Marin County Real Estate June 2019 Market Report

Spring Market Strengthens, But Dynamics Are Cooler Year-over-Year and Median Sales Prices Somewhat Lower.

Long-Term Median Home Price Trends

March-May Market: Year-over-Year Comparisons

Some indications of year-over-year cooling from the very hot spring 2018 market, pretty much across the board. The median house sales price ticked down a bit. The larger decline for condos should be taken with a grain of salt due to the relatively low number of condo sales over the period.

Generally speaking, the changes are not very dramatic, and indeed some current statistics – such as the recent, still low, months-supply-of-inventory reading – would typically be considered to indicate a high-demand/ low-supply market.

Median Home Price Changes
for Selected County Markets

Comparing annual median home prices to partial year prices is not really an apples-to-apples comparison because of the effect of market seasonality on sales prices – and year to date, some cities are up, some down and some are basically unchanged. It’s hard to discern a definitive trend.

We chose the selection of cities below because they had higher numbers of sales than other communities, while representing a range of price points. Still, in the first 5 months of 2019, Tiburon only had 26 house sales reported to MLS, a surprisingly low number. (Belvedere and Ross had even fewer, but they never have many sales.) Full-year 2019 median home prices may be significantly different than the year-to-date figures.

Median Home Sales Prices by City
& Bedroom Count

Click here to go to our updated map of Bay Area median house prices.

Selected Market Indicators

Among other angles, these charts illustrate the dramatic effect that seasonality plays in market demand. Typically, the market will now begin slowing down for summer before picking up again during the relatively short autumn selling season. However, June sales data will mostly reflect May accepted offers, and will complete our picture of the second quarter, usually the most active of the year.

Monthly Sales Volume

Marin Luxury Home Sales

Average Sales Price to Original List Price Percentage

Buyer competition for new listings as measured by this classic statistic of demand is down compared to the peaks reached in recent spring markets.

Selected Economic & Demographic Snapshots

This next chart graphs Bay Area unemployment rates from 1990 through January 2019. By April 2019, they had typically fallen another half percentage point. Marin often has the lowest rate in the Bay Area.

Bay Area housing affordability – the percentage of county households that could afford to buy a median priced house with a 20% down-payment – ticked up in Q1 2019 due to the significant drop in interest rates, and in some counties, small year-over-year declines in median house sales prices. But affordability rates around the Bay remain very low as compared to the state and the country.

Marin has the highest median age in the Bay Area (46.1), and the lowest percentage of millennials. Other counties to the south have seen large influxes of millennials during the latest high-tech boom, often significantly shifting their demographics.

Marin County Real Estate Year-over-Year, Spring Market is Cooler as Median House Sales Price Remains Steady May 2019 Report

With April’s end, we now have 2 months of spring season data unaffected by market activity at the end of 2018, when financial markets plunged. As of early May 2019, stock markets have recovered to hit new highs, interest rates are far lower than last year’s peak, and unicorn IPOs have begun to roll out after a media frenzy regarding their potential effects on real estate markets.

Marin’s median house sales price is about the same on a year-over-year basis, but in 2018, the May and June prices were higher than in April. There are still 2 months of spring selling season to go and we may see further increases. Generally speaking, supply and demand dynamics are cooler than the market of spring 2018, but some other Bay Area counties have seen larger changes, such as median sales price declines.

Monthly Median House Sales Prices – 2 Years

Marin’s monthly median sales prices tend to fluctuate more dramatically than in other counties – which is why we prefer using quarterly or longer period data – but the below chart illustrates the trend over the past 2 years, including the common effect of seasonality.

This table compares the March-April market statistics of 2018 and 2019. Many of the year-over-year changes are relatively minor – and 2 months data should still be considered short term until substantiated over the longer term. The data for the full second quarter, April through June, will be a more definitive indicator.

Home Sales by Price Segment & Bedroom Count

An illustration of the last 12 months of house and condo sales broken out by price range and number of bedrooms.

House Sales Volumes, Median Prices & Median Sizes

The next chart breaks out the number of house sales over the past 12 months by city, with median house sales prices, median square footage, and median bedroom/ bathroom count. (Median means half the sales were for more, or larger size, and half for less, or smaller size.)

Many of Marin’s cities and towns are relatively small markets. Belvedere had the highest median sales price and largest median house size, but relatively few sales.

Condo Sales Volumes & Median Prices by City

The median condo sales price in Marin – $660,000 – runs about half of the median house sales price.

Luxury Home Sales & $/Sq.Ft Values

We typically consider the luxury home market in Marin to begin somewhere in the $2.5m to $3 million range – constituting the top 10% of house sales – though what one buys for any price varies radically by location. The biggest luxury markets are exactly where one would expect: Belvedere, Ross, Tiburon, Kentfield and Mill Valley (not in that order by sales volume), though large, beautiful, expensive homes can be found throughout the county.

