Market Statistics

Bay Area Real Estate Market By County: Bubbles, Crashes and Recoveries

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The Bay Area’s various counties and market segments are not immune to unique housing bubbles and crashes. And while current recoveries are demonstrating similar trend lines, the scale of recovery and state of home values vary. Here’s a look at what’s contributing to these variations on an otherwise relatively common theme:

Bay Area Home Values since 2000 by Price Tier: Way Up, Way Down, Sharply Up Again
The Case-Shiller Index for the 5-county SF Metro Area* divides the market into three equal sets of unit sales by price-range tiers: low, middle and high.

Case-Shiller_3-Tiers_TrendsThe market bubble, crash, recover cycle is easy to identify across all three tiers, as is the subprime lending fiasco that supercharged the lowest price tier of Bay Area homes to mind-boggling 176% appreciation in less than 7 years. The foreclosure and distressed-property crisis then hit this segment the hardest, inflicting a crushing 62% drop in values. Neighborhoods, communities, and counties with mostly higher-priced homes were much less impacted by the subprime effect: they appreciated less in the bubble, depreciated less in the crash, began their recoveries earlier, and are now much closer to previous peak values, if not already beyond.

There are other economic and social factors at play in the individual markets, but overall the price-tier analysis is surprisingly relevant to what has happened across the board. Because subprime lending inflated such large bubbles in some counties, it could prove unrealistic to expect those low-price-tier homes to return to previous peak values any time soon – even with the dramatic recoveries currently underway.

*The Case-Shiller SF Metro Area does not include Napa and Sonoma, but their market trends generally played out in the same way. Also as pertaining to percentages of appreciation and depreciation: if a home has a 100% increase in values, then a 50% decrease, the value is back to where it began.

Median-Sales-Price-by-CountyMedian Home Sales Prices by County
Median prices often fluctuate for other reasons than changes in market values, such as variations in the distressed and luxury home segments, inventory available to purchase and available financing – which is why Case-Shiller Index trend lines do not correlate exactly with changes in median price.

County median sales prices are generalities that mask enormous disparities in the prices of underlying sales, but they do convey an idea of comparative home costs in different areas.

County Home Sales by Price Range
Comparing the San Francisco residential market with other Bay Area counties in regards to quantity of sales in defined price ranges, the San Francisco, San Mateo and Marin markets are similar in that their home prices trend to the higher end of the range. In fact, these counties contain some of the most expensive real estate markets in the country. Though all the counties shown have home sales across the spectrum of prices, including very high-end homes, Napa, Sonoma, Alameda and Contra Costa have the greater percentage of their sales in lower price segments.

Property types vary by county. San Francisco doesn’t have many ranch, mobile home, and houseboat sales for example, while other counties sell few if any tenancy-in-common units (TICs). San Francisco also represents a much larger condo market.

Unit Sales by County (90 days)
During the summer months this year, the Alameda and Contra Costa home markets dwarf the other counties in quantity of sales. San Mateo, San Francisco and Sonoma constitute the second tier, with Marin and Napa being distinctly smaller markets in unit sales.

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Case-Shiller Home Price Index Up Again in June

Note: Case-Shiller Home Price Indices for “San Francisco” are for a 5-county area, of which the city’s housing market is a very small part. Since they are published 2 months after the month of the Index, are 3-month rolling averages, and the time between offer acceptance and closed sale typically runs 4-8 weeks, Case-Shiller is generally 3-6 months behind the market itself, i.e. when offers are being negotiated in the present. Case-Shiller publishes 4 main indices for SF Metro Area houses: an aggregate index for all price ranges, and then one index for each third of unit sales – low price, middle price and high price tiers.

The June 2013 aggregate C-S Index (all price ranges) for the SF Metro Area is up approximately 2.7% from May, up 32% – 34% from its low point, but still approximately 20% below its peak in 2006. Please note that for a drop of 50% to be recouped, the increase must be 100%.

When the market fell from its peak in 2006-early 2008 (different areas and different market segments peaked at different times), the scale of the decline varied widely, mostly by price point. With the recovery that began in 2012 and has accelerated in 2013, the magnitude of the price recovery, as compared to previous peak values, has also varied by price point and area.

