Feverish Spring Market

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San Francisco Real Estate: Here We Go Again?
Preliminary Indications Signal another Feverish Spring Market

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Overbidding & Inventory; Bay Area Home Price Map; Renting vs. Buying; Different Markets = Different Bubbles, Crashes & Recoveries
March 2015 Report, Paragon Real Estate Group including 10 custom charts
Preliminary statistics and, even more so, indications on the ground in the current hurly burly of deal-making are sending strong signals of another very competitive real estate market in San Francisco as we approach spring. If it continues to develop as it’s looking right now, this would make the 4th intense spring season since the market recovery began in early 2012.Once again, buyer demand has surged early in the new year without a corresponding increase in listing inventory: High demand meets low supply generates competitive bidding – sometimes fiercely so – and upward pressure on home prices. This doesn’t mean every listing is selling over asking price or even selling at all – even in a red hot market, 20% – 30% of homes are price reduced before selling or withdrawn from the market without a sale taking place (usually due to overpricing). There are also hotter and cooler pockets within the market: Right now, more affordable homes – for example, condos under $1 million – appear to be in particularly high demand.

Sales statistics of one month generally reflect offers negotiated 4 – 6 weeks earlier, i.e. they are a month or so behind what’s actually occurring in the market as buyers and sellers make deals. Sales volume in January and February was down 20% year over year, reflecting a market that pretty much shut down in the last two weeks in December, and then started the year with extremely low inventory.

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Overbidding List Prices

This chart above illustrates seasonal trends in competitive bidding, which underlies the phenomenon of homes selling for over asking price. For the last few years, the average percentage of sales price to list price has been peaking in spring. But already in February, prices averaged a whopping 8% above asking – very few other markets in the country are seeing anything similar. Drilling down by property type, SF house sales in February averaged 12% over asking, condos averaged 7% over, and 2-4 unit buildings 2%. Houses are becoming a smaller and smaller percentage of city home sales (since virtually no new ones are being built), which has generally made them the most competitive market segment.

In previous years, the percentage over asking has peaked in May, reflecting offers negotiated in late March, April and early May.

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Inventory

Seasonality in the Bay Area often has more to do with summer and winter holidays than the actual weather since, unlike back east, January and February often look more like spring here. New listings and overall inventory bottom out in December, and then slowly rise in the new year. What is super-charging the market is that buyers woke up after the holidays and jumped back in the market much earlier than sellers have put homes up for sale in quantity. For the past 3 years, this unbalanced dynamic between the high pressure of buyer demand pushing against an insufficient supply of listings continued through spring, causing dramatic home-price increases, until the market slowed during the summer. We shall soon see if prices can jump higher once again in coming months.

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Days on Market before Acceptance of Offer

Months Supply of Inventory

The greater the demand, the faster listings go into contract (i.e. accept offers), and the lower the average days on market (DOM) and months supply of inventory (MSI).Both these statistics are currently in deep “seller’s market” territory. Of course, this could change dramatically if we get a sudden tsunami of new listings or if a large, negative economic event happens, but right now, we don’t have any reason to expect either to occur in the next few months.

As points of comparison, the national average days-on-market is more than twice that of San Francisco’s (approximately 69 days vs. 30), and the national MSI figure is almost 3 times higher than the city’s (approximately 4.7 months of inventory vs. 1.6). Many new listings in San Francisco are going into contract within 7 to 14 days of coming on market, as eager buyers swarm over them.

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Bay Area Median House Prices

This map gives a very general idea of comparative home values around the Bay Area. Remember that median prices will often disguise enormous variety in the underlying individual home sales.

We’ve also updated our SF neighborhood map for house and condo prices, which can be found online here: San Francisco Median Home Price Map

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Renting vs. Buying in San Francisco

Someone moving to or within San Francisco basically has 2 choices: Renting at market rate or buying at market rate. And rents have gone up so much locally that after accounting for multiple tax benefits, low interest rates, principal loan-balance pay-down (which adds to home equity) and estimated long-term appreciation, buying often looks like the financially attractive course. Above is one chart of a much more detailed analysis comparing the cost of renting a 2-bedroom San Francisco apartment at the current median asking rent, with the monthly cost of buying an SF home at the current median sales price after adjusting for tax deductions and principal pay-down.As seen above, the net monthly cost of buying can be less renting.

