San Francisco And San Mateo Market Update

Joe Polyak November 9, 2021

San Francisco And San Mateo Market Update
San Francisco County and San Mateo County’s real estate market has been continuously updating and the primary purpose of this article is to review some of the data.
Let’s just dive right in and see what’s going on in the market. Beginning with San Francisco, let us observe what’s happening in the city. Starting with the San Francisco market update, the monthly indicators report that’s provided by the San Francisco Association of Realtors. In a nationwide observation, home existing home sales fell slightly by 2% in the month of August, and that was primarily exacerbated most likely or that happened in conjunction with the rise in prices. A median home sale price nationwide is up basically 15%. It looks like year over year. A couple of things for the San Francisco market is that new listings were down 14.6%, so new listings are the number of homes that hit the market in a month. The new listings that hit the market in the month of September, for single-family homes were down 14.6% and actually down 29.3% year over year in San Francisco. That has a lot to do with the fact that we were in the pandemic last year. When the pandemic struck in March of 2020, for a few months, nobody was listing their homes for sale. And then about three to six months later, everybody who was going to list for sale in the springtime ended up listing for sale around these months, August, September, & October, which kind of pushed our usual seasonality back a little bit or forward. When you review it in that context, that’s not such a crazy number; that those new listings were down 14.6% for single-family homes, and 29.3% for condominiums. Pending sales, however, increased 14.2% for single-family homes, and 8.8% for condominiums. Again, same thing. Because of the pandemic. A lot of people didn’t list their homes for sale and a lot of people were on the sidelines and didn’t buy at the beginning and then after a few months, people decided to list their homes for sale again.
A New Beginning
Plenty of buyers decided to move on with their lives and try to buy homes and as you’ve probably seen and heard that has led to just an insane 2021. There are signs that the market may be shifting, however. So new listings have continued to hit the market bucking seasonality trends that were commonly seen in the fall, a time when listing and sales activity typically slows as children return to school. As inventory increases, competition for homes may soften and could even bring moderation in sales prices, which after 114 months of the year over year gains would be music to the ears of homebuyers throughout the country. This is true in San Francisco and as you’ll see, San Mateo County is proof that the market has been on fire. However, what’s happening right now in the front lines that haven’t been reflected quite yet in the data, because we’re still in the month of October and the data only reflects the month of September. Additionally, we haven’t received the data for the month of October yet. At least, at the time when this article was created.
A crucial change from a gap in the market
What we are seeing right now is a lot more inventory and a lot more homes hitting the market during these September-October months. That is a lot more so than we’ve seen in previous September’s in October’s. It’s going to be interesting to see because it seems that demand is down and inventory is coming up; so, when demand is down supplies up, in theory, that should affect prices and activity. I’m not necessarily seeing that quite yet but what I am seeing is a bit of a slowdown for some homes in some areas. We talked about new listings being down, we talked about pending sales being up, sold listings, down just 4.7% September, year over year, but year to date up is obviously 42% because we had a big two to three-month window where there were almost 0 sales happening during the pandemic or in the early stages of the pandemic. Median sales price up to 6.1% for single-family homes in the city of San Francisco and year to date and the month of September year over year and year to date. It’s at 1.8 million which is 11.1% higher from the previous year of 2020. And it is also lower than the National Transit and San Mateo County, which is quite interesting.
What we have been seeing is a bit of that flock to the suburbs with a good school district and the yards and the ample street parking and all that kind of stuff. It’s not surprising to see this. Average prices, though up quite a bit 14% for both of these data points, days on market down from 25 to 22. That’s the average number of days that a home is sitting on the market from when it’s listed for sale publicly on the MLS, to when it goes pending, or an offer is accepted. But then remember, there’s also the escrow period, which if it’s an all-cash sale could be, you know, five to 10 to maybe 15 days, or if it’s a mortgage, if they need to take a mortgage and there’s a loan on the property, then oftentimes, it can be anywhere from 20 to 3540 days. Active listings have dropped significantly, from September 2020 to September 2021. And again, that’s due to the pandemic and the big kind of glut of homes that didn’t get listed for sale during the early months, and then ended up getting listed for sale in July, August, & September. A couple of metrics that are pretty important as well is that the percentage of properties that sold over the list price was 84%, over 65%, for the month of September, and then a year to date, 77 or 78%, over 66%. What that is telling us is that if you know anything about San Francisco Real Estate or San Francisco Bay Area Real Estate for that matter, you have seen that homes have been selling significantly over the asking price for a long time. That’s been a strategy implemented by a lot of agents. And what you’ll see oftentimes is a home listed for sale for 995 or 1095, and then sells for three, four, or 500,000 or more over the asking price. Very normal until after the pandemic began. That trend softened and stopped for a little while. We didn’t see home selling for significantly over asking price as much as years past, but that trend has just completely 180, and now, the percentage of list price received in September of 2021 is 16%. It’s over 16%. So, this means that on average homes in San Francisco single-family homes are selling for 16% over the asking price, which is pretty insane. If you ask me, and year to date, it’s a little bit over 14%. So basically almost 15% of homes are selling for at over asking price. Let’s discuss the month’s supply quickly. The month’s supply went from 4.8 to 2.0 and that dropped by 58%.
