The year 2012 was one of the strongest in recent memory for real estate, and the frenzied pace continued through the fourth quarter, even accounting for a brief lull during the holidays. Pent-up buyer demand and an exceptionally tight supply of properties on the market meant that many homes sold quickly and with multiple offers. A balanced real estate market typically has a six-month supply of inventory, but the supply of single-family homes and condominiums in San Francisco hovered near record lows in the fourth quarter. Homes sold well across the city, and the condominium market, which had slowed in 2010 and 2011, came roaring back. San Francisco’s rebounding economy, particularly (but not exclusively) the growth in tech-sector jobs, brought many new buyers into the market, helping drive up home prices by double digits. Looking Forward: Job growth is a reliable indicator of real estate activity, and that factor alone promises a good year ahead for the San Francisco housing market. Interest rates are expected to remain near record lows through much of 2013, making the outlook even brighter. After a likely cyclical slowdown in January, we expect to see additional homes come on the market and sales take off in February and March. The median sales price represents the midpoint in the range of all prices paid. It indicates that half the prices paid were higher than this number, and half were lower. It is not the same measure as “average” sales price. Single Family Homes – Median Sales Price Click to view larger chart Condominiums – Median Sales Price Click to view larger chart Months’ Supply of InventoryThe months’ supply of inventory is a measure of how quickly the current supply of homes would be sold at the current sales rate, assuming no more homes came on the market. In general, an MSI below 4 is considered a seller’s market; between 4 and 6 is a balanced market; and above 6 is a buyer’s market. Single Family Homes – Months’ Supply of Inventory Click to view larger chart Condominiums – Months’ Supply of Inventory Click to view larger chart Average Days on the MarketAverage days on the market is a measure that indicates the pace of sales activity. It tracks, on average, the number of days a listing is active until it reaches close of escrow. Single Family Homes – Average Days on the Market Click to view larger chart Condominiums – Average Days on the Market Click to view larger chart Percentage of Properties Under ContractPercentage of properties under contract is a forward-looking indicator of sales activity. It tracks expected home sales before the paperwork is completed and the sale actually closes. Single Family Homes – Percentage of Properties Under Contract Click to view larger chart Condominiums – Percentage of Properties Under Contract Click to view larger chart Sales Price as a Percentage of Original PriceMeasuring the final sales price as a percentage of the original list price, without price adjustments, determines the success of a seller in receiving the hoped-for sales amount, but it also indicates the level of sales activity in a region. Single Family Homes – Sales Price as a Percentage of Original Price Click to view larger chart Condominiums – Sales Price as a Percentage of Original Price Click to view larger chart Delving into San Francisco’s Districts San Francisco is defined by 10 separate districts, each of which encompasses several neighborhoods.District 1:Inner Richmond, Central Richmond, Outer Richmond, Jordan Park/Laurel Heights, Lake, Lone Mountain, Sea Cliff.District 2:Outer Sunset, Central Sunset, Inner Sunset, Outer Parkside, Parkside, Inner Parkside, Golden Gate Heights.District 3:Pine Lake Park, Merced Manor, Lake Shore, Lakeside, Stonestown, Merced Heights, Ingleside, Ingleside Heights, Oceanview.District 4:Balboa Terrace, Diamond Heights, Forest Hill, Forest Hill Extension, Forest Knolls, Ingleside Terrace, Midtown Terrace, Miraloma Park, Monterey Heights, Mount Davidson Manor, Sherwood Forest, St. Francis Wood, Sunnyside, West Portal, Westwood Highlands, Westwood Park.District 5:Buena Vista/Ashbury Heights, Clarendon Heights, Cole Valley/Parnassus Heights, Corona Heights, Duboce Triangle, Eureka Valley/Dolores Heights, Glen Park, Haight-Ashbury, Mission Dolores, Noe Valley, Twin Peaks.District 6:Alamo Square, Anza Vista, Hayes Valley, Lower Pacific Heights, North Panhandle, Western Addition.District 7:Cow Hollow, Marina, Pacific Heights, Presidio Heights.District 8:Downtown, Financial District/Barbary Coast, Nob Hill, North Beach, North Waterfront, Russian Hill, Telegraph Hill, Tenderloin, Van Ness/Civic Center.District 9:Bernal Heights, Central Waterfront/Dogpatch, Inner Mission, Mission Bay, Potrero Hill, South Beach, South of Market, Yerba Buena.District 10:Bayview, Bayview Heights, Candlestick Point, Crocker Amazon, Excelsior, Hunters Point, Little Hollywood, Outer Mission, Mission Terrace, Portola, Silver Terrace, Visitacion Valley. Click to view larger chart Click to view larger chart Click to view larger chart Click to view larger chart 2012 was a blistering year for San Francisco Bay Area residential real estate, as most of our regions tallied their highest number of home sales since 2005. Back in Q2 we said jobs would drive our housing markets, and we hit the nail on the head. Exceptional job growth in San Mateo, San Francisco, and Marin counties spurred home-buying demand at a pace not seen in other U.S. markets.Due to a limited inventory of homes for sale, we also got the most interesting dynamic of our record-setting year: the return of “bidding wars”, or multiple offers, in most markets at price points up to $1.5 million.In 2013 we predict more robust demand, as job growth expands into other Bay Area counties. Continuing constrained inventory will create price appreciation for the first time since 2007. And if the appreciation continues through summer ’13, we will see “move-up buyers” re-enter the hunt for higher-end housing (over $1.5 million) in late August and early September.These buyers, who have been waiting patiently for their home values to rise so they can trade up to larger residences or better neighborhoods, will contribute to additional inventory in the mid-tier markets and improved demand in the higher end.Overall, we have a very positive outlook for Bay Area residential real estate in 2013. Whether you’re looking to buy or sell, remember that real estate is hyperlocal — and your best ally is a real estate professional who can provide you with exceptional local insight, knowledge, advice, and decision support.Happy New Year!