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Quarterly Real Estate Report Q3 2015
Steven M. Gothelf
Broker Associate
THE MARKET IN UNDER A MINUTE
San Francisco
Q3 Market Pulse Video
Get a high-level look at what’s happening and what to expect in this insightful report into the San Francisco real estate market.
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NEIGHBORHOOD DATA
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San Francisco: Q3 Results
The third quarter ended on a strong note in San Francisco, with a substantial increase in available homes hitting the market after Labor Day. That was welcome news for buyers, who had endured exceptionally tight inventory levels all year long, and they took advantage of it. With more homes to choose from, sales jumped moderately, and bidding wars declined — along with buyer stress levels.

Buyers were active at all price points and across all neighborhoods. An uptick in sales in the city’s Bayview neighborhood was of particular note, as residents fed up with the spike in rental costs opted to buy homes and build equity. The city’s booming economy and high-paying jobs coupled with historically low interest rates made buying a home affordable even as sales prices continued to rise.

Looking Forward: As a world-class global city and a U.S. economic hub, San Francisco will see no shortage of homebuyers for the foreseeable future. Early signs suggest that the late-third-quarter boost in inventory and sales will continue well into the fourth quarter, keeping buyers and sellers busy right up to the holiday season. The winter months typically see a slowdown in sales, presenting an opportunity for savvy buyers and sellers to get a jump on the competition.
Median Sales Price
The median sales price represents the midpoint in the range of all prices paid. It indicates that half the prices paid were higher than this number, and half were lower. It is not the same measure as “average” sales price.
Single-Family Homes — Median Sales Price
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Condominiums — Median Sales Price
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Months’ Supply of Inventory
The months’ supply of inventory is a measure of how quickly the current supply of homes would be sold at the current sales rate, assuming no more homes came on the market. In general, an MSI below 4 is considered a seller’s market; between 4 and 6 is a balanced market; and above 6 is a buyer’s market.
Single-Family Homes — Months’ Supply of Inventory
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Condominiums — Months’ Supply of Inventory
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Average Days on the Market
Average days on the market is a measure that indicates the pace of sales activity. It tracks, on average, the number of days a listing is active until it reaches “pending” status, meaning all contingencies have been removed and both parties are just waiting to close.
Single-Family Homes — Average Days on the Market
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Condominiums — Average Days on the Market
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Percentage of Properties Under Contract
Percentage of properties under contract is a forward-looking indicator of sales activity. It tracks expected home sales before the paperwork is completed and the sale actually closes.
Single-Family Homes — Percentage of Properties Under Contract
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Condominiums — Percentage of Properties Under Contract
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Sales Price as a Percentage of Original Price
Measuring the sales price as a percentage of the final list price, which may include price reductions from the original list price, determines the success of a seller in receiving the hoped-for sales amount. It also indicates the level of sales activity in a region.
Single-Family Homes — Sales Price as a Percentage of Original Price
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Condominiums — Sales Price as a Percentage of Original Price
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FEATURE STORY
Most Bay Area All-Cash Buyers Are Putting Down Roots
Two-thirds of Pacific Union's all-cash buyers are purchasing homes as primary residences, while a smaller than expected percentage is employed by a tech company.

Those are among the key findings from an internal analysis of Pacific Union all-cash sales from Feb. 1 to June 30 of this year. We looked at 323 all-cash deals in eight of nine Bay Area counties (excluding Solano County) in an effort to learn more about this crucial segment of the market, which makes up about 30 percent of our firm's business.

Primary Homebuyers

Sixty-six percent of our firm's all-cash buyers purchased a home in the Bay Area as a primary residence. The overwhelming majority of these buyers are domestic, with foreign citizens accounting for just 6 percent of all-cash sales. Eighty percent of buyers in the tech industry purchased a home for a primary residence, a testament to the region's economic bread and butter. The majority of these tech buyers purchased homes in San Francisco and Silicon Valley.

However, of those 323 all-cash transactions, only 40 — 12 percent — were made by tech workers. Two-dozen of those sales occurred in the ultracompetitive San Francisco market, where all-cash buyers have a distinct edge over those who will require financing.

The other 82 percent of all-cash buyers were basically split in half between domestic white-collar professionals and those categorized as other.

Long- and Short-Term Investors

Investors were responsible for 34 percent of all-cash deals. These buyers purchased property with three strategies in mind: a long-term hold plan, a source of rental income, and flipping.

Twenty-four percent of all-cash investors purchased a property as a secondary home. Domestic investors accounted for 20 percent of these sales, while international and tech buyers represented the other 4 percent.

Seven percent of investors plan to take advantage of the high-dollar world of Bay Area rents by buying income-generating properties. These buyers are all wealthy Americans, and not a single one hailed from overseas. Flippers accounted for the final 3 percent of cash investors, an unsurprisingly small number given that the Bay Area's hefty home prices can make for relatively slim profit margins.

Tech and International Buyers Paying More

As a final note of interest, our analysis shows that although international and tech-industry buyers accounted for just 18 percent of Pacific Union's all-cash sales, these buyer groups tend to spend substantially more on homes.

Domestic other and professional buyers paid average sales prices of $1.32 million and $1.68 million, respectively. For all international buyers, the average sales price was $2.26 million, with Chinese buyers spending $2.66 million. Techies had the highest average sales price of any of the buyer groups, at $2.78 million.

Editor's Note: Pacific Union has an approximate market share of 10 percent in the Bay Area, with a much larger market share in certain areas (such as San Francisco's Marina neighborhood) than others (such as the Mission District), so the results of this analysis might differ if a 100 percent sample size were taken.

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Steven M. Gothelf
Broker Associate
415.345.3063
sgothelf@pacunion.com
www.SteveGothelf.com
1699 Van Ness Avenue
San Francisco, CA 94109
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