Calculating Months of inventory
Months of inventory or months of supply represent how long it would take to deplete inventory. Assuming no new inventory is purchased or put on the market. It’s commonly used in the real estate industry to determine the health of a particular real estate market. In order to calculate it, you identify the number of active listings on the market within a certain period. But since the period is the month of September, we identify how many homes were sold or pending sale during that same time. We then divide the active listings number by the sales and pending sales to find months of supply. For example, say there were 500 active listings in February, and 125 sales and pending sales months of inventory is 500 divided by 125 or four. That means that if no new homes are listed, it would take four months for the homes currently on the market to sell when it’s 4.8 months of supply. What most economists or real estate professionals will say is that anything between four to six months is a market in equilibrium. This means that it’s not a buyers’ market and it’s not a seller’s market; more than six months of supply of inventory means it’s a buyers’ market. It’s a lot harder to sell a home and there are a lot more sellers than there are buyers. These sellers are doing anything that they can to sell a home as you have probably known unless you’ve been living under a rock, is that we’ve been in an extreme seller’s market since about 2012 in the San Francisco Bay Area, at least and more recently in the entire country. And so right now we are back to being just two months of supply. Hence, we are in a very strong seller’s market condominiums and it’s pretty much the same story as single-family homes.
But obviously, we talked about new listings, we talked about pending sales sold listings is down 12.7%, which is a little bit surprising. I would think that the number of listings sold would be more or more than 2020 of September but it is what it is. And so, the median sales price average sales price are up just a little bit which shows that the effect that the pandemic had on the San Francisco condominium market is largely still intact, albeit seeing it going on an upswing. What that means is that the pandemic, in my opinion, drew a lot of people out of high priced, high HOA, the center of the city or close walking location of bars and restaurants and things, kind of condos that drove people away from those and more to the suburbs, and more out of area more affordable areas, because they can work from home and be able to make the same amount of money and everything is closed anyway. It caused a little bit of a crash in the condominium market in San Francisco. But now that the pandemic is nearly over, it seems like we’re finished with that major hump. Therefore, we are going back to normal and restaurants are open and we still have massive mandates and vaccine mandates in the city of San Francisco. Although all those things still exist, everything is pretty much open, you can go to Giants’ games, you can go to 49ers games, you can go to Warriors’ games, you can go to the park, etc. Life is almost normal, aside from masks and vaccines and things like that. We’re back to almost being normal. This makes me feel that the condominium market will continue its uptick again, as more and more companies begin requiring at least part-time being in the office. When things open back up, I think we will start seeing more and more people coming in and demand rising supply continuing to go down. And we will see an increase in the market assuming that interest rates stay low. Meanwhile, the economy still keeps chugging along as it has been. I think we’ll take a break from San Francisco now or finish up San Francisco and let’s jump into San Mateo County. Okay, so let’s move on to San Mateo County Real Estate, we’re going to start with the third quarter because we just finished up with the third quarter.