Q1 2019 “Ultra-Luxury” Homes Market

The softest segment of the market is the highest priced – $5 million+ – where the pool of potential buyers is smallest. In the 1st quarter, as many of these listings expired without selling, as went into contract or closed sale. Note the differential between the median list prices of the various categories and the final median sales price: Correct pricing is a critical issue for these homes.

The second quarter is typically the most active of the year for luxury and ultra-luxury home sales.

Home Size & Era of Construction

Many factors influence home construction size during any particular period: Affluence, economic conditions, household size, buyer age, land costs, population growth, bridge construction, natural disasters, etc. Generally speaking, the median size of Marin houses built during the Victorian and Edwardian eras was substantially larger than those built 1920 – 1959, with new home construction surging after WWII. Sizes then started increasing until now they are larger than ever – however, new house construction has generally plummeted since 1975.

Note that the figures below are based on recent home sales, and that over the intervening years since original construction, adding a second bathroom to older homes was a very popular renovation.

Over the past few decades, condos have become a major alternative for people purchasing homes of smaller size.

Selected Demographic & Economic Factors

Population Growth (& Decline)
per New Census Figures

Population growth slowed significantly around the Bay Area from relatively torrid increase rates from 2010 to 2015/2016. According to recent census figures, Marin saw a small decline since peaking in 2015.

Among Bay Area counties, Marin has ranked second from the last in both total number growth since 2010 (illustrated below), and by percentage increase (2.9%). The 3 North Bay counties have not seen the intense population increases which have occurred in other counties in recent years – and, of course, that is exactly what many of its residents prefer.

Population growth can be a major factor in supply and demand dynamics in real estate markets.


Venture Capital Investment

In recent years, the Bay Area has been the biggest destination of venture capital investment dollars in the country – and probably the world. These tens of billions of dollars have constituted a massive factor in the local economy, supercharging the creation of new companies, hiring, and, eventually, IPOs. Ultimately, venture capital is seed money that in the last decade has exploded into the creation of stupendous amounts of new wealth.

It is impossible to know how median and average value statistics apply to any particular home without a specific comparative market analysis. These analyses were made in good faith with data from sources deemed reliable, but may contain errors and are subject to revision. It is not our intent to convince you of a particular position, but to attempt to provide straightforward data and analysis, so you can make your own informed decisions. Median and average statistics are enormous generalities: There are hundreds of different markets in San Francisco and the Bay Area, each with its own unique dynamics. Median prices and average dollar per square foot values can be and often are affected by other factors besides changes in fair market value. Longer term trends are much more meaningful than short-term.

Compass is a real estate broker licensed by the State of California, DRE 01527235. Equal Housing Opportunity. This report has been prepared solely for information purposes. The information herein is based on or derived from information generally available to the public and/or from sources believed to be reliable. No representation or warranty can be given with respect to the accuracy or completeness of the information. Compass disclaims any and all liability relating to this report, including without limitation any express or implied representations or warranties for statements contained in, and omissions from, the report. Nothing contained herein is intended to be or should be read as any regulatory, legal, tax, accounting or other advice and Compass does not provide such advice. All opinions are subject to change without notice. Compass makes no representation regarding the accuracy of any statements regarding any references to the laws, statutes or regulations of any state are those of the author(s). Past performance is no guarantee of future results.

Marin Real Estate Home Prices, Sales & Statistics; Stock Markets; Interest Rates and Unicorns

A substantial portion of Q1 statistics reflect new listings and accepted offers occurring during the mid-winter market doldrums (Thanksgiving to mid-January). In November and December 2018, the stock market plunged drastically from its all-time high in September, and interest rates hit their highest point in years: these factors negatively affected buyer demand. Then both turned in dramatically positive directions in early 2019. So, Q1 statistics reflect economic conditions in both Q4 2018 (very negative) and Q1 2019 (very positive). It is also the quarter with the lowest sales volume.

The spring selling season – whose data starts to show up in March, but is mostly reflected in Q2 – is the most active of the year, and often sees the highest rates of appreciation. As always, there are many economic factors at play impacting Bay Area markets, some of which are discussed below.

Year-over-Year & Long-Term Trends

Median Price Trends by Month – Long-Term

Median Prices by Quarter – Shorter Term

Year-over-Year Quarterly Appreciation Rates

Buyer demand, and competition between buyers for new listings cooled significantly over the past 6 quarters, with year-over-year median sales price change going negative in Q1 2019. What occurs in Q2, just begun, will be critical to understanding the market’s direction in 2019.

Selected Market Indicators

These long-term charts give greater context to the changes delineated in the table at the beginning of this report. The dramatic effect of seasonality on the market is also illustrated.

Marin Luxury Home Sales

Selected Economic Factors

A major factor underlying Bay Area housing markets has been the staggering increase in employed residents since 2010. Outward-bound migration trends of residents and businesses – often citing housing costs as one major motivator – have been an increasing concern in recent years, but for the time being, employment numbers have continued to grow.

