San Francisco Lot Prices Still Falling

San Francisco lot prices peaked in 2006 and have been falling since then. The median sale price through the first nine months of 2010 is more than 60% lower than the 2006 peak.

The chart shows the median sale price for all lots that are listed in the MLS and that have 1,500-4,500 square feet. Most of them are residential lots. Unfortunately, many listings do not include zoning information so I simply included all lots.

Land prices are highly sensitive to home prices. Why? Building costs don't change much from year to year. If the price of a home rises by $100,000, the price of the vacant lot next door is likely to rise by the same $100,000 increment. On a percentage basis, the increase in the lot price will be much larger than the increase in the home price. That's why lot prices have fallen more than 60% while home prices have fallen only 10%-20%.

Keep in mind, too, that most lots are priced under the assumption that they will be developed with multiple units. That's why the median lot price has fallen by roughly $500,000 while the median home price has fallen by only around $150,000.