There are many personal and monetary issues that pertain to this decision and our analysis is based on a number of financial assumptions – interest, inflation, appreciation and tax rates; downpayment amount; maintenance and insurance costs – that you may not agree with or might not apply to you. You can review our full analysis and also perform your own calculations here: Renting vs. Buying in San Francisco

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Different Markets, Bubbles, Crashes & Recoveries*

The real estate market is often spoken about as if it was a single monolithic entity performing in a consistent way – but nothing could be further from the truth. Markets vary enormously between states, cities, neighborhoods, property types and price segments. The S&P Case-Shiller Index looks at the Bay Area market* by breaking all house sales into 3 price segments – low, mid and high price tiers – each containing one third of the total number of sales.The exact price range of each tier changes as the market appreciates or depreciates, or more sales occur in one price range than another: Right now, the “high-price tier” starts at $872,000. In February of 2012, the high tier started at a threshold of $537,000.

Breaking down the market by price segment is a vast over-simplification – there are many other factors at play – but generally speaking, the lower the price range, the more the housing segment was impacted by subprime/ predatory lending in 2003 – 2006. In turn, that caused the larger price bubble, and then the bigger crash as the foreclosure/ distressed-property crisis took hold.

Most Bay Area counties are dominated by homes in 2 price tiers, low and mid, or mid and high, but there are pockets of homes in all tiers within most counties. The numbers in the 3 charts below all relate to a January 2000 value designated as 100. Thus a reading of 199 indicates a home price 99% above that of January 2000.

Bay Area Low-Price-Tier Houses – Currently under $542,000 
The low-price third of sales was massively impacted by subprime lending – people buying homes they couldn’t actually afford. It experienced an insane appreciation rate of 170% from 2000 to 2006, creating an enormous bubble. It then crashed by a catastrophic 60% due to the distressed-home phenomenon. As distressed sales dwindled, the recovery since 2012 has been spectacular, up 81%, but prices are still well below peak values and may not re-attain them for years. (If prices go down 60%, they must go back up 148% to get back to where they started.) Many homes in Alameda, Contra Costa, Napa, Sonoma and Solano* counties fall into this market segment.

Interestingly, this price segment was not impacted by the popping of the dot-com bubble, perhaps because these homeowners were less likely to be speculating in the technology stock market.

Bay Area Mid-Price Tier Houses – Currently $542,000 to $872,000

The mid-price segment was less hammered by subprime, but still significantly impacted. Its appreciation rate was 119% from 2000 to 2006 and its market then crashed about 42% before starting its recovery in 2012. This segment is now up 55% from the bottom and close to its 2006 peak value. Many homes in northern Marin, the southern border neighborhoods of San Francisco, northern San Mateo and various areas of the other counties fall into this price segment.

Bay Area High-Price Tier Houses – Currently over $872,000

Most of the houses in San Francisco, San Mateo and southern Marin, as well as affluent areas in other counties, fall into the high-price third of Bay Area sales, which was not deeply affected by subprime lending and foreclosure sales. Though its bubble and crash seemed dramatic enough to those experiencing them, they were much smaller: It appreciated 84% from 2000 to 2006, including a hiccup drop in 2001 after the popping of the dot-com bubble, and then fell about 25% (compared to 60% for the low-price tier). Its strong recovery since 2012, up about 44%, has now put this segment approximately 8%above its previous peak value in 2006.

Many neighborhoods in San Francisco, Marin and San Mateo would easily qualify for an “ultra-high” price segment, and it remains generally true that the higher the price, the smaller the crash. For example, most of the more affluent neighborhoods in the city peaked in value in 2007 or early 2008, then dropped 15% to 20% after the 2008 financial-markets crash.Due to the high-tech boom, many areas of San Francisco and San Mateo have significantly outperformed their price-tier in recent years.

