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2017 ‘Q2 Market Recap for Sea Cliff and the Lake Street Corridor

As we roll into fall; one of the two most active seasons for real estate activity, we are going to quickly cover the neighborhood and the overall luxury home market. I’ll try to add clarity to a somewhat sluggish luxury market in San Francisco.
 
First, let’s look at Sea Cliff and the Lake Street Corridor. If you recall, in ‘Q2 Sea Cliff was very quiet and Lake Street was on fire. In ‘Q3, Sea Cliff was still very quiet (two sales and several attempted sales that resulted in withdrawn properties) and Lake Street has cooled a bit (five sales compared to seven last quarter). Here are the numbers:
 
Q3 numbers
 
The top neighborhood sales of the quarter:
 
Q3 sales
 
What about luxury sales outside of our neighborhood? Here are the most expensive house sales this year (sans address).
 
topsales
 
Several of you ask about other luxury markets in the City; are they more or less active, are buyers paying more of a premium for properties (than our neighborhood)?
 
Typically $3M is the threshold for the luxury house market in San Francisco: that’s approximately the top 10% of the market. The ultra-luxury market starts at $5M, which constitutes the top 2.5% of sales. This chart is pretty self-explanatory. Keep in mind, Sea Cliff proper is primarily made up of larger lots (fewer homes in general) and the Lake Street Corridor is not dominated by single family homes.
 
chart
 
Why the lack of luxury activity?
 
The luxury real estate market is impacted by a number of factors: positively, by improvements in general economic conditions and confidence, highly-paid employment, population growth and especially, by the creation of new wealth in large quantities.
 
All these elements were dynamically present in the Bay Area from 2012 through mid-2015. Then significant economic and political volatility put a damper on luxury home sales; Chinese stock market turmoil, the crash in oil prices, Brexit, large U.S. stock market swings and an apparent cooling in our high-tech boom.
 
All of these elements injected uncertainty into financial and luxury real estate markets. Furthermore, Bay Area high-tech IPOs, which had created a stupendous amount of new wealth since 2011, basically dried up – previously the newly rich or further enrichened buyers have played a big role in demand.
 
These changes in the economic environment caused the SF luxury home market to cool in autumn 2015. There has been very little new, luxury house construction in the city – only about 8 to 10 per year built since 2000.
 
Then in fall of 2016 we had a change in dynamics; elections and Brexit are the rear view mirror, confidence in tech hiring and an upswing in the Chinese stock market coupled with a sudden huge surge in listings (consumer confidence), SF luxury house sales hit a new high in sales volume, and in June 2017, the luxury condo market suddenly hit a new high as well. However, neither segment is as strong, as measured by standard market metrics, as it was during the 2014 to mid-2015 peak of market heat. So what was the trend here: the market getting increasingly hotter 2012 through mid-2015, cooling from autumn 2015 through most of 2016 (during substantial financial market and political volatility), and then strengthening again in late 2016 and 2017.
 
Now we are waiting to see how the autumn 2017 luxury home market shakes out.