San Francisco Luxury House, Luxury Condo, Co-op & TIC Markets - February 2018

San Francisco Luxury House
& Luxury Condo, Co-op & TIC Markets

Prices, Conditions & Market Trends
Updated Report February 2018

As seen in the chart above, so far in 2018, San Francisco luxury home sales have been very strong, higher than in any previous year since the recovery began in 2012. The recent stock market volatility notwithstanding, the economic confidence that has been sweeping the nation is also showing up in our luxury home markets. For example, as of February 16th, the sales of condos, co-ops and TICs at prices of $2m and above has jumped 55% in the city, year over year, and luxury houses by 19%. Note that year-to-date data is very preliminary and much more will be known once the spring selling season really gets started in earnest. Also, if the recent financial market volatility continues and becomes even more dramatic, that may cool high-end home markets (and IPO activity) as it has in the past.

However behind the positive sales statistics, inventory statistics provide a note of caution, especially for what we call the ultra-luxury home segments: houses selling for $5m+ and condos and co-ops selling for $3m+. In those segments, the supply of listings has been surging well beyond demand, and many of these listings are expiring without selling. As an example, ultra-luxury home sales make up about 2.5% of total sales, but as of February 24th, they made up 12% of active San Francisco home listings (no offer accepted). It appears some sellers are getting a bit over-exuberant regarding the value of their beautiful homes. This is illustrated in the 2 charts below.





Just because a luxury market segment is notated as being in buyer-advantage market territory does not mean that some listings do not sell very quickly for well over asking price, as some certainly do. On the other hand, there are listings in the lower, seller-advantage price segments that are overpriced and ignored. Ultimately in real estate, it all depends on the specific property, its specific location, its appeal, preparation, marketing and pricing. Different neighborhoods are often experiencing very different market conditions in the city, some much stronger than others - especially in the luxury homes segments. This is discussed in greater detail later in the report.

How the 2018 market plays out depends on a number of factors that are susceptible to change: financial markets, interest rates, the course of the high-tech boom, whether our big, local start-ups proceed with IPOs, political developments, and so on. For the time being, the San Francisco market appears to be off to a heated start characterized by robust demand. Here at Paragon, our 2018 San Francisco sales volume is up 30% year over year, though admittedly we are outperforming the general market, which is up about 5%.

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Most analyses below are based on 6-month or 12-month rolling figures as those typically provide a better illustration of the general direction of market trends (using larger data sets), as opposed to common monthly fluctuations (based on very small data sets). Each data point is these cases reflects the average or median statistic for the 6 or 12 month period.


Overview: Luxury Home Listing & Sales Volumes
All houses priced $3m+; All condos, co-ops, TICs priced $2m+

Active Listings on Market since 2005



Sales Volume since 2005




Overview: Ultra-Luxury Listings & Sales Volumes
Houses priced $5m+; Condos, co-ops, TICs priced $3m+

Active Listings on Market since 2005



Sales Volume since 2005



The charts above illustrate overall listing and sales volume trends for 1) in the top 2 charts, the entire luxury home market, and then, 2) in the bottom 2 charts, specifically for the more costly ultra-luxury segment. There are some significant differences between the luxury condo and house markets, but, generally speaking, luxury home sales soared since the recovery began in 2012, cooled a bit in late 2015 (financial market volatility, as well as jump in new-luxury-condo construction), and then bounced back in late 2016 and 2017. The inventory of active listings on the market has risen considerably in the past 2 years, which has appreciably altered supply and demand dynamics. As a point of comparison, in the more affordable home segments (especially for houses), supply has not risen, and indeed has declined in some areas, and inventory is still very inadequate when compared to the heated demand.

Further down in this report, we deconstruct the luxury markets further by property type, price segment (expensive vs. very expensive) and by neighborhood, and that is where some interesting and sometimes dramatically diverging trends come to light.

In this analysis, charts will sometimes use different price thresholds for the luxury designation, depending on when the chart was first created, or whether different property types are being mixed together. Right now, we consider that luxury condos, co-ops & TICs start at about $2m, and luxury houses at $3m - that is roughly the top 10% of their markets. What we call ultra-luxury adds another $1m to condo sales prices, and another $2m to houses, and constitutes about the top 2.5%.

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This report is broken down in 5 sections: Market seasonality;
the luxury house market; the luxury condo & co-op market;
overview annual trends; and pricing and price reductions.