The lowest price range (deeply affected by foreclosures and distressed sales) fell most dramatically – an approximate 60% decline from its peak. It is now recovering dramatically on a percentage basis – up 45% from its low point – but is still about 40% below its 2006 peak. It has much more loss to make up.

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The upper price range (the top third of unit sales) in the 5-county metro area fell much less than the 2 lower price tiers (low and middle) during the bubble pop. On a percentage basis, it’s increase from its low point – about 27% — is not as great as for the lowest price tier, but is now getting close again to its previous peak value. In the city of San Francisco itself, many neighborhoods have now reached or surpassed previous peak values reached in 2007-2008.

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This chart below illustrates the short-term monthly changes in the C-S high tier price index: the recovery in 2012 accelerating in 2013. May’s reading jumped 3.7% from April’s, and June’s was 2% above May’s, so the pace of acceleration seems to be slowing after a torrid spring.

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And then looking just at the city of San Francisco itself, which has, generally speaking, among the highest home prices in the 5-county metro area: many of its neighborhoods are now well past previous peak values. Note that this chart has more recent price appreciation data than available in the Case-Shiller Indices, and that median sales prices and C-S Index numbers do not correlate exactly. This chart implies that a plateau in home values has been reached in San Francisco: this could either be an indication of a stabilizing market or simply a seasonal plateau that sometimes occurs during the summer months for a variety of reasons, including that the higher-end home market has a greater tendency to withdraw from the market during the holidays. We shall have to wait and see what occurs when the autumn selling season begins after Labor Day.

At the previous peak of the market, the combined house-condo median sales price in San Francisco was $832,000.

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House and Condo Values – Updated Charts

Two updated charts for house and condo values by selected district or neighborhood.

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Bay Area Apartment Market Report – Paragon Commercial Brokerage

The San Francisco Bay Area Apartment Building Market

The Paragon Commercial Brokerage – Reis Reports
2nd Quarter 2013 Market Update

“Welcome to what is arguably one of the worst cities in America to be a renter, but among the best to be a landlord and apartment investor. San Francisco led the top-50 U.S. metropolitan areas in average rent growth during the second quarter, jumping 7.8% to $2498, while Oakland was No. 2 and San Jose was in fifth place. The rent increases have investors rushing to purchase existing properties.”

The Wall Street Journal, July 17, 2013, “Bay Area Rally Sends Rents Soaring”

The West Bay area of metro San Francisco (SF, Marin and San Mateo counties) continued to boom through 2012 and into 2013, even as it became increasingly expensive. The 136,980-unit market-rate investment grade San Francisco apartment market has rock bottom vacancy and high rents. While the pace of population growth is not high in the densely developed and expensive West Bay, it is still solidly positive at an estimated 9,770 in 2012 and a forecast 11,270 in 2013. Even higher increases are predicted for later years by Moody’s Economy.com. It seems people will pay any price to live in San Francisco, as long as a growing number of advanced, high paying jobs are available.

The East Bay apartment market (Alameda & Contra Costa Counties) also tightened further in early 2013, although rent gains remained more moderate.

The Bay Area has a long history of boom and bust dating back to the Gold Rush of 1849 and continuing through the dot-com bubble and bust little more than a decade ago. When the previous tech boom ended, not only did the number of jobs plunge but so did the population. Moody’s Economy.com does not expect a repeat. Instead, employment is forecast to keep growing at a somewhat slower pace, surpassing the 2000 employment peak some time in 2015. Reis predicts a leveling off of the current strong conditions in the apartment market, rather than a frenzy followed by a collapse. The well timed arrival of new supply will keep rent gains in check, while pent up demand will ensure the units are absorbed, barring an unexpected economic shock from outside the Bay Area.

The first three charts below pertain to San Francisco County alone and then only those listings and sales reported to MLS. The specific numbers should be considered approximate, but the trend lines apply to and illustrate the overall Bay Area market: low supply + high demand = higher prices.

1Supply
The supply of investment properties available to purchase as listed by SF MLS has dropped by over 50% over the past 3 years.

