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Why Do All the New SF Condo/Mixed Use Buildings Look the Same?

If you’re keeping an eye out on new real estate developments around town you can’t help but notice that many of the lower story ones look very alike. Like twins, triplets and quadruplets. They all have shimmering windows set into strongly rectangular facades, with very geometric lines marching upward. To many critics (both private and speaking out in public) they’re “appallingly ugly,” “spectacularly uninspired,” and as well, “newly constructed monstrosities.” So reports hooline.com in a new article on real estate dullness in SF among these smaller buildings.

What is often the case, as the article points out, is that these new buildings are totally out of character with the neighborhood they’re set in. Often these neighborhoods are sprinkled with Victorian style home. The article points out that the charm and spaciousness of Victorians was lost on developers in the 1950’s through 1970s and many were torn down and carted away, making way for hotels and large residential projects. In 1971 that trend was curbed by the SF planners and conservation groups. Victorians are now beloved. But why are they not being built? The article explores how it’s too little space, too many people and there’s a housing crisis going on.

Go to the full story here.

Fun Interactive Photo Map on How SF Looked 1850-2000

Take an overhead street map of all of San Francisco’s districts that can be zoomed in and out of and scrolled around on. Then add in a layer of different sized black dots sprinkled all around the SF map that represent from one to multiple photos taken right at that spot. The more photos for that spot, the bigger the black dot. So you can tell if you’re going to see a lot of pictures or a few depending on the size of the black circle.

Click on the black dot and up pops on the right hand side a fairly big thumbnail of the photos, plus a caption. The image is clickable to a much larger version. The photos go as far back as 1850, pre Civil War, and as recent as year 2000.

This is really fun. For instance at the south central side of the Presidio there’s a pretty big black dot that when clicked opens up to a set of images that start with an 1890 shot of Mountain Lake Park and then proceeds chronologically to 1941, then to 1956, 1958 Mountain Lake Park shots and so on. So, all the images are in chronological order.

Go here to see the map.

Be The Lord Of Your Own Alley in San Francisco for $35,000

Here’s something curiously unique and a very once-in-a-lifetime opportunity. Haven’t you ever thought about owning your own alley in SF? Sure. Lots of people have. And it’s only $35,000. Pretty cheap. Last week, the alley was listed on the market—it’s location in the Richmond District, between 22nd and 24th avenues.

Of course, there’s no real estate on (or in) the alley. It’s a strip of concrete paved shared driveway running behind a row of homes, that is an official easement. But, it’s block from the Presidio. As the sfgate.com article correctly states there’s not much you can do with this alley, except walk on it or stand on it, and know it’s yours, and brag about it. You can’t build on it. Park a vehicle on it. Or pitch a tent. Maybe give it an unofficial name.

As the owner you pay taxes, insurance and keep it ship shape. The current owner, an East Coaster, bought the alley sight unseen at a city tax auction. The corporation that used to own it (along with the entire block) disappeared, thus property going on the auction block.

A Roundup of the Best, Largest Wineries in the larger Bay Area

Here in San Francisco, we’re great and discerning wine drinkers. And we’ve got some really good vintners in the immediate Bay Area, of whom the top 25 in toto have produced 444 million bottles.

For wine lovers in the city, the question is: what are considered the best wineries and wines according to knowing reviews. Drawing upon Wine Enthusiast magazine’s database of 216,000 wine reviews, bizjournals.com assembled a slide show of the best wines from the 10 largest wineries near us. The greater Bay Area is defined as Alameda, Contra Costa, Marin, Napa, San Francisco, San Mateo, Santa Clara, Solano and Sonoma counties.

Of course, bigger is not necessarily better. But these are some very delectable wines.

At the top of the list is the grand Trinchero Family Estates that bottles wine under 20 brands and last year produced 21 million cases of wine. Reviewers called their 2007 Cloud’s Nest Vineyard Cabernet Sauvignon the best with a 95 point rating for “complex blackberry, cherry, mineral, tobacco and cedar flavors that impress for their sheer power.”

Go to the top ten best, largest wineries and wines here.

Supply, Demand, Money & Demographics: 10 Factors Behind San Francisco’s Real Estate Market

A consideration of the main factors at play behind the current San Francisco real estate market, some of which reflect general macro-economic trends and some of which are specific to the city itself. As we’ve seen in 1989, 2001 and 2008, many of these factors can stall or go into reverse very quickly in the event of a large, negative, economic, political or even ecological event.

