There may be already a sudden and historic housing glut in San Francisco.
By Wolf Richter for WOLF STREET.
That the housing market has gone loopy in lots of elements of the nation – a phenomenon of the Pandemic stimulus extend-and-pretend forbearance free-money foreclosure-ban economic system whereas households reported a loss of 9.0 million jobs in November, from February – and that this loopy housing market couldn’t final has turn into obvious to everybody months in the past. In October, Redfin CEO Glenn Kelman said simply that. It wasn’t “sustainable,” and “there’s no method it will probably final without end,” he stated. So right now we received one other dose of loopy housing numbers, with the primary dip since all this began within the spring.
The Nationwide Affiliation of Realtors reported right now that gross sales of present houses – single-family homes, condos, and co-ops – dipped 2.5% in November from October to a seasonally adjusted annual charge (SAAR) of gross sales of 6.69 million. However given the explosion of gross sales within the prior months, gross sales had been nonetheless up 25.8% from November final yr (information through YCharts):
By way of month-to-month gross sales, not seasonally adjusted and never annualized, 442,000 houses had been offered in November, up 21.4% from November final yr.
The median worth of present houses in November jumped 14.6% year-over-year to $310,800, with home costs up 15.1% and condominium costs up 9.5%.
Over the previous 5 years, the median residence worth has risen 42%, outrunning by an enormous margin the wage positive aspects of nearly any class of wages, from the highest 5% on down.
Because the median worth is skewed by a shift within the combine, and with red-hot demand for higher-priced houses on this particular economic system of ours, the value enhance could possibly be partially a end result of a bigger portion of higher-priced houses within the gross sales combine.
And the seasonality of the median worth has been upended. The median worth usually peaks in June (the excessive factors within the chart under), however not this yr. In 2020, it peaked in October, with November being the primary dip (information through YCharts):
“Given the COVID-19 pandemic, it’s superb that the housing sector is outperforming expectations,” whereas “job recoveries have stalled previously few months, and fast-rising coronavirus instances together with stricter lockdowns have weakened client confidence,” stated the NAR report.
“Wonderful” is the phrase. Echoing Redfin’s Kelman phrases that it “can’t final without end,” the NAR report stated it can carry “effectively into the brand new yr.” So 5 months? After which what? These are rhetorical questions.
On the identical time, many owners are fighting their mortgages: 2.7 million mortgages are at present in forbearance, according to the Mortgage Bankers Affiliation, and the delinquency charges of FHA-insured mortgages, which assist the decrease finish of the market spiked to a record of over 17%, together with mortgages that had been delinquent earlier than they entered into forbearance.
A whole lot of unsold stock all the time will get pulled off the market earlier than the vacations, to be put again available on the market within the spring, which makes the “days available on the market” look rather a lot higher. Sharp seasonal declines in stock are the rule this time of the yr, however this November was nonetheless particular.
Whole stock on the market on the finish of November declined to 1.28 million houses, down 22% from November final yr, for a provide on the present charge of gross sales of two.3 months, an all-time low (information through YCharts):
However actual property is native, and stock isn’t down in every single place. In some cities, stock of unsold houses has surged. This consists of San Francisco, the place there was once a housing scarcity till there abruptly was a historic housing glut.
In San Francisco, stock of houses on the market has exploded to a document over the summer time, peaking seasonally at over 2,500 houses in early fall, the best ever, and up 80% from a yr in the past, in keeping with weekly information from Redfin.
Because the seasonal decline in stock kicked in over the previous two months, the glut, when in comparison with the prior yr, elevated additional. Within the week by December 13, stock at 1,805 houses on the market, was greater than double the stock throughout the identical interval final yr:
A few of these individuals who put their houses available on the market lately had purchased a house elsewhere earlier, in outlying areas or in different states, together with the nationwide shopping for panic. They usually now personal each houses.
Condos, which are sometimes used as funding properties, are significantly in a glut in San Francisco. There may be discuss that many condos that had been used for leases or trip leases have hit the market, as each of these segments have taken an enormous beating, amid surging vacancy rates in apartment towers and amid rents that have plunged by over 25% since June last year. And with the excessive carrying prices of condos, the condominium math collapses below these circumstances.
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