Number of Sales Continue to Rise

Despite the often heard complaint from many of us about the lack of inventory holding back the local market, the number of residential real estate sales in both San Francisco and Marin counties have continued to increase:

April sales of residential properties in San Francisco were the highest they've been since 2007.  The last three months have shown the same kind of growth.

The same trend is evident in Marin county:

More Signs of Recovery

Sales results in San Francisco for the first quarter of 2012 is one of the strongest starts since the height of our Real Estate Market back in 2006-7.  And, after two consecutive years of year-over-year growth in the number of sales, it appears that 2012 could be the third year in a row -- which most analysts consider to be a trend.   

The explosion in demand which started in February caught almost everyone by surprise and has continued through March and the first part of April.  Inventory which normally begins to build in February and March has failed to keep up with the unprecedented buyer demand and the resulting shortage of inventory has driven multiple offer situations and, ultimately, prices.

 

Looking at the current active listings for single family homes and condos/TIC illustrates just what buyers are facing.  Of the 1,790+ listings as of today, 438 of them are under contract having been on the Market for less then 2 weeks (they still have conditions remaining and some may well fall out of contract).  502  are "pending" (no contingencies remain).  This leave only about 740 listings for buyers to select among.  This is less than 2 months of inventory, a far cry from what we hear about in many other markets around the country where 6-12 months is more the norm!

If one studies certain categories of residential property and compares the highest average selling prices which were reached in 2006-7 to the average selling prices in the first quarter of 2012, it becomes rather revealing!  One of the largest declines in average selling prices was for 2bed/1bath single family homes, generally considered to be an entry-level home purchase. Having reached an average high in 2007 of $755,000 and fallen to an average price of $536,000 in the First Quarter of 2012, a decline of about 29%. On the other hand average selling prices for  1bed/1bath condos in 2007 reached $697,000, compared to first quarter 2012 at $631,000 a decline of only about 9%.  If our Market continues to have low inventory and high demand, one would logically expect for almost every category of property in San Francisco will regain value, probably an additional 10-12% by year’s end.

More signs of a trend ...

The San Francisco Real Estate Market exploded two weeks ago and while most thought it would be another solid year of sales, the shear quickness and intensity of Buyer demand was not anticipated. Inventory has been unusually low and it appears it has not been building as fast as most years. Since March 1 there have been 180 new condos and 170 new single family homes appearing in the San Francisco MLS. 88 of the condos (about 49%) are now under contract with an average DOM of 14, and 87 of the single families (about 51%) are now under contract. Shades of '05 and '06!

With two consecutive year-over-year growth years behind us and the first quarter of 2012 about to show very strong numbers, 2012 should be the third year of year-over-year growth. Most analysts and prognosticators usually consider three in a row to be a TREND. As the Bay Area goes so goes California, and as California goes so goes the Nation, let's hope the old saying holds this year!

Sellers are finding that if you generally list your property consistent with the most recent comparable sales, 1 in 3 are finding a willing and eager group of buyers, pre-qualified and able to close in 30-45 days. These buyers are anxious to WIN even if it means offering a little over asking -- in some cases with a 5 to 10% premium.

It is quite confusing to buyers, especially first-time buyers, to understand this hectic market pace since national news outlets are still talking about a sluggish real estate market. Buyers who are new to the area often remain in denial for their first two or three offers. It's gratifying for SF agents when they begin to listen to educated advice.

Seller's had just about been convinced that premium pricing was not working unless the property truly reflected premium quality. This might just make it more difficult to convince them that over pricing can still leave a property languishing on the market.

In taking a closer look at the data, it appears that this phenomenon is showing up in properties ranging from $400K to $1.5M+ and includes most of the 10 MLS districts in San Francisco. Also, Mill Valley in Marin and some South Bay Communities are experiencing similar demand.

Anecdotes do not a trend make, but ....

Several items in the news and my own experience as an agent converged today that says a good deal about the current housing market and, maybe more importantly, the mindset of potential buyers:

1. The National Association of Realtors reported that sales of existing homes rose again in January, the third time in the last four months.  This is entirely consistent with what we've been reporting for a while regarding our local San Francisco market where sales of existing homes in 2011 rose compared to the previous year and was the third year in a row of sales increases.
2. The San Francisco Chronicle reported in it's "On the Block" blog that there has been a recent spate of sales in the peninsula communities of Palo Alto, Menlo Park and others where buyers, often in multiple offer situations, are paying all cash and waiving contingencies!
3. Working with several buyers recently we've experienced first hand several properties we had some interest in go into contract within a few days of hitting the market.  And there we have begun to see the return of offer dates on listings.

Sales Rates

Here's some interesting statistics that give some clues about the state of the San Francisco real estate market.
First, for the full year 2011, the number of residential sales increased again for the third year in a row. 

More properties (single family homes, condos, TICs and co-ops) were sold last year than any year since 2007.

Sales for January, 2012, also showed strength:

Although slightly fewer sold this January than January, 2011, overall the trend is positive since the low of downward trend that started after 2007.