessimism – often plays a huge role in financial and real estate markets. And events can sometimes turn consumer confidence one way or another very rapidly, whether such movements are rational or not. Generally speaking, pessimism is bad for the economy, confidence and optimism are good, and over-confidence – sometimes called irrational exuberance – is dangerous. It can be hard to draw the line between where confidence moves into irrational exuberance.
Mortgage Interest Rates since 1981
It’s much harder to decipher any cycles in 30-year mortgage rates. Rates remain very low by any historical measure, but have risen since the 2016 election. Interest rates play a huge role in the ongoing cost of homeownership (affordability) and the real estate market. The substantial decline in interest rates since 2007 has in effect subsidized much of the price increases that have occurred since 2011.
Real estate market cycles have a symbiotic relationship to other economic cycles, such as illustrated in the employment chart above.
Housing Affordability Index (HAI) Cycles, 1991 – Present
for San Francisco & Bay Area, per CA Association of Realtors
Unsurprisingly, there is a reverse correlation between the trend lines for housing affordability rates and those of real estate price cycles (above). HAI rates jump higher in market recessions, peaking at the bottom of the market, and then decline as the market recovers, bottoming out when peak prices are hit. The lowest Bay Area housing affordability housing index rates (probably in history) were hit in 2007 right before the 2008 market crash (subsidized by buyers taking out loans they could not afford). The Bay Area overall is still above those lows in its current recovery.
The 2008 San Francisco Bay Area real estate crash was not caused just by a local affordability crisis: It was triggered by macro-economic events in financial markets which affected real estate markets across the country. It is important to note that in the past (certainly going back at least 50 years), major corrections to Bay Area home prices did not occur in isolation, but parallel to national economic events (though the 1989 earthquake, which occurred just before the national recession began, certainly exacerbated the local downturn). Ongoing speculation on local bubbles (and predictions of awful upcoming local crashes) often neglect to remember this.
Still, dwindling affordability is certainly a symptom of overheating, of a market being pushed perhaps too high. Looking at the charts above, it is interesting to note that the markets of all Bay Area counties hit similar and historic lows at previous market peaks in 2006-2007, i.e. the pressure that began in the San Francisco market spread out to pressurize surrounding markets until all the areas bottomed out in affordability. This suggests that one factor or symptom of a correction, is not just a feverish San Francisco market, but that buyers cannot find affordable options anywhere in the area. We are certainly seeing that radiating pressure on home prices occurring now, starting in San Francisco and San Mateo (Silicon Valley) and surging out to all points of the compass.
Significant increases in mortgage interest rates – as happened in the second half of 2018 (before then subsiding again in 2019) – affect affordability quickly and dramatically, as interest rates along with, of course, housing prices and household incomes, play the dominant roles in this calculation.
Different Bay Area Market Segments:
Different Bubbles, Crashes & Recoveries
The comparison composite chart dramatically illustrates the radically different market movements of different Bay Area housing price segments since 2000. Farther below are updated individual price charts for each price segment.
Again, all numbers in the Case-Shiller chart relate to a January 2000 value of 100: A reading of 220 signifies a home value 120% above that of January 2000. The chart above illustrate how different market segments in the 5-county SF metro area had bubbles, crashes and now recoveries of enormously different magnitudes, mostly depending on the impact of subprime lending. The lower the price range, the bigger the bubble and crash. In the city itself, where many of our home sales would constitute an ultra-high price segment, if Case-Shiller broke it out, many of our neighborhoods have risen to new peak values. Updated C-S charts for each price segment are below.
Since mid-2016, the low-price tier has begun taking the lead in home price appreciation.
Updated Case-Shiller Price-Tier Charts
Low-Price Tier Homes
Huge subprime bubble (170% appreciation, 2000 – 2006) & huge crash
(60% decline, 2008 – 2011). Strong recovery, now slightly above previous peak.
Mid-Price Tier Homes
Smaller bubble (119% appreciation, 2000 – 2006) and crash (42% decline)
than low-price tier. Strong recovery has put it significantly over its 2006 peak.
It is interesting to note that the low and mid-price house tiers basically shrugged off the dotcom bubble popping in 2001, while the high-price house tier and condos (and apartment rents) saw significant declines. This is another example of how difficult it can be to make big, general pronouncements regarding the entire Bay Area market.
High-Price Tier Homes
84% appreciation, 2000 – 2007, and 25% decline, peak to bottom.
