The Multi-Unit Residential Property Markets of San Francisco, Alameda & Marin Counties

The big political issue facing the market is CA Prop 10, which, if passed in November, repeals the limits on local rent control laws enacted in the Costa-Hawkins Rental Housing Act. This would almost certainly have negative ramifications for owners of multi-unit residential properties in San Francisco and Oakland. The CA Legislative Analyst Office does a good job summarizing the issues: Prop 10 Review. Prop 10 is currently creating something of a shadow on the larger apartment building market, with some buyers waiting for election results – much as happened with SF Prop G did in 2014. (Prop G failed and the market rallied dramatically after Election Day.) However, the market certainly did not grind to a halt in Q3, nor did values plunge.

Historically speaking, it has been difficult for rent control measures to pass on a statewide basis, because homeowners, all of whom are potential landlords, outnumber tenants in California. On this issue, people tend to vote their financial interests, and homeowners generally vote in higher percentages than tenants. Strong rent-control measures are generally found only in tenant-majority communities. All of which is not to take for granted what will occur on November 6.

This report generally separates out the 2-4 unit and the 5+ unit apartment building markets, since they have different dynamics and values. All the statistics herein are broad generalities covering a wide variety of buildings of very different location, age, size, quality, condition, tenant profile, income and income potential. The number of sales in many of the segments is relatively small, which can make the statistics more prone to anomalous fluctuations.

Some charts pertain to multiple counties, and others drill down on statistics specific to San Francisco; some track the last 12 months of sales, and others have a final data point reflecting 2018 YTD sales. All numbers should be considered good-faith, general approximations.

Trends in Residential Rents

This chart below tracks longer-term average asking rent trends, instead of median asking rent appreciation since 2012, as illustrated in the charts above. It provides a bit more historical context.

Sales, Prices & Market Trends

2-4 Unit Buildings

5+ Unit Buildings: Inventory, Sales & Values

The inventory of active listings ticked up in the last 2 quarters.

SF 5+ Unit Buildings: Trends in Gross Rent Multiple,
Cap Rate & Dollar per Unit Value

Many of the standard value parameters have remained remarkably
consistent in San Francisco over recent years.

San Francisco New Construction Pipeline

Almost 70,000 housing units are now in the SF new construction pipeline. Plans are constantly being added, revised and abandoned, and new housing construction is extremely sensitive to changes in economic conditions.

Q3 2018 Sales of San Francisco 5+ Unit
Apartment Buildings

San Francisco is a unique residential-investment market: the buildings are smaller and older than in most places, built in a wide range of architectural styles. The great majority of the market is under rent control, which makes upside rental-income potential a big component of valuation, even if it is unknown when that potential might be realized. Within the city the variety in buildings and units is enormous.

In real estate, the devil is always in the details: If you are interested in further insight into the details of any of the above sales, or regarding properties currently on the market, please contact me.

Broker Performance in
Residential Multi-Unit Property Sales

In the summer of 2018, Paragon and Pacific Union merged into Compass to create the largest residential investment property brokerage in San Francisco.

It is impossible to know how median and average value statistics apply to any particular apartment building without a specific, tailored, comparative market analysis. Statistics are generalities: This is especially true for multi-unit properties, with the enormous range of property types, sizes, conditions, circumstances, qualities, financial data and locations. We are often dependent upon listing agents for income and expense details, which can be of varying accuracy. A percentage of investment property sales are not reported to MLS, which sometimes limits our ability for more comprehensive data analysis.

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.

© 2018 Compass

CoreLogic S&P Case-Shiller Home Price Index Update

The CoreLogic S&P Case-Shiller Home Price Index does not evaluate median sales price changes, but employs its own proprietary algorithm to measure home price appreciation over time. Since its indices cover large areas – for example, the San Francisco Metro Area is comprised of 5 counties – which themselves contain communities and neighborhoods of widely varying home values, the C-S chart numbers do not refer to specific prices, but instead reflect prices as compared to those prevailing in January 2000, designated as having a value of 100. Thus a reading of 250 signifies that home prices have appreciated 150% above the price of January 2000 (with its reading of 100).

