Recent reports show San Francisco real estate prices rising, partly due to a reduction in housing inventory. It’s a blip on the EKG of an otherwise flat-lining housing market.
The Alamo Square neighborhood of San Francisco
On Monday, real estate analytics firm Altos Research released its latest market report. The company’s “Real-Time Housing Market Update” focuses on the same 20 metro areas featured in the S&P/Case-Shiller Home Price Index. Their latest data shows that home prices in San Francisco rose 2.34 percent in June, compared to the previous month.
That’s not a big leap by any means. But it was the second largest increase of all 20 metro areas included in the report.
San Francisco took the lead in the three-month category. Based on data for April, May and June, San Francisco home prices rose by 5.75 percent. This was the largest three-month increase of all 20 cities contained in the report.
Inventory Reduction Supports Prices
San Francisco stood out in other ways, as well. The city had the second largest inventory reduction of all 20 metro areas tracked by Altos Research. If this trend continues, it could put continued upward pressure on San Francisco real estate prices. This is good news for homeowners who have lost significant equity since the housing market crashed.
In most real estate markets across the country, excessive inventory is the biggest drag on home prices. Mortgage rates are low, and homes are more affordable than they’ve been in years. But high inventories have been pushing prices south, making potential buyers wary about taking the plunge.
If you take the falling prices out of this equation, you have a perfect scenario for buyers and investors — low mortgage rates, and low (but rising) home prices. This is how things are shaping up in the San Francisco real estate market.
Granted, most housing analysts are predicting a long and flat bottom for housing markets — San Francisco included. But when the patient has been in a coma for years, any sign of life is worth noting.
San Francisco Home Prices in Second Half of 2011
On July 8, 2011, real estate valuation firm Clear Capital released a report showing home-price trends and forecasts for 50 U.S. cities. Their predictions were mostly gloomy for the second half of 2011, with a few exceptions. San Francisco was one of the exceptions. It was one of only five metro areas where home prices were predicted to rise in the second half of 2011 (New York, Dallas, Orlando, and Washington, D.C. were the other four).
Stated differently, San Francisco was in the ten-percent club. The other ninety percent of the metro housing markets tracked by Clear Capital were predicted to see flat or declining home prices for the rest of this year.
The Truckee, California-based company expects San Francisco home prices to rise by 0.2 percent between July and December of this year. It’s a small number by any yardstick. But given the price erosion predicted for the rest of the country, it’s a noteworthy number.
Jump in Home Sales – May to June 2011
We also witnessed an unexpected jump in home sales in San Francisco, from May to June. Bay Area home sales rose by 14.5 percent during that month-over-month period. This marked the highest level of home sales since June 2010 (when the home-buyer tax credits were expiring).
DataQuick president John Walsh pointed to a number of factors that could have caused the spike: “June likely benefited from a combination of factors, such as price reductions, low mortgage rates and perhaps a batch of short sale transactions from spring that took months to close.”