SF is finally 'officially' a Buyer's Market

Despite month’s of negative news regarding real estate, San Francisco has proven amazingly resilient to price decreases (southern neighborhoods such as South of Market not withstanding) that is, until quite recently.

Below is an analysis of Inventory Supply in San Francisco, compiled by Patrick Carlisle , showing a sharp change occurring in the market since September. The changes are particularly dramatic in several neighborhoods that have been very strong sellers’ markets heretofore.

By nature, these analyses are snapshots, which can sometimes change dramatically from month to month. Months-Supply-of-Inventory (MSI) & Days-on-Market (DOM) Analysis
Opinions vary but roughly speaking 4-6 months supply of inventory is considered a “balanced” market between buyers and sellers; less than 4 months is considered a sellers’ market; and more than 6 months is considered a buyers’ market.

By these definitions, for the first time in years, the home market in probably most of San Francisco’s neighborhoods can now be considered a buyers’ market – a time when buyers can usually secure substantially better deals than in the past. Good agents should be particularly aggressive on their buyers’ behalves, and ensure that their sellers understand the change in market dynamics. Important footnotes below chart…

To view a map of individual neighborhoods broken down by district numbers go here…

IMPORTANT: As this analysis was done on 12/1/08 regarding November 08 activity, the Months-Supply-of-Inventory figure is probably skewed somewhat higher than it should be since a number of offers accepted – probably a relatively small number considering the amount of activity during a typical Thanksgiving week – occurring in November may not have yet been reported to MLS. An extreme example of this is District 7 houses: since only 2 reportedly went into contract in November, if 2 more offer acceptances occurred in November but have not yet been reported, the MSI would decline from 20 months to 10 months – still very high by historical standards. District 5 only reported 8 houses under contract out of 112 available as of 11/30/08. A few more unreported offer acceptances would reduce that MSI from 14 months to 8 – 10 months (still very high by historical standards).

The only districts showing a decline in MSI year to year are Districts 3 & 10 – where sales activity has picked up markedly in recent months, probably due to foreclosure sales (and rapid declines in median sales price). Many other districts saw a doubling, tripling, quadrupling or more of MSI comparing 11/08 to 11/07.

Note the very high average-Days-on-Market (DOM) figure for “For Sale” homes. Average DOM has increased significantly for both sold and under contract homes (sometimes doubling year over year), but the “For Sale” DOM increase is particularly dramatic. Many properties are sitting on the market for much longer periods of time. Subsequently, the number of price reductions has soared as well. AVERAGE DAYS ON MARKET (DOM) is defined as: The average number of days it took all of the properties that went under contract during the period to accept a first position offer. MONTH’S SUPPLY OF INVENTORY (MSI) is a measure of how long it would take, in months, to sell the existing inventory at the current sales rate for the specific neighborhood and property type. MSI is defined as: The number of active properties on the market for one day or more during the month, less the number of properties that have been withdrawn or expired, divided by the number of properties that have gone under contract during the month.

All data is derived from Agent Metrics, may contain errors and omissions and is not guaranteed.

CalBRE #01224570

2 comments On SF is finally 'officially' a Buyer's Market

  • To look at some great and current interior pics to get a better feel for the essence of SF Real Estate I’ve found that http://www.chdmag.com/ is a reliable source for a variety of neighborhoods as well. Hopefully this will supplement the financial advice on this blog.

  • The best “buyers market” in San Francisco is still several years away.

    Perhaps in 2012.

    And the sweet spot could last for several years thereafter.

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