Your Home as a Profit Center

4 January 2007

 Happy New Year!

In today's San Francisco Chronicle Business Section, an article by Kathleen Pender indicates that almost 97 percent of people who sold their homes in November got more than they paid for their properties and almost half more than doubled their money (according to a report by Real Estate Solutions).  Using county records, the report looked at all single-family homes sold in November for which a prior sales price was available.  It then compared the median sales price for houses sold in November to the median sales price when the house was purchased.  The study did not look at individual home prices for these timeframes but the median prices.  The implied profit for homes in San Francisco is 68%, and the median months between sales in SF is 75 months.  Forty five percent of sales in San Francisco represent a profit of over 100%.  Amazing.

Of course this analysis only creates an interesting model and doesn't reflect any one homeowner's actual experience.  It is also no surprise that the profit levels are so high.  What is interesting to me is that the average (actually median) home-seller in this study lived in their home for over 6 years.  Many reports I have read recently indicate that Americans are moving frequently, and a median of over 6 years is healthy.  While I don't expect that profit levels can remain this high (e.g. we won't see the same appreciation in the SF market we have in recent years), the fundamental drivers of our real estate market remain strong--limited supply and high demand for living in this great community of ours.