In 2016, the market in San Francisco started to cool off somewhat after 4 years of a ferociously high-demand/low-supply dynamic. By any national standard, it is still a strong market, especially in the more affordable price segments, but it has distinctly changed with listing inventory increasing and buyer demand softening. The influx of newly constructed condos have affected the condo market most of all, especially the luxury condo market.

  • Population growth vs. New Construction: San Francisco has recently been adding approximately 10,000 – 12,000 new residents per year. New construction is booming again in the city, and tens of thousands of new housing units are now somewhere in the planning and construction pipeline. Thousands of new condos and apartments (mostly at the high end of prices) hitting the market have been affecting the supply and demand dynamic, with both condo prices and apartment rents ticking down from 2015 highs – especially in those districts where new construction is concentrated. It will be interesting to see how influx continues to affect the market as more inventory arrives. There is no question that the city continues to suffer from a grievous lack of more affordable housing.

  • Employment growth: San Francisco has recently hit new highs in the number of employed residents and its unemployment rate is as low as it has ever been. Many of these new jobs – in high tech, bio tech and professional occupations – are very well paid. Approximately 14,000 units of housing have been built in San Francisco since 2010. Over the same 6 years, the number of employed residents has increased by about 100,000. In light of the mismatch between supply and demand, the pressure on housing prices is not surprising. Employment actually dropped in the first 6 months of 2016 and then surged again in mid-summer to its highest point ever.

  • Stock market upswing: Though there was some major volatility in the period from autumn 2015 through autumn 2016, adding in the recent surge after the election, the S&P 500 is way, way up from 2011. The affluent have benefited most from this large increase in the value of financial assets, and San Francisco has one of the most affluent populations in the country. When people feel wealthier, they spend more on homes, second homes and real estate investment properties. However, we believe much of the local affluent population has become somewhat more cautious with all the extreme volatility – China stock market, oil price crash, Brexit, the 2016 election – that has occurred in the stock market over the past 20 months.

 

  • Brand new wealth: Thousands of newly affluent residents, including significant numbers of millionaires and even billionaires, have been created in the Bay Area in recent years from stock options, IPOs and company sales. This super-charged the “wealth effect” on the real estate market from 2011 through mid-2015. According to Wealth-X, San Francisco ranks 3rd in the nation for number of “ultra-high-net-worth” residents. However, since mid-2015, there have been very few new IPOs, so the dynamic creation of huge amounts of brand new wealth has slowed. On the other hand, the Bay Area is still full of large start-ups like Uber, Airbnb and Palantir, which certainly have the potential to go public in the not too distant future, and start minting, once again, new millionaires by the dozens or even hundreds. It’s also interesting to note that: “San Francisco ranks first among U.S. cities in income mobility, i.e. the opportunity to rise upward on the income scale thanks to its schools, its growing economy and its compact physical size that doesn’t produce walled-off divisions.” (San Francisco: a city pushed to new limits and opportunities)
  • High rents: Purchasing a home in San Francisco, with the attendant multiple tax benefits, being able to take advantage of low interest rates, and equity accrual (as well as the possibility of future appreciation), often makes compelling financial sense if the alternative is to pay an extraordinarily high rent (with none of those benefits). SF rents started to plateau in mid-2015 and have dropped a little in 2016 and early 2017, but they are still the highest in the country.

  • Low interest rates: from 1996 to 2006, the average interest rate on a 30-year fixed rate loan was approximately 6.3%. By late July 2016, it was running under 3.5%, and as of late-March 2017, it was running about 4.2%. Even after the relatively big post-election jump, the large reduction, 2007 to present, in the cost of financing has made an enormous difference in affordability and the ongoing cost of housing. To a significant degree, declines in interest rates to these near-historic lows have subsidized increases in home prices. It is extremely difficult to predict interest rate movements, but if rates continue to rise appreciably, it will certainly affect housing affordability.