Case-Shiller divides all the house sales in the SF metro area into thirds, or tiers. Thus the third of sales with the lowest prices is the low-price tier; the third of sales with the highest sales prices is the high-price tier; and the third in between is the mid-price tier. The price ranges of these tiers changes as the market changes. The 3 tiers experienced dramatically different bubbles, crashes and recoveries over the past 18 years, to a large degree determined by how badly the tier was affected by the subprime financing crisis. The low price tier was worst affected – huge bubble, huge crash, most dramatic recovery – and the high-price least affected (but still deeply affected).

Most of the house sales in expensive counties such as San Francisco, Marin and San Mateo, as well as affluent communities in other Bay Area counties are in the “high price tier”, and that is where we focus most of our attention. In fact, much of the house market in San Francisco and other very expensive markets would qualify for an “ultra-highprice
tier,” but C-S does not break that out. All counties, to some degree, have sales in all 3 price tiers.

The Index is published 2 months after each month delineated – the July index was released in late September – and reflects a 3-month rolling average, so in effect, it is looking into a rear-view mirror at the market 3 to 5 months ago.

The 5 counties in our Case-Shiller Metro Statistical Area are San Francisco, Marin, San Mateo, Alameda and Contra Costa: Alameda and Contra Costa are by far the largest markets; SF itself comprises only about 7% of house sales in the metro area. We believe the Index generally applies to the other Bay Area counties as well. There are many dozens, if not hundreds, of unique real estate markets found in such a broad region, with different dynamics, moving at varying speeds, sometimes even moving in different directions. How the C-S Index applies to any particular property is impossible to say without a specific comparative market analysis.

More information: https://us.spindices.com/index-family/real-estate/sp-corelogic-case-shiller

S&P Dow Jones Indices LLC, S&P/Case-Shiller U.S. National Home Price Index [CSUSHPINSA], retrieved from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/CSUSHPINSA, September 25, 2018.

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.

Marin County Real Estate Market Report

While we wait for the autumn selling season to begin in September, this report will take a look at Marin and Bay Area market trends from a variety of angles, starting with home prices.

Paragon & Compass Merge

We are pleased to announce that Paragon Real Estate has joined forces with Compass in order to deliver a new level of support and service for our clients. Founded in 2012, Compass is a real estate technology company now operating in 30 regions with over 90 offices across the United States, including New York City, San Francisco, Los Angeles, Chicago, Boston, Seattle, Washington D.C., Dallas and Miami. With the merger, the Compass Bay Area team consists of more than 500 agents closing more than $4.5 billion in annual sales volume.

Bay Area Housing Affordability

The California Association of Realtors (CAR) just released its Q2 report on housing affordability, which we have illustrated in the 3 charts below. (For some reason, CAR calculates the Q2 Marin median house sales price at a little less than our MLS analysis, but the difference is not material.)

The Luxury Home Market

Spring 2018 was a strong market for high-end homes in Marin, though as is typically the case, it was not as hot as the market for more affordable homes. These dynamics were consistent across the Bay Area.

Bay Area Sales by County

In total sales volume, Marin has the fourth largest luxury home market in the Bay Area, but if population is taken into account, it has the largest proportionally: Both SF and San Mateo have about 3 times the Marin population, while Santa Clara has 7 times more residents.

Luxury Market Seasonality

As illustrated by the next 3 charts, the Marin luxury market is fiercely seasonal. Typically, there is a large burst of new listings in September, which fuels the relatively short autumn selling season. In mid-November, market activity plunges, and the expensive home market does not pick up again until early spring.

Trends in Market Dynamics
Time on Market to Acceptance of Offer

As the market get hotter, listings sell faster.

Sales Price to List Price Percentage

As the market get more competitive, overbidding increases.

General Market Seasonality

Market activity climbs steeply from the beginning of the year to peak in spring, slows in midsummer, spikes back up in autumn, and then plunges for the mid-winter holidays.