Financial Markets

A wild ride in stock prices, particularly in high-tech: Prices soared to new peaks in summer-early autumn 2018, plunged drastically in Q4 2018, and then saw the biggest Q1 jump in 20 years. Huge amounts of wealth appearing, disappearing and reappearing – another major influence on consumer confidence and home-buyer demand.

A new surge of large, high-tech unicorn IPOs – mostly of firms headquartered in SF – has just started to roll out. IPOs have historically created vast quantities of new wealth in the Bay Area, though the magnitude of effect of this new wave on Marin County housing markets is yet unknown.

Interest Rates

There has been a stunning decline in mortgage interest rates from mid-November 2018 through the end of March, from 4.94% to 4.06% – to the enormous advantage to buyers. Big drops such as this have helped to recharge buyer demand in the past.

As is not unusual, Marin ranks last in new home construction in the Bay Area. The scarcity of new construction plays a significant role in supply and demand dynamics, and thus home prices.

Housing Affordability & Household Incomes

This chart calculates the income required to buy a median-price house in Q4 2018. Median condo prices are substantially less in every county and would require lower incomes.

County median household incomes are broken out below for homeowners and tenants – Marin is tied with Santa Clara for the highest median homeowner income in the Bay Area, and ranks 4th for renter income. However, comparing the chart below to the one above illustrates the disparity between prevailing incomes and the incomes required to purchase in the Bay Area.

Health & Economic Indicators

According to, Bay Area counties are at the top of the list within CA, and Marin ranks first in overall health outcomes, positive health factors, and length of life. However, Marin has the second highest income inequality ratio in the state after San Francisco.

Marin Real Estate Entering the Spring Selling Season

Spring 2018 was one of the hottest markets in the Bay Area over the last 2 decades. Then the market began to cool in summer and autumn – demand, sales and appreciation rates generally dropping, while supply and price reductions increased – before the mid-winter doldrums took hold. The magnitude of these changes varied by region, and Marin was not as affected as much as some other counties.

Since the recovery began in 2012, spring has typically been the most active season of the year, and often the period during which appreciation gains have been the largest. The spring 2019 market is just getting started amid a diverse set of economic indicators. Financial markets have, so far, recovered in 2019, interest rates have dropped, and big IPOs loom. We will know much more very soon.

Long-Term, Annual Trends in Median Sales Prices

Median Sales Price Changes by Month
since 2012

Median Home Price Appreciation
by City, 2011 – 2018

Markets appreciate due to a wide variety of local and macro-economic reasons: economic cycles, industry booms, inflation, consumer confidence, interest rates, hiring, gentrification, new construction, comparative affordability, ecological factors, population migration, buyers’ median age, commuting, fashion, and so forth. The particular combination of factors affecting any particular region is often specific to that market.

Around the Bay Area, more expensive homes have generally appreciated less than more affordable homes, especially over the last 3-4 years. On the other hand, during the last downturn after 2008, the prices of more expensive homes usually declined significantly less. These appreciation percentages should be considered very approximate.

For more context on the appreciation percentages above, below is a chart from last month’s report delineating 2018 median home prices by city.

Market Seasonality

New Listings by Month

February-March is usually the time of the year when new listings start to pour onto the market, fueling the spring selling season.

Sales Volume by Month: General Market

March is typically the month in which the spring surge in sales begins to show up – following the uptick in new listings.

Luxury Home Sales by Month

If anything, the luxury market is even more fiercely seasonal than the general market.

Active Listings on Market
Number of Listings in January-February
Year-over-Year Comparisons

The number of active listings in January-February 2019 is well up from levels during the same periods in 2017 and 2018, when inventory levels were abnormally low. They are not particularly high from a historical perspective.

Listings for Sale by Price Segment
on 3/1/19

The number of active listings fluctuates daily, and the numbers below are increasing as more new listings come on market. These next 2 charts are snapshots of active listings on the market on February 28th and March 1st.

Houses for Sale & Median LIST Prices
by City, 2/28/19

The supply of listings available to purchase varies widely between cities, which can be a simple reflection of market size and/or an indicator of supply and demand dynamics. If median LIST prices (below) are well above median SALES prices (charted earlier in this report), it is typically a sign that the balance in listings for sale is disproportionately weighted towards higher priced properties, where demand is softer – and/or a sign of systemic overpricing beyond what buyers consider fair market value.

Market Statistics by City

Around the Bay Area, higher-priced communities have generally had somewhat cooler markets than more affordable markets in recent years, which is reflected in the next two charts. But home price is certainly not the only factor at play, which is why the scale doesn’t simply run from low to high price areas.

Sales Price to Original List Price % by City

Months Supply of Inventory
by City

Comparing Bay Area Markets
by County

Median Home Prices, Q4 2018

Listings for Sale under $1 Million
by County, 3/1/19

Listings for Sale Priced $3 Million+
by County, 3/1/19

Marin is a very affluent county with a very active luxury home market, but Marin has a much lower population than any county except Napa, and sales volumes are often lower.