Now far above previous 2007 peak values.
Bay Area Condo Values
Other Compass San Francisco Bay Area real estate reports with market conditions, trends, home prices and appreciation rates:
- San Francisco Real Estate Market Reports – Compass
- Santa Clara County Real Estate Market Reports – Compass
- San Mateo County Real Estate Market Reports – Compass
- Marin County Real Estate Market Reports – Compass
- Oakland, Berkeley, Piedmont, Alameda: Real Estate Market Reports – Compass
- Diablo Valley & Lamorinda Real Estate Market Reports – Compass
- Sonoma County Real Estate Market Reports – Compass
- Napa County Real Estate Market Reports – Compass
- Tri-Valley, Pleasanton Region Real Estate Market Reports – Compass
- San Francisco Neighborhood Home Prices – Compass
- 30 Years of Bay Area Real Estate Cycles – Compass
- Angles on Bay Area Real Estate – Compass
- Seasonality in the San Francisco Real Estate Market – Compass
High-demand/low-inventory spring market brings median home sales prices bouncing back to 2018 peaks. San Francisco luxury home sales hit new monthly high.
Median Home Sales Prices
We consider 3-month rolling median sales prices to be more reliable than single month figures, which are much more prone to less meaningful fluctuations. Both houses and condos are basically back up to the peak prices they hit last year at this time. June sales will mostly reflect accepted-offer activity in May, so it will be interesting to see that final bit of spring data. Market activity typically begins to significantly slow for the summer, hitting its mid-year low in August.
Median House Sales Prices since 1990 – The Long-Term Perspective
Luxury Home Sales Hit New Monthly High
For the purposes of this chart, we looked at all home sales of $2,500,000 and above: May 2019 sales were approximately 13% higher than the previous peak in May 2018. More data on the spring luxury home market can be found in the table further down in this report: High-price house sales saw the big jump this spring.
Comparing Year-over-Year Spring Markets
Last year’s spring 2018 was a very, very hot market – around the Bay Area – which created a large burst in home-price appreciation. Spring 2019 in SF has also been very strong, with many of the supply and demand statistics only slightly cooler – a few more days on market, a bit less overbidding, etc. – plus an increase in high-end home sales. Median home sales prices are much the same as last year, re-attaining, but so far, not exceeding previous peaks to any significant degree.
Median Price Changes in Selected Districts
Comparing annual median home prices to partial year prices is not really an apples-to-apples comparison because of the effect of market seasonality on sales prices, but the below analysis is still an interesting look at home-price trends.
We chose these districts to illustrate a range of price points in areas with a good number of sales. Some are up, some are down, some have relatively unchanged median sales prices: It fits in with the overall, city price stability mentioned earlier. Full-year 2019 median home prices may be significantly different than the year-to-date figures.
Further down is a link to an updated San Francisco home price map, featuring the last 12 months of sales.
Neighborhood Home Prices – by Bedroom Count
Following are 2 sample tables breaking out median house and condo sales prices over the past year in 3 city districts by bedroom count. Some neighborhoods had relatively few sales of a particular home size.
Below the tables are links to our complete analyses for all 10 Realtor districts with their 70-odd neighborhoods.
Click on the links below for our complete review of San Francisco neighborhood home prices.
Selected Market Indicators
Besides giving more perspective to longer-term trends, these two charts are also excellent illustrations of how seasonality affects supply and demand statistics.
Selected Demographic & Economic Snapshots
Within the Bay Area, SF has by far the highest percentage of residents aged 25 to 34, and by far the highest percentage of single-person households. It also has the lowest percentage of residents under 5 years of age of any major metro area in the country. So, not too many children, but a big population bulge of millennials.
This next chart graphs Bay Area unemployment rates from 1990 through January 2019. By April 2019, they had typically fallen another half percentage point.
With April’s end, we now have 2 months of spring season data unaffected by the end of 2018, when financial markets plunged. As of early May 2019, stock markets have recovered to hit new highs, interest rates are far lower than last year’s peak, and our local, unicorn IPOs have begun to roll out after a media frenzy of speculation on their potential effects on the market.
The market has heated up considerably from the slowdown in the second half of 2018, with strong buyer demand for a very limited inventory of listings. Median home sales prices have returned to highs close to those in spring 2018, but, so far, last year’s peaks have not been exceeded. This is a big change from the year-over-year appreciation rates of the past 6-7 years.