Months Supply of Inventory (MSI)

The stronger the buyer demand as compared to the supply of listings available to purchase, the lower the MSI. Generally speaking, MSI figures around the Bay Area have been flirting with historic lows in 2018.

Percentage of Listings Accepting Offers

As the buyer demand increases, higher percentages
of listings go into contract within the quarter.

Price Reductions

Sellers reduce prices most often at two times of the year: At the end of spring and early summer as they try to sell unsold listings before the summer slowdown, and then at the end of autumn before the market dives into its winter doldrums. It is an effort to grab the attention of buyers anew before or during periods of reduced demand.

Mortgage Interest Rates
Short-Term and Long-Term Trends

Two of the factors that have worried market analysts have been the big changes in federal tax law limiting the deductibility of state and local taxes, and interest rate expenses – changes that affect more affluent, higher home cost areas like ours most dramatically – and increasing interest rates. So far in 2018, buyers appear to have shrugged off any such concerns, and dollar-appreciation rates have generally accelerated since the beginning of the year.

Interest rates play a big role in housing affordability, and their drop after the 2008 crash played a vital part in the market recovery of the past 6 years. It has typically been very difficult to predict interest rate changes with any accuracy, though most economists believe they are headed higher. The questions being: If so, how high? And how will buyers react?

It is impossible to know how median and average value statistics apply to any particular home without a specific, tailored, comparative market analysis.

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.

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.

© 2018 Compass

Marin Home Prices, Market Conditions & Trends

This report contains Annual Median Home Price Appreciation Rates, Market Values by City, Bedroom Count and Price Segment in addition to Luxury Home Sales & Where Best to Look in Your Price Range. Enjoy this Mid-Year 2018 Report.

Marin, SF, CA & U.S.
Median Home Price Trends

Annual Median Sales Price Changes
by Dollar and by Percentage

Appreciation is typically viewed through the lens of percentage changes, but looking at dollar-value increases is another angle that is sometimes more interesting. Below are charts measuring appreciation by both parameters.

Comparing the first half of 2018 to 2017, the Marin median house sales price increased by an astounding $135,000. However, it is not a given that the second half of the year will see home price appreciation at similar rates: Prices could indeed increase further, or they might plateau or even tick down instead. For the last 7 years, spring has typically been the most feverish selling season of the year and has often powered most of the appreciation occurring over the full year.

Median sales price is that price at which half the sales occurred for more and half for less, and it is often affected by other factors besides changes in fair market value, such as changes in inventory or in luxury home sales. Sometimes median sales prices in a particular community fluctuate without great meaningfulness. This is especially true in smaller towns with relatively few sales and wide ranges of sales prices. A specific comparative market analysis of a particular property is sometimes the only way to gauge appreciation trends.

Home Value Appreciation by City

Median Sales Prices
2011 through Mid-2018

Average Dollar per Square Foot Values
2012 through Mid-2018, Selected Cities

Home Sales & Prices by City & Bedroom Count

Reflecting 12 Months Sales through Mid-2018

There are also tables available for Marin 2-bedroom and 6-bedroom house sales, and for 3-bedroom condo sales, which we are happy to provide upon request.

Where Best to Look in Your Price Range
Home Sales by City & Price Segment

Luxury Home Sales by City

City Sales Breakdowns

Moving north from the Golden Gate Bridge
to the Sonoma County border

Coastal and western Marin communities are small with relatively few home sales in any 12 month period, but we can provide more information on their sales and prices upon request.

Additional reports can be found here: Paragon Main Reports Page

Please let us know if you have questions
or if we can be of assistance in any other way.

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 certain statistics to some small degree.

© 2018 Paragon Real Estate Group

Marin County Market Prices & Trends

Before diving into prices and trends in individual city markets in this month’s report, these four charts are overviews for Marin County market. In April 2018, the median house sales price hit a new peak price, slightly above the previous high achieved in May of 2017. Since median home sales prices often hit their annual high points in May – illustrated by the gold columns in the first chart – we may well see another increase before spring is over.

