San Francisco Bay Area Homes Right Here - Real Estate Expertise from Alain Pinel

Using Days On Market Figures to Time The Market

September 25th, 2009

This last week I was working with a client getting ready to sell his large condo in Pacific Heights. Due to his particular tax situation he needs to have it close after the first of the year in 2010. Since he has no immediate time pressure to sell he was interested in what type of market indicators he could use to determine the optimal time to sell his condo. Would it be seasonal? Or when prices show an upward trend? Or he asked what would I as his agent, suggest? He knew that in other parts of California home sales were increasing. However I told him a lot of that type of data does not reflect very accurately the home sales activity in a high value area of town like Pacific Heights. Indeed in the past year there have been several months where there were no sales of condominiums in his price range in the north part of town. Most of the lack of sales activity appears to be due to the lack of available jumbo-loan financing. In fact most of the slowing in sales activity in the $1,500,000 to $2,000,000 price range all over San Francisco may be due to banks tightening underwriting standards for jumbo loans (+$729,750) and fewer banks making those kinds of loans. This is important to a seller in San Francisco where according to the California Assn of Realtors 41% of the property sales here required jumbo loans since it means that fewer buyers are qualified to purchase their higher value properties.

So I spent several hours thinking about his particular situation and the San Francisco market. And what I came up with was that if he was set on trying to time the market, which is not a very reliable strategy, and to answer his direct question, he should wait until we have several weeks of declining Days On Market figures in his property’s price range as shown on a city wide basis. I felt that of all the indicators I track on a weekly basis, the Days on Market are the most susceptible to being affected by the ability of a buyer to obtain a loan. When that number begins to decrease it will mean that more money is becoming available, or lending standards have been loosened for jumbo loans and a greater number of buyers will be able to purchase his property. I felt The Days On Market indicator would actually precede increasing sales prices or decreasing levels of inventory and using it as a market timing indicator would put his property on the market when there is an increasing supply of money for loans available and yet lower inventory to compete against for a sale. I actually have no idea if I’m technically correct, but since he has some time available anyway, he and I are watching the situation for a few weeks to see if we can develop any additional correlation as a way to add to his market knowledge. If you have other thoughts on the subject, I’d love to hear from you. You can email me at bwygant@apr.com.

San Francisco Market Data as of Sunday September 20, 2009

Currently there are 598 Single Family Homes, 1153 Condos/TIC/Lofts and 251 2-4-unit buildings listed for sale on the Multiple Listing Service in Districts 1-9 in San Francisco.

Last 30 Days:

182 Single Family Homes sold after an average of 55 days on the market

Average Listing Price was $1,084,222
Average Selling Price was $1,106,666

244 Condo/T.I.C/Loft sold after an average of 78 days on the market

Average Listing Price was $805,492
Average Selling Price was $827,817

41 2-4 Unit Buildings sold after an average of 82 days on the market

Average Listing Price was $1,158,688
Average Selling Price was $1,181,492

Same 30 day period 1 year ago

147 Single Family Homes sold after an average of 44 days on the market

Average Listing Price was $1,217,269
Average Selling Price was $1,221,873

195 Condos/TIC/Lofts sold after an average of 72 days on the market

Average Listing Price was $803,165
Average Selling Price was $781,123

36 2-4 Unit Buildings sold after an average of 71 days on the market

Average Listing Price was $1,334,717
Average Selling Price was $1,344,861

The information is based on:
A 3 bedroom 2 bath home of approximately 1795 sq ft., a 2 bedroom 1.5 bathroom Condo of approximately 1,306 sq ft. and a 2-4 unit building of approximately 3206 sq ft.

Posted By: Bill Wygant