Now that Super Bowl Sunday has come and gone, San Francisco’s springtime home selling season is officially here — assuming that traditional start date means anything in these unusual times.
Word on the street among local real estate professionals is that open house traffic has increased noticeably in recent weeks alongside renewed interest in purchasing property while the getting is good. It’s impossible to determine exactly to what extent this month’s uptick in activity is normal seasonality versus the beginning of something greater, perhaps, but buyers do appear to be making moves before the Fed’s next anticipated rate hike.
According to CNN, San Francisco experienced the country’s largest median price drop last quarter as homes tumbled 6.1 percent year-over-year, and 21 percent from their peak in Q2 2022. Those figures represent the most extreme contraction in well over a decade. In fact, in-depth examination of key metrics shows a real estate market that is in some regards more imperiled going into 2023 than at any Great Recession. But contrary to the doom-and-gloom conveyed by headlines and lagging indicators, the worst may be over.
There is no substitute for local expertise and having realtime boots-on-the-ground data in making buying and selling decisions. So far this month, the average sales price of Single-Family and Condo/TIC/Coop properties has jumped almost 9 percent to $1,038 from $953 per square foot in January 2023. The increase is not unexpected with consideration to historical trends — and it should continue through the first half of the year — but its magnitude is remarkable.
All this begs the question: When will the market reach bottom (or has it already)?
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Single-Family
New Listings
› January 2023 saw the month’s lowest number (163) of Single-Family homes listings come on the market since at least 2005. For comparison, January 2021 (255) and January 2022 (228) are two of the month’s highest numbers in the past decade.
Inventory of Active Listings
› 230 Single-Family home listings in January 2023 represents a 20+ year low for the month, and is down 12.9 percent from last year. The number of Active Listings hit a staggering pandemic-era high in October 2020 at 766, and topped out 1,373 during the Great Recession.
Sold Listings
› 99 houses sold last month, setting a 20+ year record low and representing a year-over-year 25 percent drop. The number is actually not far off from any January in the 2015-2020 period. January 2021 (162) and January 2022 (132) are two of the month’s highest numbers in the past decade, consistent with elevated listing activity.
Months Supply of Inventory
› At 1.2, MSI in January 2023 is on par with monthly trends over the past 10 years, excepting an outlying 2021 (1.9). Expect MSI to grow thru September/October as the number of New Listings hitting the market outpaces sales, as it historically does. However, any sudden jump in buyer demand could flip that script this year as a larger-than-usual number of would-be sellers wait for market conditions to improve.
Percent of Properties Sold Over List Price
› Less than half of the houses sold last month were purchased for more than asking. The steady decline since last spring correlates with a movement away from so-called strategic underpricing of listings in favor of a transparent buy-it-now approach. The last time so few properties sold over list price was back in February 2012, and the lowest number on record is 28.7 percent in March 2009.
Median Percent of List Price Received
› Exactly 100.0 percent. The number peaked at 121.9 percent in April 2022, accounting for the last listings to go under contract before the Fed’s rate hikes.
Median Sales Price
› Topping $2 million for the first time last spring, the median price of Single-Family homes has since fallen by almost one-third. The decline is one of the most severe on record, second only to the 36.2 percent drop from April 2008 thru January 2009.
Condo/TIC/Coop
New Listings
› While the number (338) of Condo/TIC/Coop properties landing on the market in January 2023 is down 28.8 percent from a year ago, it’s at approximately pre-pandemic levels and the longterm average. Expect monthly listing numbers to grow moderately thru the spring, pull back in the summer, and spike in September.
Inventory of Active Listings
› 583 Condo/TIC/Coop listings in January 2023 is approaching the 2013-2020 average for the month (501), and is less than half the number in 2021.
Sold Listings
› Monthly unit sales typically begin the year at a low, and last month the number fell to 102 — the lowest since at least 2005 and about 50 percent lower than in boom times. This decline from the spring is typical, however the severity is akin to that period in 2008.
Months Supply of Inventory
› At 2.3 MSI, the pace of units selling relative to the number of active listings is unchanged from a year ago and at pre-pandemic levels. January 2015 holds the record for the the lowest MSI at any time in the past 20 years at 1.3, back when tech IPOs were minting millionaires by the hundreds.
Percent of Properties Sold Over List Price
› Only 1 out of 5 Condo/TIC/Coop properties sold over ask in January 2023, a 49.1 percent decline from one year ago. That figure is at levels experienced during the Great Recession. As with other property types, the trend toward transparently-priced listings is partly responsibly for the unusually severe drop from last spring, which is otherwise consistent with seasonality.
Median Percent of List Price Received
› Having been at or above 100.0 percent since February 2012, the median price of Condo/TIC/Coop units dipped in Q4 2021 but quickly recovered. At 97.6 percent last month, it is among the lowest points reached in 2008/2009.
Median Sales Price
› The January 2023 median price of $992,900 marks only the fifth time it dropped below $1 million since early 2015. Year over year, it represents a 6.8 percent decrease. Since peaking at $1,362,500 in April 2022 (again, before the impact of rate hikes began showing up in data), it has fallen approximately 27 percent. The last time the median price dropped so dramatically was between July 2008 ($760,000) and January 2009 ($562,500) — approximately 26 percent.
Ready To Make Your Move?
CONSULT WITH A LOCAL LENDER AND OBTAIN PRE-APPROVAL
› This is essential before making an offer, and can take anywhere from a few days to a week or more. Consider speaking with more than one lender and making them compete for your business. Having your loan file already reviewed by the underwriter will allow you to make a stronger offer. If you plan to stay put in your new home for only a few years, choosing an adjustable-rate product will lower your interest payment. Contact us and we can point you in the right direction.
GET FAMILIAR WITH HOMES FOR SALE AND RECENTLY SOLD
› Homes today are more likely to sell at or near the asking price, but this is by no means a rule. Egregious underpricing is still a common strategy used by sellers and their agents to attract interest (and multiple offers). Be willing to compromise on your wants — if you wait to find the perfect home, you’ll be waiting forever. You can upgrade and personalize a property but you cannot change its location.
COMMIT TO ONE AGENT AND TOUR HOMES TOGETHER
› Let’s talk! There are dozens of off-market and coming soon listings in San Francisco which are not marketed to the public. Properties in San Francisco are not straightforward and value isn’t always obvious. Your agent should always see any property that you may consider purchasing. They should also obtain the seller’s disclosure documents, actually read them, and review them with you as part of your due diligence. Whether you make an offer or not, consider it education.
MAKE THAT OFFER, BABY!
› Buyers today have an opportunity to negotiate price and all sorts of terms. The worst that can happen is that the seller says no. If your offer is not accepted outright, you can try to find middle ground, agree to everything the seller wants, or choose to walk away. In San Francisco, buyers and sellers use a purchase agreement and other standard forms not used outside the city. Working with an experienced agent who knows them inside and out, respects the local customs, and presents a buttoned-up offer on your behalf will give you an advantage.