Marin Market Dynamics by City

Though we tend to speak of the real estate market as a single reality, in fact, market size and dynamics vary considerably by community and price segment. As further context to the analyses below, here are links to 2 charts from our April report illustrating home prices and price per square foot values by city: Median Sales Prices & Average Dollar per Square Foot Values

Remember that value statistics can be affected by other factors besides changes in fair market value, such as seasonality, changes in the luxury or new-construction markets, or fluctuations in inventory available to purchase.

Though not yet reflected in the chart below, median sales prices have continued to increase in 2018.

Many more market analyses can be found further down this web page and via these links:

Paragon Main Reports Page
Marin County Home Price Trends by City
Marin County Demographics
Positive & Negative Factors in Bay Area Markets
Survey of Bay Area Real Estate Markets
Article: 30+ Years of SF Bay Area 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. 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.

© 2018 Paragon Real Estate Group

Marin Market Report: What City’s Median Home Price Appreciated by $1 Million since 2011?

Before diving into prices and trends in individual city markets, these three charts are overviews for Marin County. In April 2018, the median house sales price hit a new peak price, slightly above the previous high achieved in May of 2017. Since median prices often hit their annual high points in May – illustrated by the gold columns in the first chart – we may see another increase before spring is over.

Marin Market Dynamics by City

Though we tend to speak of the real estate market as a single reality, in fact, market size and dynamics vary considerably by community and price segment. As further context to the analyses below, here are links to 2 charts from our April report illustrating median prices and price per square foot values by city:

Median House Sales Prices by City
Average Dollar per Square Foot Values

Remember that these general statistics can be affected by other factors besides changes in fair market value, such as seasonality, changes in the luxury or new-construction markets, or simply significant fluctuations in the inventory available to purchase.

Overbidding percentages have typically – but not always – been higher in more affordable home markets.

Many of the statistics in the next 2 charts would be considered incredibly low – indicating feverish markets – by any historical measure.

Additional reading can be found here:

Paragon Main Reports Page
Marin County Demographics
Sonoma County Market Report
Positive & Negative Factors in Bay Area Markets
Survey of Bay Area Real Estate Markets
30+ Years of SF Bay Area Real Estate Cycles

Please let us know if you have questions or if we can be of assistance in any other way.

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 certain statistics to some small degree.

© 2018 Paragon Real Estate Group

Marin Median Home Prices Hit New Highs

Consumer confidence is still soaring, and buyers continue to push aside concerns regarding recent financial market volatility, federal tax law changes affecting Bay Area homeowners, and interest rate increases, to fuel heated markets throughout Marin.

In Q1 2018, the Marin median house sales price of $1,325,000 was 10% above the Q1 2017 price of $1,200,000, and a tad above the previous peak reached in Q2 2017. The median condo sales price jumped 18% on a year-over-year basis, and was 6% higher than the recent Q4 2017 high. The market for homes under $2m is particularly feverish with days on market and months supply of inventory hitting 2 year lows in March. Prices usually increase from Q1 to Q2 as the spring selling season really gets going. It will be interesting to see what happens this year.

Marin Median Home Sales Prices by Quarter
since 2012

Median sales prices often fluctuate by quarter or season.
Longer-term trends are more meaningful than short-term changes.

Marin Median House Prices by Year
since 1990

Long-Term Home Price Trends
Bay Area vs. National Appreciation since 1987
per CoreLogic S&P Case-Shiller Home Price Index

The Case-Shiller Index does not use median sales prices to measure appreciation, but instead employs its own algorithm. This chart compares the national home price appreciation trend with that for high-price-tier houses in the 5-county SF Metro Area. The high price tier applies best to most of the markets in Central-Southern Marin, San Francisco and San Mateo.

In this chart, home prices in January 2000 are designated at a value of 100, thus the reading of 248 in December 2017 signifies a price that has appreciated 148% in the 18 years since then. Notice how similar the national and Bay Area trend lines are, with appreciable variations occurring after the 1989 earthquake, during the dotcom bubble and crash, and during the most recent Bay Area high tech boom.

