Cloudy Economic Outlook Weighs on San Francisco Housing Market
SAN FRANCISCO, CA, August 16, 2010 - Recent stock market declines and worries about the possibility of a double-dip recession affecting the housing market has caused some home buyers to delay purchasing homes in San Francisco, according to the latest Market Focus report published jointly by the Rosen Consulting Group (RCG) and the San Francisco Association of REALTORS®. The evidence can be found in the number of completed home sales for July which showed a year-over-year decline of 18 percent.
According to John Lee, president of the Association, "Concerns about the effect of the economy on home sales have been compounded by the slowdown in sales typically seen during the vacation months of June, July and August and the unusually cool weather we have been having in the Bay Area which may be discouraging buyers from looking for housing."
Despite the slowdown in recent sales, RCG believes that the accelerating pace of job growth, combined with a continued decline in interest rates fueled by the Federal Reserve’s purchase of treasury bonds, as well as tight housing inventory levels, should propel the San Francisco housing market forward in coming quarters.
But improvements to the housing market are becoming increasingly dependent on job creation, according to RCG. Anticipated increases in payrolls through the remainder of the year should help drive year-over-year home price appreciation and tighter market conditions into year-end 2010 it believes. And, although the market will be forced to take a few steps back during the fragile economic recovery, the overall underlying trend, RCG says, should remain positive.
Median Price Trend Remains Positive
Despite the decline in year-over-year completed home sale activity, the median single-family home sale price increased by 0.6% from July 2009 to $785,000 in July 2010. Of the 192 closed sales in July 2010, homes priced less than $700,000 accounted for 42% of completed sales, up from only 18% of all sales in July 2007, the peak of the last housing market cycle.
"While the sale of higher-priced homes has gained traction in recent months," says Lee, "moderately priced homes continue to make up a considerable portion of sale activity in San Francisco, especially in comparison to historical levels."
The number of single-family homes on the market increased in July 2010 and now stands at 685 active listings. As a result, based on the current monthly contract sale rate, the months of supply inventory rose slightly to 3.0 months from 2.7 months in July 2009. The heightened inventory level can be partially attributed to the rise in new home listings, which rose by 16% during this same period.
The median sale price for condominiums rose to $662,500 in July 2010, a 10.2% increase from July 2009. Despite a drop-off in completed sales, pending condominium sales increased by nearly 15% during the past year. Condominiums priced less than $500,000 accounted for 43% of all units under contract, which is a considerable increase from July 2007, when units in the same price segment accounted for only 16% of all contract sales.
Condominium inventory retreated by 1.8% in July 2010 from the previous year, with 1,063 condominium units on the market. At the current monthly pending sale rate, the months of supply inventory eased to 4.9 months in July 2010 from 5.7 months in July 2009.
For condominiums priced less than $500,000, the months of supply inventory rose slightly to 2.8 months from 2.5 months at the same time last year, while months of supply inventory for condos priced between $500,000 and $900,000 declined to 4.5 months from 5.1 months.
The slowdown in the sale of luxury condominiums priced greater than $900,000 resulted in an increase of the months of supply inventory to 6.3 months from 4.9 months last year.