  • Renting instead of selling: Very high rents and very low interest rates have convinced some owners who would have sold their homes to rent them out instead, and the Airbnb rent-to-tourists option is probably adding to this (even if in many instances, it violates city statutes.) As an adjunct to the financial calculation for renting instead of selling, we are also hearing from some owners that they are afraid that if they sell now, they or their children will never be able to afford to move back. All this further depresses the supply of new listings coming on market, exacerbating the inventory shortage. This is particularly true of houses in San Francisco, of which virtually no new ones are being built. (Condo construction is booming, and condo owners have a tendency to move much more often.) Not selling as frequently: According to a November 2016 report by ATTOM Data Solutions, “homeowners who sold in the third quarter [of 2016] had owned their home an average of 7.94 years, a new high in our data and substantially higher than the average homeownership tenure of 4.26 years pre-recession.” This big decline in turnover goes a long way to explaining the extremely low inventory levels of homes on the market: Owners are selling much less often.
  • Work there, live here: A relatively recent development, many of the people working or taking new jobs in Silicon Valley high-tech and bio-tech now insist on living in the city, creating what might be called a “reverse commute” from past patterns. The Google bus phenomenon (picking up employees in the city and ferrying them to offices in Mountain View) is just one illustration of a trend which puts considerable additional pressure on our housing market.
  • Magnet effect: Economic, social, cultural: San Francisco, a small city of 7 by 7 miles, is now the capital of perhaps the strongest, fastest growing, most lucrative, highest-prestige business segment in country: The Bay Area economy is the envy of the world. San Francisco is also in one of the most beautiful, best educated, most tolerant and culturally rich metropolitan areas in the world. That makes the city a magnet for smart, creative, ambitious people from all over the planet and they are willing to pay a premium to live here. (Of course, at certain levels of housing costs, people and companies start to look for alternatives, even if they’d much prefer to be located in SF. And that doesn’t begin to address the issue of teachers, police officers and so many other employment profiles, who can’t begin to think about affording to buy a home here.) There has clearly been a general demographic trend for post-college adults, aged 24 – 39, to move back into urban core areas – and that certainly is dramatically occurring in San Francisco. (See the books, “The Great Inversion & the Future of the American City” and “Who’s Your City? How the Creative Economy Is Making Where to Live the Most Important Decision of Your Life.”)
  • Limited supply: Almost two thirds of the city’s housing is in rental units, much of it under rent control. The number of homes suitable for owner-occupancy and available to purchase each year is relatively small, usually 6,000 to 8,000 units. The SF homes market is less than half the size of the markets in either Alameda or Contra Costa counties.Furthermore, new housing construction simply has not been adequate to the city’s needs over the past 35 years. 49% of San Francisco’s housing stock was built prior to 1940. As seen in the chart below, the surge in population during WW II led to a burst of building, which then steadily declined to clearly insufficient levels until the big increase in condo construction at the end of the 1990’s. The 2008 market crash ended that cycle, and the current feverish boom in home construction has been quickly gathering steam only in the past few years – however, as increasing volumes of new-construction housing units come on market, it has been significantly altering the supply and demand dynamic that has prevailed 2012 – 2015. Worth noting is that ever since the mid-1990’s the units being built are typically 1 or 2-bedroom condos or apartments, instead of 2 and 3-bedroom houses, i.e. the new housing units being added accommodate fewer people per unit. Our report on new housing construction in San Francisco is here: SF Housing Inventory & Construction Report

Tax benefits: We won’t count this as one of the 10 factors behind the current market, because the enormous tax benefits of homeownership in the U.S. are always present, boom or bust (until Congress legislates large, unexpected changes to U.S. tax law), but still they are a big factor underlying the housing market. Being able to deduct interest costs and property taxes allows homes to cost (much) more and yet remain affordable to buyers. And there is also the $250,000/ $500,000 exclusion of gains realized upon sale of a primary residence from capital gains taxes: There is not another financial investment we can think of that allows one to reap profits of this magnitude without any tax liability. It’s interesting to note that the tax benefits of homeownership in this country are rarely found anyplace else in the world.

This chart below is a simplified, smoothed-out and approximate look at the last few real estate cycles in the San Francisco Bay Area, illustrating estimated percentage changes in home prices from successive peaks and bottoms of the market. The years between these high/low points are simply depicted here as straight lines (which does not reflect reality). Different market segments – areas, property types, price segments – have experienced varying appreciation and depreciation rates over the years and how this chart applies to any specific property is unknown without a tailored analysis.

We want to reiterate that none of this implies justification for an ever-appreciating real estate market: Almost all these factors can stall or even go into reverse, and as mentioned earlier, in 2016, conditions began to cool. Real estate and financial markets are prone to a wide variety of extremely complex and hard-to-predict economic and political factors, and they typically go in cycles: up, down, flat, up again (repeat). And economic and market fluctuations are not uncommon within cycle phases. Still, the above factors are, we believe, the fundamental realities underpinning the city’s homes market in recent years.

