The Real Estate Trading Game

The luxury home market in San Francisco consists of houses selling for $2,000,000 or more, and condos selling for $1,500,000 plus. This market bounced back from the crash that occurred in the 3 – 5 months after 9/15/08, but year over year, 2009 luxury house sales were still down about 33% from sales in 2007 and 2008, and luxury condo sales were down about 40% from 2008 and 50% from 2007. Financing became more difficult for upper-end homes and obviously economic conditions affected the market, but much of the drop in sales can be explained by the 15% – 20% drop in values that occurred, i.e., a fair number of homes that were in the luxury range simply no longer qualified as such. Indeed, 2009 sales numbers are quite similar to those in 2006 before values peaked. Depending on neighborhood, peak values for the luxury market usually occurred in 2007 and 2008.

As the number of sales have declined, the average days on market, the number of price reductions, and the number of listings withdrawn from the market without selling rose dramatically — all are signs of sellers and/or listing agents not wanting to recognize new pricing realities in the market.

Still, the luxury home market in San Francisco is very much alive, and of those homes that did sell in 2009, 35% – 40% accepted offers within 30 days of going on market, and on average closed within 3% – 4% of the original asking price. The demand isn’t as frantic as it was in previous years, but there is still strong demand for well priced luxury properties. A fair number is still receiving multiple offers and selling for over asking price. Values appear to have stabilized after their large drop, and may have – it’s too soon to be definitive – started to tick up in the last quarter.