Revised: Peak Values vs Current SF prices - Single Family Homes

Below, median and average sales prices and average dollars per square foot are given for the last 6 months of sales, and then the percentage change is calculated as compared to the first half of 2007. To get a sense of changes in value, it’s often best to come at the subject from a variety of ways, and then compare. To make it more complicated, sometimes the analyses seem to point to different conclusions – which one must compare, juggle and balance as best one can. Sometimes the results are simply abnormal due to unusual events that occurred within one of the comparison periods.
In the charts below, current values are based upon sales occurring after 10/12/08, reported through 4/10/09.

Peak values: Generally, the first half of 2007, before the subprime crisis started to break big time, is considered to be the home-value peak for the city – and that is the period used for comparison below. But some of areas of the city actually peaked in 2006, while others – generally the most affluent neighborhoods – peaked in the first half of 2008. For those areas that peaked earlier or later, the declines from peak values are higher than shown below.

All House Sales of Every Size
Note: District sales statistics, in particular, are generalities since neighborhoods of differing values are averaged together.

4 Bedroom Houses

3 Bedroom Houses

2 Bedroom Houses

The above statistics probably understate the decline in values as of today, for three 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. Also, this analysis averages sales for the entire 6 month period – and it is generally accepted that the market has declined somewhat since mid-October.

2. The market has shifted to smaller, less expensive homes. 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. (This applies particularly to the analyses of homes “of all sizes.”)

3. In a sellers’ market, virtually everything sells, but in a buyers’ market, typically just the best homes sell – best appearing, best condition, overall best value as perceived by a willing and able buyer. Thus statistics for the current period apply to “best-value homes” while those for 2007 apply to homes of a much wider range of quality. This also skews the apples-to-apples comparison.

Definitions:
Dollar per Square Foot is based upon the home’s interior living space and does not include garages, unfinished attics and basements, rooms built without permit, or exterior spaces (though all those can add value to a home). These figures are usually derived from appraisals or tax records, but are sometimes unreliable (especially for older homes) or unreported altogether. All things being equal a house will sell for a higher dollar per square foot than a condo, a condo higher than a TIC, and a TIC higher than a multi-unit building. All things being equal, a smaller home will sell for a higher $/sqft than a larger one. There are often surprisingly wide variations of value within neighborhoods and averages may be distorted by one or two sales substantially higher or lower than the norm. Location, condition, amenities, parking, views, lot size & outdoor space all affect $/sq.ft. In SF, the highest numbers—over $1500/sqft—are typically achieved by relatively small penthouse condos, with staggering views, in very prestigious buildings.

Median Sales Price is that price at which half the properties sold for more and half for less. It may be affected by unusual events or by changes in buying trends. Median prices do not necessarily reflect the value or changes in value for any particular home.

Average Sales Price is the total dollar volume of sales divided by the number of sales. Especially when sales quantities are small, averages can be easily distorted by one or two sales abnormally higher or lower than common for an area.

Peak Value Vs Current SF Value Feb 2009 [SFHomeBlog]

Peak Values Vs Current SF Values

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.