County to County Migration
People Moving to or Leaving Marin

People move to the Bay Area from all over, and people leave Bay Area counties to move to a vast number of locations, for differing reasons. This analysis looks at those counties with the greatest number of people coming and going. In many cases, there is a large exchange between 2 counties, with residents going in both directions – for example, as occurs between Marin and Sonoma. Often, but not always, the outward flow is greater to counties with more affordable home prices, but there are many dynamics at play.

Demographic Snapshot
Educational Attainment
Marin vs. U.S.

Marin is one of the most highly educated counties in the country, which ties in with its high level of affluence.

Education & Income
Disparities by Sex

An indicator of the income-generating value of education, along with an unhappy indicator of where progress remains to be made in income equality. (As an aside, real estate is certainly one of the first, major professions that saw income equality established between the sexes: Women have been holding their own and, indeed, sometimes dominating rankings of top Bay Area agents for many decades.)

The statistics in this report are very general and approximate indicators based upon listing and sales data pertaining to assortments, of varying size, of relatively unique homes across a broad spectrum of locations and qualities. How these statistics apply to the current value, appreciation trend, and prevailing market conditions of any particular property is unknown without a specific comparative market analysis.

Marin Real Estate Heading into the 2019 Market

As of early February, the government shutdown is over – at least for a couple more weeks – the stock market has recovered dramatically from its late 2018 plunge, and interest rates are well down from November highs. A good number of large, local, high-tech “unicorns” continue to plan IPOs in 2019. All these are positive economic indicators for the Bay Area real estate market. However, indicators have proven to be volatile over the past 5 months, and their future direction should not be taken for granted.

As detailed in recent reports, there was some cooling in the market in the second half of 2018, after a very hot spring. The month of January typically has the fewest sales of the year, sales which mostly reflect activity during the December market doldrums: We don’t consider its data to be a reliable indicator of conditions or trends. But activity is picking up, and the beginning of the spring sales season – typically the strongest market of the year – will soon provide more direction as to where the market is heading.

Market Overviews

Median sales prices often fluctuate by month or season, and such short-term changes often have little to do with changes in fair market value: There can be other supply and demand factors at play. But these charts illustrate the longer-term trends in appreciation in the Marin market.

This median condo value chart has the monthly fluctuations smoothed out.

Since San Rafael and Novato are by far the largest markets in Marin by sales volume, they have an outsized impact on county median sales prices. Further down in this report, median prices are broken out by city and town. The dominant home sale in the county is the 3-bedroom house, with 4-bedroom houses not far behind.

Annual Sales by Price Segment since 2012

Since 2012, home sales under $1 million have dropped by half as prices have steadily appreciated. This chart shows the migration of sales to higher price segments.

Annual Luxury Home Sales since 2012

Home sales at prices of $3 million and above in 2018 were about the same as the number sold in 2017. The big jump was in the first couple years of the recovery, 2012 to 2014.

Marin Home Sales by Size

One of the many differences between Marin and San Francisco is that Marin has much higher percentages of larger homes: 60% of SF sales in 2018 were of homes smaller than 1500 sq.ft., while in Marin the percentage was only 32%. Factors behind this are age of construction, the quantity of condo construction in recent decades, household affluence and median household size.

This next chart illustrates how the extremely hot spring 2018 market in Q2 cooled off in the second half of the year. This cooling is a relatively common dynamic each year, and Q3 and Q4 2018 readings are very similar to those in Q3 and Q4 2017. Some other Bay Area counties have seen more market softening than Marin since last summer.

Median Price, Average Dollar per Square Foot & Median Home Size by City

City values are influenced by many factors, including location, of course, but median home size is another basic consideration. All things being equal – especially pertaining to the quality of location – a smaller home will sell for a lower price, naturally, but a higher dollar per square foot value. The fact that Belvedere has the largest median home size and close to the highest average $/sq.ft. value (plus the highest median home sales price) establishes it clearly as the most expensive market in Marin (and one of the most expensive in the Bay Area). But there are several very affluent communities – Ross, Tiburon, Kentfield and so on – close behind it. And of course, communities with lower median or average values often contain extremely expensive homes as well.

How Quickly Homes Sold, by City

With average days on market, the lower the number, the faster buyers are snapping up new listings coming on the market. It is not uncommon for more expensive homes to have higher average days-on-market readings: The pool of buyers is much smaller, and the sellers of large, gorgeous homes are somewhat more prone to overpricing.

With the percentage of sales occurring within 30 days of being listed, the higher the percentage, the stronger the demand as compared to the supply of listings. Again, more expensive homes will often see lower percentages.

A Very Multi-Cultural Place | Bay Area Demographics

Before looking at the next charts, here is the demographics quiz question for today: What 4 nationalities account for the origin of the highest numbers of Bay Area residents?

Stock Prices & Interest Rates

Financial markets and interest rates often influence real estate markets. Changes in the S&P 500 since the 2016 election have been very dramatic. The queasy volatility seen in stock prices – and its effect on household wealth – since they peaked in early autumn has been a wild ride for investors, and for many home buyers.

