San Francisco Real Estate: a Year-Over-Year Study, Part II

We continue today with ZipRealty’s analysis of the San Francisco real estate market in a year-over-year in-depth study. Today we’ll look at prices: both asking and selling, and reductions in prices of MLS listed properties. We’ll also look at days on the market.

1. List Price Vs. Sell Price

In general, selling prices are more telling than asking prices, because what a property sells for reflects its “worth” to buyers on the market better than what the seller hopes for.

That’s why this next chart is so interesting. Here, Zip has calculated the sell/ask ratio of San Francisco homes for sale in the past two years. The sell/ask ratio is calculated by dividing the median selling price by the median asking price in each month. A sell/ask ratio of 100% means that most properties sell approximately for their respective asking prices. A ratio above 100% indicates that a median home sells for above asking price. A low ratio below 100% may point to lowering market prices when most properties sell for prices below asking.

Here is SF’s sell/ask ratio:

While the line graph shows quite a few ups and downs, the market has ultimately landed where it started at the beginning of the study in 2009. Such a landing is certainly a softer one than some less fortunate American local markets have experienced in this same time period.

2. Price Reductions and/or increases

In recording home sale activity, Zip also tracks prices: whether they stay at original list, are reduced or in some case actually increase (the latter, though rare, does indeed happen, and is more likely to happen in a place like San Francisco where real estate in general still enjoys a competitive buyer pool).

This chart illustrates the market’s sale structure in terms of the price changes. Each transaction has been recorded with indication of whether the property has been sold at the initial price, increased or reduced. The total transactions are plotted in 100% scale, and each bar represents the percentages out of total.

During the last 2 years, the sales with price reduction have had some fluctuations from 20% to 44% of all transactions, while sales with price increases contributed small portion of the sales, approximately 1% – 5%. Keep in mind that price reductions and price increases are not related to differences between ask and sell prices. These data relate to the list price before it actually sells at all.

3. Days on the Market (DOM)

Another telling feature of real estate health is the number of days on the market a particular property must sit before it finally sells. Obviously, the fewer days, the better for the seller. So, when overall, a region reports fewer days on the market (DOM) than the national average, that region could be considered the sort of market that serves the seller more than it does the buyer.

SF’s DOM over the past 20 months:

Here both average and median days has been plotted, because average days on market is normally higher than median days on market because of “outlier” properties that take a lot longer to sell than properties centrally located, or otherwise situated in more “desirable” neighborhoods which take less time to sell. The median value, therefore, is a predictor of how long a randomly picked listing is likely to stay on the market. This latter value then helps buyers and sellers understand the market better. If, for instance, a home sits longer than the median DOM, the seller may need to reduce the price. The buyer meanwhile can use DOM to assess if a lower offer might be welcome.

Again here SF shows that over nearly two years, both the median and average DOM values have fluctuated, but are currently lower than they were at the beginning of the studied period. The data then, together with that we saw on Monday, attest to the incredible endurance and overall health of San Francisco real estate.

Other resources:
San Francisco Real Estate: a Year-Over-Year Study, Part I
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