San Francisco’s real estate market is now heading into the beginning of its 6th year of its current market recovery since the crash and recession that ran 2008 – 2011.

Our full report on real estate cycles is here: 30+ Years of San Francisco Real Estate Cycles

Paragon’s Fascinating Round Up of First Quarter 2017

San Francisco’s Paragon Real Estate Group has been rethinking and redesigning its online Market Updates resources for the Bay Area, and its quite a useful, aesthetic presentation for everybody interested in SF (and all Bay Area) real estate as displayed in analysis and graph charts.

The site page’s focus now is on the first quarter of 2017 and includes market trend stats of median sales prices, year-over-year comparisons, luxury homes market analysis, and an array of graphed perspectives on supply and demand.

A few tempting tidbits:

  • Long-term annual trends in San Francisco Real Estate
  • Marin County Real Estate Market Report
  • San Francisco Neighborhood Affordability
  • San Francisco Bay Area Apartment Market Report

And much more.

Go to Paragon’s current Market Updates by clicking here.

2017 Design Trends and Features for Luxury Homes

What’s in for 2017 in the creative world of designing or renovating luxury homes—a vital interest for both sellers and buyers? The inman.com site had a talk with the twin brothers of HGTV’s Property Brothers about this and came up with 30 trends and features.

The first point the article makes is that high-end buyers this year are seeking the antithesis of standard, cookie-cutter looks and functionality. They want convenience, style and recreation built into their house.

HGTV personalities Jonathan and Drew Scott in the article talked about their ranch style house they built in Las Vegas, which has a designer kitchen, blended living space and mixed metal adornments, along with very smart home technology, and plenty of recreational year-round space built in.

Some of the items they point out for 2017 luxury homes are: single story outselling multistory homes; 5800 to 7000 square feet; 6-plus car garage; in the kitchen a full raft of the ultimate in commercial appliances; full on smart house automation including LED wall pads for adjusting lighting and temperature or voice activation; spacious walk-in closets; collapsible window walls; and much more.

Go to the 30 luxury home design trends for 2017.

View From the Top of the World—in SF

Trivia fact: what is the tallest building in SF now? Well, it’s the Salesforce Tower, jutting up an impressive 61 stories (1,070 feet) from the corners of 1st, Mission and Fremont Streets. The tower’s roof is being put on now in a process contractors and architects whimsically call “topping off.” So, the views from the top have to be pretty panoramically awesome.

The tower is a whale of square feet, with 1.4 million square feet, with many big name companies leasing out blocks of the office space, including Salesforce which won the naming rights with its 714,000 square foot office lease deal. The tower will be next door to the upcoming Transbay Transit Center, and a new city park being developed with a grove of redwood trees—certainly apropos.

What do you see from the tippy top of the Salesforce Tower? Well…everything in the Bay Area, practically. A slide show that is a mix of building shots, people shots, and view shots has been produced on the bizjournals.com site. Skip through the people shots, and relish the views from the pinnacle spot in the city.

Go to Salesforce Tower Slideshow.

San Francisco Real Estate in Early 2017 – Preliminary Indications of Market Direction

In recent months, there have been multiple reports in local media about Big Drops in San Francisco Home Prices! But, umm, we are not seeing it, neither on the ground in the hurly burly of buyers and sellers making deals, nor in the year-over-year quarterly statistics of supply and demand. News articles often make a big deal regarding the median sales price in a single month, but monthly data is often gravely deficient as an indicator, fluctuating up and down without much meaningfulness due to a number of factors. January and February are particularly bad months to draw conclusions from: The lowest sales volumes of the year, reflecting deals negotiated during the December-January market doldrums, with weather issues sometimes thrown in besides (for instance, in early 2017). Last but not least, the media often mixes property types to come up with a single median sales price, and that is generally not a good idea either.

This chart above illustrates San Francisco quarterly median sales price movements since 2012, which, as one can see, is also prone to significant fluctuation. In Q1 2017, the median house price basically plateaued year over year, while the median condo price actually increased from Q1 2016. (Historically, it is not unusual for Q1 median prices to drop from Q4 due to seasonal reasons, mainly the characteristic big slowdown of luxury home sales in mid-winter.) Q1 is the quarter of the year with the least number of closed sales, so too much should not be made of its data, but we have summarized annual Q1 dynamics for the past 4 years in the 2 charts below. For context, remember that 2014 and 2015 were particularly feverish markets. A much better assessment of the direction of the 2017 market will be possible after Q2 data is in: March through June is usually the most active selling season of the year.