The changes in the stock prices of some of our Bay Area high-tech giants over the past 3 years make the fluctuations in the S&P 500 look modest. If the big, local unicorn IPOs go forward in 2019 as currently expected, and are received enthusiastically, they could have a substantial effect on housing markets.

Interest rates are a major factor in housing costs and the ability to qualify for home loans. After hitting its most recent high in November, rates have dropped off considerably. Such declines sometimes spark renewed buyer motivation to move forward quickly.

Marin Real Estate Looking Back on 2018

There were almost too many local, national and international political, economic, social and ecological factors impacting the 2018 market to count. In the first half of the year, market conditions were very hot, and there were strong year-over-year appreciation rates. Come summer/early autumn, real estate and financial markets began to shift distinctly cooler. Looking at 2019, there are many wild cards whose impacts are difficult to predict: extremely volatile financial markets, fluctuating interest rates, contentious national politics, international trade issues, spiraling debt levels, employment growth – and a dramatic surge of local high-tech unicorns that plan to go public, which could create a tsunami of new wealth in the Bay Area.

Annual Median Home Price Appreciation

On a year over year basis, the Marin annual median house sales price increased by 7.6% or $95,000, to $1,345,000 in 2018.

Quarterly Home Price Appreciation

The most recent, significant increase in median house sales price occurred in the 2nd quarter of 2018. It then dropped by $100,000 in the second half of the year. However, it is not uncommon for median sales prices to jump in Q2 during the spring selling season, and then drop or plateau in the year’s subsequent quarters. The question is where it will go in the next 2 quarters considering some of the market cooling indicators seen around the Bay Area this past autumn.

Quarterly Year-over-Year Appreciation Rates

The year-over-year appreciation rate in Q4 2017 was a very high 12%. The rate then proceeded to step down quarter by quarter to 3% in Q4 2018. This dynamic of a hot market cooling in the second half of the year was relatively common around the Bay Area.

Market Overviews

Median Home Prices by Bedroom Count

Blank fields indicate that the number of sales was too low to generate a reliable median price.

Selected Market Indicators

Some of the standard market statistics are relatively stable, while others – such as the increasing numbers of price reductions and expired listings – are more indicative of a slowing market. Real estate sales are fiercely seasonal, and midwinter is the slowest time of the year, with by far the lowest number of sales. Our next significant, statistical indications of market direction will probably come in early spring.

Median Sales Price Changes by City & Town

In recent years, all around the Bay Area, median price increases have been most substantial in the more affordable communities within each market. In the most expensive areas, median prices have often plateaued or even ticked down since 2015. But tracking appreciation in the most expensive towns – with relatively few sales and a very wide range of sales prices – is much more challenging than in larger, less expensive markets.

30+ Years of Bay Area Real Estate Cycles

The CoreLogic S&P Case-Shiller high-price-tier Home Price Index for the 5- county San Francisco Metro Area, illustrated above by the blue line, applies best to more expensive Bay Area housing markets such as most of San Francisco, Marin, San Mateo and Diablo Valley/Lamorinda. The SF Metro low- and mid-price tiers had much more dramatic bubbles and crashes in 2005-2011, but as of December 2017, have ended up at points a bit higher than the high-price tier. The green line tracks home price appreciation for the United States as a whole. The Case-Shiller Index is predicated on a January 2000 price of 100. “250” signifies a price that has appreciated 150% since January 2000.

Financial-market cycles have been around for hundreds of years, from the 1600’s Dutch tulip mania through our recent speculative frenzy in crypto-currencies. Though cycles vary in their details, their causes, effects and trend lines are often similar, providing more context as to how the market works over time.

Human beings have always been worried about (or terrified of) the future, and going back many thousands of years, we have constantly attempted to predict what it holds. However, 2018 © Compass whether using priests, oracles, astrologers, economists, analysts or media pundits, we show no aptitude as a species for having the ability to do so with any accuracy. In 2012, a NobelPrize-winning economist, famous for housing market analysis, said that the U.S. real estate market might not recover “in our lifetimes.” In hindsight, we now know that the recovery had already begun in some markets such as San Francisco. In 2015, during a period of financial market fluctuations and a slowdown in our local high-tech boom, a very well-respected Bay Area economist predicted that there would soon be “blood in the streets of San Francisco.” But then housing and stock markets soared higher and the high-tech boom dramatically strengthened again. (He has since postponed the arrival of blood until 1919 or 1920.)

Our smartest experts can’t get it right, much less the thousands of glib, confident forecasts by utterly unqualified individuals reported on in the media every month. We can’t even remember the mistakes of the recent past – one reason why we don’t seem to be able to escape the curse of recurring cycles – much less foretell what’s going to happen tomorrow. Which leads to the next point.

