Concerns Regarding the Economy Continue to Weigh on San Francisco’s Real Estate Market

SAN FRANCISCO--(BUSINESS WIRE)--Completed and pending home sales, particularly in the condominium market, declined in comparison to previous months, according to the most recent Market Focus report published jointly by the Rosen Consulting Group and the San Francisco Association of REALTORS®.

“The decline is attributable to the pull-forward effects of the expired tax credit and lingering concerns regarding the pace of the economic recovery.”

According to John Lee, president of the Association, “The decline is attributable to the pull-forward effects of the expired tax credit and lingering concerns regarding the pace of the economic recovery.” But he added, “With mortgage rates at their lowest levels since the 1970s, buyers should be motivated to stay in the market for properties meeting their purchase criteria.”

Rosen Consulting Group notes in the Market Focus report that while the single most important factor in returning the San Francisco housing market to equilibrium is a sustained rebound in employment, the market is expected to maintain a positive underlying trend through the remainder of the year, although events may impede its trek to a full recovery.

Pending Sales Rise by 19.1% Percent From September 2009

The median single-family sale price in September 2010 increased by 2.1 percent from September 2009 to $730,000. Despite the monthly decline in closed sales, year-to-date sale activity continued to outpace sales during the same nine-month period in 2009, with 1,688 homes sold – a 10 percent increase from the previous year.

Approximately 48 percent of all completed sales in September 2010 were single-family homes priced less than $700,000; in September 2007, homes in this price segment represented less than 28 percent of all completed sales. While completed sales activity trended downward during the month, pending sales activity rose by 19.1 percent from September 2009, with 231 single-family homes going into contract. First-time home buyers remain a major driver of sale activity, particularly at the low-end of the market. The sharp reduction in home equity levels during the recent downturn in the economy has left many potential move-up buyers immobile.

Inventory levels trended upwards as completed sale activity subsided and an increasing number of sellers placed their homes on the market, sensing an improvement in market conditions. The number of active single-family homes on the market reached 817 homes, a 20 percent increase from September 2009. At the same time, the number of new homes placed on the market rose by 22.5 percent from the same time last year, with 462 units offered for sale in September 2010.

Because the increase in single-family homes for sale was met by an equally strong rise in pending sale activity, the months of supply inventory remained unchanged at 3.5 months. By price segment, the months’ supply declined for homes at the two ends of the pricing spectrum, while supply inventory for homes priced between $700,000 and $1.2 million rose to 3.5 months from 2.7 months in September 2009.

Condo Sale Activity Stalls, Inventory Levels Rise

The effects of the expiring tax credit had a more noticeable effect on condominium unit demand: the number of completed condominium sales declined by 23.4 percent from the previous year to 177 sales in September 2010. Pending sale activity followed a similar trajectory, contracting by 10.6 percent from the previous year to 211 sales in September 2010. However, with 1,745 condominium sales completed year-to-date, condominiums sales have risen by 22 percent from the same period in 2009. Despite the slowdown in sales during the most recent month, the median condominium sale price continued to stabilize through September 2010, declining by only 2.3 percent from September 2009 to $635,000.

Fueled by a jump in new units coming to market and a slowdown in closed sales, the number of active condominium units on the market in September 2010 totaled 1,187, a 15.5 percent increase from September 2009. Rising confidence among sellers and an increase in the release of bank-owned properties resulted in 573 new condominium units entering the for sale market in September, a 29.6 percent increase from the same month last year. At the current contract sale rate, the condominium supply inventory reached 5.6 months. While the months of supply of condominiums priced less than $500,000 trended downward to 2.9 months, units priced between $500,000 and $900,000 rose to 5.1 months from 3.8 months, and for luxury units priced more than $900,000, the months’ supply rose to 7.9 months from 5.7 months in September 2009.

San Francisco Housing Market Outlook Remains Positive

While the recent drop in sale activity has raised questions regarding the sustainability of the current housing recovery, the market’s supply-constrained environment, pent-up buyer demand, and numerous economic drivers lead the Rosen Consulting Group to maintain a positive outlook on the San Francisco real estate market.

Real estate data in Market Focus is provided by Terradatum. Market Focus is written by the Rosen Consulting Group. For additional information on the real estate market or Market Focus, please contact:

San Francisco Association of REALTORS® 301 Grove Street San Francisco, CA 94102 415-431-8500 x132 www.sfrealtors.com

Rosen Consulting Group 1995 University Ave., Ste. 550 Berkeley, CA 94707 510-549-4510 www.rosenconsulting.com

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