November 2015 San Francisco Luxury Homes Market Cools

Luxury Home Segment Cools Down
“Affordable” Homes Market Remains Competitive

A number of reasons may explain this: Firstly, the affluent are much more invested in the stock market than other groups, and the volatility of late August, early September may have encouraged more wealthy homeowners to sell (before things might possibly get worse), and more wealthy homebuyers to postpone buying until things clarified.As of very early November, the S&P 500 has regained its lost ground from August, so this effect may fade. Secondly, it’s certainly possible that sellers and listing agents have finally pushed the envelope on prices a little too far: San Francisco’s high prices have clearly motivated some buyers to look at options outside the city (which has helped pressurize the markets of other counties). Last but not least, more and more luxury condos are being built in San Francisco: Growing supply not only gives buyers more options and more negotiating room, but it decreases the urgency to write strong offers quickly and the motivation to compete with other buyers.

However, the luxury home market hasn’t “crashed”: there are still high-end homes selling very quickly for very high prices amid competitive bidding.But it has markedly cooled and the number of luxury home listings in San Francisco hit a new high in October, so correct pricing has becomes increasingly vital. It remains to see if this change is just a transitory market blip – such blips are not uncommon in financial or real estate markets – or the beginning of a longer term reality.

Median Sales Price by Month

For houses alone, the median sales price in October was $1,300,000 and for condos, it was $1,100,000.

Supply & Demand Statistics by Price Segment, October 2015

Because SF has been so hot for so long, we’ve adjusted the thresholds for what MSI readings define “seller’s market” and “buyer’s market” to better reflect the psychology of the current market.

The Luxury Home Market: Months Supply of Inventory
Year over Year over Year Comparisons

Seasonality & Market Demand
Luxury & Non-Luxury Market Segments, MSI by Month

4 San Francisco Neighborhood Snapshots

Average Asking Rents in San Francisco

This has made rental property ownership an increasingly lucrative proposition, which we discuss in more detail in our last Commercial Brokerage report: Bay Area Apartment Building Market

The S&P 500 and Shanghai Composite Indices
July 2014 – November 2015

Many comparisons were made between the “frothiness” of both the Shanghai stock market and the U.S. stock market. This chart above gives a little more context to exactly how (un)similar their movements have been over the past 16 months. To add to the anomaly of the widely divergent trend lines, it is generally agreed that during this period, the Chinese economy has been significantly slowing, while the economy of the United States has continued to strengthen.

As of November 6th, the S&P 500 has made up all the losses sustained in the late August-September time-frame, and is now about 6% above its level of July 2014, and 1.3% down from its peak in May 2015. The Shanghai Composite Index, after soaring 150%, for no discernible reason besides fantastically irrational exuberance, between July 2014 and June 2015, then plunged 41%. (This engendered much excited comment regarding the “trillions of dollars” of “value” wiped out.) It is now, after repeated government interventions and limitations on trading, about 31% down from its June peak, but still almost 75% above its level in July 2014.

Median Household Incomes

In Selected San Francisco Zip Codes

By Bay Area County

Additional demographic analyses from previous reports can be found here: San Francisco & Bay Area Demographics and Bay Area Affordability

Other market reports you might find interesting:

San Francisco Market Reports

San Francisco Market Overview Analytics

Marin County Home Prices & Trends by City

Central Contra Costa Real Estate Market Report

Sonoma County Home Prices & Trends by City

30+ Years of San Francisco Real Estate Cycles

These analyses were made in good faith with data from sources deemed reliable, but they may contain errors and are subject to revision. Statistics are generalities and all numbers should be considered approximate. How any median or average statistic applies to a particular home is unknown without a specific comparative market analysis. Sales statistics of one month generally reflect offers negotiated 4 – 6 weeks earlier.

© 2015 Paragon Real Estate Group