The Market Continues to Recover, But with Many Dynamics at Play

Buyer demand continued to rebound from the depths of the mid-winter slowdown: The number and percentage of listings going into contract, and overbidding percentages continued to climb, and days-on-market to drop as the spring selling season gained traction. Buyers generally shrugged off the local banking crisis, the main effect of which, so far, has been a significant drop in interest rates in the 4 weeks after SVB collapsed and First Republic first came under pressure.

But though conditions have improved considerably, the market remains significantly weaker on a year-over-year basis, and across the Bay Area, median home sales prices have declined. However, it’s worth remembering that the market in Q1 2022 was severely overheated, and approaching the peak of a historic, 10-year boom. This will distort many year-over-year comparisons.

The number of new listings coming on market continues to be extremely low, as many potential sellers hold off from listing their homes due to the doubling of interest rates since early 2022: This constitutes a huge factor in market dynamics and is undoubtedly holding back sales activity.

Across the Bay Area, year-over-year sales declines in the highest price segments have outpaced drops for less expensive homes, and their demand-to-supply ratio – the number of sales compared to the number of listings for sale – is much weaker. Luxury home sales have been hit harder since the market correction began in mid-2022, though they too have been rebounding in 2023.

April, May & June sales volumes are commonly among the highest of the year, and this is especially true for luxury home sales.

Report created in good faith with data from sources deemed reliable, but may contain errors and subject to revision. All numbers approximate, and may change with late-reported activity.

San Francisco House Price Trends

Median House Sales Prices, 2012 – Present, by Quarter

Year over year, the Q1 2023 median house sales price was down about 18% from Q1 2022. Median sales price is that price where half the homes sold for more and half for less. It is a very general statistic that disguises a wide range of prices in the underlying sales. Seasonal fluctuations are common, and it’s not unusual for median sales prices to peak for the year in spring (Q2). Longer-term trends are more meaningful than short-term changes.

San Francisco Condo Price Appreciation

Median Condo Sales Prices, 2012 – Present, by Quarter

Year over year, the Q1 2023 median condo sales price was down about 7% from Q1 2022. Seasonal fluctuations are common. Longer-term trends are more meaningful than short-term changes. Different city districts often see varying median sales price trends.

San Francisco Home Value Appreciation

Median Dollar per Square Foot Values – 3 Month Rolling, Since 2012

Unlike other local counties, in San Francisco, the median$/sq.ft. value for condos (white line) typically ran higher than that for houses (gold line), but values have converged since the pandemic hit. On a year-over-year basis, Q1 2023 median $/sq.ft. values were down about 18% for houses, and 14% for condos.

Each data point on chart reflects 3 months of sales. Seasonal fluctuations are common, and values can change due to factors other fair market value. Updated through March 2023.

Mortgage Interest Rates, 2022 - 2023 YTD

30-Year Conforming Fixed-Rate Loans, Weekly Average Readings

“Mortgage rates continue to trend down entering the traditional spring homebuying season. Unfortunately, those in the market to buy are facing a number of challenges, not the least of which is the low inventory of homes for sale, especially for aspiring first-time homebuyers.”

FHLMC, 4/6/23

Per Freddie Mac (FHLMC), on April 6, 2023, the weekly, average, 30-year interest rate was 6.28%. For 15-year loans, the rate was 5.64%(not illustrated).

New Listings Coming on Market

San Francisco Market Dynamics & Seasonality

March columns highlighted for year-over-year comparisons. The number of new listings is running far below those in 2021 and 2022.

San Francisco Homes Market

Active & Coming-Soon Listings on 1st of Month*

The # of active listings on a given day is affected by 1) the # of new listings coming on market, 2) how quickly buyers put them into contract, 3) the sustained heat of the market over time, and 4) sellers pulling their homes off the market without selling. Inventory has been running slightly lower than last year at the same time.

San Francisco: Supply & Demand by Price Segment, Property Type

Active Listings, Avg. Monthly Sales, Months Supply of Inventory

The lower the MSI reading, the higher the buyer demand as compared to the supply of homes for sale. In the highest price segments, small changes in sales can dramatically affect the MSI calculation.