2Demand
While supply has plunged, demand has soared as measured by this statistic, percentage of listings accepting offers.

3Appreciation
The supply and demand dynamic, super-charged by improving economic conditions, rapidly rising rents and extremely low interest rates, has led to a rapidly appreciating market. This chart tracks average dollar per square foot values.

In the analyses below, the San Francisco Metro Area is comprised of San Francisco, San Mateo and Marin counties, while the Oakland-East Bay Metro Area consists of Alameda and Contra Costa counties. When mixing many buildings of very different size, quality and location, all the statistics should be considered very generalized and approximate. The county of San Francisco itself typically has significantly higher rents and values than the other counties.

SAN FRANCISCO METRO AREA RENTS & VACANCY

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OAKLAND-EAST BAY METRO AREA

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SALES ACTIVITY

In the West-Bay SF Metro Area, the Civic Center/Downtown submarket led the rest in units sold over the past four quarters at 1,370, and dollar value of sales at $266 million. Among submarkets with substantial sales price per unit, Marina/Pacific Heights leads in price per unit at $478,442. Generally speaking, as the market appreciates, Gross Rent Multiples are heading higher and Cap Rates lower.

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OAKLAND-EAST BAY METRO AREA

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NEW CONSTRUCTION

For the 3-county, west SF Metro Area, 2,300 apartment units are expected to complete construction in 2013, followed by 3,600 in 2014. The three years to follow are expected to see less new supply, but still more than 1,000 units completed in each year. Whatever number of apartments is built, however, Reis expects net absorption to match it as pent up demand is met. The only question is at what rent level.

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In Alameda and Contra Costa counties, apartment developers are re-starting projects shelved during the recession, and the under construction total has risen to about 1,760 market-rate units. There are also 1,226 subsidized and senior housing units under construction. Relatively few units, however, are expected to complete construction this year, allowing the vacancy rate to fall to a low point of 2.5% at year-end.

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SELECTED SUBMARKET SNAPSHOTS

The 15,771-unit Civic Center/Downtown submarket has a first quarter 2013 vacancy rate of 3.5% and an average asking rent of $1,604 per month, the lowest among eleven submarkets according to Reis. The 417-unit second phase of Trinity Plaza was projected to complete construction in summer 2013. The 750-unit Crescent Heights broke ground in January 2013 for completion in April 2014.

In the 9,787-unit Russian Hill/Embarcadero submarket, the vacancy rate is 2.5%, and the average asking rent is $2,767 per month, the highest in the West Bay area according to Reis.

In the 8,084-unit Marina/Pacific Heights submarket, the first quarter vacancy rate is reported by Reis at 2.0%, the lowest in San Francisco proper, with an average asking rent at $2,368 per month. “The Marina, the tract with the highest creative class concentration in San Francisco, has a reputation for being chock-full of young former fraternity members,” according to the Atlantic Cities. “As the San Francisco Chronicle notes, ‘Today the apartment buildings, shops, and restaurants seem to be bursting at their seams with beautiful, young and fit 20- and 30-somethings.”

The 16,018-unit South of Market (SoMa) submarket has a vacancy rate of 5.0%, highest among the submarkets, and an average asking rent of $2,517 per month, the second highest market-wide. In the close vicinity of both the financial district and the high-tech, bio-tech hubs in the city, this is a very strong market. This submarket has dominated new supply recently, but while 1,032 units remain under construction here, new supply is spreading to other areas.

The 8,381-unit North Marin submarket has a vacancy rate of just 1.5%, the lowest among the submarkets, and an average asking rent of $1,608 per month, the second lowest according to Reis.

In the 14,713-unit Central San Mateo submarket, the first quarter vacancy rate is reported by Reis at 2.9%, with the average asking rent given at $2,006 per month, highest in the suburbs.

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Case-Shiller Home Price Index Up Again in May

Note: Case-Shiller Home Price Indices for “San Francisco” are for a 5-county area, of which the city’s housing market is a very small part. Since they are published 2 months after the month of the Index, are 3-month rolling averages, and the time between offer acceptance and closed sale typically runs 4-8 weeks, Case-Shiller is generally 3-6 months behind the market itself, i.e. when offers are being negotiated in the present. Case-Shiller publishes 4 main indices for SF Metro Area houses: an aggregate index for all price ranges, and then one index for each third of unit sales – low price, middle price and high price tiers.