However, there are still 2 months of spring sales data to come in (before the typical summer slowdown), and word on the street is that some new listings are again generating feverish bidding wars between buyers.
Monthly Median House Sales Prices
Monthly median sales prices are often affected by other factors besides changes in fair market value – for example, the extreme seasonality of luxury home sales – but the above chart helps illustrate trends over the past 2 years: Spring 2018 was one of the hottest markets in history, with dramatic year-over-year price appreciation. The market then cooled, stock markets turned scary, and interest rates climbed. 2019 has heated up again, but, so far, without any y-o-y median price gains.
The most expensive housing market in the country has, for the time being, stopped becoming more expensive.
The table below compares the March-April market statistics of 2018 and 2019. Prices were stable, overbidding was down, and luxury home sales were up, but most statistics were remarkably similar to last year’s. The SF and Oakland-Berkeley markets are currently the strongest in the Bay Area.
Home Sales by Price Range & Bedroom Count
Below is an illustration of sales of houses, condos, co-ops and TICs over the past 12 months, by price segment and by number of bedrooms.
Condos now constitute the biggest share of sales in San Francisco, which mostly explains the high columns for 1- and 2-bedroom sales in the $500,000 to $1.5 million range.
District Sales & Median Home Prices
The next 2 charts break down the last 12 months of sales by Realtor District (delineated on the map above). Some districts were split into 2 for these analyses, but all these areas contain neighborhoods of differing characteristics and home values.
House Sales, Median Prices & Median Sizes
The two biggest districts by volume of house sales – Bayview/ Excelsior/ Crocker Amazon (D10) and Sunset/ Parkside/ GG Heights (D2) – are also 2 of the 3 most affordable districts for purchasing a house in the city. Many of the older districts with bigger, more expensive houses are relatively small markets.
Condo Sales & Median 2-BR/2-BA Condo Prices
Condo sales in SF run across a wide range of eras and styles, from Victorian and Edwardian units in small buildings, through brand new, ultra-luxury high-rise penthouses. The breakout of median sales prices pertain to 2-bedroom, 2 bath condos only.
San Francisco Luxury Homes Markets by District
We typically define the SF luxury house market as houses selling for $3 million+, and the luxury condo, co-op and TIC market as those selling for $2 million+.
SF Luxury House Sales by District
The central Noe, Eureka and Cole Valleys district (D5) dominates the market for houses selling from $3 to $4.99 million. The northern Pacific Heights-Cow Hollow district (D7) dominates the $5 million+ ultra-luxury segment. But high-end home sales are scattered across the city.
Luxury Condo, Co-op & TIC Sales by District
Luxury condo sales are concentrated in 3 districts: District 9, where most of the newer, high-rise, luxury projects are found in the South Beach/Yerba Buena area (which 30 years ago was filled with parking lots and auto-stereo shops), and in the old-prestige, northern neighborhoods of Districts 7 & 8, which include Pacific Heights and Russian Hill. (This is also where the city’s high-price co-op units are clustered).
Q1 2019 “Ultra-Luxury” Homes Markets
We start the “ultra-luxury” segments at $5 million for houses, and $3 million for condos and co-ops. There has been a large (and continuing) surge in the construction of very expensive condo projects over the last 15 years, which makes for a greatly increased inventory of high-price condos for sale – and softer market dynamics.
House Size & Era of Construction
Many factors influence home construction size during any particular period: Affluence, economic conditions, household size, buyer age, land costs, population growth, natural disasters, etc. Generally speaking, the median size of houses was larger during the Victorian-Edwardian era, and declined through the 1940’s – when enormous swathes of the city were built out in the south and southwest districts. Home sizes then began increasing again, and are now larger than ever – however, few new houses are currently built in the city.
The sizes of houses built in earlier periods have increased over the years due to renovations: Adding that 2nd bathroom, or a 3rd bedroom behind the garage.
Condos have become the major alternative for people purchasing homes of smaller size.
Selected Demographic & Economic Factors
SF has seen a dramatic population increase over the past 10 years, and by percentage growth, SF had the 2nd highest rate in the Bay Area after Alameda County. But new census data indicates the rate of growth is rapidly dropping.
Our latest burst of growth – an increase of about 78,000 or 10% – with all its social and economic effects, looks paltry compared to the 1940’s, when the city’s population soared by 140,000, a jump of 22% that began with WWII.
