The World Changed in September

Sale price statistics can be volatile, but it seems safe to say that the San Francisco real estate market changed in September. Take a look at the chart, below, which shows median home prices for San Francisco County.

The pink line shows the average level of home prices for the three-year period between July 1, 2005 and June 30, 2008. A fair interpretation of the chart is that, monthly fluctuations notwithstanding, prices were in a holding pattern over that three-year period. As late as August of 2008, prices were still within 2.5% of the three-year average. When Lehman Brothers filed for bankruptcy on September 15th, however, the world changed. Stock prices fell 7% during the remaining weeks of September, and have fallen another 25% since then.

I predicted at the time that the San Francisco real estate market would suffer as a result. (Okay, that wasn't much of a stretch.) In fact, San Francisco home prices fell 10% in September alone, and have fallen another 4% through the end of November. It's not clear that the stock market meltdown caused this drop. For starters, most of the sales that closed in September would have been initiated in August, before the meltdown really started. But it's starting to look as if something important happened to the San Francisco market in September.