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Market Seasonality

The real estate market in San Francisco is noticeably affected by seasonality with significant ebbs and flows in activity, but the luxury home segment is drastically affected. As illustrated by these 2 charts below, the high-price market wakes up and heats up as the new year gets going, with spring typically being the most active season overall for sales. It then slows way down in mid-summer, spikes back up dramatically for the short autumn selling season, and then plunges for the mid-winter holiday period.

Note the delay between new listings coming on market and listings accepting offers: For example, September is typically the single month with the highest number of new listings, leading to the big October spike of listings going into contract. Sales then usually close 3 to 5 weeks after going into contract.





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New Listings Coming on Market
Long-Term Trends since 2005, 12-Month Rolling Figures

Obviously, the supply of luxury homes available to purchase plays a huge roll in market dynamics. Supply is affected by 3 large factors: 1) the number of new listings coming on market, 2) how quickly these new listings sell, and 3) how many listings are taken off the market because they cannot find buyers (expired and withdrawn listings). The chart below looks at longer term trends for new listing activity: The number of new listings hitting the market accelerated in early 2016 as the luxury segment was cooling due to financial market volatility (Chinese stock market crash, oil price crash, Brexit vote).



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San Francisco Luxury HOUSE Market Analysis

The following charts drill down specifically on the luxury $3m to $4.99m market, and then the ultra-luxury $5m+ house market, and also break out statistics on the top neighborhood districts for these sales.

Overview: Luxury House Sales Trends since 2012




The next two charts illustrate how the growth in supply (active listings) over the last 3 years started to outpace the growth in demand (closed sales). A softening in the supply and demand equation, and the reduction in bidding competition between buyers, reduces pressure on price appreciation. Conversely, in the non-luxury, more affordable market segments, supply has continued to dwindle over recent years amid feverish buyer demand (lots of bidding wars), which has continued to push those prices up.

Luxury Houses - Priced $3m to $4.99m
Active listings vs. Sales since 2005




Ultra-Luxury Houses - Priced $5m+
Active listings vs. Sales since 2005




Overview: Average Dollar per Square Foot Values




Months Supply of Inventory (MSI)

This 6-month rolling, months supply of inventory chart illustrates 2 things: 1) that, not surprisingly, the lesser expensive end of the luxury house segment has a stronger demand vs. supply dynamic than the ultra-luxury segment (as shown by lower MSI figures), and 2) the autumn 2017 sales season was quite hot, which led MSI figures to drop precipitately, especially in the $3m to $4.99m segment. Much of the drop in December and January is due to sellers pulling their listings off the market for the holiday season: We will now have to wait to see what occurs in the spring selling season, typically the most active of the year.




Luxury House Market by San Francisco District



The Pacific Heights-Marina district still has the highest number of active house listings priced $3m and above (the blue line in the first chart below), but in 2017, the central district of greater Noe, Eureka & Cole Valleys took the lead, by a nose, in the number of sales. (Chart above and the red line in the second chart below.) The staggering growth in luxury house sales in this district since 2012 has been supercharged by the high-tech boom: Its younger, very affluent, high-tech demographic likes the lower key ambiance and demographic mix of these neighborhoods, and their proximity to both the liveliness of the Mission district and to highways south to the peninsula. This district dominates the $3m to $5m price segment, though sales above that are still relatively rare.


Active Listings by District




Sales Volume by District




Ultra-Luxury House Sales by District

The northern Pacific & Presidio Heights, Cow Hollow & Marina district still completely dominates the market for ultra-luxury houses priced $5m & above. Not shown on chart: A very small number of ultra-luxury house sales also occurs in the Russian, Nob and Telegraph Hills district (but are vastly outnumbered by condo and co-op sales there).




Overview: Expired/Withdrawn Listings (no sale)




Listings Not Selling (Expired/Withdrawn) vs. Sales

When the number of listings expiring or being withdrawn from the market without selling (the red bars) starts to elongate in comparison to the number of listings selling (the blue bars), that typically signifies that sellers want more money than buyers are willing to pay, and/or that the inherent demand for homes of that price in that area is too small to digest the inventory of listings for sale. The example that stands out in this chart is the segment for ultra-luxury houses in the greater Noe, Eureka & Cole Valleys district: More $5m+ listings expired or were withdrawn without selling than actually sold.

Note that listings that expire or withdrawn sometimes come back on the market at lower prices, and then sell.




