Posted On: Monday, March 19, 2012 - 5:39pm | Posted By: Randall Kostick
Topics: Market Statistics | Tags: housing inventory, housing market
“You can’t time the market”- How many times have you heard that? The reason this adage is so enduring is because it is so true. Every time there is a change in the real estate market it seems to take buyers, sellers and even REALTORS® by surprise. It seems we all assume that the market will be the same tomorrow as it is today, yet we all know that’s just not how things work. There are few better examples of a cyclical market than real estate.
Every indicator that we’re seeing is telling us that the tides have already changed. For the first time since we entered the gloom of the downturn we are beginning to hear buyers say they think they may have “missed the bottom.” This is usually an utterance heard only after the bottom of a market has come and gone.
What is there to suggest that the market has already changed?
First, sales activity throughout the Bay Area is dramatically up. Although activity has been improving in San Francisco for some time now, the rest of our metropolitan area has not experienced the same comeback (until the last couple of months). Over the last thirty to sixty days, real estate offices are reporting multiple offers and over asking sales prices affecting all of our surrounding neighbors. In spite of the fact that many national and even state locations have yet to experience a rebound, the Bay Area is definitely coming alive!
Second, rising median sales prices. San Francisco prices have been flat to rising over the past two years (depending on the neighborhood). However, the uptick in prices for February alone was 6.5 percent citywide.
Third, if you haven’t heard already, we are experiencing a four-year low in “months supply of inventory,” which is a measure of how many months might be needed to sell out the current inventory at the current rate of sale. The supply side of this basic supply and demand statistic is illustrated in the above graph. It tracks the steady, substantial decrease in inventory over the last 18 months.
What’s causing these changes in the Bay Area and particularly in San Francisco?
At least part of the answer has to do with the incredible boom in technology development and the resulting strong employment environment that we enjoy. Have you experienced the lines outside of the restaurants serving lunch South of Market or the wait behind a Genentech bus as it picks up or drops off employees? Our housing market is host to a wave of new employees that are working for everybody from Facebook to Zynga to YouTube.
What’s it all mean?
With national economic indicators showing some very healthy signs and local economic factors creating a long-term foundation for a strong housing market, anyone who is “waiting for the market to improve” before they sell may be missing one of the most exciting seller’s markets in years. We currently have buyers who are wishing they had purchased a year ago. Will sellers be looking back at today’s sales environment a year from now and asking why they sat on the sidelines and watched a fabulous seller’s market pass them by? Good question!