As always, market dynamics often vary significantly by specific location, property type and price segment, and median prices are often affected by other factors besides changes in fair market value (such as fluctuations in luxury home and new construction sales, and in the average size of homes sold). Late reported sales may affect the median sales prices illustrated in the quarterly chart, though typically only to a minor degree.

A condensed version of our report on the ups and downs in the market over recent decades: SF Bay Area Real Estate Cycles

Marin Home Values
by City & Town

Sales Reported to MLS, 10/1/17 – 4/6/18

Below is a glance at recent house median prices and average dollar per square foot values broken out by community, for sales reported to MLS in the last 6 months or so – basically since autumn sales began to close in early October.

Median House Sales Prices

Average Dollar per Square Foot Values

Marin Median House Sizes
Square Footage by Community

Median home square footage varies markedly from town to town, and the differences in size gives important context to the differences in median prices and average dollar per square foot values. Note that median home sizes in communities with relatively low numbers of expensive and very expensive home sales – such as Belvedere and Ross in particular – can fluctuate significantly from period to period.

Marin Market Seasonality

The market has just begun what is typically the busiest selling season of the year, as new listings pour onto the market, and buyers jump on those listings.

Percentage of Listings Accepting Offers
within 30 Days (i.e. very quickly)

It is not unusual for more expensive markets to have lower percentages since higher priced homes often take longer, on average, to sell. Not only are there fewer buyers in higher price segments, but overpricing becomes a larger issue, as will be illustrated in the chart following the one below.

Home Pricing & Overpricing

For home listings under $2m, the difference between the median list price and the median sales price is quite small, less than 5%, though when looking at listings that do not sell, but expire instead, the difference swells to 13%. But for homes over that price threshold, the differences get much more striking: The median list price is almost 25% higher than the median sales price, and there is an astounding 46% difference between median sales price and the median asking price of those expensive homes that do not sell at all.

Generally speaking, sellers and listing agents in the luxury home segment are much more prone to overpricing their listings beyond what buyers are willing to contemplate paying. Even the most beautiful home has a fair market value based on a rational comparative market analysis.

The Facts Regarding Bay Area
Migration, Population & Employment Trends

Alarmist Media Reports Forecast Doom for Bay Area

Many semi-hysterical articles were published in March regarding Bay Area residents fleeing in droves, that more people are leaving than arriving, that Silicon Valley is over, and this may spell disaster for the region. Wow, that sounds very bad – but is not true: Though the rate of growth has considerably slowed from the torrid pace of recent years – which is probably a good thing, since the Bay Area is now bursting at the seams – more people are still arriving than leaving, and population and employment numbers are still increasing. Our report, Will the Last Person Leaving the Bay Area Please Turn Off the Lights covers this topic in much greater detail.

Here are 3 of the charts from our full article, based on recent U.S. census and CA state employment data.

Net domestic and foreign migration in and out of the SF Metro Area,
natural population increases and annual net population growth

The SF Bay Area population continued to increase in 2017,
though slowing from the feverish growth rates of previous years.

The Bay Area continues to be a high-paying-job-creating machine,
though hiring intermittently speeds up or slows down.

Mortgage Interest Rates

Interest rate changes are one of many factors we reviewed in a recent report Positive & Negative Factors in Bay Area Markets. It may be that fears of impending rate increases are helping to fuel the strong buyer demand we are seeing so far in 2018.

MEDIAN List Rents by County
Short-Term Trends since 2011

Additional reports can be found here: Paragon Main Reports Page

Please let us know if you have questions or we can be of assistance in any other way.

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 certain statistics to some small degree.

© 2018 Paragon Real Estate Group

Marin Real Estate Market – A Strong Start to 2018

So far in 2018, the market seems to have mostly brushed aside concerns about increasing home prices, rising interest rates, stock market volatility and new federal tax law changes. It is still too early to come to definitive conclusions about where the year is going, but right now, in most market segments, buyer demand remains very strong for a limited supply of listings. This is especially true in the more affordable home segments, a dynamic playing out around the Bay Area. Of course, whatever the price segment, how buyers respond to a particular listing depends on the specific property and its location, appeal, preparation, marketing and pricing: Some listings sell very quickly, some only sell after price reductions, and, even in a hot market, some do not sell at all.