*Active and coming-soon listings (no offer accepted) posted to MLS on 4/1/23. **Average monthly sales volume over previous 6 months. ***How long it would take to sell the current inventory at the average monthly sales rate over the past 6 months.

As reported to NorCal MLS Alliance. Will not include new-project condo activity unreported to MLS. Data from sources deemed reliable, but may contain errors and subject to revision. Not all listings and sales are posted to MLS. Numbers are approximate, and change constantly.

Active Listings on Market – Longer-Term Trends

San Francisco Market Dynamics & Seasonality

This is a snapshot measure of how many active listings can be expected on any given day of the specified month. The number of active listings on a given day is affected by 1) how many new listings come on market, 2) how quickly buyers snap them up, 3) the sustained heat of the market over time, and 4) how many sellers pull their homes off the market without selling. The number typically ebbs and flows by season.

Listings Pending Sale (in Contract, Offer Accepted)

San Francisco Market Dynamics & Seasonality

This is a snapshot measure of how many pending listings can be expected on any given day of the specified month.

Percentage of Listings Accepting Offers

San Francisco: Listings Going into Contract by Month

Since the pandemic hit, the absorption rate for condos and co-ops has typically run below the rate for houses – but rates have climbed in 2023 for all property types.

Absorption rate: A measurement of buyer demand as compared to the inventory of listings. The higher the percentage, the stronger the demand as compared to the supply of homes for sale. It typically ebbs and flows according to seasonal trends, as well as being affected by changes in general market dynamics.

Monthly Sales Volume

San Francisco Market Dynamics & Seasonality

Sales in one month mostly reflect accepted-offer activity in the previous month. March columns highlighted for year-over-year comparisons

Year over year, March 2023 sales volume was down about 38%.

San Francisco Higher-Price Home Sales

Homes Selling for $3 Million+

The number of higher-price sales typically ebbs and flows dramatically by season, with spring usually the biggest selling season, and mid-winter the slowest. Sales usually follow the time of offers being accepted by 3 to 5 weeks.

Year over year, $3m+ sales were down about 55% in March 2023.

Ultra-Luxury Home Sales, $5 Million+*

Bay Area Luxury Home Market since January 2021

Year over year, Bay Area sales of homes selling for $5,000,000+ were down about 52% in March 2023.

Bay Area Median Large House Values by County

Early Spring 2023 Update: 5+ Bedroom/4+ Bath Count**

*Monterey and Santa Cruz Counties only had 8 sales each in this category. Napa County had too few sales for analysis.

**Sales reported to NorCal MLS Alliance during the 4 months through mid-late March 2023. Excluding “fixer uppers.” Counties contain submarkets of widely varying values. Median values fluctuate for reasons besides changes in fair market value. Data from sources deemed reliable, but may contain errors and subject to revision. Numbers approximate, and may change with late reported sales. Not all sales are reported to MLS.

Bay Area Median House Values by County

Early Spring 2023 Update: By Bedroom/Bath Count*

*Sales reported to NorCal MLS Alliance during the 4 months through mid-late March 2023. Excluding “fixer uppers.” Counties contain submarkets of widely varying values. Median values fluctuate for reasons besides changes in fair market value. Data from sources deemed reliable, but may contain errors and subject to revision. Numbers approximate, and may change with late reported sales. Not all sales are reported to MLS.

Bay Area Median Home Values by County

Early Spring 2023 Update: By Bedroom/Bath Count*

San Francisco has by far the largest luxury condo market in the Bay Area, one factor behind its much higher median condo values.

*Sales reported to NorCal MLS Alliance during the 4 months through mid-late March 2023. Excluding “fixer uppers.” and “below market rate” sales. Counties contain submarkets of widely varying values. Median values fluctuate for reasons besides changes in fair market value. Data from sources deemed reliable, but may contain errors and subject to revision. Numbers approximate, and may change with late reported sales. Some categories within counties saw relatively few sales. Not all sales are reported to MLS.

