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Amid record surge in luxury house sales.

By Wolf Richter for WOLF STREET.

The San Francisco market is dominated by condos. Over the past few decades, nearly all residential construction was for multifamily buildings – apartments and condos – and almost no single-family houses were built, which makes sense for a city that is boxed in by water on three sides.

In terms of condos over the past four months, sales hovered around 450 units per month, not including sales of new condos that are handled directly by the sales offices of the developers and not reported to the MLS. House sales were in the 300 unit per month range. So that’s the size of the market, with condo sales being generally higher than house sales. And this market has totally split in two.

Over the past four months, culminating in June, there has been a historic surge in sales of luxury houses in San Francisco. Luxury in San Francisco starts at $3 million. In June, according to Compass, 70 luxury house sales closed, nearly double the prior peaks.

A good part of this spike in luxury house sales has to do with the fact that the wealthy got immensely wealthier in this pandemic, thanks to the asset price inflation strategy the Fed has pursued – going for the infamous “Wealth Effect” – and some of them bought luxury houses.

Median prices are sensitive to changes in mix. And this record number of luxury house sales that closed over the past four months altered the mix of total house sales and skewed the median price upward (a sharp decline in the number of luxury sales in future months would unwind some of that price spike).

And so, according to MLS data provided by Thomas Stone, a retired real estate broker in Sonoma County, the median price of single family houses in June spiked to $2.1 million, having tripled since 2012, for a beautiful WTF moment:

But condos beg to differ.

While the median price of condos has been volatile, bouncing up and down as median prices do, it has gone nowhere for over three years.

In June, the median price of condos was $1.28 million, about where it had first been in March 2018. While the median house price tripled since 2012, the median condo price only doubled since then. OK, that sounds kind of funny, something that “only doubled” in nine years, I mean, what kind of rinky-dink market is San Francisco?

Condos had their share of crazy price increases, but before March 2018. Since then, the median price bounced up and down but essentially went nowhere. And there has for years been a large number of condos on the market, with new ones being put on the market all the time.

During the housing bust, the median condo price and the median house price were not that far apart; but since 2015, the spread started widening, and now the median house price is $900,000 higher than the median condo price:

“All of the markets are fear-driven, and none of them are rational,” said Thomas Stone, the retired real estate broker, regarding this situation (he’ll be happy to send readers an MLS-generated housing-trends report for any of the Northern California counties, free; you can find his email here).

Similar situation in the broader Bay Area.

In the five-county Bay Area that the Case-Shiller Home Price Index covers – San Francisco, San Mateo, Alameda, Contra Costa, and Marin – similar trends are playing out. But the Case-Shiller methodology avoids the problem of a change in mix skewing the median price because it doesn’t use median price; it uses the “sales pairs” method, where the sales price of a home in the current month is compared to the sales price of the same home when it sold previously. That’s a big advantage.

The disadvantage is that it lags about four months behind the point when the actual deals were made, compared to the median price index which lags roughly one month behind the actual deals.

This chart shows house-price indexes by price tiers and the condo price index (red) in the five-county Bay Area. San Francisco is the most expensive housing market among the five counties, but it also has the largest share of condos.

House prices in all price tiers started spiking last year, while condo prices continued to go nowhere. The last reading of the condo price index (“April”) was where it had first been in mid-2018:

The San Francisco Bay Area entered the pandemic with a flat housing market. According to the Case-Shiller Indexes, in all of 2019, house prices had been slightly down or slightly up year-over-year, depending on the month. Median prices showed similar trends. Condo prices were down a little year-over-year in 2019.

What changed everything in terms of house prices was the pandemic – the Wealth Effect – and house prices suddenly exploded. But the pandemic didn’t change condo prices much.

Food for idle thought: condo prices, as per the Case-Shiller chart above, had also flattened in the years before the Housing Bust hit the San Francisco Bay Area.

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Article source: https://wolfstreet.com/2021/07/10/condos-v-houses-san-francisco-house-prices-do-holy-moly-spike-condo-prices-flat-for-3-years/

SAN FRANCISCO (CBS SF) – In another daunting sign for prospective Bay Area home buyers, the time for an average renter to save a down payment on a starter home has grown, according to Zillow.

Despite having an income nearly twice the national average, the real estate website found an average renter household in the San Francisco market saving 10% of its income would take 17.4 years to save for a 20% down payment on a typical “starter” home, about eight months longer than five years ago.

The typical starter home, defined as a median home in the bottom third of home prices, is worth $846,415.

Meanwhile in San Jose, where such a home is worth $940,490, the time to save for 20% down has grown to 16.6 years, about 1.1 years longer than it would have taken five years ago.

“In a housing market where prices are rising at record rates, especially when compared to renter incomes, the ever-increasing sum of a 20% down payment can feel out of reach,” Nicole Bachaud, a Zillow economic data analyst, said in a statement.

Nationally, an average renter household saving 10% would need about six years to save for the down payment on a typical starter home, about a year longer than in 2016.

With home prices continuing to rise in much of the country, Zillow said prospective buyers will need to factor that into their saving plans. The company projects 14.9% appreciation over the next year, meaning the average renter would need to save an additional $369 per month to keep up.

