Much like the rest of 2012, December produced improved buyer demand, steadily rising home prices (the median now at $850,000, up by 39.3 percent) and pockets of robust activity throughout the city.
With such a strong buyer demand, the current inventory was gobbled up quickly, with the average days on market at 41.
As sharply rising rents and low interest rates continue to drive the market, it makes financial sense for buyers to purchase now rather than rent, to lock in at these low 30-year rates and wait for appreciation. And, with job creation remaining at the forefront for the city’s leaders, we can all maintain a positive and fruitful outlook as we embark into the next twelve months.
Single-Family Home Sales
Since December of last year, the inventory of single-family homes for sale in the city fell by 40.8 percent, to a total of 379 properties. The number of homes under contract increased by 13.4 percent, while the number of homes sold dropped by 13.9 percent, to a total of 199 properties sold.
For homes that were priced below $700,000, the months of supply inventory dropped as much as 74 percent to a reading of 0.7 months. For higher-priced homes between $700,000 and $1.2 million, the months of supply inventory also fell, by 40.2 percent to 1.3 months.
(These exceedingly short time frames are indicative of a sellers’ market, where sellers have more leveraging power over buyers who are all vying against a limited amount of properties.)
One area of the city which sustained positive sales activity is in the Central District, located in the geographic center of San Francisco. Compared to December 2012, the number of homes under contract here rose by 46.2 percent, while the total number of homes sold surged ahead by 42.9 percent, to 30 properties sold. The Central District includes such desirable neighborhoods as the historic Haight Ashbury, which until this day, still retains its bohemian quality from the 1960s, to the more clean-cut and family-oriented Noe Valley, whose typically sunnier weather and rows of merchant shops highlight the wholesomeness of its predominately young family community, and Twin Peaks, which offers some of the city’s most remarkable views, thanks largely to its steep streets and high vantage points. The median price for a home here is $1,517,500, which is up by 12.4 percent from last year.
In the same market behavior as single-family homes, the inventory of condominiums for sale in the city fell by 41.4 percent, to a total of 487 condominiums. The number of condominiums under contract rose by 29.9 percent, while the number of condominiums sold increased by 20.6 percent, to a total of 240 units sold.
For condominiums that were priced between $500,000 and $900,000, the months of supply inventory greatly tapered by 74 percent to a reading of 0.7 month. For luxury condominiums priced above $900,000, the months of supply inventory also dropped by 44.6 percent to 1.6 months.
One region which saw a tremendous increase in condominium sales activity is the South Beach and SoMa (South of Market) neighborhoods in the central-eastern portion of the city. Compared to this time last year, the number of condominiums under contract here rose exponentially by 143.3 percent, while the number of condominiums sold also increased by 25.4 percent, to a total of 79 units sold. Home to AT&T Park and Caltrain, the continuously expanding South Beach area offers some of the city’s most sought-after and stylish condominiums, while SoMa is the center of the city’s art community, with SFMOMA, the Yerba Buena Center for the Arts, the Academy of Art College, and throngs of small galleries all around. The median price for a condominium here is $677,000, which is up by 17.6 percent from 2012.
The consumer confidence index, which had declined slightly in November, posted another decrease in December. The index now stands at 65.1, down from a reading of 71.5 in November. Lynn Franco, Director of Economic Indicators at the Conference Board, says that, “Consumers’ expectations retreated sharply in December resulting in a decline in the overall Index. The sudden turnaround in expectations was most likely caused by uncertainty surrounding the oncoming fiscal cliff. A similar decline in expectations was experienced in August of 2011 during the debt ceiling discussions. While consumers are quite negative about the short-term outlook, they are more upbeat than last month about current business and labor market conditions.”
Business Insider reports, “Going into 2013, home prices are expected to rise 6 percent driven by steady demand, lower bank-owned (REO) sales, and lower inventory of unsold homes. This is according to CoreLogic’s latest report. The CoreLogic Home Price Index (HPI) increased 6.3 percent in 2012, the largest increase and highest level since 2006. And year-over-year home price increases were more widespread. This increase in home prices across a broader geographic spread is expected to continue in 2013.”
In another sign of an improving housing market, California home buyers are more optimistic about the housing market now than they were three years ago, according to the California Association of REALTORS®’ recent “2012 Survey of California Home Buyers.” The survey found that more home buyers this year believe that home prices will rise, with 25 percent saying prices will rise in one year; 41 percent saying they will rise in five years; and nearly three-fourths of buyers (73 percent) believing home prices will rise in 10 years. This compares to only eight percent, 35 percent, and 60 percent, respectively, in 2009, when the question was first asked.
From the SF Chronicle, “Congressional efforts to reduce the U.S. deficit revived tax breaks for mortgage insurance and extended interest deductions for homeowners that will cost the government $600 billion over five years. Congress raced to pass the ‘fiscal cliff’ bill before Jan. 1 to avoid sweeping spending cuts and tax increases that jeopardized the economic recovery. Legislators also left in place a 2007 tax break for homeowners whose debt is forgiven by lenders and preserved exemptions for profits on home sales, while maintaining mortgage-interest deductions. The moves could help a housing market that last year started to reverse a five-year slump that pushed the U.S. economy into the longest recession since the 1930s.”