SAN FRANCISCO (KRON) — The San Francisco housing market saw a high decrease in home sales over the past year, according to a report published by real estate company ReMax.
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San Francisco saw the fourth-highest decrease in housing transactions in markets across the U.S. with a 29.1% drop in sales between June 2021 and June 2022. The city that took the top of the list? Miami, Florida with a 35% drop in transactions. Fellow Californians in San Diego saw a 33.1% decrease over the year.
Courtesy of ReMax
Home sales going down and active housing inventory going up in San Francisco is a good thing for potential homebuyers in the area, according to Tim Yee, President and Broker of RE/MAX Gold Bay Area. “Sellers are getting more realistic, and there are fewer buyers in the market right now. There’s less foreign investment. The pricing is better than it was a year ago at this time,” Yee told KRON4.
The prices of homes in San Francisco have gone up 12.6 percent over the past year, and the median home price is nearly $1.3 million. For many people this means buying a home in the area is not an option. However, buyers who are able to pay the big purchase prices may see this as an opportunity.
Yee says this is a great time for potential homebuyers to “get creative” with their purchase choices, because there are fewer all-cash offers on the market. However, some buyers who may be waiting for a big dip in the market to get into their homes may be waiting in vain, says Yee.
“I don’t see any massive bubble bursting…I don’t think it’s a great time for buyers to wait,” Yee said. Though interest rates are higher than they were months ago, they are still in a “reasonable” bracket, and could increase over time.
Layoffs at big technology companies in the Bay Area may be impacting the market, but not by much according to Yee, “remember that a lot of these folks had big bonuses and stock options, so there’s still a lot of equity in the tech market.” Yee says that because tech companies are still investing in commercial real estate spaces in the Bay area it will continue to see growth.
Yee is confident in the sustainability of the Bay Area housing market, and he believes part of that is due to the area’s influence in the tech world. “After 2008 this market came back faster than any other in the country. I predict that we will always be the first to recover,” Yee said.
People who live in the Bay Area who were scrambling to find affordable homes in April were suddenly locked out of the market when interest rates started to climb.
But something had to give and it turned out to be housing prices.
Real estate website Zillow said back in April less than 5% of homes selling in San Jose took a price cut. By May, sellers cut the prices of more than 8% of the listed homes.
And it’s not just the Bay Area — housing affordability nationwide has sunk to its lowest point since 2007.
U.S. economic conditions are shutting the door on the red-hot residential real estate market in the North Bay, with climbing interest rates contributing to May’s double-digit percentage drop in the region’s home sales, according to the California Association of Realtors.
And this may be just the start of a changing real estate market, thanks in part to interest rates that have doubled since the start of the year.
“The industry was caught very blindsided by that, because all of the mortgage-lending industry and most economists expected mortgage rates to remain in the (3% range) all during this year,” said Nevin Miller, president and CEO of San Rafael-based Pinnacle Loans, which serves Marin, Sonoma, Napa and Solano counties, as well as Southern California. “For them to go from 3% to 6% is a shock to the market.”
The current market still favors sellers, he noted, but that doesn’t mean they aren’t reacting, even with all-time low inventory.
“Sellers who have now got a ton of equity because homes have appreciated so much are rushing to put their home on the market before the market changes, which it is doing now,” Miller said.
In the North Bay, year-over-year property sales in May were down in several counties, according to the agent association. Sonoma County home sales dropped by 22.8% to 385 homes sold; Napa County 12.1% to 102 homes; and Marin County, 10.1% to 178 homes, CAR reported. Solano County sales, however, rose 5.8% to 328 homes sold in May.
This wasn’t surprising to CAR Deputy Chief Economist Oscar Wei, who noted that Solano is the most affordable county in the Bay Area and North Bay.
Insights and cash
In Sonoma Valley, while large overbids on homes have not been unusual, with three-quarters of offers coming in all-cash, the buying frenzy reached out to traditionally more affordable areas of the county, said Duane Margreiter, sales manager for Century 21 NorthBay Alliance in Sonoma. One of his properties was a $1 million home in Windsor, where overbids had previously gone as high as $25,000 over asking, and that property sold for $75,000 over.
