August 2009

Greetings,

I hope this newsletter finds you well and that you are enjoying the San Francisco summer. I wanted to let you know that I'll be changing the release of my monthly newsletter to the beginning of the month, as the real estate market continues to heat up. If you have any questions regarding the San Francisco market, don't hesitate to contact me. I'm at your service and can help you in anyway.

Warm regards,
Meredith
 

The San Francisco Luxury Home Market

Summer 2009 Update

The number of upper-end home sales declined by a massive 70% in the 5-6 months after the Wall Street melt-down of 9/15/08. This was due to 1) a natural hesitancy by high net worth individuals to make large investments when virtually every financial market (stocks, real estate, commodities, etc.) was in a tailspin, and 2) financing the purchase of luxury homes became much more difficult and expensive. The market then rebounded and accelerated in the spring (as economic optimism increased), albeit still at rates significantly below that of previous years. (Depending on neighborhood, the luxury market in San Francisco peaked between spring 2007 and summer 2008.) Because financing options are still limited, most buyers must now put down very large cash down-payments or, as some do, pay all cash. This constraint on financing continues to limit demand in a major way.

Definitive statements about value changes in the luxury market are difficult because of several reasons: The number of sales is relatively small, which limits statistical analysis. The term “luxury real estate” covers an enormous array of radically different properties, from South Beach penthouses to Presidio Heights mansions, selling anywhere from $2,000,000 to $20,000,000. Many sales were confidential, i.e. the final sales price was not reported, and even when sales prices are known, square footage is often unreported, making dollar per square foot analysis impossible. And the buyers of such homes often perform major renovations, even after buying them for millions of dollars—thus the home bought and the home resold is not really the same property. Finally, the crazy bidding wars of the previous red-hot market make it hard to assess what market value meant in the past.Except for an egregious exception or two (such as the largest sale of 2009 YTD), luxury homes have not been much impacted by the foreclosure crisis.The number of sales is down, especially for condos. Many more properties are staying on the market unsold for increasingly longer periods of time. The number of listings expiring or being withdrawn from the market has soared, as have the number and scale of price reductions. All these are classic signs of sellers (and agents) who don't want to face changed market realities—and thus overpricing their homes. Still, some very expensive homes are selling, often very quickly, sometimes with multiple offers, though generally not going over asking price in the high percentages of earlier years. Very generally speaking, depending on location and property type, the city's luxury home market has probably declined 12 – 22% in value since its peak, with condos typically declining in value more than houses.

Below is an analysis of current luxury home listings and sales during the 6-month period ending August 7, 2009. We'll look first at houses and then condominiums.

Luxury Houses ($2,000,000 & above)

The SF luxury house market is usually defined by prestige location, large size, expensive appointments and sweeping views. One change that has occurred in the past 10 years is that high-end house sales have begun occurring in quantity in neighborhoods such as Noe Valley and Clarendon Heights (many sales over $3m; 2 sales over $5m in 2008), as well as in classic prestige neighborhoods like Pacific Heights, Russian Hill and Sea Cliff. However, since 9/15/08, the luxury market has been hit harder in the “new” neighborhoods than the old.

# ACTIVE Listings on Market: 68 Median List Price: $3,545,000

• Average Square Footage: 5334 sq.ft.
• Average Dollar per Square Foot at List
• Price: $939
• Average Days on Market: 118 days
• Median Days on Market: 64 days
• High Listing: $65,000,000 in Pacific Heights, asking $3154/sq.ft. (on the market for 3.5 years)

Active Listings by List Price:

• $2m - $2.999m: 30
• $3m - $4.999m: 21
• $5m - $9.999m: 11 (4 in Pac/Presidio Hghts; 2 in Russian Hill; 2 in Sea Cliff;1 each in St. Francis Wood, Noe Vly & Mission Dolores)
• $10m+: 6 (5 in Pacific/Presidio Heights; 1 in Sea Cliff)

Neighborhoods with Most Luxury House Listings:

• Pacific & Presidio Heights: 24 listings, median price $4.77m, average size 6590 sq.ft., averaging $1140/sq.ft.
• Noe Valley/Eureka Valley/Ashbury & Clarendon Heights: 12 listings, median price $2.997m, average size 5114 sq.ft., averaging $819/sq.ft. (Realtor District 5)
• St. Francis Wood: 8 listings, median price $2.685m, 5195 sq.ft., avg. $671/sq.ft.
• Russian Hill: 7 listings, median price $4.9m, $/sq.ft. not available

Currently PENDING SALE (offer accepted, but sale not closed): 17

• Median List Price of Pending Sales: $2,695,000
• Average Square Footage: 3972 sq.ft.
• Average Dollar per Square Foot at List Price:
• $751 (for the 8 of 17 that gave square footage)
• Average Days on Market: 103 days (the time between going on market and being designated as “Pending Sale, Contingencies Removed”)
• One can see that the median list price of homes pending sale is well below the median list price of active listings, i.e. the lower end of the high end is more active.
• Highest Priced Pending Sale: $7,995,000 in Presidio Heights