Median Price Jumps in October & Advantages to Buying in the Off Season
November 2017 Report
Wow, what an October that was! Here is what is covered in this post.
- The median house price in San Francisco surged to a new level.
- The fall selling season is coming to a close—and I'll tell you why you should buy during the wintertime.
- Tax changes are proposed—and you are probably affected!
SF Median House Sales Price Surge
The median price surged over $100k over the previous peak in May to a new high of $1.588 million. The reason for the surge was a record number of luxury (over $3 million) home sales. The median condo sales price, at $1,180,000, was a tad below the recent peak hit in August, and luxury condo sales were well below their peak sales volume reached this past June. I cover the luxury market further down in this report.
Advantages to buying during the mid-November to mid-January slowdown
Just before Thanksgiving, the market begins to rapidly subside until starting to revive about 7-8 weeks later. Many buyers simply check out during this period, but there are good reasons for staying engaged - mainly the possibility of getting a much better deal. Starting in October and extending into November, sellers begin reducing prices in large numbers as they try to capture the attention of disappearing buyers: Buyers should treat these as brand new listings and take a fresh look. Competition between buyers drops dramatically during the mid-winter period, and since competitive bidding is the biggest single factor behind higher prices, its decline can mean significant savings. Fewer buyers also means that sellers are often more willing to negotiate: Throw offers in at whatever price you feel is right and see where they go. It is true that the number of new listings coming on markets plunges, but there are still hundreds of listings to consider for those willing to stay in the game.The dark red lines in the charts below illustrate these big, seasonal market shifts.
Price Reductions Soar in October/November
Overbidding Declines
Average Days on Market Increases, Making Sellers More Willing to Negotiate
Inventory Drops, But Hundreds of Listings Remain on Market
Median Home Prices Drop
San Francisco Luxury Homes Market
As mentioned before, luxury house sales hit a new high in October 2017. In recent years, October has become the biggest month for very expensive house sales. This is not the case for luxury condos, which typically peak in spring. Looking at broader trends in the second chart below, the luxury home market grew dramatically from 2012 through 2015, cooled significantly in 2016 (especially the luxury condo segment), and then surged back in 2017 to hit new highs. But then everything seems to be surging higher nowadays, from stock markets to homes to iPhone prices.
Luxury house sales in October were concentrated, highest to lowest numbers, in the Pacific Heights-Marina district (D7), the Noe, Eureka & Cole Valleys district (D5), and the Lake Street-Sea Cliff district (D1). These 3 districts contained about 80% of the sales. Other luxury house sales were scattered singly around the city: Russian Hill, Telegraph Hill, Inner Sunset, Potrero Hill, Mission, Bernal Heights, Hayes Valley and Lower Pacific Heights. The 3 districts that dominated luxury condo sales, with 9 to 11 sales each, were the Russian & Nob Hills district (D8), Pacific Heights-Marina (D7), and the South Beach-Mission district (D9). There were also a handful of sales in Noe-Eureka Valley (D5), and a couple in Lake Street-Richmond (D1). (Sales reported by 11/5/17.)
Median Home Price Trends by Neighborhood 2005 to Present
Following are 2 charts on houses and one on condos illustrating home price appreciation trends over the past 12 years in selected neighborhoods. We generally picked neighborhoods with greater quantities of sales, but please contact us if you would like information on one not included below. (The highest priced house neighborhoods like Pacific and Presidio Heights - with median prices in the $6m range - have relatively few sales and an enormous range in sales prices, which has a tendency to make the trend lines jump up and down somewhat erratically.)
Neighborhoods with current median house prices under $1.5m have generally seen smooth, consistent appreciation since the recovery began in 2012.
Neighborhoods with current median house prices of $1.5m to $3m: Some of these saw median price dips in 2016, but recovered in 2017
Two-Bedroom Condos - Median Sales Price Trends: Some SF condo markets saw significant dips in 2016, but recovered in 2017
On the chart below, South Beach would ideally be divided into two distinct neighborhoods, with condos on lower floors of highrises in one, and condos on higher floors in another (distinctly more expensive). Since that is not easily possible, the median price below is a blend of both. To a large degree, all median sales prices are derived from a blend of a wide range of individual sales, but the highrise dynamic is concentrated in the greater South Beach area.
Tax Change Proposals
Any homeowner in San Francisco and California in general should be aware there are possible changes coming to the tax code regarding home ownership. Here are a few of the changes proposed:
1. Mortgage Interest Deduction capped at $500,000 2. State and Local Tax Deduction eliminated 3. Property tax deduction capped at $10,000 4. Property tax deduction 2nd homes eliminated 5. HELOC Interest Deduction eliminated 6. Capital gains tax exemption of $250,000 individual $500,000 couple will require living in property for 5 of 8 years. Current requirement is 2 of 5 years
If you are affected by this (and you probably are) contact your Congressman and Senators.
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Please let us know if you have questions or we can be of assistance in any other way. Information on neighborhoods not included in this report is readily available.
------------------------------------------------------------It is impossible to know how median and average value statistics apply to any particular home without a specific, tailored, comparative market analysis. In real estate, the devil is always in the details.
These analyses were made in good faith with data from sources deemed reliable, but may contain errors and are subject to revision. It is not our intent to convince you of a particular position, but to attempt to provide straightforward data and analysis, so you can make your own informed decisions. Median and average statistics are enormous generalities: There are hundreds of different markets in San Francisco and the Bay Area, each with its own unique dynamics. Median prices and average dollar per square foot values can be and often are affected by other factors besides changes in fair market value. Longer term trends are much more meaningful than short-term. Late-reported MLS activity may change the statistics for the last month in some charts.