Two months don't make a year, but over the last 15 years, sales volumes in January and February have provided a reliable leading indicator of full-year sales volumes. Take a look at the chart, below, which shows the recent history of sales in San Francisco.
The blue bars (left-hand scale) indicate sales volumes for the first two months of each year. The purple bars (right-hand scale) indicate sales volumes for the corresponding full-year period. If the historical correlation between these two series holds up, 2009 sales will probably come in around 2,800 units. The lowest previous full-year total was 3,664 units, which occurred in 1995.Prices haven't suffered as much as sales volumes, but 2009 is nonetheless off to a bad start. The median sale price for the first two months of the year was $660,000. That's 16% lower than the median price for the first two months of 2008 (i.e., $785,000).
The 16% year-on-year price decline is particularly discouraging because it was concentrated into the six-month period since September, when Lehmann Brothers failed and the financial crisis began in earnest. (The median sale price for August was $780,000, which was only slightly lower than the beginning-of-year figure of $785,000.)
Recent price declines don't necessarily indicate continuing price declines. But sales volumes seem likely to come in at a 16-year low. All things considered, 2009 is shaping up to be a bad year for San Francisco real estate.
Update (3/3/09): The National Association of Realtors just released its Pending Home Sales Index numbers for January. They show a 7.7% decline in the number of purchase contracts signed, relative to December. In the West, the PHSI actually rose 2.4%. Remember, however, that much of that increase was driven by sales of bank-owned properties. Unlike private owners, banks are not price-sensitive sellers.
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