Interpreting Real Estate Data

As most of the readers of this column know by now, I tend to write on what I feel is the most relevant real estate topic at the moment. I get my ideas from the people I talk with every day. If certain questions come up often, then that becomes the column of the month!

Lately, I have been getting many questions on published statistical reports and how the numbers relate to our marketplace. This is a confusing time for the real estate market as the number of sales is low, the mortgage rates are still high, but prices are moving up when the economic principle of supply and demand indicates that the prices should be coming down. The statistics just do not make sense.

Real estate is local, meaning there are pricing trends in neighborhoods that can run contrary to what is going on in nearby areas. For example, the San Francisco index consists of the nine counties in the Bay Area. But the pricing trend in San Francisco is very different from the pattern in the East Bay or North Bay. So, relying on the general combined data can lead to wrong conclusions.

How do you get local real-time data? This is important, especially if you are in the market and have to make some decisions about purchasing and price. I recommend that you work with a knowledgeable local real estate agent, ask him or her to provide you with up-to-date listing and sales data and perform your own analysis to convince yourself of the local conditions.

Agents are on the ground and in the field each and every day. We talk to buyers, sellers and other real estate professionals and have a good pulse on the market. The real estate market has been pretty active the first four months of 2024 with low inventories, much pent-up buyer demand and thus resulting in higher prices in certain areas.

Single family home prices in San Francisco are up about 8.2% from last year while down 11.2% from 2022. Prices of all properties sold are up 5.9% year over year, but down 6.9% from 2002. The number of sales has gone up 4.8% over last year, but down 35.4% from 2022. Listing inventory is up 8.3%, but down 29.9% from two years ago.

So, based on very limited initial data this year, the market appears to be turning up from the bottom despite mortgage rates staying stubbornly in the 6.75-7% level. The majority of listings I have seen this year have received multiple offers and sold for higher than asking prices. What is going to happen next?

From what I have seen, there is still an imbalance of buyers and sellers. That means quite a number of people are looking to buy and are unable to find what they are looking for. Though the listing inventory is up slightly over last year, it is still down quite a bit from years past, leading to competition on the inventory that does come on the market.

People often raise the question of how can buyers afford to pay the San Francisco prices? It is very difficult as our affordability index typically hovers about 15-20%, meaning the percentage of the population who can afford to buy the median-priced home in the City. With our robust economy and a fair share of high-paying jobs, our real estate market may pause, but it has always recovered.

We are in the midst of our spring selling season. There is still not enough supply to meet demand. In San Francisco, we only have a historically low one- to two-months’ supply of inventory on the market, meaning prices will not fall in the near future. I will continue to update you on the market throughout the year.

John M. Lee is a broker with Compass specializing in the Richmond and Sunset districts. If you have any real estate questions, call him at 415-465-0505 or email johnlee@isellsf.com.