Tag: May 2023

This report will generally look at Bay Area home markets of $5 million+, or, depending on the analysis, at large, higher-price homes of 4000+ square feet. Generally speaking, luxury home sales soared from spring 2020, when the pandemic hit, through spring 2022 (the “pandemic boom”). Economic changes then caused the market to cool rapidly in the 2nd half. In early 2023, buyer demand began to rebound and sales to climb again. On a year-over-year basis, sales are still running far below levels seen last spring at the peak of the pandemic boom, but somewhat higher than before the pandemic. Activity continues to accelerate as we get deeper into the spring selling season.

In more affordable price segments, the number of new listings coming on market has generally dropped considerably since large interest rate increases began in early 2022 – this is mostly ascribed to the “mortgage lock-in effect” – but the number of new $5m+ listings in April 2023 was slightly higher year-over-year. Over 540 Bay Area $5m+ homes are now posted to MLS (plus others marketed off-MLS): About a 7 month supply of inventory at the current rate of sale. This substantially changes supply and demand dynamics, with buyers having a much greater choice of listings than in other price segments. For sellers, this means correct pricing is critical.

Within the inner Bay Area, activity in the luxury market typically climbs rapidly through spring, slows in summer, spikes back up in fall (usually with a large surge of new listings in September), and then plunges for the mid-winter holidays. But counties with large second-home markets, such as Napa and Sonoma, can see activity peak in summer with gradual declines thereafter.

What constitutes a “luxury” home is, of course, a matter of opinion, and factoring in the large differences in values by location, varies widely across the Bay Area. What one gets for however many millions of dollars in any specific city, town or neighborhood varies enormously, and in some locations, $5 million will purchase a huge, immaculate mansion on a 10+ acre estate; in others, a “fixer-upper.” In some Bay Area counties, the threshold for “luxury” home prices could easily be set at $3,000,000, or lower. In real estate, and especially in the market for very special, very expensive homes and estates, the devil is alwaysin the details.

Statistics are very general indicators, and how they apply to any particular property is unknown without a specific comparative market analysis. Data from sources deemed reliable, but may contain errors and subject to revision. All numbers are approximate.

Median Sales Price is that price at which half the properties sold for more and half for less. It may be affected by economic events, by changes in inventory and buying trends – especially in the new construction and luxury home segments – as well as by changes in fair market value. The median sales price for an area will often conceal an enormous variety of sales prices in the underlying individual sales.

Dollar per Square Foot is based upon the home’s interior living space and does not include garages, unfinished attics and basements, rooms built without permit, patios, decks or yards (though all those can add value to a home). These figures are usually derived from appraisals or tax records, but can be measured in different ways, are sometimes unreliable (especially for older homes) or unreported altogether. The calculation can only be made on those home sales that reported square footage. Generally speaking, all things being equal, a larger home will sell at a lower dollar per square foot value. Increasing lot sizes, not uncommon in luxury home sales, complicate this calculation.

Typically, the fewer the sales, the less reliable the statistic. This is especially true of areas with sales across a very wide range of individual sales prices, such as is often the case in the most expensive market segments. Longer term trends are more meaningful than short term fluctuations. Data from activity reported to NorCal MLS Alliance, supplemented at times by non-MLS sales data reported in the media. It may contain errors and is subject to revision. All numbers in this analysis are to be considered approximate. How these statistics apply to any particular home is impossible to know without a specific comparative market analysis.

Compass is a real estate broker licensed by the State of California, DRE 01527235. Equal Housing Opportunity. This report has been prepared solely for information purposes. The information herein is based on or derived from information generally available to the public and/or from sources believed to be reliable. No representation or warranty can be given with respect to the accuracy or completeness of the information. Compass disclaims any and all liability relating to this report, including without limitation any express or implied representations or warranties for statements contained in, and omissions from, the report. Nothing contained herein is intended to be or should be read as any regulatory, legal, tax, accounting or other advice and Compass does not provide such advice. All opinions are subject to change without notice. Compass makes no representation regarding the accuracy of any statements regarding any references to the laws, statutes or regulations of any state are those of the author(s). Past performance is no guarantee of future results.