“We’re seeing a shift in the market,” Margreiter said. “Buyers are taking a different look. They’re realizing that they do not need to put in an offer on the first thing they see.”
While the rise in interest rates is likely to initially price out first-time homebuyers, overall it likely will result in a shift to a more balanced market, rather than a crash like in 2005 to 2012, when the Great Recession had a wave of foreclosures, Margreiter said.
Patricia Oxman, a 30-year real estate veteran and top producer for Golden Gate Sotheby’s International Realty, said the Marin County market data she tracks suggests local entry-level buyers have already pulled back so far this year, but higher-priced homes continue to be selling.
Sales of single-family homes in Marin County are down 17%, with 1,120 changing hands so far this year, compared with 1,346 in the same time frame last year. Home sales under $1 million have dropped to 72 from 145 a year ago. Sales of mid-range homes ($2 million to $4 million) moved down to 48% of all sales from 54% last year, while top-end homes (over $4 million) now make up 46% of sales, up from 34% a year ago.
“The luxury market is still strong because buyers pulled money out in anticipation of the purchase, and 28% of our sales are all cash,” Oxman said.
Gerrett Snedaker, broker and partner with Better Homes and Gardens Real Estate-Wine Country Group, said he’s seen “a decrease in multiple offers and homes selling in excess of asking prices.” The firm has multiple offices in Napa, Sonoma and Mendocino counties.
In May, 16% of homes in the three counties sold at reduced prices, and by late June that proportion is 19%, in line with the level from a year before, according to Snedaker. And the share of homes selling for over the asking price was 55% in May, 44% through late June and 52% a year before.
Market influences
The changing market conditions have already started to reduce prices on listings.
Just over 9% of Sonoma County listings experienced a price cut in May, compared with 6.9% in April and 4.9% in March, Zillow reported. About the same percentage of sellers lowered their prices in neighboring Napa County, in contrast to reductions in April at 7.1% and 6.3% in March. To the west in Marin County, 6.8% of listings were lowered, versus 5.1% in April and 4.9% in March.
Much of this trend is due to “rising interest rates on the back of the incredible price appreciation in recent years,” Zillow spokesman Matt Kreamer pointed out, adding: “People are being priced out.”
SAN FRANCISCO (KRON) — The San Francisco housing market saw a high decrease in home sales over the past year, according to a report published by real estate company ReMax.
KRON On is streaming now
San Francisco saw the fourth-highest decrease in housing transactions in markets across the U.S. with a 29.1% drop in sales between June 2021 and June 2022. The city that took the top of the list? Miami, Florida with a 35% drop in transactions. Fellow Californians in San Diego saw a 33.1% decrease over the year.
Courtesy of ReMax
Home sales going down and active housing inventory going up in San Francisco is a good thing for potential homebuyers in the area, according to Tim Yee, President and Broker of RE/MAX Gold Bay Area. “Sellers are getting more realistic, and there are fewer buyers in the market right now. There’s less foreign investment. The pricing is better than it was a year ago at this time,” Yee told KRON4.
The prices of homes in San Francisco have gone up 12.6 percent over the past year, and the median home price is nearly $1.3 million. For many people this means buying a home in the area is not an option. However, buyers who are able to pay the big purchase prices may see this as an opportunity.
Yee says this is a great time for potential homebuyers to “get creative” with their purchase choices, because there are fewer all-cash offers on the market. However, some buyers who may be waiting for a big dip in the market to get into their homes may be waiting in vain, says Yee.
“I don’t see any massive bubble bursting…I don’t think it’s a great time for buyers to wait,” Yee said. Though interest rates are higher than they were months ago, they are still in a “reasonable” bracket, and could increase over time.
Layoffs at big technology companies in the Bay Area may be impacting the market, but not by much according to Yee, “remember that a lot of these folks had big bonuses and stock options, so there’s still a lot of equity in the tech market.” Yee says that because tech companies are still investing in commercial real estate spaces in the Bay area it will continue to see growth.
Yee is confident in the sustainability of the Bay Area housing market, and he believes part of that is due to the area’s influence in the tech world. “After 2008 this market came back faster than any other in the country. I predict that we will always be the first to recover,” Yee said.