It is extremely difficult to predict when different parts of a cycle will begin or end. There is no rule regarding how long the different parts of a market cycle will last. Boom times, even periods of “irrational exuberance,” can go on much longer than expected, or get second winds, with huge jumps in values. On the other hand, negative shocks can appear with startling suddenness out of nowhere, often triggered by unexpected economic or political events that hammer confidence, adversely affect a wide variety of market dominos, and then balloon into periods of decline and stagnation. These negative adjustments can be in the nature of a bubble popping, the slow deflation of a punctured tire, or some combination of the two.

Going back many decades, all the major Bay Area recessions have been tied to national or international economic crises. Considering the fundamental strengths of the local economy, absent a major natural disaster, it is unlikely that a major downturn would occur due simply to local issues. However, local issues can exacerbate a cycle: The 1989 earthquake intensified the effects of the national recession in the early 1990’s; our greater exposure to dotcom businesses produced a spike up and down with the NASDAQ bubble & 2000-2001 crash; and our current, raging high-tech boom has poured fuel on our up-cycle during the current recovery.

All bubbles are ultimately based on irrational exuberance, runaway greed, criminal behavior, or all three mashed up together. Whether exemplified by junk bonds, stock market hysteria, gorging on debt, a corporate Ponzi-scheme mentality, an abandonment of reasonable risk assessment, and/or incomprehensible and dishonest financial engineering, the bubble is relentlessly pumped bigger and tighter.

However, it should be noted that the 2008 crash was abnormal in its scale, and much greater than other downturns going back to the Great Depression. The 2005-2007 bubble was fueled by home buying and refinancing with exorbitant, unaffordable levels of debt, promoted by predatory lending practices such as deceptive teaser rates, no-down-payment loans and an abysmal decline in underwriting standards. The market adjustments of the early 1990’s and early-2000’s saw declines in Bay Area home values in the range of 10% to 11%, as compared to the terrible 2008 – 2011 declines of 20% to 60%. (Bay Area prices are now above their 2007 peaks.)

Whatever the phase of the cycle, many people think it will last forever. Going up: “The world is different now, profits don’t matter, and there’s no reason why the upward trend can’t continue indefinitely.” And when the market turns: “Homeownership has always been a terrible investment and the market will not recover for decades.” But the economy mends, the population grows, people start families, inflation accumulates over the years, and the repressed demand of those who want to own their own homes builds up. In the early eighties, mid-nineties and in 2012, after about 4 years of a recessionary housing market, this repressed demand jumped back in – or “exploded” might be a better description – and home prices started to rise again. Then kept rising as consumer confidence returned; ultimately moving into over-confidence and irrational exuberance. The nature of cycles is to keep turning.

As long as one doesn’t have to sell during a down cycle, Bay Area homeownership has almost always been a good or even spectacular investment (though admittedly if one does have to sell at the bottom of the market, the results can be painful). This is due to the ability to finance one’s purchase (and refinance when rates drop), certain tax benefits, the gradual pay-off of the mortgage (the “forced savings” effect), inflation, and long-term demographic and appreciation trends.

The best way to overcome cycles is to buy a home for the longer term, one whose monthly cost is readily affordable for you now, ideally using a long-term, fixed-rate loan, while keeping an adequate financial reserve for emergencies – and then resisting the urge to use your home as an ATM during times of significant appreciation. If one keeps to those rules, then it usually true, quoting a NYT editorial, “Renting can make sense as a lifestyle choice… As a means to building wealth, however, there is no practical substitute for homeownership.”

Compass is a real estate broker licensed by the State of California, DRE 01527235. Equal Housing Opportunity. This report has been prepared solely for information purposes. The information herein is based on or derived from information generally available to the public and/or from sources believed to be reliable. No representation or warranty can be given with respect to the accuracy or completeness of the information. Compass disclaims any and all liability relating to this report, including without limitation any express or implied representations or warranties for statements contained in, and omissions from, the report. Nothing contained herein is intended to be or should be read as any regulatory, legal, tax, accounting or other advice and Compass does not provide such advice. All opinions are subject to change without notice. Compass makes no representation regarding the accuracy of any statements regarding any references to the laws, statutes or regulations of any state are those of the author(s). Past performance is no guarantee of future results.

Mixed Signals in the Marin County Real Estate Market

Autumn markets in counties around the Bay Area have seen significant shifts, but with wide variance in the magnitude of these changes between counties. So far, Marin itself has seen much less dramatic changes than some other local markets such as Santa Clara and Sonoma Counties.

Homes that sell have generally continued to sell quickly, many after receiving multiple offers. Median sales prices are considerably higher on a year-over-year basis, and luxury house sales were higher in October 2018 than in October 2017. However, listing inventory has climbed, the percentage of sales receiving multiple offers has declined, and the numbers of price reductions and expired listings are increasing.

Many standard statistics are lagging indicators and take time to reflect any changes on the ground. They will bear watching in coming months.