Comparing shifts in markets
Now we’re going to compare the third quarter of 2020 with the third quarter of 2021. Currently, a couple of top-level things that we’re seeing is that new homes are basically the same: the third quarter of 2020 and the third quarter of 2021, the number of new homes that hit the market hasn’t changed very much. But obviously, what did change quite a bit is that the inventory, so the inventory number that you see here is the number of homes that are left for sale at the end of the period. So, at the end of the third quarter, 2020, and third quarter of 2021 On the last day. I believe that was September 30 but that’s how many homes are left for sale at that time. And so obviously, that’s important to see, because the number of homes left for sale is our supply. That number is down 18%, year over year from 2020 to 2021 and from 705 to 575. So that’s pretty significant, and then the number of sold homes was up quite a bit it was up also about 18%, year over year, third-quarter 2021 from 2020. The inventory is down and the number of homes being higher signifies that it’s a hot market. And actually, the next stat is average DOM which is the Average Days on Market. That’s the number of days that a home sits on the market from when it’s listed until when an offer is accepted. And so that number went from 28, which was historically in San Mateo County over the last 10 years that I’ve been reviewing this data is it’s hovered around there, like it’s been in the mid-20s, you know, sometimes the low 30s. But right now, from the end of the third quarter to the third quarter of 2021. It’s 17 days that’s in the entire county of San Mateo. And that’s insane when you think about it when you look at just all the cities that with the median prices and the prices where there are where they are, and just homes are selling in a little bit over two weeks on average. It’s insane. So, in the way you can describe it, the market is still on fire. As I discussed a little bit, we are starting to see a little bit of a shift that hasn’t been reflected in this data yet, which is happening right now, which is what I’m feeling this is a little side note here and what I’m feeling as a real estate agent and talking to other real estate agents talking to other people in the market is I’m seeing a little bit of a lot of buyers who were you know, very motivated, who got their IPO money who wanted to take advantage, have the low-interest rates and were just motivated and wanted to buy a place and move into a place quickly. A lot of them already bought, and supply was low, but now supply is increasing, and we’re seeing a lot more supply. And then a lot of the other buyers that were in the market that maybe were, you know, fifth, fourth, third place out of 10 offers, and we’re coming in with reasonable offers based on the comps we’re getting blown out of the water by offers that were significantly above the comparable sales and above what the market suggests that these homes are worth. A lot of those buyers who are making reasonable offers became discouraged and disenfranchised are kind of like, you know, I’m tired of this. I’m tired of making reasonable offers and even offers above the comps and still getting blown out of the water. A lot of them got discouraged and left the market is what I’m feeling. So based on that I’m seeing right now an uptick in supply. And I think this will be reflected in the data, I’m seeing an uptick in supply and a drop in demand. If you’re thinking about buying a house right now, this is my message to you, if you’re working with a realtor or if you’re not working with a realtor, and you’re thinking about buying a house right now, this is the time to get in. You’re not necessarily going to get a good deal. You probably won’t get a good deal. But at least you’ll get a fair price, a fair market price, and you’ll be able to beat out the competition in interest rates are still very low. If interest rates go up, but the average price drops, you’re still paying the same thing for the same house, and you spent less time being a homeowner, that was just a side note. So median price, again, as I mentioned, when I was reviewing the San Francisco data, the median price went from 1.76 in the third quarter of 2020 to a whopping 1.9 10 million in the 3rd quarter of 2021. So, the median sales price for single-family homes in San Mateo County is almost $2 million, which is insane. And then we have the median price per square foot number that jumped up over 10% $1,122, this year from $1,000 last year. It’s over a 10% increase again, it’s just crazy. In months of inventory went down from being 1.7 last year to 1.2 this year. So that’s where we see a difference in the San Francisco market is that the market took a lot longer to recover in San Francisco last year because of the number of people moving out of the city. Whereas right now, the market is recovering in San Francisco, but in San Mateo County and the other counties like areas like San Ramon Danville Novato, other areas throughout the Bay Area within maybe like a one hour or one and a half-hour drive to Silicon Valley have increased quite a bit. And I’ve gotten a lot busier because of people not needing to commute and being more interested in great school districts and okay with being a little bit further out. So that’s showing in the data.
