An article in last week’s San Francisco Chronicle blared the headline: “Bay Area Home Prices Up 24.6% over 2012.” Much of the anecdotal information in the story is what I’ve been reporting for more than a year now: fierce competition over a tiny bit of inventory with wild overbidding.
There are other parts in the story that are a bit confusing and perhaps even misleading. If it were left up to me, for instance, I would have written the headline as “February’s Bay Area Median Sales Price Up 24.6% from February 2012.” While that’s not quite so dramatic, the monthly median sales price is something quite different from what is implied in the first half of the article. That doesn’t mean there aren’t some homes in the city that have risen that much in value, but we can’t guarantee that every home in San Francisco is worth 25 percent more today.
That’s because the median price trend is a reflection of a steep decline in distress sales and a dramatic surge in luxury home sales values. Since median price is that price at which half the properties sold for more and half for less, the needle pointing to the median price jumps out of proportion to the change in general market values.
The other confusion that arises when these kinds of articles come out is that the statistics used are almost always Bay Area-wide. This lumps San Francisco values in with homes that are everywhere from Brentwood to Novato to San Jose. Such a broad swath is bound to reveal median and average sales prices significantly lower than San Francisco. It also explains why, when troubled real estate assets in San Francisco are a rapidly shrinking phenomenon, a third of February’s homes were foreclosures or short sales.
A chart with the article also displays statistics that don’t align with the information coming from the MLS, where the median price shows a jump of 26 percent for single-family homes (from $615,000 to $805,000) and a 21 percent jump for condos ($675,000 to $815,000). We think the lower figures in the chart are pulling data from public records, which can include inter-family transfers and sales with special circumstances.
What was news to me is the large number of investors coming into the market. According to DataQuick, absentee buyers accounted for nearly 30 percent of February’s sales. All-cash buyers also hit a record, representing 31.9 percent of February sales. I really shouldn’t be surprised, though. The rental return on a real estate investment can be a nice annuity, and when I listed and sold 7-9-11 Downey Street last month, many of the bidders were first-time real estate investors who had been advised by their financial planners to diversify.
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