Median Value Trends
from Different Angles

Year-over-year changes comparing relatively short periods of time – 3 months in the chart below – should be taken with a grain of salt. Still, appreciation rates around the Bay Area have been well above inflation rates, though they appear to be slowing since spring. It is not unusual for median sales prices, and indeed most real estate statistics, to fluctuate by month or by season.

Supply & Demand Statistics
Some changes- but the sky is not falling.

Year over year, the number of active listings on the market was considerably up from 2017 and 2016, but similar to 2015 and 2014, and below 2013. So, a distinct change from the last two years, but certainly not outside the bounds of normal listing inventory since the recovery began in 2012.

Generally speaking, sales volumes dropped 18% in the Bay Area in September, and dropped 9% in Marin. But Marin home sales in October were actually a bit higher than in October 2017 (though a bit lower than in October 2016).

October 2018 saw by far the highest number of price reductions in 6 years, up 89% year over year. However, some other local counties saw y-o-y increases over 350%. This is an important indicator of changing market conditions, especially if it continues.

Competitive bidding declined in September-October 2018, compared to both the hot spring 2018 selling season, and to September-October of last year. Buyer competition (and overbidding) for new listings is a major driver of home price appreciation. However, the recent percentages, though down over the past year, would still be considered very high from a historical perspective.

The average sales price to original list price percentage was down from spring, as is typical, but, at 99% (i.e. 1% below asking price) about the same as the October percentages in the previous 3 years.

The number of listings expired and withdrawn from the market (without selling) ticked up in October, but the change was much less dramatic than in most other Bay Area Counties – Santa Clara saw a 208% increase. November is typically the biggest month of the year in Marin for listings being pulled off the market for the mid-winter holiday slowdown. We will see if there are substantial further increases in November and/or December of homes that sellers have not been able to sell at the prices they currently consider acceptable. One indicator of a changing market is a growing disconnect between buyer and seller expectations.

So far, those listings selling this autumn have generally sold relatively quickly. But this statistic is a lagging indicator and won’t reflect properties that have not yet sold, perhaps after necessary price reductions. If the market is in the midst of a sustained transition, future months may see significant adjustments in this metric.

Luxury Home Sales

Year over year, the sale of homes of $2.5 million and above was down in August, flat in September and then way up – 58% – in October. However, compared to 2 years ago, October’s sales were basically flat.

Appreciation Trends in Selected Cities & Towns

The following are seasonally adjusted, smoothed charts of estimated median house values. They are not based on MLS sales data, and their calculations can vary from MLS median sales price data – though the trend lines are typically very similar.

The selected communities below are listed in alphabetical order. If you want information on a town not included below, please let us know.

The Multi-Unit Residential Property Markets of San Francisco, Alameda & Marin Counties

The big political issue facing the market is CA Prop 10, which, if passed in November, repeals the limits on local rent control laws enacted in the Costa-Hawkins Rental Housing Act. This would almost certainly have negative ramifications for owners of multi-unit residential properties in San Francisco and Oakland. The CA Legislative Analyst Office does a good job summarizing the issues: Prop 10 Review. Prop 10 is currently creating something of a shadow on the larger apartment building market, with some buyers waiting for election results – much as happened with SF Prop G did in 2014. (Prop G failed and the market rallied dramatically after Election Day.) However, the market certainly did not grind to a halt in Q3, nor did values plunge.

Historically speaking, it has been difficult for rent control measures to pass on a statewide basis, because homeowners, all of whom are potential landlords, outnumber tenants in California. On this issue, people tend to vote their financial interests, and homeowners generally vote in higher percentages than tenants. Strong rent-control measures are generally found only in tenant-majority communities. All of which is not to take for granted what will occur on November 6.

This report generally separates out the 2-4 unit and the 5+ unit apartment building markets, since they have different dynamics and values. All the statistics herein are broad generalities covering a wide variety of buildings of very different location, age, size, quality, condition, tenant profile, income and income potential. The number of sales in many of the segments is relatively small, which can make the statistics more prone to anomalous fluctuations.

Some charts pertain to multiple counties, and others drill down on statistics specific to San Francisco; some track the last 12 months of sales, and others have a final data point reflecting 2018 YTD sales. All numbers should be considered good-faith, general approximations.

Trends in Residential Rents

This chart below tracks longer-term average asking rent trends, instead of median asking rent appreciation since 2012, as illustrated in the charts above. It provides a bit more historical context.

Sales, Prices & Market Trends

2-4 Unit Buildings

5+ Unit Buildings: Inventory, Sales & Values

The inventory of active listings ticked up in the last 2 quarters.

SF 5+ Unit Buildings: Trends in Gross Rent Multiple,
Cap Rate & Dollar per Unit Value

Many of the standard value parameters have remained remarkably
consistent in San Francisco over recent years.

San Francisco New Construction Pipeline

Almost 70,000 housing units are now in the SF new construction pipeline. Plans are constantly being added, revised and abandoned, and new housing construction is extremely sensitive to changes in economic conditions.