Though the price tiers had radically different bubbles, crashes and recoveries, all 3 are now almost exactly the same in relation to the year 2000, showing appreciation of 97% to 99% over the past 15 years. This suggests equilibrium is once again being achieved between them.

* Technically the Case-Shiller San Francisco Metropolitan Statistical Area is comprised of San Francisco, Marin, San Mateo, Alameda and Contra Costa counties, but we believe its general trends apply to other Bay Area counties as well.

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San Francisco Combined House & Condo Median Sales Price

Selected U.S. City Median Rents Chart courtesy of California Association of Realtors

 

These analyses were made in good faith with data from sources deemed reliable, but they may contain errors and are subject to revision. Statistics are generalities and how they apply to any specific property is unknown without a tailored comparative market analysis. All numbers should be considered approximate. Please contact us with any questions or concerns.
© 2015 Paragon Real Estate Group

San Francisco Median Sales

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San Francisco Median Sales Prices, 1993 – 2014

Unit Sales Trends by Property Type

The first chart above graphs median sales prices by year. Looking only at the 4th quarter of 2014, house and condo median prices climbed to all-time highs of $1,125,000 and $999,250 respectively, and the TIC median price increased to $829,500.

The second chart above illustrates sales volume by property type. Houses turn over much less often than condos or TICs – i.e. house owners generally live in their homes longer before selling – and with virtually no new houses being built in the city, house sales as a percentage of total sales are declining, but this has also made them the market’s highest-demand, most competitive segment. Condos now dominate SF home sales and will continue to do so with the many new-condo projects being built. TIC sales are down almost 60% from 2007, probably due to financing conditions and changes in condo conversion and tenant eviction laws. The number of listings fell last year putting additional pressure on the market.

SF New Construction & Population Trends Since 1940

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San Francisco New Construction & Population Trends since 1940
After reading our recent reports on new development and factors behind the market, one of our clients suggested graphing out the quantity of new housing built in the city over time. Based on census figures, the resulting (very approximate) chart illustrates the decline in new-home construction in the 1980’s and 1990’s, which helped exacerbate our current housing crunch.

Another note: the housing "units" built in 1940-1950 were not only much more numerous, but were typically 2-3 bedroom houses, while since 1980, the units built have generally been 1-2 bedroom condos and apartments (which makes sense with our changing demographics - more singles and couples, fewer families - but obviously hold fewer people per unit). And now a big topic in development is building urban “micro-units” of 250 to 350 square feet.

Our chart on SF population growth follows as a counterpoint.

Condo Values by Size and Era of Construction

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Condo Values & Sizes by Era of Construction
A previous condo construction boom ran from the end of the 1990’s until 2008, when it crashed for 4 years – and now we’re in the midst of a new boom.Condos built in the last 15 years are selling at higher dollar per square foot values, but average unit sizes have also been getting smaller – and all things being equal (they rarely are), the smaller the unit the higher the per square foot value. Of course, there are other considerations besides size that affect value: quality and graciousness of construction (i.e. Marina-style and Edwardian flats), views (most likely in high-rises), amenities (security, gyms, outdoor space, etc.) and neighborhood ambiance (Russian Hill vs. Noe Valley vs. SoMa). The average $/sq.ft. for new condos now exceeds $1000 in the city, and, according to estimates, at the new, luxury, South Beach development, Lumina, it is now running $1400 to $1500/sq.ft. on units going into contract.

As increasing quantities of “luxury” condos come on market in coming years, it will be interesting to see how the market reacts and absorbs the new inventory.

Home Appreciation vs Inflation

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Home Appreciation vs. Inflation
Since 1988, home price appreciation has hugely outpaced CPI inflation, though as seen below, the difference can swing dramatically depending on the exact point within a financial cycle.On a cash investment basis, if you had put $100,000 down on a $500,000 home purchase with a 30-year loan in 1988, by the end of 2014, per the Case-Shiller Index, your home would be worth approximately $1,900,000. After deducting 7% closing costs and paying off the remaining loan balance, your $100,000 down-payment turned into approximately $1.65 million in proceeds (if you didn’t continually refinance out your growing equity to buy new toys).

