A Few Data Points
Just for kicks, let’s look at average prices for the last 25 years:
Year Condos Single-family Homes v. Condos
1990 $318,000 $362,000 14%
1995 $314,000 $342,000 9%
2000 $656,000 $729,000 11%
2005 $834,000 $1,079,000 29%
2010 $758,000 $996,000 31%
2015 $1,253,000 $1,637,000 31%
As you can see, prices were relatively stable for 10 years from 1990 to 2000, although they did more than double during that period, and there were ups and downs. Over the 25 years, average prices have appreciated an average of about 6.5% annually; single-family homes a bit more than condominiums.
The premium of single-family homes over condominiums is interesting, although I have no solid evidence as to why there is a premium, nor why it has grown to double digits in the last 10+ years (31% thru September 2016). However, of note, there is no land to build single-family homes, while condominium construction has boomed. Also, the typical owner stays in his/her single family home some 40+ years, while the typical condominium owner stays less than 20 years.
The good news for buyers is that the rate of price growth (10%+/year appreciation in each of the last four years) has leveled off, and it does not seem that we will have another four years of robust price appreciation in the near term.
The bad news is that prices are not likely to soften very much (I hate going out on a crystal ball limb) because 1. while most young, primary (first time) home buyers may not be able to afford San Francisco prices, there are many recently minted millionaires, well-heeled empty nesters, and pied a terre buyers who can afford our heady prices, and 2. many single-family home owners would likely be “stuck” with a large capital gains tax were they to sell (forget about the issue of where they would move to), thus limiting the supply of additional homes for sale.
So if you own and are here, that’s good, and if not, that’s not so good. Lots of people want to be here, but it’s an expensive place to be. If you want lots of space at a low cost, I understand that Iowa has much to offer (don’t ask me exactly what).
I have decided to help first time buyers break into the market using some creative thinking. Call me.
The Pulse of the Market book (edited Pulses from 2005 to 2015) is available in paperback and Kindle at Amazon.com. It offers insights and perspectives on what has made San Francisco residential real estate tick in the past 10 years. Let me know if you would like a personal autograph.