Venture Capital Investment
In recent years, the Bay Area has been the biggest destination of venture capital investment dollars in the country – and probably the world. These tens of billions of dollars have constituted a massive factor in the local economy, supercharging the creation of new companies, hiring, and, eventually, IPOs. Venture capital is effectively seed money that has exploded into the creation of stupendous amounts of new wealth.
San Francisco Real Estate Home Prices, Sales & Statistics; Stock Markets; Interest Rates and Unicorns in Spring
A substantial portion of Q1 statistics reflect new listings and accepted offers occurring during the mid-winter market doldrums (Thanksgiving to mid-January). In November and December 2018, the stock market plunged drastically from its all-time high in September, and interest rates hit their highest point in years: these factors negatively affected buyer demand. Then both turned in dramatically positive directions in early 2019. So, Q1 statistics reflect economic conditions in both Q4 2018 (very negative) and Q1 2019 (very positive). It is also the quarter with the lowest sales volume.
The spring selling season – whose data starts to show up in March, but is mostly reflected in Q2 – is the most active of the year, and also typically sees the highest rates of appreciation. As always, there are many economic factors at play impacting Bay Area markets, some of which are discussed below.
Year-over-Year & Longer-Term Trends
Median Sales Prices
Median house sales prices dropped dramatically from last spring, but then spiked up again in March 2019. Spring is typically the season when median prices increase most.
The biggest change since last spring as been a switch from high year-over-year quarterly appreciation rates to zero appreciation and a slight decline in the last 2 quarters. What occurs this spring will be critical to understanding market trends.
New Listings Coming on Market
Year-over-year, there was a plunge in the number of new listings coming on market in Q1 – new listings almost always climb from January through March, but not this year. Were sellers waiting for a hoped-for rush of new IPO millionaires to appear? Will new listing inventory jump now that the IPOs have begun to occur? Q2 will provide much more data regarding the media-frenzy “IPO effect.”
Luxury Home Sales
There has been a significant drop in MLS sales of luxury condos. The jump in the number of new, luxury (and ultra-luxury) condos being built is creating a surge of supply that has increased the competition between sellers for buyers’ attention. (Many new-project luxury condos are neither listed nor their sales reported to MLS, and so are not reflected in this chart.)
Selected Economic Factors
Stock Markets & Unicorn IPOs
A wild ride in stock prices, particularly in high-tech: Prices soared to new peaks in summer-early autumn 2018, plunged drastically in Q4 2018, and then saw the biggest Q1 jump in 20 years. Huge amounts of wealth appearing, disappearing and reappearing – a major influence on consumer confidence and home-buyer demand.
A new surge of large, high-tech unicorn IPOs – mostly of firms headquartered in SF – has just started to roll out. IPOs have historically created vast quantities of new wealth in the Bay Area, though the magnitude of the effect of this new wave on the SF housing market is yet unknown – but currently fiercely disputed. Anecdotally, there have certainly been reports of buyers moving more quickly to beat the “rush of new millionaires” and of sellers waiting to list in order to catch the rush (see New Listing chart above).
A gigantic factor underlying Bay Area housing markets has been the staggering increase in employed residents since 2010. Outward-bound migration trends of residents and businesses – often citing housing costs as one major motivator – have been an increasing concern in recent years, but for the time being, employment numbers have continued to grow.
New Home Construction
Due to a number of factors, including a rapid increase in land and construction costs, new housing construction in SF dropped dramatically in 2018. The quantity of new homes being built plays a significant role in the supply and demand equation, and thus home prices.
There has been a stunning decline in mortgage interest rates from mid-November 2018 through the end of March, from 4.94% to 4.06% – to the enormous advantage to buyers. Big drops such as this have helped to recharge buyer demand in the past.
Housing Affordability & Household Incomes
This chart calculates the income required to buy a median-price house in Q4 2018. Median condo prices are substantially less in every county and would require lower incomes.
County median household incomes are broken out below for homeowners and tenants – some Bay Area county incomes are among the highest in the country. However, comparing the chart below to the one above illustrates the disparity between prevailing incomes and the incomes required to purchase in the Bay Area.
Health & Economic Indicators
According to a 2018 ranking of state health conditions by the Commonwealth Fund, California ranks 14th in the nation (1st being best – Hawaii). According to CountyHealthRankings.org, Bay Area counties are at the top of the list within CA for Overall Health Outcomes: Marin, San Mateo and Santa Clara rank 1, 2 & 3, while SF is 8th. On the less positive side, SF has the highest income inequality ratio in the state.