Sunday, March 9, 2014

Striking it Rich near Gold(en) Gate Park

Prices of sold properties with performance data chart (click on charts to enlarge):

The annualized rate of growth extending back twenty years is an exceptional range of annualized compounded growth between 15% and 28%. Obviously, that was not the case every year, and is generally the challenge with projecting outcomes in less-than-one-year time frames. Some of the important differences between properties with different room counts are:

·        That 2 room properties have been the slowest to recover throughout the recent market cycle.
·        Since the mid 2000s, the rates of change between property sizes have begun to differ—where larger units (not surprisingly) began commanding more of a premium.
·        There appears to be stronger correlation and often very similar prices between 3 and 4 bedroom properties. This suggests better relative value with four bedroom properties.
·        The Inner Richmond region maintains a consistent price premium of 10% to 30% over Central Richmond, this is regardless of a specific time period.

But it’s equally important to pay attention to the technicals within the marketplace…

Looking only at the Inner Richmond district, below are the numbers for days on the market & premium selling price compared to listing:

What the above data indicates is:

·        Regardless of bedroom count, properties are selling within their long-term 40 day turnover rate.
·        Premium prices, too, are persisting once again: indicating that sellers have been able to command and obtain prices that they are seeking.
·        Three-bedroom properties (red line) in particular show the most stable, gradual movements over time: this is primarily due to these homes persistently making up the majority of sales. Therefore, the data seen on the 3-room options are one of the best proxies to use when studying the Richmond, at large.

Again, everything above is a technical understanding of who are the buyers and sellers within the San Francisco real estate marketplace. Fundamentally, as we have discussed in the past, there are very real economic and demographic justifications behind these numbers. Until next time.