This is a very simplified calculation of a complex financial scenario that includes leverage, financing terms and interest rates, inflation, appreciation, multiple tax benefits and housing costs – you should talk to your accountant – but it still illustrates why a recent New York Times op-ed piece (11/30/14, “Homeownership & Wealth Creation”) said, “Renting can make sense as a lifestyle choice or because of income constraints. As a means to building wealth, however, there is no practical substitute for homeownership.”

Mortgage Interest Rates

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Mortgage Interest Rates 
One of the big factors underlying the market’s strength in recent years has been extraordinarily low interest rates, which have a tremendous effect on the ongoing, monthly cost of housing. In 2010, pundits almost universally predicted interest rates would rebound to 6% or higher, but instead rates dropped until hitting a low point in mid-2013 of about 3.5%. After fluctuating up and down a bit since, interest rates at the start of 2015 were somewhat below 4% - incredibly low by any historical standard.

Month's Supply of Inventory

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Months Supply of Inventory (MSI) 
Low inventory remains a huge issue in the San Francisco market. Typically, the year begins with the lowest number of listings, which then gradually increases into spring. In the past 3 years, buyers have woken up from the holidays much more quickly than sellers have put their homes on the market. This set the stage for the city’s early spring market frenzies in 2012, 2013 and 2014. In the second half of 2014, home prices plateaued or even dropped a little in the more expensive housing segments, while continuing to tick up in more affordable areas.

What 2015 has in store for the market will become clearer in the next few months.

New Construction in San Francisco

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New Construction in San Francisco
These 2 charts are from our San Francisco Development Report, excerpting the highlights of the SF Planning Department’s new Pipeline Report of residential and commercial real estate projects. Almost 7,000 residential units (sale, rental and social-project) and several million square feet of new commercial space are currently under construction in the city, with much more coming in the next few years (absent some large, negative economic event occurring).

Adding large quantities of new inventory should eventually affect the recent, high-appreciation dynamic for both sale and rental markets in the city, but so far, population, employment, wealth and buyer demand has continued to outpace supply. Also, the great majority of new-home construction intended for sale is for high-end, ultra-modern condos costing $1000 – and sometimes much more – per square foot, so how that surge in inventory will affect other segments of the SF market – such as for houses or Edwardian condos – is unclear.

San Francisco's Luxury Home Market

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San Francisco’s Luxury Home Market
Over the past 3 years, the luxury home market has outperformed the overall market as wealth dramatically surged in the Bay Area. In the last 15 years or so, the high-end market segment has been spreading from the classic, northern prestige neighborhoods – such as Sea Cliff, Pacific Heights, Russian Hill – to other districts of the city, such as those surrounding South Beach and Noe Valley.

3 Years into the Recovery- SF Real Estate Cycles

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San Francisco Real Estate Cycles, 1984 - 2014

The 2 charts above look at the last 30 years of real estate cycles, and also compare percentage appreciation during the first 3 years of recent market recoveries (the light blue columns in the 2nd chart). Appreciation since 2012 has occurred somewhat faster than the other recoveries since 1980, but it is also coming off a much larger crash than earlier cycles. Typically, recoveries, and the upswings in appreciation they engender, have lasted 5 to 7 years – which is no guarantee how our current cycle will play out.

The chart below graphs the quarterly path of median house price appreciation in San Francisco since 2012, illustrating shorter-term seasonal cycles. Condo prices in the city followed a similar trajectory, though at somewhat lower values: In the latest quarter, the median condo sales price was just the tiniest bit under $1 million.

San Francisco Home Price Appreciation

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San Francisco Home Price Appreciation Which Neighborhoods Have Appreciated Most and Why?

4th Quarter 2014, Paragon Special Report

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Percentage Appreciation Rates

2010/2011 – Present

This analysis is based upon review of both median sales price and average dollar-per-square-foot data. However, there is no San Francisco or Noe Valley median or average home that one can use as the unchanging basis for comparison year after year, only differing collections of unique homes selling in different times and circumstances. Please see notes at the end of this report regarding our methodology.