Home Value Appreciation
Year-over-Year Comparisons

Marin year over year home price appreciation

The 16% year-over-year jump in median sales prices is unusually high and should probably be taken with a grain of salt until substantiated over a longer period of sales. The 7% increase in average dollar per square foot values is probably closer, but possibly a tad low as an indicator of recent home-value appreciation. (Median sales price and average price per square foot appreciation rates sometimes do not move in parallel when the mix of homes sold appreciably varies – for example, in average home size – from one period to the next.) What is indisputable is that significant market appreciation has continued over the past year, and perhaps accelerated over the last 4 or 5 months. We will know more once the spring selling season really gets going in earnest.

Home Values by Lot Size

In San Francisco, a house worth $1m can sit next to one worth $4m, each on its own narrow, 25-foot-wide, 2500 square foot lot, but in Marin, with more land to stretch out on, home values correlate to a surprising degree with lot size, as illustrated below. Which does not mean this applies to every home in the county, and of course, in Marin, considerable percentages of lots can consist of steep hillside land. Steep hillsides often bring lovely views, while, on the other hand, good-sized, flat yards are highly prized as well.

Additional Chart: Marin Home Sales by Era of Construction

Appreciation by City & Town
by Year

The next 3 charts look at house value appreciation in cities and towns around the area, from most affordable, to more expensive, to most expensive.

In the most expensive communities, median sales prices sometimes bounce around without great meaningfulness due to the quantities of sales being relatively low, and to the very wide range of home sales prices. That said, it is also true that the greatest pressure of buyer demand in recent years has been in the more affordable home segments – affordable by Marin standards – and appreciation in those communities has typically been more consistent since 2015.

Median House Sales Prices
by City since 2010

Average Price per Square Foot House Values
by City since 2012

Supply & Demand Statistics

Months Supply of Inventory (MSI)
& Average Days on Market (DOM)

As seen below, as measured by two classic statistics of supply and demand, the market in recent months has certainly not softened in comparison to the last 2 years, and according to Months Supply of Inventory and the Percentage of Listings Selling within 30 Days (the second chart down), it has become appreciably stronger.

Listings Selling within 30 Days
Year-over-Year Comparisons

Active Listings on Market
by Month & by City

This next chart illustrates both the seasonality of the market and the size of the respective city markets in Marin County. We are just now entering the time of year when inventory swells to fuel the spring selling season. The 3 biggest home markets are San Rafael, Novato and Mill Valley. Tiburon is a smaller market, but now constitutes the biggest luxury home market in the county. Some Marin markets – such as in Belvedere, Ross, Kentfield and Larkspur – are very small, but very expensive.

Additional Chart: Marin Sales Volumes by City & Town

Sales, Price Reductions
& Listing That Do Not Sell

General Market Listings under $2m

The last 12 months have been a strong market in Marin real estate, and the great majority of sales under $2m sold very quickly, and averaged a sales price over asking price. Those listings that had to go through price reductions before selling spent an average of 9 weeks longer on the market. And then for every 8 to 9 listings that sold, 1 listing expired and was withdrawn from the market, typically because buyers deemed the property overpriced. This is a very low ratio of listings that do not sell.

Marin Luxury Home Market

Number of New Listings Coming on Market
& Number of Active Luxury Listings by City

Just as in San Francisco, the luxury home market in Marin is fiercely seasonal, with the market slowly waking up in the first two months of the year; soaring in spring, the dominant period for high-end listings and sales; slowing way down for the mid-late summer doldrums; spiking back up for the short, intense autumn selling season; and finally plunging for the winter holidays.