Average Dollar per Square Foot by District

By far the highest average dollar per square foot values for luxury houses is found in Pacific & Presidio Heights, Cow Hollow & Marina, generally ranging recently in the $1400 to $1500 range. The other areas with established luxury house markets are generally seeing values in the range of $1000 to $1125 dollar per square foot. The St. Francis Wood district has seen a big surge over the past 18 months, with values jumping from around $800 to over $1000.

Remember that averages almost always disguise an enormous range of values in the underlying individual sales. How an average or median value statistic applies to any particular property is impossible to say without a specific, tailored comparative market analysis.




Pacific & Presidio Heights
Median Sales Price Trends

Full of mansions with Golden Gate Bridge views, this is
the most expensive house market in San Francisco.




Noe, Eureka (Castro) & Cole Valleys
Luxury House Sales Trends

Over the past 6 years, the fastest growing luxury
house market in the city.



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San Francisco Luxury CONDO Market Analysis
Includes co-op and TIC sales as well

The following charts drill down specifically on the luxury $2m to $2.99m market, and then the ultra-luxury $3m+ condo, co-op and TIC market, and also break out statistics on the top neighborhood districts for these sales. These analyses are generated by listings and sales reported to MLS.

Note that it is somewhat more difficult to analyze this market, because of the high numbers of new-construction luxury condos coming on market in recent years (with many more on the way). The new-condo projects sometimes put their expensive condo listings into MLS, but often do not. They sometimes report their sales to MLS, but often do not. Since they often keep their sales activity close to their chests, we often do not know exactly is going on once these projects open their sales offices. However, it is clear that the surge of these very expensive listings is playing a big role in the market, since they swell the supply of listings available to buy for a relatively small number of very affluent buyers. New luxury condo construction is a huge factor in the market dynamics of this segment, especially in the areas in which new construction is heavily concentrated, such as in the greater South Beach-SoMa district.

Overview: Luxury Condo Sales Trends since 2012




The next two charts illustrate how the growth in supply (active listings) in the last 3 years started to outpace the growth in demand (closed sales), especially in the ultra-luxury $3m+ condo segment, which is by far the softest market segment in the city. When this occurs, the need to price correctly right from the moment of going on market becomes an imperative for sellers.

A wildcard in this dynamic are the new ultra-luxury condo projects currently on market, under construction and planned. San Francisco is in the midst of an unparalleled building boom for extremely costly (and gorgeous) condos, often with staggering views. One has to wonder: Are there really enough buyers for these new $3m to $5m+ condos to absorb the increasing supply? Presumably, developers are confident that there are. Some developers do not publish sales activity figures, especially in the marketing period before construction is completed, so it is difficult to have a precise picture of current demand. However, it appears that sales have been strongest in newly built projects in established, prestige neighborhoods where new construction is relatively rare, such as Pacific Heights and Russian Hill, as opposed to areas where new high-rise projects have been and are being built in significant numbers.






Overview: Average Dollar per Square Foot Values




Months Supply of Inventory (MSI)

This 6-month rolling, months supply of inventory chart illustrates 1 thing in particular: For the past 18 months, the MSI for ultra-luxury condos has ranged between 7.2 and 9.2 months of inventory, which signifies a supply above current demand for such properties. This does not include new-project condos not listed in MLS, which, if included, would almost certainly swell these MSI figures further - and there are other large, ultra-luxury, new-condo projects in the works. Much of the drop in December and January is due to sellers pulling their listings off the market for the holiday season: We will now have to wait to see what occurs in the spring selling season, typically the most active of the year.




Luxury Condo Market by San Francisco District
Includes co-op and TIC listings and sales




Active Listings by District

The greater South Beach, SoMa, Mission district has by far the highest number of active luxury condo listings in the city. This district is where most of the largest, luxury condo construction projects have been clustered.




Sales Volume by District

The older, high-prestige neighborhoods running across the north of the city from Pacific & Presidio Heights-Marina through Russian, Nob and Telegraph Hills have been dominating the sales of luxury and ultra-luxury condos (the top 2 lines in the next 2 charts). The greater South Beach, SoMa, Yerba Buena, Potrero Hill and Mission district comes next.






