What Stories Do the Data Tell?
What you’ll find here is a compilation of relevant market data as reported on San Francisco’s Multiple Listing Service, which captures the fair share of residential real estate sales in the City.
Looking at sales data is a good starting point for buyers and sellers alike but it shouldn’t be the only deciding factor when it comes to truly determining a property’s value and worth (note, those can be different figures too). The sole deciding factor in deciding a property’s real worth as each property is so special.
Because real property is viewed as being inherently unique (no two properties can occupy the same space) this is one of the rare legal areas where judges are still empowered to use their inherent equitable authority as judges to compel a property sale, removal of residents from a parcel or other actions (like injunctions or orders) because money damages (purely legal relief) are deemed insufficient. Keep this in mind as you consider each data point and each comparable property you consider when assigning value to a given property.
Each data point represents a story unto itself and can only go so far as a comparison to any other property no matter how seemingly identical.
Factors Influencing Home Sales Data Quality
Sample Size
Small differences in square footage or number of similar sales can be amplified if you lack a proper sample size of properties or if property values are as expensive as they are in San Francisco
Seasonality
There are certain annual market cycles for San Francisco that other markets lack. Unlike other places, the summer is usually the slow time of year in San Francisco for example
Secrecy
For whatever reasons, a good portion of property transactions never end up reported in the MLS, so the true value of a property may be hindered as a result (see sample size). Also, a lot of agents want to deflect attention away from $/sqft issues and will omit square footage.
Not all data is created equal or shared equally.
Data from outlets like Zillow or Redfin is mostly sourced and syndicated from reputable organizations like the San Francisco Association of REALTORS, but some of the data Zillow or others may use is scraped from other property tax records or open data sources that are oftentimes inaccurate, outdated or incomplete. You shouldn’t be making hugely important life decisions regarding home sales and purchases on flawed data, right?
This is why you work with professionals like Kevin and Jonathan for accurate, current and detailed data and the proper context that goes along with it which will empower you to make the right decisions.
Lesson No. 1
Agents tend to Underprice Their Listings in San Francisco on Purpose
Every market has its own rules, customs and practices. In San Francisco, agents have tended to price property listings less than what properties were worth. Right or wrong it’s the way it was done here since the economy recovered after the 2012 low point in the market. Even during and after the Pandemic pricing was always purposely under where market value would otherwise say a property’s value was.
The rationale behind this tactic is to attract interest and attention that will hopefully yield multiple offers and competitive (and emotional) bidding that all go to drive a property’s final sale price — higher. Competitive bidding feels pretty much like an auction where people get caught up in the competitive moment let their emotions dictate their bids.
All of this is true unless it isn’t. The times underpricing is less prevalent: in a declining or uncertain market or in a seasonal market (like the end of summer for us in San Francisco and the holiday season for almost everyone)
On property pricing: priced to entice or transparent?
(% sold over list price — all housing types)
Lesson No. 2
San Francisco has Always Been Expensive.
If you want to ballpark what you might pay for a home in San Francisco, you should start with about $1,000/sqft.
There have been housing crunches and booms since the very beginning. Crises, pandemics, crashes and bubbles ever since gold was found up north in 1849. But apart from that gold, San Francisco has always been a destination and aspirational city to be a part of. There are the big attractions that draw people here: a temperate climate, the pervasive entrepreneurial spirit, the diversity of people from all over the country and world, the area’s natural beauty, cuisine, proximity to nature, its universities, and, of course, the engines of the tech and data economy are based here among more.
In 2022 we saw Mark Zuckerberg’s Liberty Hill home sell for $31 million and former Secretary of State George Schultz’s penthouse condominiums sell for $29 million — all despite interest rate hikes from the Fed at the same time. There is money here and it’s been like this.
San Francisco has drawn entrepreneurs and innovators alike as it has done so since its founding. Population booms and housing crunches (and crises) have been as much a part of San Francisco as the fog has been. Because it’s been a boom town, it has attracted folks from far and wide seeking opportunity which has led to diverse architecture, housing patterns and market patterns as a result.
Combine the above draws with the fact that we’ve run out of room to build anything (not to mention the cost) the Bay Area's real estate market has been impact by a lot of policy-driven factors that make land a scarce commodity. Some of those policies relate to strong historic protections, property tax and capital gains tax policies that favor long-term ownership, rent control laws and heavily regulated building regulations that make construction contentious and difficult many times, all combine to make the place even more valuable than it would otherwise be.
Average Sale Price in San Francisco for the Past 3 Years
(all housing types)
Lesson No. 3
Property is Scarce and Inventory is Limited. It’s Also Seasonal
There are various reasons as to why so few homes come up for sale. Even during the height of the Pandemic we were edging towards a buyer’s market (which means there would be enough months’ supply to satisfy demand) but we never got there. Here are some of the reasons why:
- Geographic: we’re locked in by water
- Human-made: rent control and eviction control laws promote long tenancies
- Human-made 2: stringent planning and zoning requirements that allow a lot of community involvement cand drag on for years before permits for new construction or remodeling are approved
- Financial: taxes — property tax locks and long-term capital gains are two of the most common impediments to selling
- Affinity populations/destination setting: San Francisco means so many things for so many types of people. From a mild climate, an accepting climate, a climate of rich cultural traditions to a climate where people can get rich through the tech and biotech sectors among more, it’s a sought-after place to live in
Inventory Levels
(all property types)
BREAKING DOWN THE DATA
Let’s delve a bit deeper shall we? Condominiums are the most traded property type in San Francisco. Single-family houses are, of course, the bread and butter of any market as it is here.
FOR CONDOMINIUMS
ONE-BEDROOMS
TWO-BEDROOMS
THREE-BEDROOMS
CAN YOU PREDICT IT?
Growth in San Francisco has been around ever since it was nothing more than an adobe building. But when the prices are going up and when they decline to when they go up again is something that is a bit more unpredictable.
