How Much Have San Francisco Home Values Declined Since their Peak?

Below is an analysis of San Francisco neighborhoods comparing dollar per square foot ($/sq.ft.) at what is estimated to be the most recent peak value, to what the $/sq.ft. was for sales occurring Oct 15th, 2008 – January 30th 2009. (Sales occurring after 10/15/08 reflect the impact of the 9/15/08 financial meltdown on the SF market.) Only neighborhoods with enough sales to generate what appear to be reliable statistical results were analyzed as many areas of the city did not have sufficient sales.

Also important to note is the fact that different areas reached peak values at different times – in 2006, 2007 or 2008 – and the asterisked notes denote the estimated peak value period that pertains. The price ranges of the sales were chosen because we felt them to be in a standard range of value for the area and property type specified – thus attempting to eliminate both the ultra high and the ultra low end, which often distort averages.

Key to Estimated Peak-Value Period for the Chart Below:
* Peak values estimated to have been reached 1/1/06 – 6/30/06
** Peak values estimated to have been reached 1/1/07 – 6/30/07
*** Peak values estimated to have been reached 1/1/08 – 6/30/08

In the SFH (single family homes) analysis, only homes with parking were included. Also Price per square foot ($/sq.ft) was chosen because it is more trustworthy than median prices. Median prices have dropped significantly more than $/sq.ft. because less expensive homes now make up a much larger proportion of sales than they did previously for a variety of reasons (most of them obvious in today’s current economic and financing climate).

Final but important note: the changes delineated probably understate the actual decline in values for 3 reasons:

1. In a declining market, sales data – which typically shows up 30 to 45 days after acceptance of offers – will always be a step behind current activity, i.e. offers being accepted right now.
2. The market has definitely shifted to smaller, less expensive homes (less expensive as to total sales price). All things being equal, a smaller home will have a higher dollar per square foot value than a larger one, therefore skewing current values higher than they ought to be in an apples-to-apples comparison.
3. In a sellers’ market, virtually everything sells, but in a buyers’ market, typically just the best homes sell – best appearing, best condition and/or best value. So the $/sq.ft. for the recent period applies to the “best homes” while the $/sq.ft. for the peak period applies to homes of a much wider range of quality.

This entry was posted on Wednesday, February 4th, 2009 at 7:22 pm and is filed under Price per square foot, home values, real estate san francisco. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.