Additional Chart: Marin 2017 Luxury Home Sales by City

Luxury Home Sales, Price Reductions
& Listings That Do Not Sell

This chart illustrates the difference between high-end listings the market deems appealing and fairly priced – on average, selling quickly for full list price – and those that have to go through price reductions prior to selling (on average, an extra 14 weeks on the market), and then those that do not sell at all, but expire and withdrawn from the market. The ratio of listings that do not sell – 1 expired listing for every 3 that sell – is much higher in the luxury segment than in the general market, and this has everything to do with both demand and pricing (or overpricing).

Rising Mortgage Interest Rates
Short-Term Trends

Long-Term Trends

Long-Term Mortgage Interest Rate Trends

Debt in America

One of the macro-economic factors of concern is that debt levels, of virtually every kind, are hitting new highs in the country (and in the world). This has been heavily subsidized by the historically low interest rates prevailing in recent years, but rates appear to be headed upward, and increasing debt often plays a big role in market cycles.

Debt Taken On to Invest in Financial Markets
(Often a Sign of Investor Over-Exuberance)

Household Non-Housing Debt
Credit Cards, Student Loans, Car Financing

Household Mortgage Debt Service Ratio

The amount of total mortgage debt in the country is now about the same as at its last peak in 2008 (not illustrated on this chart), but because of the plunge in interest rates since then, the ratio of mortgage debt service to disposable income was close to an all-time low in mid-2017. Interest rates have been rising since then, but are still about 30% lower than in 2007. The good news is that so much of mortgage debt in America is now in fixed-rate loans at very low interest rates, which adds much stability to economic conditions, a stability grievously lacking at the time of the 2008 financial markets crash.

Link to additional charts on debt

Additional reading for those interested:

Paragon Main Real Estate Reports Page
Positive & Negative Factors in Bay Area Markets
Survey of Bay Area Real Estate Markets
San Francisco & Bay Area Demographics

Please let us know if you have questions or we can be of assistance in any other way.

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 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 certain statistics to some small degree.

© 2018 Paragon Real Estate Group

A Survey of Bay Area Real Estate Markets

Our newly updated median home price maps for Marin, Diablo Valley & Lamorinda, and Wine Country markets in addition to San Francisco by neighborhood. To access them, click on the map image below and then roll your cursor over the maps on the webpage.

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Bay Area Q4 2017 Median House Sales Prices

San Francisco Bay Area Median Home Sales Prices

Bay Area 2017 Median Condo Sales Prices

San Francisco Bay Area Condo Median Prices

One cannot draw many conclusions regarding the new year market by looking at January data, whose low volume of sales mostly reflects offers accepted in December, however, so far, it appears that the low-inventory/ strong-buyer-demand dynamic is continuing in 2018. One recurring situation in recent years is that buyers jump back into the market in January in larger numbers than sellers getting their homes listed to sell – setting up a mismatch between supply and demand. Typically, many more listings will start pouring onto the market in February and March, and a much better idea regarding where the market is heading in 2018 will be possible once spring selling season data starts coming in.

Since questions constantly arise as to how one development or another is affecting or may affect Bay Area real estate markets – new tax laws, the high-tech boom, interest rates, financial markets, new home construction, climate change, and so on – our chief market analyst has made an attempt to identify and quantify the factors currently at play: Positive & Negative Factors in Bay Area Real Estate Markets

This report will focus on Bay Area trends, but other reports are available via these links: Marin County Market Report *** Marin Home Price Trends by City *** Sonoma County Report *** San Francisco Report

Year-over-Year Home Price Appreciation Rates
Comparing 2017 Median Sales Prices to 2016 Prices

San Francisco Bay Area Home Price Appreciation

Additional chart: Bay Area Median Home Price Appreciation since 1990

Average Dollar per Square Foot Values
& What You Get for $1 Million in the Bay Area

San Francisco Bay Area Dollar per square foot values

Your great aunt gives you a check for a million dollars to buy a home, so you go down to the real estate store to fill your cart. Below are some examples of how much home you would get for your money at 2017 average dollar per square foot rates: In Palo Alto, you could buy 626 square feet of home, and in Vallejo, 3817 square feet, with many other options in between.