Q3 2018 Sales of San Francisco 5+ Unit
Apartment Buildings

San Francisco is a unique residential-investment market: the buildings are smaller and older than in most places, built in a wide range of architectural styles. The great majority of the market is under rent control, which makes upside rental-income potential a big component of valuation, even if it is unknown when that potential might be realized. Within the city the variety in buildings and units is enormous.

In real estate, the devil is always in the details: If you are interested in further insight into the details of any of the above sales, or regarding properties currently on the market, please contact me.

Broker Performance in
Residential Multi-Unit Property Sales

In the summer of 2018, Paragon and Pacific Union merged into Compass to create the largest residential investment property brokerage in San Francisco.

It is impossible to know how median and average value statistics apply to any particular apartment building without a specific, tailored, comparative market analysis. Statistics are generalities: This is especially true for multi-unit properties, with the enormous range of property types, sizes, conditions, circumstances, qualities, financial data and locations. We are often dependent upon listing agents for income and expense details, which can be of varying accuracy. A percentage of investment property sales are not reported to MLS, which sometimes limits our ability for more comprehensive data analysis.

Compass is a real estate broker licensed by the State of California, DRE 01527235. Equal Housing Opportunity. This report has been prepared solely for information purposes. The information herein is based on or derived from information generally available to the public and/or from sources believed to be reliable. No representation or warranty can be given with respect to the accuracy or completeness of the information. Compass disclaims any and all liability relating to this report, including without limitation any express or implied representations or warranties for statements contained in, and omissions from, the report. Nothing contained herein is intended to be or should be read as any regulatory, legal, tax, accounting or other advice and Compass does not provide such advice. All opinions are subject to change without notice. Compass makes no representation regarding the accuracy of any statements regarding any references to the laws, statutes or regulations of any state are those of the author(s). Past performance is no guarantee of future results.

© 2018 Compass

CoreLogic S&P Case-Shiller Home Price Index Update

The CoreLogic S&P Case-Shiller Home Price Index does not evaluate median sales price changes, but employs its own proprietary algorithm to measure home price appreciation over time. Since its indices cover large areas – for example, the San Francisco Metro Area is comprised of 5 counties – which themselves contain communities and neighborhoods of widely varying home values, the C-S chart numbers do not refer to specific prices, but instead reflect prices as compared to those prevailing in January 2000, designated as having a value of 100. Thus a reading of 250 signifies that home prices have appreciated 150% above the price of January 2000 (with its reading of 100).

Case-Shiller divides all the house sales in the SF metro area into thirds, or tiers. Thus the third of sales with the lowest prices is the low-price tier; the third of sales with the highest sales prices is the high-price tier; and the third in between is the mid-price tier. The price ranges of these tiers changes as the market changes. The 3 tiers experienced dramatically different bubbles, crashes and recoveries over the past 18 years, to a large degree determined by how badly the tier was affected by the subprime financing crisis. The low price tier was worst affected – huge bubble, huge crash, most dramatic recovery – and the high-price least affected (but still deeply affected).

Most of the house sales in expensive counties such as San Francisco, Marin and San Mateo, as well as affluent communities in other Bay Area counties are in the “high price tier”, and that is where we focus most of our attention. In fact, much of the house market in San Francisco and other very expensive markets would qualify for an “ultra-highprice
tier,” but C-S does not break that out. All counties, to some degree, have sales in all 3 price tiers.

The Index is published 2 months after each month delineated – the July index was released in late September – and reflects a 3-month rolling average, so in effect, it is looking into a rear-view mirror at the market 3 to 5 months ago.

The 5 counties in our Case-Shiller Metro Statistical Area are San Francisco, Marin, San Mateo, Alameda and Contra Costa: Alameda and Contra Costa are by far the largest markets; SF itself comprises only about 7% of house sales in the metro area. We believe the Index generally applies to the other Bay Area counties as well. There are many dozens, if not hundreds, of unique real estate markets found in such a broad region, with different dynamics, moving at varying speeds, sometimes even moving in different directions. How the C-S Index applies to any particular property is impossible to say without a specific comparative market analysis.

More information:

S&P Dow Jones Indices LLC, S&P/Case-Shiller U.S. National Home Price Index [CSUSHPINSA], retrieved from FRED, Federal Reserve Bank of St. Louis;, September 25, 2018.

Compass is a real estate broker licensed by the State of California, DRE 01527235. Equal Housing Opportunity. This report has been prepared solely for information purposes. The information herein is based on or derived from information generally available to the public and/or from sources believed to be reliable. No representation or warranty can be given with respect to the accuracy or completeness of the information. Compass disclaims any and all liability relating to this report, including without limitation any express or implied representations or warranties for statements contained in, and omissions from, the report. Nothing contained herein is intended to be or should be read as any regulatory, legal, tax, accounting or other advice and Compass does not provide such advice. All opinions are subject to change without notice. Compass makes no representation regarding the accuracy of any statements regarding any references to the laws, statutes or regulations of any state are those of the author(s). Past performance is no guarantee of future results.