Adjusting your screen-view to zoom 125% or 150% will make the charts easier to read. A San Francisco neighborhood MAP can be found at the bottom of this webpage.

The above chart illustrates the approximate home value appreciation from the bottom of the market (2010-2011) to present (2014 YTD), as illustrated by the dark gray bars, and the overall appreciation or depreciation to date since the last market peak (2006-2008), as illustrated by the red numbers.

Over the past 3 years, in our latest market recovery, San Francisco neighborhoods have typically appreciated 40 – 50%, with an overall increase of approximately 44%. This correlates well with the Case-Shiller Index for the Metro Area, which estimates appreciation in the range of 42% - 46% for Bay Area mid and high-priced homes. As one can see in the percentages in red, most of the city’s neighborhoods have now exceeded, often by substantial margins, their previous peak values before the bubble popped. However, some of the neighborhoods hit hardest by the subprime crisis are still below their previous peaks.

Looking at the 3 neighborhoods with the highest appreciation rates from the bottom of the market to present, there are distinctly different reasons why they stand out:

  • Bayview: Up 75% from 2010/11; but still down 12% from its market peak in 2006. Due to subprime lending, Bayview’s bubble was so big, its market crashed terribly when it popped. During the downturn, its housing market became dominated by distressed sales and it fell so far that now, with the disappearance of the subprime effect, its recovery has been equally dramatic. But because its bubble was so large, it is still below its 2006 peak value. The markets in the Bayview and nearby neighborhoods are quite strong, because they contain the most affordable houses in the city.
  • Inner Mission: Up 63% from 2010/11; up 46% from 2007 (pre-crash peak). The Mission’s appreciation rate is explained by a huge change in its buyer demographics over recent years: Though it had been slowly gentrifying since the nineties, more recently it became a highly sought-after home location for young, hip, affluent, high-tech buyers. They love the Valencia Street corridor, being close to Dolores Park, the sunny weather and the (disappearing) edginess – and the speed of gentrification shifted into a feverishly high gear. This change has also entailed the construction of expensive, new, condo projects (typically selling for $1000 per square foot and up), which is also pushing up average and median values.
  • Bernal Heights: Up 57% since market bottom; up 24% from its previous market peak in 2007. Bernal Heights has become one of the most popular, more affordable, go-to neighborhoods for house buyers who like the neighborhood ambiance of the general Noe Valley area, but were priced out there by its rocketing prices. Bernal Heights’ houses – with a median price about 45% lower than Noe Valley’s – have looked likeextremely good values in comparison. Buyer competition for new listings became particularly fierce in the past year or so.

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To give context to the appreciation rates, this next chart delineates actual 2014 YTD median home sales prices. In the second half of 2014, after a frenzied spring market, appreciation generally flattened or even ticked down a little in the more expensive areas of the city, but continued to tick up in the more affordable districts. On the other hand, the more expensive neighborhoods began their recoveries in late 2011 and early 2012, much earlier than the less affluent districts.

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Dollar Appreciation Rates

Whether you are a buyer, seller or real estate agent, dollars are more real than percentages: Hearing that a home has jumped hundreds of thousands of dollars in value in a relatively short time period grabs the attention more than a percentage change. The higher priced neighborhoods sometimes have lower percentage appreciation rates than less expensive areas in a given time period, but the dollar-amount changes can make the eyes pop:

In Pacific & Presidio Heights, the theoretical “median house” now costs over $1.3 million more than it did 3 years ago. In Noe, Eureka & Cole Valleys, the increase is over $700,000.

