Archive for December, 2008

San Francisco's A Buyers' Market – Update

I revisted my chart from ‘SF Officially a Buyers’ Market’ post from last week due to several late reported sales which have altered, albiet slightly, the numbers originally reported.  I also  was reminded by a fan of the blog that it might be helpful to put those numbers in some kind of perspective; so I have included a reference to the Months Supply of Inventory (MSI) in 2007 for comparison purposes.

As you will see, MSI in many areas of the city, has doubled or tripled from one year ago.

In light of the recent Buyer’s market, the NY Times recently published an article suggesting now might be the time to jump back in. http://www.nytimes.com/2008/12/06/business/yourmoney/06money.html?em

Of course I cannot say we are witnessing the bottom of the real estate market, that unfortunately is reserved for hindsight.  My personal opinion is we are most likely bouncing along what is close to a bottom, and probably will continue to do so until about June of 2009, (most recessions last an average of 18 months).   

What I can say is there is a huge benefit to negotiating with sellers now, while there is still so much uncertainty about the economy, and there appears to be quite a bit of evidence there is a fair amount of money sitting on the sidelines.  When that money does finally start to flow, it likely will pick up steam fairly quickly.   

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Remodeling Costs for San Francisco Real Estate Jobs

The 2007 Cost vs. Value Report establishes cost-to-construct benchmarks for a set of common remodeling projects, then estimates how much of that investment will be recouped at resale in the current market.  It’s a must read for those needing more space, like many of my clients with growing families, but are weighing the risk/reward for selling and upgrading in this kind of market.

San Francisco Job Costs:


“What the Numbers Mean

When comparing cost estimates for actual projects, remember that averaging tends to have a leveling effect on “Job Cost” data from the 2007 Cost vs. Value Report. And as always, seemingly small differences in size, scope, or quality of finishes can dramatically affect final project cost.
It’s also important to consider whether a remodeled space reduces the perceived number of rooms or available square footage. For example, carving a half-bath out of unused storage space under a stair case is an obvious gain in usable space. But converting an existing bedroom into a master bath, while a positive development in many respects, may reduce the total number of bedrooms below the minimum expectation of typical prospective buyers.”

The full article can be found here on the Handley Wood Remodeling website, and is quite the interesting read. (The 2008/09 numbers are due out soon).

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SF is finally 'officially' a Buyer's Market

Despite month’s of negative news regarding real estate, San Francisco has proven amazingly resilient to price decreases (southern neighborhoods such as South of Market not withstanding) that is, until quite recently.

Below is an analysis of Inventory Supply in San Francisco, compiled by Patrick Carlisle , showing a sharp change occurring in the market since September. The changes are particularly dramatic in several neighborhoods that have been very strong sellers’ markets heretofore.

By nature, these analyses are snapshots, which can sometimes change dramatically from month to month. Months-Supply-of-Inventory (MSI) & Days-on-Market (DOM) Analysis
Opinions vary but roughly speaking 4-6 months supply of inventory is considered a “balanced” market between buyers and sellers; less than 4 months is considered a sellers’ market; and more than 6 months is considered a buyers’ market.

By these definitions, for the first time in years, the home market in probably most of San Francisco’s neighborhoods can now be considered a buyers’ market – a time when buyers can usually secure substantially better deals than in the past. Good agents should be particularly aggressive on their buyers’ behalves, and ensure that their sellers understand the change in market dynamics. Important footnotes below chart…

To view a map of individual neighborhoods broken down by district numbers go here…

IMPORTANT: As this analysis was done on 12/1/08 regarding November 08 activity, the Months-Supply-of-Inventory figure is probably skewed somewhat higher than it should be since a number of offers accepted – probably a relatively small number considering the amount of activity during a typical Thanksgiving week – occurring in November may not have yet been reported to MLS. An extreme example of this is District 7 houses: since only 2 reportedly went into contract in November, if 2 more offer acceptances occurred in November but have not yet been reported, the MSI would decline from 20 months to 10 months – still very high by historical standards. District 5 only reported 8 houses under contract out of 112 available as of 11/30/08. A few more unreported offer acceptances would reduce that MSI from 14 months to 8 – 10 months (still very high by historical standards).

The only districts showing a decline in MSI year to year are Districts 3 & 10 – where sales activity has picked up markedly in recent months, probably due to foreclosure sales (and rapid declines in median sales price). Many other districts saw a doubling, tripling, quadrupling or more of MSI comparing 11/08 to 11/07.

Note the very high average-Days-on-Market (DOM) figure for “For Sale” homes. Average DOM has increased significantly for both sold and under contract homes (sometimes doubling year over year), but the “For Sale” DOM increase is particularly dramatic. Many properties are sitting on the market for much longer periods of time. Subsequently, the number of price reductions has soared as well. AVERAGE DAYS ON MARKET (DOM) is defined as: The average number of days it took all of the properties that went under contract during the period to accept a first position offer. MONTH’S SUPPLY OF INVENTORY (MSI) is a measure of how long it would take, in months, to sell the existing inventory at the current sales rate for the specific neighborhood and property type. MSI is defined as: The number of active properties on the market for one day or more during the month, less the number of properties that have been withdrawn or expired, divided by the number of properties that have gone under contract during the month.

All data is derived from Agent Metrics, may contain errors and omissions and is not guaranteed.

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