As of my last newsletter in January, I covered the 2018 fourth quarter market slowdown. I know a lot of people (professional and otherwise) thought it was the beginning of the next down cycle for San Francisco real estate. But, without rhyme or reason 2019 started off with a lot of rain and the real estate market was firing on all cylinders. Buyers were out en masse and new listings were acquired quickly. Even overpriced Q4 re-tread’s were selling.
One commonly expressed explanation (as to the market jump start in winter) was that the current crop of buyers did not want to wait around to compete with the deep pockets of the newly minted (buyers) from the likes of coming IPO companies like Pinterest, Uber, Lyft, etc. But, the majority of those buyers will not be liquid until fall at the earliest. So what other explanation would be plausible? I do think some of the buyer urgency was driven by the desire to “get into the market” before more competition appears…and this was covered my many major media outlets (most reports seemed quite optimistic). I see the major driver as employment. Local companies still cannot fill all open jobs, compensation is very good and employees have confidence. If you are a well-employed professional with an in demand skill or experience, you are quite likely a buyer (or an owner).
Looking at the overall Bay Area market from the lens of Case-Shiller, they just released their January numbers and it shows quite a slowdown (keep in mind their index for “San Francisco” includes San Francisco, San Mateo, Alameda, Contra Costa, and Marin). Having ended last year with the largest month-over-month decline in seven years, Case-Shiller Index for single-family home values dropped another 1.3 percent in January. The index has dropped a total of 4.3 percent since the third quarter of 2018. And its year-over-year gain now measures 1.8 percent, representing the smallest year-over-year gain for the index since the second quarter of 2012.
For reference, Case Shiller indicates Las Vegas is still leading the nation in terms of home price gains (up 10.5% year-over-year versus a national average of 4.3%) with Phoenix in second place (up 7.5%) and Minneapolis (up 5.1%) having displaced Atlanta (up 4.9%).
On to our corner of the City. In the Sea Cliff & Lake Street Corridor we are experiencing a (seasonal) slowdown in the number of sales; volume is down just over 50% in both neighborhoods. In Sea Cliff the average sale price was skewed (upwards) by one sale that was significantly more expensive than the other two.
Here are the consecutive quarter & year over year numbers:
Looking at the top neighborhood sales; 320 Sea Cliff Avenue finally sold after two plus years on the market. The seller sold for about 37% less than the original asking price, but about 46% more than he paid for it in 2010.
Keep in mind that the Bay Area macro view of real estate does show a slowing. But, when focusing on the premium markets and premium neighborhoods, we are still experiencing more demand than supply. San Francisco in general is still on the upswing and properties in Sea Cliff and Lake Street are still selling quickly.