Typically the real estate market takes a breath in January and February. Very little takes place until after the Super Bowl. It might be because historically we’ve been a football-crazed society that finds watching playoff games on Sunday afternoons more enjoyable than attending open houses.
Or it might be because homes are less attractive in the dead of winter, when the weather can be gloomy, and on occasion, downright nasty.
In any event, it gives real estate agents a break before the spring selling season. It’s a time to recharge, reorganize, and plan for what’s ahead in the coming months. This year, they might need this brief respite more than ever.
A recent Redfin report said that buyers need to earn $402,821 a year to pay San Francisco’s typical $10,071 monthly mortgage payment, up 33.6 percent from a year ago. That’s a big jump and a boatload of money.
The silver lining, if there is one, is that in contrast buyers in 40 of the 93 metros included in Redfin’s analysis need to earn at least 50 percent more income to afford a home than they did a year ago. They need to earn at least 30 percent more in all 93 metros.
This is due to the fact that mortgage rates have more than doubled over the last 12 months. Even though home prices have fallen in many places, including San Francisco, home prices are still persistently high — and that’s why more income is required.
As a matter of fact, in a second report, Redfin said that home sale prices fell year-over-year in 20 of the 50 most populous United States’ metros. By comparison, 11 metros saw price declines a month earlier.
The typical United States’ home sold for $351,250 during the four weeks ending Jan. 8. That’s up 0.8 percent from a year earlier, but down about 10 percent from the June peak.
Meanwhile, San Francisco’s December numbers reveal dramatic changes in the market year-over-year.
According to the San Francisco Association of Realtors, the median price for a single family home in the city in December was $1,625,000 — down 5.8 percent from December 2021. The median price for a condominium in December was $989,000 — down 23.9 percent from the previous year.
Days on market increased to 30 days for single family homes, and to 63 days for condos in December, up 114.3 percent and 85.3 percent respectively year-over-year.
Active listings for single-family homes were down 18.1 percent, and 30.6 percent for condos in December in comparison to the previous year. Sold listings for single-family homes were down 36.5 percent, and an astounding 59 percent for condos during the same period.
One last very revealing figure: According to the SFAR, the median percent of list price received for single-family homes reached an all-time high in April 2022, climbing to 123.3 percent. Just a few months later, in December, that number had dropped all the way back down to 100.1 percent — down 9.9 percent even from the previous year.
THE DIFFERENCE A YEAR MAKES
That’s a lot of numbers, but they all point to the same thing. The market has shifted dramatically in the past 12 months. If you can afford to buy a home, there are bargains out there, especially if you’re looking for a condominium.
According to Redfin, there are signs that early-stage demand is up.
“We’re entering 2023 with positive economic news: The latest consumer price index report confirms that the worst of inflation is behind us. That means the Fed is likely to continue easing its interest-rate increases, which should cause mortgage rates to continue gradually declining. This could bring back some homebuyers in the coming months,” said Redfin Deputy Chief Economist Taylor Marr.
“We’ve already seen an uptick in people initiating home searches. Although those house hunters haven’t yet turned into buyers, they may soon, given that monthly mortgage payments are notably down from their peak and the latest inflation and employment data lower the chances of a recession.”
The real estate agents quoted in a recent San Francisco Business Times story were generally optimistic about the months ahead. They acknowledge that late 2022 was a grind, but seem to believe that after a sluggish start, there may be a more normalizing market in San Francisco by early spring.
The agents tend to believe that buyers with money are out there — it’s just that they are not willing to make offers as of yet. Give them time, and a little more economic certainty, and they’ll be back.
Keep in mind Realtors are by nature an optimistic bunch. Sometimes, there is no more important attribute than that.
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