Home News San Francisco Real Estate Prices Rise as Inventory Falls

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By Brandon Cornett | 7/14/11
© 2011, All rights reserved

Recent reports show San Francisco real estate prices rising, partly due to a reduction in housing inventory. It’s a blip on the EKG of an otherwise flat-lining housing market.

The Alamo Square neighborhood of San Francisco

On Monday, real estate analytics firm Altos Research released its latest market report. The company’s “Real-Time Housing Market Update” focuses on the same 20 metro areas featured in the SP/Case-Shiller Home Price Index. Their latest data shows that home prices in San Francisco rose 2.34 percent in June, compared to the previous month.

That’s not a big leap by any means. But it was the second largest increase of all 20 metro areas included in the report.

San Francisco took the lead in the three-month category. Based on data for April, May and June, San Francisco home prices rose by 5.75 percent. This was the largest three-month increase of all 20 cities contained in the report.

Inventory Reduction Supports Prices

San Francisco stood out in other ways, as well. The city had the second largest inventory reduction of all 20 metro areas tracked by Altos Research. If this trend continues, it could put continued upward pressure on San Francisco real estate prices. This is good news for homeowners who have lost significant equity since the housing market crashed.

In most real estate markets across the country, excessive inventory is the biggest drag on home prices. Mortgage rates are low, and homes are more affordable than they’ve been in years. But high inventories have been pushing prices south, making potential buyers wary about taking the plunge.

If you take the falling prices out of this equation, you have a perfect scenario for buyers and investors — low mortgage rates, and low (but rising) home prices. This is how things are shaping up in the San Francisco real estate market.

Granted, most housing analysts are predicting a long and flat bottom for housing markets — San Francisco included. But when the patient has been in a coma for years, any sign of life is worth noting.

San Francisco Home Prices in Second Half of 2011

On July 8, 2011, real estate valuation firm Clear Capital released a report showing home-price trends and forecasts for 50 U.S. cities. Their predictions were mostly gloomy for the second half of 2011, with a few exceptions. San Francisco was one of the exceptions. It was one of only five metro areas where home prices were predicted to rise in the second half of 2011 (New York, Dallas, Orlando, and Washington, D.C. were the other four).

Stated differently, San Francisco was in the ten-percent club. The other ninety percent of the metro housing markets tracked by Clear Capital were predicted to see flat or declining home prices for the rest of this year.

The Truckee, California-based company expects San Francisco home prices to rise by 0.2 percent between July and December of this year. It’s a small number by any yardstick. But given the price erosion predicted for the rest of the country, it’s a noteworthy number.

Jump in Home Sales – May to June 2011

We also witnessed an unexpected jump in home sales in San Francisco, from May to June. Bay Area home sales rose by 14.5 percent during that month-over-month period. This marked the highest level of home sales since June 2010 (when the home-buyer tax credits were expiring).

DataQuick president John Walsh pointed to a number of factors that could have caused the spike: “June likely benefited from a combination of factors, such as price reductions, low mortgage rates and perhaps a batch of short sale transactions from spring that took months to close.”

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Filed under Market Reports

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Article source: http://www.homebuyinginstitute.com/news/san-francisco-prices-172/

By Brandon Cornett | 3/16/11

Reader Question: “We live in Oakland but are considering a move soon. We have an appointment with a real estate agent to go look in Livermore and San Ramon, California. Can you tell me anything about the real estate market in these areas, or the San Francisco Bay Area in general? I’m wondering about home prices and how much they’ve come down. Are we at the bottom? Would now be a good time to buy?”

Bay Area Home Prices Real Estate Trends

The real estate market in the Bay Area is very diverse, in terms of home prices. There’s a lot of price differential from one city to the next, and sometimes from one neighborhood to the next within the same city. With that said, I don’t think the Bay Area as a whole has hit bottom yet. In fact, they just experienced one of the biggest price drops of any metro area in the U.S.

According to Altos Research, home prices in the San Francisco metro area declined by 3.53% from January to February. The 90-day trend showed an even bigger decline: “All 27 of the major markets tracked by Altos showed price decreases during the most recent quarter, most significantly in San Francisco … which showed declines of 9.31%.”

Here’s a must-read article from the Wall Street Journal. It talks about San Francisco home prices in 2010, but the article was published recently. So it will give you some insight into where the market has been, and where it might be headed.

San Ramon home prices seem to be stabilizing faster than Livermore, but both areas could see continued declines in the coming months. San Ramon looks like it might (keyword “might”) be bouncing along the bottom right now. This would mean small ups and down for the near future, with an upward trend in the next 6 – 12 months. Just note that I used the word might two times in that sentence.

A lot of San Francisco real estate agents will point to the steady appreciation that occurred during the first half of 2010. But this was almost entirely due to the California tax credit for home buyers, which has since expired. It was artificial market stimulation that evaporated when the government stopped the incentive.

Real estate agents will say anything to make things seem better than they really are — it’s in their interest to do so. You can’t blame them really. You just have to take it with a grain of salt. On a side note, if your agent wants to throw tomatoes at me when reading this, please make sure they’re organic.

And then there’s the whole foreclosure situation. I think foreclosures will drive inventories up through most of this year, which puts even more downward pressure on home prices. RealtyTrac already predicted a 20% rise in foreclosure filings for 2011, with an all-time high occurring sometime this year.

I’d Buy Outside of San Francisco

What does all this mean? You can probably expect further declines in home prices for most cities in San Francisco metro area. But the true bottom may not be far off. I’d buy a house in the outskirts right now, but probably not within the city of San Francisco. I think the outlying cities are going to see some appreciation much sooner than the metro.

Even if prices drop a little after you buy a house, it’s probably nothing to worry about. Barring another housing crisis, you’ll start seeing some appreciation soon — and it could be significant appreciation.

You have more bargaining power than the seller does right now. But tread carefully when making an offer. Some homeowners realize that it’s a tough market to sell in, so they’ve priced their homes competitively. Despite the sluggish housing market, a multiple-offer scenario could still occur if the home is priced well. So if you come in and low-ball the homeowner out of a false sense of security, you could see your offer rejected. In other words, you should make your offer based on the realism of the asking price.

This article makes a good companion piece for everything we’ve just discussed:
Is now a good time to buy a home?

Disclaimer: This QA response contains forward-looking statements about real estate prices in the San Francisco area. These statements are based on information available at this time. The real estate market changes rapidly. So these remarks should not be taken as gospel.

Filed under Home Prices

Article source: http://www.homebuyinginstitute.com/news/san-francisco-prices-155/