The Spring Market Continues to Recover

The specifics for San Francisco will be covered in great detail within this report. But looking at the overall Bay Area, buyer demand has continued to rebound from its late-2022 nadir. Though mortgage applications are still well down year over year, many buyers have accepted higher interest rates as the new normal and decided to move forward – and, in the last 2 months, rates have been trending downward. A significant minority of buyers are paying all-cash. Open houses are seeing increased traffic, more listings are selling, and selling more quickly with multiple offers. Median sales prices have generally been ticking back up in 2023, though still down across the Bay Area from the market peak last spring. San Francisco was more negatively affected by the pandemic – with lower rates of appreciation during the pandemic boom – and due to its specific economic circumstances has typically seen somewhat larger price declines since the market shifted in mid-2022.

Even with the increase in demand, sales activity remains far below last spring due to a number of economic and supply constraints. While increasing from mid-winter lows – with some very big sales occurring – luxury home sales volumes have generally seen larger declines as compared to the peak of the pandemic boom, when luxury sales often hit spectacular new highs.
The number of new listings has also dropped from historic norms. This is mostly ascribed to the “mortgage lock-in effect,” i.e. owners with very low, long-term, fixed-rate mortgages are reluctant to sell to then buy at much higher prevailing rates. This decline in new listings has major ramifications for supply and demand dynamics, and increases pressure on prices even in a reduced activity environment.

Some uncertainty clearly continues with inflation, interest rates, stock markets, bank crises, high-tech layoffs, and now, as of early May, federal debt-limit negotiations. But, so far, the 2023 housing market has mostly been moving in a positive direction.

Report created in good faith with data from sources deemed reliable, but may contain errors and subject to revision. Please see notes at end of report.

Statistics are generalities, essentially summaries of widely disparate data generated by dozens, hundreds or thousands of unique, individual sales occurring within different time periods. They are best seen not as precise measurements, but as broad, comparative indicators, with reasonable margins of error. Anomalous fluctuations in statistics are not uncommon, especially in smaller, expensive market segments. Last period data should be considered estimates that may change with late-reported data. Different analytics programs sometimes define statistics – such as “active listings,” “days on market,” and “months supply of inventory” – differently: what is most meaningful are not specific calculations but the trends they illustrate. Most listing and sales data derives from the local or regional multi-listing service (MLS) of the area specified in the analysis, but not all listings or sales are reported to MLS and these won’t be reflected in the data. “Homes” signifies real-property, single-household housing units: houses, condos, co-ops, townhouses, duets and TICs (but not mobile homes), as applicable to each market. City/town names refer specifically to the named cities and towns, unless otherwise delineated. Multi-county metro areas will be specified as such. Data from sources deemed reliable, but may contain errors and subject to revision. All numbers to be considered approximate.

Many aspects of value cannot be adequately reflected in median and average statistics: curb appeal, age, condition, amenities, views, lot size, quality of outdoor space, “bonus” rooms, additional parking, quality of location within the neighborhood, and so on. How any of these statistics apply to any particular home is unknown without a specific comparative market analysis. Median Sales Price is that price at which half the properties sold for more and half for less. It may be affected by seasonality, “unusual” events, or changes in inventory and buying trends, as well as by changes in fair market value. The median sales price for an area will often conceal an enormous variety of sales prices in the underlying individual sales.

Dollar per Square Foot is based upon the home’s interior living space and does not include garages, unfinished attics and basements, rooms built without permit, patios, decks or yards (though all those can add value to a home). These figures are usually derived from appraisals or tax records, but are sometimes unreliable (especially for older homes) or unreported altogether. The calculation can only be made on those home sales that reported square footage.

Compass is a real estate broker licensed by the State of California, DRE 01527235. Equal Housing Opportunity. This report has been prepared solely for information purposes. The information herein is based on or derived from information generally available to the public and/or from sources believed to be reliable. No representation or warranty can be given with respect to the accuracy or completeness of the information. Compass disclaims any and all liability relating to this report, including without limitation any express or implied representations or warranties for statements contained in, and omissions from, the report. Nothing contained herein is intended to be or should be read as any regulatory, legal, tax, accounting or other advice and Compass does not provide such advice. All opinions are subject to change without notice. Compass makes no representation regarding the accuracy of any statements regarding any references to the laws, statutes or regulations of any state are those of the author(s). Past performance is no guarantee of future results.