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Boom, Bust, Recovery

2000 – 2014

Different neighborhoods and price segments experienced bubbles, crashes and now recoveries of significantly different magnitudes. The city’s less affluent neighborhoods – on this chart illustrated by Bayview, Excelsior & Portola – had much bigger bubbles and subsequently much bigger crashes, both inflated by subprime lending issues. Bayview saw an astounding 136% appreciation from 2000 to 2006, followed by a huge 50% drop from 2006 to 2010/2011. Excelsior and Portola were an order of magnitude behind with 90% appreciation and 30% decline. Generally speaking, the mid and high-end segments of the city’s market appreciated 60% - 70% from 2000 to pre-crash peak, and then dropped by 15% to 20% subsequent to the 2008 market crash. And, as mentioned earlier, on average the city’s home values have now increased 40% - 50% over the past 3 years, with some neighborhoods outperforming the general range.

According to the Case-Shiller Home Price Index, Bay Area homes of all price segments are now, regardless of their different ups and downs over the past 15 year, about 96% above their prices in year 2000 (as of late 2014). This may suggest that an equilibrium is being achieved in the market.

Note that the tremendous burst in home price appreciation actually began in 1996, subsequent to the early nineties recession. Prices approximately doubled in the 5 years 1996 to 2000. This earlier period is not included in these charts, nor is the smaller, short-term decline following the dotcom bubble bursting in 2001 broken out.

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Housing Cost: Today vs. Previous Peak Values 

Comparing current San Francisco home values to previous peak values before the 2008 financial markets crash, we estimate general home-price appreciation in San Francisco of approximately 15% to 20% over the past 7 years. However, mortgage interest rates are now about 35% lower than in 2007 and there has been inflation of approximately 15% over the same period. Thus, we estimate that, adjusting a normal 20% - 25% down-payment plus resulting loan expense to 2007 dollars, the current cost of housing – mortgage and property taxes – is about 12% lower now than it was in 2007. This is a back-of-the-envelope calculation based on a number of basic assumptions – and it would obviously vary widely by neighborhood – but we believe it to be generally valid.

The Bay Area’s current market recovery has lasted about 3 years now. Over the past 35 years of cycles, recoveries have typically lasted in the range of 5 to 7 years, which doesn’t guarantee that this one shall follow past patterns.

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Important notes regarding this report:

The estimates in this analysis should be considered very approximate since there are different ways to evaluate home value movements – such as median price and average dollar per square foot – and they don’t always agree, nor are they perfectly reliable. Besides which, other factors can affect these statistics besides changes in values, such as big changes in the distressed, new-construction or luxury home segments. There are also a wide variety of economic and political factors that can and do impact real estate markets.

Different San Francisco neighborhoods peaked in value at varying times before the bubble popped on 9/15/08: Generally speaking, the least affluent areas peaked in 2006; the mid-price segment in 2007; and the high-end market hit peak prices in late 2007/early 2008. We use the 2-year period of 2010-2011 as the basis for “bottom of the market” values, and we use aggregate 2014 YTD values (as of mid-late November) for “present” values. If one cherry-picked specific months or quarters for the absolute lowest and highest values in each neighborhood, the percentage and dollar swings illustrated would be much more dramatic than with the broader periods used in this report, but, we believe, no more meaningful.

This map of neighborhoods is according to the San Francisco Association of Realtors,

SAN FRANCISCO REALTOR DISTRICTS

District 1 (Northwest): Sea Cliff, Lake Street, Richmond (Inner, Central, Outer), Jordan Park/Laurel Heights, Lone Mountain

District 2 (West): Sunset & Parkside (Inner, Central, Outer), Golden Gate Heights

District 3 (Southwest): Lake Shore, Lakeside, Merced Manor, Merced Heights, Ingleside, Ingleside Heights, Oceanview

District 4 (Central SW): St. Francis Wood, Forest Hill, West Portal, Forest Knolls, Diamond Heights, Midtown Terrace, Miraloma Park, Sunnyside, Balboa Terrace, Ingleside Terrace, Mt. Davidson Manor, Sherwood Forest, Monterey Heights, Westwood Highlands

District 5 (Central): Noe Valley, Eureka Valley/Dolores Heights (Castro, Liberty Hill), Cole Valley, Glen Park, Corona Heights, Clarendon Heights, Ashbury Heights, Buena Vista Park, Haight Ashbury, Duboce Triangle, Twin Peaks, Mission Dolores, Parnassus Heights

