Here Comes the Spring Selling Season!

Since the recovery began in 2012, spring has typically been the most active season of the year, and usually the period during which appreciation gains have been the largest. Spring 2018 was one of the hottest markets in SF and the Bay Area in the last 2 decades. Spring 2019 is just getting started. Financial markets have, so far, recovered in 2019, interest rates have dropped, and big local IPOs loom. We will know much more soon about how these factors will impact the housing market here.

What do we mean when we talk about the Spring selling season? This chart helps illustrate. Though September is the month when the greatest number of new listings hit the market, the spring is the most sustained period of new listings between the doldrums of the winter holidays and summer vacation season. This is when there is the greatest amount of opportunity for buyers.

San Francisco Market Seasonality

Now let’s talk about pricing. The chart below illustrates trends in home prices in San Francisco and California over a long arc of time. What I want to draw your attention to specifically is the lines indicating single-family residence versus condo pricing in San Francisco since 2012.

Median Home Sales Prices by Year in San Francisco

You’ll notice that in 2012, the median price of SFRs and condos was approximately the same. In 2018, SFR prices averaged about 33% higher than condos—and that delta is continuing to spread. Why? The most likely explanation is that the great majority of new housing units coming on the market are condos. This means SFRs are becoming comparatively scarce, but demand is probably not waning, so it’s a simple supply and demand equation. The big takeaway here is that, if you are really interested in buying a single-family home in San Francisco, you might want to act. As long as that delta continues to spread, you lose buying power.

Adding fuel to the fire, we are also facing a substantial IPO season. Uber, Lyft, Airbnb, Pinterest, and Slack are believed to be going public in 2019. Combined, the four potential 2019 IPOs could reach valuation of $176 billion, almost twice as large as Facebook’s 2012 valuation. 10,000 San Francisco based workers could be affected, which could have a notable impact on the Bay Area housing market. Again, this may be a compelling reason to act sooner than later.

Let’s take a look at how values have shifted by neighborhood. When you’re talking about SFRs, the luxury market has tended to appreciate at a less steep rate than in less expensive areas. In my opinion, this has a lot to do with how the tech sector has increased demand in central neighborhoods such as the Mission, Bernal, Castro and Noe Valley—in short, places where there is an abundance of tech buses combined with good southbound freeway access. Still, while the rate of increase at the high end is less for luxury properties, the overall values are still significantly higher.

San Francisco Median Home Sales Price Appreciation 1998-2018

Similar patterns emerge in similar areas for condos, though with one standout statistic. You’ll notice that the rate of increase on condos in SOMA, South Beach, and Yerba Buena is the slowest here. This is because this area has by far the greatest amount of new construction of condos happening. While that has a depressing effect on the rate of appreciation, it does present opportunities for new buyers. Case in point, I just got a client into 99 Rausch, a really great new building that has competitive prices and incentives.

San Francisco Median Condo Sales Price Appreciation 1998-2018

So what’s available out there now? Here’s a snapshot for both houses and condos. Buyers, and first-time buyers in particular, would be well served to pay attention to the areas where inventory is high and prices are comparatively low. I’m a big fan of D10, and Bayview and Portola in particular, as underrated areas with many great houses. And as noted before, SOMA, Yerba Buena, and South Beach abound with opportunity for condo buyers.

Active House Listings by District/Neighborhood in San Francisco 3/1/2019
Active Condo Listings by District/Neighborhood in San Francisco 3/1/2019

I hope this helps frame the state of the market right now for you. If you have any questions, I am more than happy to talk about it further. Just contact me.

The statistics in this report are very general and approximate indicators based upon listing and sales data pertaining to assortments, of varying size, of relatively unique homes across a broad spectrum of locations and qualities. How these statistics apply to the current value, appreciation trend, and prevailing market conditions of any particular property is unknown without a specific comparative market analysis.