Breed spokesman Jeff Cretan said that rising construction costs, high inflation and interest rates, along with a sluggish pandemic recovery “make it an absolutely appropriate time to look at our policies so we can ensure that we are building the most housing, including affordable housing, that is possible.”
Supervisor Aaron Peskin, who co-sponsored the most recent version of the city’s affordable housing mandates, said “it’s definitely time to reconvene” the committee.
The push comes as the city is seeing declines at all points in the housing production cycle. Fewer new buildings are opening. Active construction sites are way down. And applications for new projects are few and far between.
During the Planning Commission meeting on Thursday, city economist Ted Egan and Land Use Program Manager Joshua Switzky delivered a mostly grim outlook for future housing development as well as office occupancy in downtown San Francisco.
Housing proposed for Schlage Lock land at Bayshore Boulevard and Leland Avenue in S.F. remains stalled.
Paul Kuroda/Special to The Chronicle 2021
So far this year San Francisco has had 1,161 units completed, putting the city on pace to see fewer than 3,000 new homes. Compare that to 2021 when 4,649 units came online. Meanwhile, there are 4,100 units under construction, compared to the high of 10,000 units that were being built in 2016 or 2017.
The future doesn’t look much better. So far in 2022, about 800 units have been approved, with a projected 2,000 by the year’s end — or just about half of the 10-year average.
Meanwhile, tens of thousands of approved units are languishing as the cost of building has outpaced revenues that can be generated through rents or sales. Rents in San Francisco are still 14% below what they were pre-pandemic, while construction costs have gone up, Egan said.
And developers still have to pay a wide range of fees, depending on the size of the project, where it is and whether the builder is taking advantage of any of the “density bonus” programs. For example, fees on a 24-unit project developer Marc Babsin has won approvals for in Diamond Heights would exact $261,000 in fees per unit, while the builder of a stalled project at 11th and Folsom would pay about $75,000 a unit.
“We have been hearing more and more that the inclusionary numbers don’t work today,” said Supervisor Ahsha Safai. “We need to reset it. It’s an impediment.”
Much of the city’s housing pipeline remains clogged. There are 14 projects comprising 2,257 units that were entitled in 2018 or 2019 and have not started construction. While progress is being made on two phased mega-projects — Treasure Island and Mission Rock — several major projects remain stalled, including a 6,000-unit expansion of Parkmerced, 12,000 units at the Shipyard and Candlestick Point, and 1,679 units at Schlage Lock. In addition, the 8,550 units expected to be generated in large projects alongside the future Central Subway are stalled.
Developer Eric Tao, on the committee looking at fees and requirements, said he is hoping for a repeat of what happened in 2010, during the Great Recession, when late Mayor Ed Lee brought together a group of developers, building trades leaders, lawmakers and advocates to figure out how to get construction started again.
In the end, the city lowered affordable housing requirements and deferred 80% of fees so developers paid when residents moved into a building, rather than when construction permits were obtained. This change jump-started several noteworthy projects, including the 655-unit Lumina project at 201 Folsom St., a condo development that also included 198 affordable units at 1400 Mission.
“What happened is we all came together and came up with some tools,” Tao said. “I think we need to do that again. It seems like it’s harder now — everything is more politicized.”
The key is to find a “sweet spot” that Tao called “maximum feasible affordability.”
“We are not saying get rid of (fees), we are just saying defer them until we can get the thing built and stabilized,” said Tao.
Mira condo tower (middle) at 160 Folsom St. in San Francisco couldn’t be built today because of prohibitive costs and fees, says the building’s developer.
Liz Hafalia/The Chronicle 2019
Thursday’s Planning Commission meeting featured a number of builders and real estate attorneys who outlined the challenges the industry faces.
Sarah Dennis-Phillips, a senior director for Tishman Speyer, said the group’s most recent building, the 392-unit Mira, which opened in 2020, wouldn’t work financially today. Tishman Speyer has an approved project at the former Creamery cafe site South of Market, but that project is not feasible.
“The costs are simply too high to generate an acceptable return,” said Dennis-Phillips, who is also on the committee looking into fees.
J.K. Dineen is a San Francisco Chronicle staff writer. Email: jdineen@sfchronicle.com Twitter: @sfjkdineen
