Although year-over-year sales of single-family homes moderated slightly in April, probably as a result of the expiration of last year’s federal home buyer tax credit, sales of common interest developments (condominiums, TICs, stock cooperatives and lofts) surged 24.6 percent, keeping San Francisco’s housing market on track to recovery.
The reasons most often given for San Francisco’s comparatively strong housing market are the improving economy, particularly in nearby Silicon Valley, increased lending activity on the part of banks and the high standard of living that attracts workers from all over the world to the city.
In recent decades, San Francisco’s property values and household income levels have risen to among the highest in the nation, creating a large and upscale restaurant, retail, and entertainment scene. According to a 2008 quality of life survey of global cities, San Francisco has the second highest quality of living of any city in the country.
Single-Family Homes Sales
In spite of a drop of 5.4 percent in single-family home sales from April 2010, sales of this type of housing in San Francisco has remained brisk and, in some areas, exceptionally strong.
One area of the city that has seen impressive gains in sales over the past year is the Richmond District, located in the northwestern corner of the city. Sales in the district have increased a whopping 33.3 percent year-over-year, making it one of the city’s hottest real estate markets.
The Richmond District is located directly north of Golden Gate Park. Chinese now make up close to a majority of residents in the district. The commercial strip of shops and restaurants along Clement Street in the district is now referred to by many as “New Chinatown.”
Another area which can boast an increased level of sales activity is the central east part of the city which includes the South of Market and the Inner Mission Districts. Since April of last year, sales of single-family homes in these districts have increased an astounding 46.7 percent, making it the city’s hottest real estate market.
The South of Market District, once filled with decaying buildings, has witnessed significant redevelopment in recent years. The focal point
of the dot-com boom during the late 1990s, the district began seeing skyscrapers and condominiums during the last decade. Following the success of the district’s South Beach neighborhood, another neighborhood, Mission Bay, underwent redevelopment, anchored by a second campus of the University of California, San Francisco. Southwest of Mission Bay is Potrero Hill which features panoramic views of downtown San Francisco.
The Inner Mission District owes its significant popularity to the Mediterranean climate and Latin culture that make it unique. Its geographical location insulates it from the fog and wind from the west and causes the district to be warmer and sunnier than the rest of the city.
As housing sales in these and other districts of the city have increased, the months of supply inventory has declined. In April, the months of supply inventory of single-family homes in San Francisco stood at 2.4 months, a slight drop from 2.5 months in March, and 2.6 months in April 2010.
Compared to April of last year and broken down by price segment, the months of supply inventory for single-family homes priced at less than $700,000 remained steady at 2.4months. For homes in the mid-price range of the market, between $700,000 and $1.2 million, the months of supply rose from 2.2 to 2.5 months. For homes in the high-end price range of the market, $1.2 million and above, the months of supply inventory declined from 3.7 to 2.4 months.
Sales of condominiums surged 24.6 percent from April 2010. As with single-family homes, sales in some areas were exceptionally strong.
The sales leader is the northernmost area of the city that includes the Marina, Presidio Heights and Pacific Heights Districts. The area boasts some of the city’s most prestigious properties and attracts many young urban professionals.
In April, the percentage of condominiums under contract in the area rose a spectacular 31.8 percent, compared to the prior month. And although there was a 4.3 percent drop from March in terms of total units sold, condominium sales in the area are still up by an incredible 57.1 percent from April 2010.
Another area that saw notable sales activity was the central part of the city that includes the Castro, Noe Valley, Twin Peaks, Cole Valley and Haight-Ashbury Districts.
Historically known as Eureka Valley, the Castro now is the center of gay life in San Francisco.The Haight-Ashbury District, associated with 1960s hippie culture, has become home to expensive boutiques although it still retains some of its earlier bohemian character.
Sales in the five districts increased 14.7 percent from the same time last year.
The months of supply inventory of condominiums in the city stood at 3.3 months in April, dropping from 3.5 months in April 2010.
Despite the sustained volatility of statistics relating to San Francisco’s housing market, according to experts, the city’s diverse economic base and improving job market are likely to drive the market into recovery faster than other major housing markets in the country.
Many expect San Francisco to benefit from the large number of young adults ages 31 to 45, who have located to the city in recent years. This group represents the prime home buying segment of the city’s population. With job security and the need for housing, this group is expected to see today’s affordable home-loan rates and lower prices as a good time to get off the fence and purchase real property.
The latest figures from the Bureau of Labor Statistics support the reports that the local economy is improving. According to the bureau, the San Francisco-Oakland-Fremont metropolitan unemployment rate fell to 10 percent (preliminary finding) in March 2011 from 10.7 percent in March of last year. Bloomberg News also recently reported that “American employers added more jobs than forecast in April and previous monthly gains this year were revised up, easing concern the economy was cooling.”
Another contributing factor to an improved outlook for housing in San Francisco is rising personal income levels reported by the U.S. Department of Commerce. According to the department’s chief economist, Mark Doms, “Personal income continues to show strong growth—for the first quarter of 2011, personal income grew at an 8.1 percent annual rate, boosted by the Middle Class Tax Relief Act of 2010 and by strong employment gains.”
Housing sales activity in San Francisco for April 2011 reflected this improving picture for the economy, as well as the increased willingness of banks to lend for housing purchases. Unknown, at this time is what effect economic and political factors, including rising inflation, the declining dollar and the debt crisis, might have on housing markets throughout the country, including San Francisco’s.