District 6 (Central North): Hayes Valley, North of Panhandle (NOPA), Alamo Square, Western Addition, Anza Vista, Lower Pacific Heights

District 7 (North): Pacific Heights, Presidio Heights, Cow Hollow, Marina

District 8 (Northeast): Russian Hill, Nob Hill, Telegraph Hill, North Beach, Financial District, North Waterfront, Downtown, Van Ness/ Civic Center, Tenderloin

District 9 (East): SoMa, South Beach, Mission Bay, Potrero Hill, Dogpatch, Bernal Heights, Inner Mission, Yerba Buena

District 10 (Southeast): Bayview, Bayview Heights, Excelsior, Portola, Visitacion Valley, Silver Terrace, Mission Terrace, Crocker Amazon, Outer Mission

Some Realtor districts contain neighborhoods that are relatively homogeneous in general home values, such as districts 5 and 7, and others contain neighborhoods of wildly different values, such as district 8 which includes both Russian Hill and the Tenderloin.

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Statistics are generalities that may fluctuate for a number of reasons, including but not limited to changes in home values. There is no San Francisco “median home” or “average home,” that one can use as the unchanging basis for analysis year after year, only differing collections of unique homes – and how these general statistics apply to any particular property is impossible to say without a custom market analysis. These analyses were performed in good faith with data derived from sources deemed reliable, but they may contain errors and are subject to revision. All numbers should be considered approximate. Please contact us with any questions or concerns.

© 2014 Paragon Real Estate Group

Bay Area Real Estate Prices

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Bay Area Real Estate Prices

These two charts come from our recent report on Bay Area Demographics, covering issues such as ancestry, income, housing and education.

Square Footage for $1,000,000: At average county values, you’ll get double the square footage in Sonoma and Contra Costa as you will in San Mateo and San Francisco, and, of course, in other parts of the country, that can double or triple again.

Average Asking Rents: In terms of rental-rate appreciation, the Bay Area has 3 of the 4 hottest rental markets in the country in Oakland, San Jose and San Francisco. High rents, of course, are one of the big factors behind high home prices.

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San Francisco Neighborhood Snapshots

A look at long-term home-value trends in selected city districts. Please call or email if you’d like information on another neighborhood. Median and average statistics are generalities which summarize a huge range of underlying, individual sales.

 

San Francisco Luxury Home Market

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San Francisco Luxury Home Market

Luxury Home Sales Soar Again: October saw a big autumn surge in luxury home sales: It was by far the biggest month ever for SF house sales of $2m+, with 61 sales. Luxury condo sales were also quite high at 55 sales, a figure which doesn’t include market response to the new “ultra-luxury” Lumina project in South Beach, where 80 to 100 very expensive condos went into contract amid almost frenzied bidding – these units won’t close escrow until construction is completed in 2015 or early 2016.

The average days-on-market (DOM) for luxury houses sold in October was 21 days, and for luxury condos, it was 28 days: These are very low DOM figures, indicating quick market response to the listings purchased.

Luxury House Values: House sales of $2,500,000 and above, charted here by average dollar per square foot, cluster in a handful of areas in the city. The Pacific Heights-Marina district has the most sales and the highest median sales price for such sales: Historically, this district has been the city’s nexus for big, luxury houses. However, the greater Noe, Eureka & Cole Valleys district now sees a substantial (and growing) number of sales in this segment, though at a significantly lower price point. This area is becoming popular with the young, high-tech, ultra-wealthy (such as Mark Zuckerberg) and record prices are being achieved. Russian & Telegraph Hills have very few house sales, but very high values, as seen below. And the greater St. Francis Wood-Forest Hill area is by far the best value for big homes (often on big lots) by how much house you get for your money.

Average house size varies from approximately 2700 square feet in Russian & Telegraph Hills to 3260 in Noe, Eureka & Cole Valleys to 4200 in Pacific Heights-Marina. All things being equal (which they rarely are), a smaller home will typically sell at a higher dollar-per-square-foot than a larger one.

