A changing market? Have SF home prices reached a plateau?

August 9, 2013 Market Conditions

The market usually does slow down at least a little in mid-summer – a question has come up: is this possible slowdown caused by listing agents continually pushing the envelope on pricing for new listings or pricing to the last, highest, frenzied sale, a move that buyers are now finally starting to resist? It may be, that without buyer demand really slackening for homes deemed “reasonably” priced, we have come to a point, at least for the time being, that buyers are no longer willing to pay new tippet-top peak prices.

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Have prices reached a plateau? Monthly median price stats are subject to fluctuation without great meaningfulness (which is why I prefer quarterly or longer periods), but after the big jump early in the year, the median sales price has been within a 4-5% spread (not a huge spread for monthly home prices) for 5 months, Including a drop from April-May. The idea of a plateau contradicts the recent Case-Shiller Index report, but the Index is about 3-5 months behind current realities, San Francisco is only a tiny part of the Index and the city has outperformed C-S since the turnaround began – having appreciated so much faster than other places, we may be due a flattening of appreciation before other areas. And that also may be true for different SF neighborhoods – since they have rebounded at different speeds, some may be plateauing and others are still appreciating.

At this point, this is speculation and it won’t be clear for a while – these things only become clear in retrospect – because spring median prices sometimes spike and summer prices drop a little as some of the higher end market checks out for the holidays. And median sales prices are not perfect correlations of changes in market value, being affected by a number of other factors, including seasonality. Anecdotally, we are hearing stories of the market not responding to homes priced at the top (even if “justified” by another recent sale), and also stories in which the winning bidder offered a huge amount, sometimes hundreds of thousands of dollars, more than what the second highest buyer was willing to pay – i.e. the winning buyer ultimately paid much more than necessary to win the deal.

The number of expired/withdrawn listings is also increasing, though not to some crazy level yet.

So it’s worth considering, that we “may” have reached a plateau or bumped into a ceiling, transitioning into a somewhat different market. If we are in a transition, the market will be schizophrenic for a while: some buyers acting one way and another growing group of buyers acting another.

Summarizing the charts above and below:

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