Average Dollar per Square Foot by District
Condo sales only

The average dollar per square foot values for luxury condos in the big 3 districts for such sales are currently clustered in the $1400 to $1600 range. In the Noe, Eureka & Cole Valleys district, the average is hovering around $1100 per square foot (which also applies to the Hayes Valley, NoPa and Lower Pacific Heights district, which does not appear on this chart).

Remember that averages almost always disguise an enormous range of values in the underlying individual sales. How an average or median value statistic applies to any particular property is impossible to say without a specific, tailored comparative market analysis.




Overview: Expired/Withdrawn Listings (no sale)




Listings Not Selling (Expired/Withdrawn) vs. Sales

When the number of listings expiring or being withdrawn from the market without selling (the red bars) starts to elongate in comparison to the number of listings selling (the green bars), that typically signifies that sellers want more money than buyers are willing to pay, and/or that the inherent demand for homes of that price in that area is too small to digest the inventory of listings for sale. The examples that stand out in this chart are the luxury, and, especially, ultra-luxury condo segments in the South Beach, SoMa, Yerba Buena area. We believe there are 2 main factors here: 1) the large increase in supply from new luxury and ultra-luxury condo projects coming on market, and 2) the widespread negative press on the leaning/sinking problems at the Millennium Tower - even though the issues there are specific to the building (and there are hopes that a solution has now been found), they seem to have dampened demand in the surrounding area as well. That dampening effect may already be starting to fade.

Note that listings that expire or withdrawn sometimes come back on the market at lower prices, and then sell. And new-construction projects will sometimes list a luxury condo in MLS, which then expires without selling, but when the unit does ultimately sell, the sale is not reported to MLS.




Days on Market & MSI by District

These next two charts echo the chart above: As measured by both average days on market, and months supply of inventory, the greater South Beach-SoMa district (where new construction has swollen supply at the same time the problems at the Millennium Tower has dampened demand) is the softest luxury condo market in the city: It is well into buyer-advantage territory. However, its statistics have been markedly improving since mid-2017. The Pacific Heights-Marina and the Noe, Eureka & Cole Valleys districts are in seller-advantage territory, and the Russian, Nob and Telegraph Hills district is somewhere in the middle.






Pacific & Presidio Heights, Cow Hollow & Marina
Luxury Condo Sales Trends




Russian, Nob & Telegraph Hills
Luxury Condo Sales Trends




Noe, Eureka (Castro) & Cole Valleys
Luxury Condo Sales Trends




South Beach, SoMa, Potrero Hill, Mission
Luxury Condo Sales Trends



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Annual Changes in Classic Market Statistics

The next 6 charts compare year-over-year changes in annual statistics measuring the heat of the market: How quickly do luxury home listings sell (i.e. accept offers)? What percentage of listings sell quickly? Of those listings that sell quickly, how do sales prices compare to asking prices, i.e. average overbidding percentages? What percentage of listings sell for over the final list price? And how many listings expire or are withdrawn without selling?

Generally speaking, the statistics remain generally flat from 2016 to 2017, or reflect the market getting a little bit stronger year over year, but weaker than in 2015, which was the most recent peak in market heat (i.e. demand vs. supply). However, as noted earlier in this report, the number of actual sales in 2017 was higher than in 2015, fueled by an even larger jump in listings.

Average Days on Market




Percentage of Sales Occurring within 30 Days

Though still historically high, the percentage of listings which sell that sell quickly has dropped since the peak in 2015. However, this reduction does not take into account the increasing number of listings that are not selling at all (i.e. expired/withdrawn listings), which would effectively reduce these percentages further.




The below chart reflects overbidding for only those listings selling within 30 days.
If priced well and appealing, buyers are often still competing for the purchase.




Average Overbidding Percentages - All Sales




Percentage of Sales over Final List Price
(Not adjusted for listings that do not sell)




Expired/Withdrawn (No Sale) Listings

The number of listings expiring or being withdrawn instead of selling
has shot up in the last 2 years.



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Listings Selling Quickly; Selling after Price Reductions;
or Not Selling at All

This first chart below, combining luxury homes of all types, illustrates the differences between those listings the market deems attractive and well-priced - on average, selling quickly for over asking price - and those listings that have to go through price reductions before selling, and then those listings that do not sell at all, but instead expire or are withdrawn from the market.

The second chart below compares the median asking prices, sales prices, and expired/withdrawn (no sale) prices.




Median list prices for those listings that do not sell, are significantly higher than
the median list prices of those that do - which suggests overpricing as a major factor.