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2018 Year in Review

January 06 2019
January 06 2019
By

If the first half of the year was the high rolling good times from a tech company launch party where the champagne flowed and the insta-celebrities showed up around 2am, the 2nd half was the brutal hangover from the reality check that you may be getting too old for this stuff.

MARKET RECAP

The year as a whole finished strong with a median sale price for single family homes of $1.6M, which is a 13% increase compared to 2017 - the strongest we’ve seen in the past few years. Volume was roughly unchanged, with about 2,200 SF houses traded - this is fairly consistent with the past few years.

The warning signs that the party may be over started to emerge in the 2nd half of the year fueled by rising interest rates, stock market volatility and a general macroeconomic and political uncertainty.

All of this wrapped in a envelope of affordability challenges.  Home buying has become wishful thinking for the majority of SF families.  To afford the median house in SF, the California Association of Realtors recommends a combined salary of at least $333,270/yr, which is a party attended by less than 18% of the residents of our pricey little town.

The last two quarters of the year in SF saw price declines in both price per foot and median sale price across virtually all property types.  We haven’t seen a two quarter decline in the past four years, which essentially wiped out all of the gains from the first half of the year. Q4 is typically one of the slower quarters, but the rapid decline is more dramatic than previous holiday quarters.

Our neighbors around the city fared better than SF, with modest gains this Q4 over last Q4.  Santa Clara County eeked out a 2.3% increase in median sale price and San Mateo grew by 3.85%. Alameda grew by 3.7% and Marin saw gains of 3.5%.  I don’t recall another time where San Francisco prices dropped before surrounding areas - a sure sign that folks are finding more affordable places to live.

Overbidding (the amount a buyer pays over the list price), which we generally interpret to be a leading indicator of consumer confidence in the local real estate market, has dropped significantly from 24% in Q2 to 9% in Q4.  The last time we saw a drop this significant it took 2 years to complete it’s descent, wrapping up in Q1 2017.

OUTLOOK

The outlook for next year is generally bearish.  Nationally, you’d be hard pressed to find many Real Estate professionals forecasting a strong year for growth and San Francisco is no exception.

The Spring is seasonally the strongest time of the year with the largest number of buyers in the market fueling the greatest rates of appreciation all year.  Wage growth is strong and unemployment is low - those are all good things.

This upward pressure on demand, however, will be offset by the downward pressure from higher costs of money, competition from more affordable neighboring counties, and the uncertainty caused by the stock market. Not to mention the general political chaos from a White House in a perpetual state of near meltdown. Which side of the fulcrum will have the greater pressure is anyone’s guess, but I expect a lackluster Spring with modest or neutral gains, followed by a slow but steady decline in the 2nd half of the year.

WHAT DOES THIS MEAN FOR YOU?

If you’ve been on the fence about selling, this may be one of the last times before we experience the full weight of a bear market or another (gasp!) recession.  If you can sell this Spring when prices are good, you’ll be in a great position to buy this summer or fall when we expect prices to be softening.

If you've been waiting for prices to come down and finally get your foot in the market or invest in a second home at a more reasonable price, there are reasons to be optimistic.

And if you’re curious how all of this affects your future and would like to discuss further, or your having a killer launch party and would like to invite us, please give us a call.

Cheers,

Michael | 415.606.2625 | Hello@LevelUpGroupSF.com


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