Luxury Condo & Co-op Values: The Pacific Heights-Marina district currently has the most luxury condo and co-op sales – but not for long: With all the new, high-rise condo construction in the greater South Beach-Yerba Buena district – already featuring the highest average dollar per square foot values in the city – this new residential area will soon dominate sales volume too. The prestigious condo and co-op neighborhoods of Russian, Nob and Telegraph Hill also feature some of the most expensive units in San Francisco. With new, luxury condo construction surging across the city, such sales – at very high dollar per square foot prices – are growing in neighborhoods such as the Mission, Hayes Valley, Duboce Triangle, Mission Dolores and Potrero Hill – and there’s a lot more coming.

Average unit size for luxury condos ranges from about 1650 square feet in South Beach/Yerba Buena to 1900 - 2100 square feet in the older, northern neighborhoods such as Pacific Heights. Older buildings usually feature larger units.

Perhaps as many as 30-40% of luxury units in the city are being purchased as pied e terres and second homes by the very affluent, or even as investments (often by wealthy foreign buyers).

San Francisco Autumn Real Estate Market Dynamics

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San Francisco Autumn Real Estate Market Dynamics

November 2014 Market Report

The San Francisco market definitely cooled after the overheated feeding frenzy of the first half of the year. The competition between buyers for new listings declined to more rational levels: Homes that might have received 5 to 10 offers earlier in the year received 1 or 2 or 3. Values in many of the city’s neighborhoods plateaued or even ticked down a bit after spring’s big spike - the exception being districts with the most affordable house prices (under $1.2 million) where prices generally continued to tick up. The number of expired and withdrawn listings jumped 18% August through October when compared to last year, to over 460 listings, as buyers decided many sellers were pushing the envelope on prices too far.

On the other hand, as seen in the charts below, the autumn market has been very strong by any reasonable measure, just not one of utterly crazed competition. The number of house and condo sales was a little higher in October 2014 than October 2013, and that doesn’t include a very large number of high-end, new-development condos that went into contract. Most of the city’s listings have continued to sell quickly for well over the asking price and luxury home sales hit their highest number ever.

The market for multi-unit buildings did decline dramatically, but that was due to Prop G fears. Since the proposition failed on November 4, that effect should quickly dwindle. Meanwhile, buyers have a large inventory of 2-4 unit buildings to choose from.

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General Market Dynamics 

Median Sales Price by Month: Median prices are affected by other factors besides just changes in home values, such as seasonality, inventory available to purchase and significant changes in the luxury market. It often jumps up and down by month and season: It is the longer-term trend which is most meaningful. In this chart above, the spring spike, summer decline and early autumn increase are clear. Among other factors, luxury home sales usually jump in spring and autumn and drop in summer and mid-winter, and this rise and fall affects the overall median price. For the last 3 years, the general trend line has been dramatically up.

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Homes Selling Over & Under List Price: As seen in the 2 charts below, an astounding percentage of San Francisco home listings continue to sell over, and sometimes far over asking price. However, an increasing percentage of listings aren’t selling at all: A hot market doesn’t mean buyers will pay any price sellers dream up.

This first chart looks at SF houses, condos, co-ops, TICs and 2-4 unit buildings, breaking down sales by those that sell with and without price reductions, and the difference that makes in sales price and average days on market. Pricing correctly right from the start reaps significant rewards for sellers.

This chart breaks down SF house and condo listings by the percentage of list price achieved upon sale. Even if the autumn market isn’t as white-hot as last spring’s, these are incredible statistics. It should be noted that some of this phenomenon is certainly due to strategic underpricing of homes by some listing agents, which became increasingly popular in 2014.

Months Supply of Inventory (MSI): At just under 2 months of inventory, San Francisco’s MSI is up from spring 2014, but still indicates a very strong seller’s market.

San Francisco Employment

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San Francisco Employment

We recently illustrated our report on the main factors behind our market, charting employment, seen below, city population, city rents, interest rates and the S&P 500. Taken together, one clearly perceives the inter-connectedness between them and with SF home price trends as well. The full report, with all the new charts, is here: 10 Factors behind the Market