The aggregate C-S Index for the SF Metro Area is up approximately 30% – 34% from its low point, but is still approximately 20% below its peak in 2006. Please note that for a drop of 30% to be recouped, the increase must be about 43%.

When the market fell from its peak in 2006-early 2008 (different areas and different market segments peaked at different times), the scale of the decline varied widely, mostly by price point. With the recovery that began in 2012 and has accelerated in 2013, the magnitude of the price recovery, as compared to previous peak values, has also varied by price point and area.

The lowest price range (terribly affected by foreclosures and distressed sales) fell most dramatically – an approximate 60% decline from its peak. It is now recovering dramatically on a percentage basis – up 38% from its low point – but is still way below its 2006 peak. It simply has much more loss to make up.

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The upper price range (the top third of unit sales) in the 5-county metro area fell much less than the 2 lower price tiers (low and middle) during the bubble pop. On a percentage basis, it’s increase from its low point – about 25% — is not as great as for the lowest price tier, but is now getting close again to its previous peak value. In the city of San Francisco itself, many neighborhoods have now reached or surpassed previous peak values reached in 2007-2008.

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This chart below illustrates the short-term monthly changes in the C-S high tier price index: the recovery in 2012 accelerating in 2013. May’s reading jumped 3.7% from April’s.

Case-Shiller_High-Tier_2011

And then looking just at the city of San Francisco itself, which has, generally speaking, among the highest home prices in the 5-county metro area: many of its neighborhoods are now blowing past previous peak values. Note that this chart has more recent price appreciation data than available in the Case-Shiller Indices and that the rate of appreciation accelerated in the March-May timeframe. Note that median sales prices and C-S Index numbers do not correlate exactly.

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Updated Bay Area Home Value Map

Median prices almost always conceal large disparities in the prices of the underlying individual sales – this is particularly true for larger cities: in San Francisco for example, median house prices by neighborhood range from $465,000 to $4,000,000, and there will be similar disparities in Oakland and San Jose. But median prices can be valuable to show appreciation trends, and to some degree, to compare general home values between different areas. The last quarter was a period of rapid price appreciation virtually everywhere on this map.

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Is the Market Cooling? Let’s look at the weekly charts.

It’s typical for the market to slow down during the summer months (not as bad as the Thanksgiving to New Year slow down but still a slow-down). However, looking at the Weekly Charts below, statistically there is little sign of a cooling market – which doesn’t mean that it might not be: these supply and demand statistics won’t change if a listing gets 3-5 offers instead of 10-20 as long as it goes into contract. But even if it is cooling – which is not a certainty – it would still be a very-high-demand/very-low-supply market by any historical measure.

When a market is this strong, it’s not unusual for demand to keep up through the third week of August. Some listing agents believe late July/August is a better time to list – with inventory so low – than after Labor Day, when new listings surge again and there’s more competition. Other agents always wait til September.

These weekly market charts are for SFD and Condo listings only.

The number of Active Listings has been falling since summer began and is now at a level roughly comparable with February; it’s about equal to the number available last year at this time. It’s not unusual for inventory to continue to drop as the summer progresses — until that turns around after Labor Day. September is usually the month of the year with the highest number of new listings.

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The number of New Listings coming on the market has been falling from the spring “burst”, but new listings in the last 3 weeks are about 13% higher than the same period last year – which is a positive sign.

Blue Columns = Number of Listings Accepting Offers;
Red Columns = Number of New Listings Coming on Market

Over the past 5 weeks, new inventory is still being gobbled up as fast (actually faster) than it is coming on market:

7-21-13_New-vs-UC_Listings

Percentage of Listings Accepting Offers: Except for the slight (typical) decline in the 4th of July week (you see the same thing in the Memorial Day week), the percentages have continued to be very high, similar to the percentages we’ve seen since mid-February (which has been a red-hot demand period). Two years ago, the percentages ran 6% – 7%; now they’re twice that.

7-21-13_SFD-Condo_Percentage-UC

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