With mortgage rates low, the company said it is possible to secure a mortgage while putting less than 20% down, with some lenders allowing as little as 3-5%.

“That lower upfront payment comes with higher monthly payments, but the opportunity to build equity can outweigh those extra costs for many,” Bachaud said.

Among the top 50 real estate markets, Zillow found renters in Los Angeles and San Diego have the longest time to save 20% for a starter home (17.6 and 17.9 years, respectively), while renters in Birmingham, Alabama and Memphis, Tennessee have the shortest (both at 4.7 years).

Article source: https://sanfrancisco.cbslocal.com/2021/07/09/zillow-bay-area-home-down-payment-saving-time-grows/

At the state level, Hawaii just edged out California for most expensive homes, with a median price of $710,000, compared to California’s $654,629. These both far outpace the national median home price of $281,370, researchers found.

But on the city level, California has the top-four most expensive metro areas with over 1 million people — San Jose ranks number one, with a median home value of around $1.4 million, followed by San Francisco at $1.2 million, Los Angeles at $783,610 and San Diego at $729,318.

Bay Area cities also rank among the most expensive small metro areas — populations with 100,000 to 349,999 people: Santa Cruz was number one, with a median home price of about $1 million, and Napa was No. 2 at $796,806.

Among mid-size metros — between 350,000 and 999,999 people — six of the top ten most expensive were in California, including Santa Rosa at No. 3 and Vallejo at No. 6.

Low interest rates, a housing production shortfall, fewer houses on the market and changes in consumer spending during the pandemic are among the many reasons why housing prices are shooting up, according to a study by the Joint Center for Housing Studies at Harvard. This is very different from normal economic downturns, when housing prices normally decline, Don Layton, a senior fellow at the center wrote.

Will the prices continue to rise? That’s still unclear.

“While it could simply be a pandemic-period distortion that will disappear as COVID vaccines are broadly distributed,” Layton wrote, “it could also reflect a new normal for the dynamics of housing and housing finance.”

At the state level, Hawaii just edged out California for most expensive homes, with a median price of $710,000, compared to California’s $654,629. These both far outpace the national median home price of $281,370, researchers found.

But on the city level, California has the top-four most expensive metro areas with over 1 million people — San Jose ranks number one, with a median home value of around $1.4 million, followed by San Francisco at $1.2 million, Los Angeles at $783,610 and San Diego at $729,318.

Bay Area cities also rank among the most expensive small metro areas — populations with 100,000 to 349,999 people: Santa Cruz was number one, with a median home price of about $1 million, and Napa was No. 2 at $796,806.

Among mid-size metros — between 350,000 and 999,999 people — six of the top ten most expensive were in California, including Santa Rosa at No. 3 and Vallejo at No. 6.

Low interest rates, a housing production shortfall, fewer houses on the market and changes in consumer spending during the pandemic are among the many reasons why housing prices are shooting up, according to a study by the Joint Center for Housing Studies at Harvard. This is very different from normal economic downturns, when housing prices normally decline, Don Layton, a senior fellow at the center wrote.

Will the prices continue to rise? That’s still unclear.

“While it could simply be a pandemic-period distortion that will disappear as COVID vaccines are broadly distributed,” Layton wrote, “it could also reflect a new normal for the dynamics of housing and housing finance.”

A century-old, 47-acre estate just south of San Francisco is for sale by its owner—who happens to be Elon Musk. 

The tech entrepreneur and Tesla CEO tweeted early Monday that he had “decided to sell my last remaining house.” The price tag is $37.5 million. 

Mr. Musk, 49, did not engage a broker, and the listing instructs interested parties to contact the owner. Calls to the phone number provided went directly to an answering service. 

Also the CEO of SpaceX, Mr. Musk has sold nearly his entire property portfolio in recent years in an effort to get rid of his possessions, as he focuses on “multiplanetary” life. Only this Bay Area home was left, and it was being “rented out for events,” he explained in a Tweet last week.

More: Tesla Boss Elon Musk Sells Four Los Angeles Homes in $60 Million Deal

In fact, he tried to sell the property, located in the town of Hillsborough, last year. The six-bedroom, 10-bathroom home hit the market in May 2020 for $35 million, according to listing records. It was removed in November. 

Mr. Musk bought the estate in 2017 for $23.4 million through Gatsby LLC, which is connected to another entity, Excession, tied to Mr. Musk’s family office. When he completed the purchase, the property had been on the market since 2013, when it was listed for $100 million, Mansion Global reported. 

The historic European-style mansion dates to 1916, when it was built by Count Christian de Guigné, a French nobleman. He came to California and married Mary Katherine Parrott, whose father, John Parrott, had made a fortune in the Gold Rush era, Mansion Global previously reported. 

From Penta: Future Returns: Nuveen’s Private Market Strategy for Impact

Set on one of the area’s largest parcels of private land, amenities of the estate include views of the San Francisco Bay, a ballroom, a banquet dining room and a “preserved but completely updated professional kitchen,” according to the listing. There’s also a pool, hiking trails, a three-car garage and an eight-car carport.

Mr. Musk did not immediately return request for comment. 

Article source: https://www.mansionglobal.com/articles/elon-musk-lists-his-san-francisco-bay-area-estate-for-37-5-million-01623793339