Price Reductions on Active Listings

San Francisco Market Dynamics & Seasonality

The number of price reductions typically ebbs and flows by season, but can also be affected by specific events in the economy and the market. It’s not unusual for price reductions to peak in October before the mid-winter holiday slowdown begins in mid-November.

Overbidding List Prices in San Francisco

Percentage of Home Sales Closing over List Price, since 2018

The percentage of home sales over list price has spiked back up since hitting its mid-winter low. Sales in 1 month mostly reflect market dynamics in the previous month. Seasonal ebbs and flows are typical.

Average Sales Price to Original List Price Percentage

San Francisco Over/Under Bidding: Market Dynamics & Seasonality

Houses have higher average, sales price to list price percentages than condos. Both are much lower than last spring, but ticked up in February. This statistic fluctuates by season, and is a lagging indicator of market activity 3-6 weeks earlier.

Average Days on Market

San Francisco Market Dynamics & Seasonality

Measuring how long it takes for sold listings to accept offers. Houses have significantly lower average days-on-market readings condos, but both are dropping.

This statistic ebbs and flows seasonally, and is a lagging indicator of market conditions.

Net Domestic Migration by County: 2021-2022

Population movements occurred from counties in orange to counties in blue.

1 dot = 100 people

Statistics are generalities, essentially summaries of widely disparate data generated by dozens, hundreds or thousands of unique, individual sales occurring within different time periods. They are best seen not as precise measurements, but as broad, comparative indicators, with reasonable margins of error. Anomalous fluctuations in statistics are not uncommon, especially in smaller, expensive market segments. Last period data should be considered estimates that may change with late-reported data. Different analytics programs sometimes define statistics – such as “active listings,” “days on market,” and “months supply of inventory” – differently: what is most meaningful are not specific calculations but the trends they illustrate. Most listing and sales data derives from the local or regional multi-listing service (MLS) of the area specified in the analysis, but not all listings or sales are reported to MLS and these won’t be reflected in the data. “Homes” signifies real-property, single-household housing units: houses, condos, co-ops, townhouses, duets and TICs (but not mobile homes), as applicable to each market. City/town names refer specifically to the named cities and towns, unless otherwise delineated. Multi-county metro areas will be specified as such. Data from sources deemed reliable, but may contain errors and subject to revision. All numbers to be considered approximate.

Many aspects of value cannot be adequately reflected in median and average statistics: curb appeal, age, condition, amenities, views, lot size, quality of outdoor space, “bonus” rooms, additional parking, quality of location within the neighborhood, and so on. How any of these statistics apply to any particular home is unknown without a specific comparative market analysis.

Median Sales Price is that price at which half the properties sold for more and half for less. It may be affected by seasonality, “unusual” events, or changes in inventory and buying trends, as well as by changes in fair market value. The median sales price for an area will often conceal an enormous variety of sales prices in the underlying individual sales.

Dollar per Square Foot is based upon the home’s interior living space and does not include garages, unfinished attics and basements, rooms built without permit, patios, decks or yards (though all those can add value to a home). These figures are usually derived from appraisals or tax records, but are sometimes unreliable (especially for older homes) or unreported altogether. The calculation can only be made on those home sales that reported square footage.

Compass is a real estate broker licensed by the State of California, DRE 01527235. Equal Housing Opportunity. This report has been prepared solely for information purposes. The information herein is based on or derived from information generally available to the public and/or from sources believed to be reliable. No representation or warranty can be given with respect to the accuracy or completeness of the information. Compass disclaims any and all liability relating to this report, including without limitation any express or implied representations or warranties for statements contained in, and omissions from, the report. Nothing contained herein is intended to be or should be read as any regulatory, legal, tax, accounting or other advice and Compass does not provide such advice. All opinions are subject to change without notice. Compass makes no representation regarding the accuracy of any statements regarding any references to the laws, statutes or regulations of any state are those of the author(s). Past performance is no guarantee of future results.