Okay, let’s jump to September 2020 versus September 2021, rather than the third-quarter data. So basically, new homes inventory sold, it’s essentially more of the same for the third quarter stats, I’m not going to bore you with it, but it’s painting the same picture overall. Same thing with the days on the market, the average prices, and the medium prices. Days on market are down. Average medium prices are up, and we’re just seeing, I would say this is the hottest that I’ve ever seen in the market for the third quarter. September was a pretty hot market as well, although not as hot as the spring in my opinion, although prices did increase. It’s just not the same level of craziness. But right now, I am seeing things are slowing down quite a bit, or not necessarily quite a bit, but they are slowing down. Now one of the things though, that I didn’t talk about for third-quarter data, which I want to talk about right now is that the again, the average list price to sales price ratio. Before the pandemic, as everybody knows, we would always do the lowest price and sell for higher than pandemic hits. And we stopped doing that as much. And you know, we started deciding to list closer to what we expected, because we were concerned and know what to do. That trend reversed again quite a bit. And now homes on average in San Mateo County are selling for 9% over asking versus 2% a year ago over asking and the reason why that’s a little bit calmer than in San Francisco is in the city of San Francisco. And in fact, cities like Oakland and Berkeley and a lot of cities throughout the East Bay as well. It’s just not as commonly done in a lot of the peninsula like along the coast, Halfmoon Bay, areas like that. And even in the mid-Peninsula and a lot of the higher-priced areas. It’s not done as commonly or as aggressively There’s a lot of higher-priced areas like Hillsborough and Atherton, which feed into this data quite a bit as well. Hence, it’s not as aggressive. But in general, on average homes are selling for 9% over the asking price. That’s the data for single-family homes in San Mateo and the data for all condos and single-family homes in San Francisco.
Taking advantage of this change
Now, mortgage rates have been at rock bottom. I recently got a modification approved by the Bank of America for 950 bucks. They sent me a letter and my PMA mortgage guy called me and said, “Hey, you’re approved for a modification, I don’t know where it calls me, you got to pay 950 bucks that will drop your rate down to 2.75”. And I had a rate I believe, of 3.25. I started at 3.85, they did this modification for me before getting me down to 3.25. And for 950 bucks, they dropped me down to 2.75. And that was kind of all across the board, as a lot of people have been getting, I’ve even seen people get the sub-2.5, they had to pay it down with coins and all that kind of stuff. But I’ve been seeing I’ve seen people get sub-2.5. But on average, I was seeing people getting 2.5 to 2.75 for jumbo mortgages, which is over the I believe the limit was 822,000 or so. And so, which is insane. You know, getting under 3% already as crazy under 4% is crazy. So right now, it looks like and I am hearing that this is ticking up slowly. So right now, the averages that I’m hearing about are about 3%. And sometimes in the low threes, mortgage rates right now are starting to hover around that 3% mark, and they are moving up slowly. People always ask me, what do you think prices are going on and what do you think mortgage rates are going and things like that? And you know, I hear people giving their opinions and it’s okay to have an opinion. But I’m not confident in my predictions because there are so many variables, I don’t know anything about the Fed. I don’t know anything about the political and the monetary policies and, and what behind the scenes conversations they have and what’s important and what their thinking is in economics. And in fact, none of those people do either the biggest brightest minds, Alan Greenspan kept interest rates super low. He was, you know, the wizard, the most genius person, and he admitted to making huge mistakes that helped contribute to the financial crisis. Even the world’s smartest people, machines, robots, none of them know, I don’t know, I sell houses, right? That’s all I know. But if I had to guess, and make a prediction, I would guess that interest rates are going to just they’re not going to continue to increase. But they’re probably going to hover around this range of this 3% to maybe up to three and a half. But probably not above that for quite some time. I do believe that. And I also feel that it’ll probably be the same, we’re not going to keep seeing the skyrocketing asset appreciation that we have been, I think we are going to somewhat level off. Now historically, still, interest rates are very low, and housing prices are very high. Take that with a grain of salt and take with it what you want. But that’s just my opinion, I’m probably going to be wrong because I am just one person. And most of my time, I am thinking about how am I going to help get this person instead of a house? How am I going to help you sell this person’s house? What are the things that I have to do scheduled or movers coordinate with them, that’s what I think about that’s what I do all day? It’s going to be pretty egotistical and ridiculous of me to act with any kind of confidence that I can predict anything. So, if you have a real estate agent, or even you know, somebody who’s an economist or whatever, they have this confident opinion about what’s going to happen, they are pretty much confident in them rolling the dice. And if I’m rolling the dice in Vegas at the craps table, you know, if I’m rolling the dice, I’m not confident it’s 100%. Luck. Simple as that. It’s the same thing with these people who have predictions in my opinion, sorry, fellow real estate agents who do that.
As always, we remain committed to helping our clients achieve their current and future real estate goals. Our team of experienced professionals are happy to discuss the information we’ve shared in this newsletter. We welcome you to Contact Us with any questions about the current market or to request an evaluation of your home or condo.

Let’s Talk

You’ve got questions and we can’t wait to answer them.