Healthy Rise in Pending Home Sales Points to More Robust Rebound in Home Sales in San Francisco in Coming Months

Healthy Rise in Pending Home Sales Points to More Robust Rebound in Home Sales in San Francisco in Coming Months

Pending home sales activity in San Francisco increased 8.9 percent during the month of February which should result in stronger homes sales in coming months, according to the most recent Market Focus report issued jointly by the Rosen Consulting Group and the San Francisco Association of REALTORS®.

The current pending sales rate equates to a 2.6 months of supply inventory. The single-family months of supply inventory declined across price segments, with the months of supply inventory for homes priced greater than $1.2 million showing the greatest improvement, declining to 2.2 months from 2.9 months in February 2010. Though stringent mortgage lending standards continue to keep potential homebuyers out of the market, mortgage rates have reverted to the sub-5 percent range in recent weeks, supporting higher affordability levels. Foreclosures and short sales make up a much smaller proportion of sales in San Francisco than other areas of the country. Despite this, in February 2011, the median sales price of a single-family home declined by 7.2 percent year-over-year to $645,000. Closed sales also contracted by 7.2 percent during this time.

Condominiums sales increased by 10.3 percent year-over-year in February 2011. The median price during this time declined 12.3 percent to $565,000.

The current rebound in employment growth is expected to gain momentum through the coming year, which, when combined with elevated affordability rates and limited new construction, should result in a more robust housing market recovery in the coming quarters, according to the Rosen Consulting Group. Driven largely by increased hiring across the tech industry, payroll levels in Bay Area metropolitan areas have rebounded in comparison to the same time last year. In January 2011, on a seasonally-adjusted basis, total employment levels in the San Jose and San Francisco metropolitan areas increased by 1.8 percent and 0.3 percent year-over-year, respectively. During this period, the contraction in East Bay employment levels flattened to a 0.4 percent year-over-year decline in jobs. Combined, job growth within these two Bay Area metropolitan areas during this period resulted in the addition of approximately 13,600 jobs. As the real estate market is driven largely by job creation, this trend bodes well for housing demand in the months to come.

Copyrighted Material by Rosen Consulting Group - Market Focus March 2011. Reprinted with Permission.