Updated S&P Case-Shiller Home Price Index for San Francisco Metro Area

04 Apr

Updated S&P Case-Shiller Home Price Index for San Francisco Metro Area

The S&P Case-Shiller Index for the San Francisco Metro Area covers the house markets of 5 Bay Area counties, divided into 3 price tiers, each constituting one third of unit sales. Most of San Francisco’s, Marin’s and Central Contra Costa’s house sales are in the “high price tier”, so that is where we focus most of our attention.” The Index is published 2 months after the month in question and reflects a 3-month rolling average, so it will always reflect the market of some months ago. The Index for January 2016 was released on the last Tuesday of March 2016. It mostly reflects the market in late 2015.

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The 5 counties in our Case-Shiller Metro Statistical Area are San Francisco, Marin, San Mateo, Alameda and Contra Costa. (And we believe the Index generally applies to the other Bay Area counties as well.) There are many different real estate markets found in such a broad region, and it’s fair to say that the city of San Francisco’s market has generally out-performed the greater metro-area market.

These 5 charts below illustrate the price recovery of the Bay Area high-price-tier home market over the past year and since 2012 began, when the market recovery really started in earnest. In 2012 – 2015, home prices dramatically surged in the spring (often then plateauing or even ticking down a little in the following seasons). The surges in prices that have occurred in the spring selling seasons reflect frenzied markets of high buyer demand, low interest rates and extremely low inventory. In San Francisco itself, it was further exacerbated by a rapidly expanding population and the high-tech-fueled explosion of new, highly-paid employment and new wealth creation. International and national financial markets volatility rose and fell in early autumn 2015 and again in early 2016. At this point, we are waiting for the data from new spring selling season to start arriving, which will occur over the next few months. Then we will start getting an idea of where the market is heading in 2016.

For more regarding how seasonality affects real estate: Seasonality & the Real Estate Market .

Case-Shiller Index numbers all reflect home prices as compared to the home price of January 2000, which has been designated with a value of 100. Thus, a reading of 220 signifies home prices 120% above the price of January 2000.

Short-Term Trend: Past 12-14 Months

Note that short-term fluctuations are much less meaningful than longer-term trends.

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This chart below highlights the highly seasonal nature of home price appreciation over the past 4 years.

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Longer-Term Trends & Cycles

The first two charts below reflect what has occurred in the longer term (for the high-price tier that applies best to San Francisco, Marin, San Mateo and the most affluent portions of other counties), showing the cycle of recession, recovery, bubble, decline/recession since 1996, and since 1988. Note that, past cycle changes will always look smaller than more recent cycles because the prices are so much higher now; if the chart reflected only percentage changes between points, the difference in the scale of cycles would not look so dramatic (as seen in the third chart below).

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Longer-Term Trends & Cycles

The first two charts below reflect what has occurred in the longer term (for the high-price tier that applies best to San Francisco, Marin, San Mateo and the most affluent portions of other counties), showing the cycle of recession, recovery, bubble, decline/recession since 1996, and since 1988. Note that, past cycle changes will always look smaller than more recent cycles because the prices are so much higher now; if the chart reflected only percentage changes between points, the difference in the scale of cycles would not look so dramatic (as seen in the third chart below).

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Different Bubbles, Crashes & Recoveries

This next 3 charts compare the 3 different price tiers since 1988. The low-price-tier’s bubble was much more inflated, fantastically inflated, by the subprime lending fiasco – an absurd 170% appreciation over 6 years – which led to a much greater crash (foreclosure/distressed property crisis) than the other two price tiers. All 3 tiers have been undergoing dramatic recoveries. The mid-price-tier is just now back to its previous peak values, but the low-price-tier is still well below its artificially inflated peak value of 2006. It may be a long time before the low-price-tier of houses regains its previous peak. The high-price-tier, with a much smaller bubble, and little affected by distressed property sales, has now significantly exceeded its previous peak values of 2007. Most neighborhoods in the city of San Francisco itself have now surpassed previous peak values by very substantial margins.

Different counties, cities and neighborhoods in the Bay Area are dominated by different price tiers though, generally speaking, you will find all 3 tiers represented in different degrees in each county. Bay Area counties such as Alameda, Contra Costa, Napa, Sonoma and Solano have large percentages of their markets dominated by low-price tier homes (though, again, all tiers are represented to greater or lesser degrees). San Francisco, Marin, Central Contra Costa, San Mateo and Santa Clara counties are generally mid and high-price tier markets, and sometimes very high priced indeed. Generally speaking, the higher the price, the smaller the bubble and crash, and the greater the recovery as compared to previous peak values.

Remember that if a price drops by 50%, then it must go up by 100% to make up the loss: loss percentages and gain percentages are not created equal.

Low-Price Tier Homes: Under $562,000 as of 1/16

Huge subprime bubble (170% appreciation, 2000 – 2006) & huge crash (60% decline, 2008 – 2011). Strong recovery but still well below 2006-07 peak values.

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Mid-Price Tier Homes: $562,000 to $900,000 as of 1/1

Smaller bubble (119% appreciation, 2000 – 2006) and crash (42% decline) than low-price tier. A strong recovery has put it back up to its previous 2006 peak.

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High-Price Tier Homes: Over $900,000 as of 1/16

84% appreciation, 2000 – 2007, and 25% decline, peak to bottom.

Now climbing well above previous 2007 peak values.

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High Price Tier vs. Low Price Tier Appreciation
2012 to Present

The more affluent neighborhoods led the city and the Bay Area out of recession in 2012, surging quickly, while the lower priced tier, still trying to recover from the huge distressed property/foreclosure crisis, lagged well behind. That dynamic shifted: the low-price tier caught up in 2013-2014, and lately it has been appreciating more quickly than the other segments.

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In San Francisco, where many neighborhoods vastly exceed the initial price threshold for the high-price tier, declines from peak values in 2007 in those more expensive neighborhoods typically ran 15% – 20%, and appreciation over previous peak value has also exceeded the high-price tier norm.

San Francisco, Marin and Central Contra Costa
Median Sales Price Trends

Looking just at the city of San Francisco itself, which has, generally speaking, among the highest home prices in the 5-county metro area (and the country): many of its neighborhoods are now blowing past previous peak values. Note that this chart has more recent price appreciation data than available in the Case-Shiller Indices. This chart shows both house and condo values, while the C-S charts used above are for house sales only. Median prices are affected by other factors besides changes in values, including seasonality, new construction projects hitting the market, inventory available to purchase, and significant changes in the distressed and luxury home segments.

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Marin County

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Central Contra Costa County

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And this chart for the Noe and Eureka Valleys neighborhoods of San Francisco shows the explosive recovery seen in many of the city’s neighborhoods, pushing home values far above those of 2007. Noe and Eureka Valleys have become particularly prized by the high-tech buyer segment and the effect on prices has been astonishing.

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