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Bay Area Luxury Home Markets

Though San Francisco is a major player in luxury home sales, Silicon Valley – Santa Clara & San Mateo Counties together – has over 3.5 times as many homes selling for $2m and above. All 3 counties have similar average dollar per square foot house values in this high-price category. SF dominates the luxury condo market, and these condos, on average, sell at the highest per square foot values in the Bay Area. Marin, Alameda and central Contra Costa Counties have smaller luxury home segments, but you start to get more for your money.

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Market Dynamics Overviews

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The decline in active listings available to purchase has played a significant role in pressurizing the market in recent years, especially as buyer demand has increased over the same period during which supply has dropped.

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Since median sales prices are so often quoted and compared, it adds context to look at the average size of houses in the different markets. (Comparing median prices to average sizes is not ideal, but you get the idea.)

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New Housing Construction

This chart below from the November 2017 Housing Inventory Report issued by the SF Planning Department is for 2016, but illustrates how new housing construction in Alameda County has recently accelerated ahead of San Francisco and Santa Clara. Our larger analysis of this report, which focuses mostly on San Francisco, can be found here: SF New Home Construction Report

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Days on Market, Overbidding Asking Prices
& Months Supply of Inventory

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Interest Rate Trends

Interest rate changes will certainly be one of the main factors to keep an eye on in 2018, as they play a huge role in housing affordability.

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Bay Area Unemployment Rate Trends

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Bay Area Housing Affordability Trends

The CAR Housing Affordability Index, of which the trend lines since 1991 are charted below, estimates the percentage of households who can afford to purchase a median priced house in their county, based on a 20% downpayment. The big factors in this analysis are prevailing household incomes, interest rates, and, of course, quarterly median house sales prices. It should be noted that half of home sales are, by definition, below the median sales price, and that if one included condos in the equation, that would add substantially to affordability percentages.

For Q1 2018, the Index will attempt to factor in the effects of the new federal income tax law limiting mortgage interest, property tax and state income tax deductions, which will presumably reduce affordability percentages further. As seen below, many Bay Area counties are already getting close to historic lows, clearly one of our biggest social and economic challenges.

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County to County, Metro Area to Metro Area
& State to State Migration Trends
Bay Area County-to-County Migration

Though people from all over the country and world migrate to and from the Bay Area, the greatest flow is actually between the local counties themselves. In net migration numbers, amid all the back and forth, people are, generally speaking, flowing from the core, most expensive counties to adjacent, somewhat less expensive counties, and then to even more affordable counties outside the inner Bay Area. However, the inner core counties, where the high-tech boom has been most concentrated, attract significant immigration from outside the Bay Area, state and U.S., which is why their population numbers have continued to grow. Note: This chart does not include Santa Clara County, though much of its migration patterns can be seen in the data of the other counties.

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U.S. Metro Area to Metro Area Migration

This chart pertains to immigration in and out of the 5-county San Francisco metro area, which does not include Santa Clara to its south. Between U.S. metro areas, more people are leaving the SF metro than arriving, but that deficit has been more than made up for by substantial numbers of foreign immigrants. These numbers, however, pre-date the much more hostile view of immigration by the current administration, so we will have to wait and see what effects derive from that change. Looking at net metro-area migration, more people come to the SF metro area from Santa Clara County, Southern California, New York, Chicago and Boston. And more peopleleave the SF metro area to go to other (less expensive) CA counties east and north of the Bay Area, and to metro areas in Texas, Nevada, Oregon and Washington State. The exodus is made up of both people changing jobs, and retirees, though they tend to go to different places.

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If you want to read about state to state migration patterns, our recent article is here: California Migration Trends

All our Bay Area reports and articles can be found here: Market Trends & Analysis

One of our recent and popular reports: San Francisco & Bay Area Demographics

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 the Bay Area, each with its own unique dynamics. Median prices can be and often are affected by other factors besides changes in fair market value, and longer term trends are much more meaningful than short-term. It is impossible to know how median prices apply to any particular home without a specific comparative market analysis. All numbers in this report are to be considered approximate.

© 2018 Paragon Real Estate Group