Year-over-Year Comparisons of Q1 Statistics

Chart 1: San Francisco House Market Overview

Chart 2: San Francisco Condo Market Overview

Annual Median House Sales Price Trends:
5 Selected San Francisco Neighborhoods, since 2004

Generally speaking, in higher priced areas, median house prices have been plateauing or dropping a little, while the more affordable neighborhoods have continued to appreciate: This is a relatively common dynamic around the Bay Area.

The only way to assess value or appreciation for a particular home is by performing a comparative market analysis tailored to its specific location, condition and circumstances. Of all the neighborhoods graphed above, the Marina has by far the fewest house sales and the widest range of individual home sales prices, so it is most susceptible to median price fluctuations caused by other factors besides changes in value – for example, a substantial change in the listings available to purchase in a given year. We do not believe that the same Marina house selling in 2015 would have sold for 15% less in 2016: something less, perhaps; 15% less, very unlikely. This is a good illustration of the dangers of making too much of median sales price changes.

If you would like median home price trends for another San Francisco neighborhood, please let us know.

Average Sales Price to Original List Price Percentage

By Month: House, Condo, Co-op, TIC & 2-4 Unit Building Sales

As seen in this chart, overbidding typically heats up as the market moves into spring. So far, this year has been no exception, though the overbidding percentages are somewhat lower than in recent years.

Annual Market Trends

For clarity and meaningfulness, we much prefer annual trend analyses, with their much bigger data sets, and have recently completed a comprehensive review of virtually every statistic we could think of on that basis. Doing so allows us to stand back to see the broader view of what is happening in the market, instead of getting obsessed by what happens to be in front of our shoe. Looking at annual trends, virtually all the market statistics illustrate the same general conclusion: The market became progressively stronger coming out of the 2009-2011 housing recession; the frenzy peaked in 2015; and the market cooled a bit in 2016, condos more so than houses. This is a generalization of the macro-trend: Different market segments have been going in somewhat different directions and speeds in the city and around the Bay Area in the past year or so.

Below are a few of the many analyses. The full review is here: Long-Term Annual Trends in San Francisco Real Estate

First 2 charts: The hotter the market, the greater the percentage of listings that sell quickly, and the more ferocious the competitive bidding on those listings.

Even with some cooling, the overbidding on appealing new listings has remained quite dramatic: Our current percentages over asking would stun anyone from almost any other market in the country. (However, underpricing has also become a more common strategy here than in other markets.)

Annual Trends Chart 3: As a market begins to cool, the number of listings that expire or are withdrawn without selling increases. This is typically due to increasing supply, softening demand, sellers looking for more money than buyers are willing to pay, or all three.

Annual Trends Charts 4 & 5: As new condos and new rental apartments came on the market in greater numbers in the past year, it cooled those two market segments, much more so than the house segment, of which hardly any are built new in the city anymore. (The more affordable house market in the city has remained remarkably hot.) The rental market was affected most as more new rental units came on market than at any time since WWII: Though SF still has the highest rents in the country, they have dropped from their peak in 2015.

Chart 6: To a large degree due to big changes in tenant eviction and condo conversion laws, the TIC market has gone through a large decline in sales volume. It is also true that after decades of turning multi-unit buildings into condos and TICs, the supply of such properties available to do so has declined. Generally speaking, TIC median sales prices plateaued from 2015 to 2016 at about 14% below the median condo price.

San Francisco Luxury Home Market

Three sample charts from our big report on the high-priced home segment. Generally speaking, the luxury market has cooled more than the more affordable segments, and the luxury condo market has cooled more than the luxury house market. This is mostly due to the recent surge of new-construction luxury condos onto the market in the city.

The first two charts below are snapshots of either the house or condo segment of the luxury market in two of our major districts.

This next chart illustrates one of the bigger changes in SF high-end home markets. Many more listings, resale luxury condos in particular, are expiring or being withdrawn from the market without selling.

Our full report is here: Luxury Home Market of San Francisco

Interest Rates

Constantly shifting economic and political factors continue to affect rates: Mortgage interest rates are significantly up since the election, fluctuating up and down since the year began, but still far below historical norms. This is a factor everyone is watching carefully because of its potential impact on affordability, already a big issue in the Bay Area.

Apartment Building (Multi-Unit Residential) Sales

We have also released our quarterly report on the multi-unit residential property markets of San Francisco, Marin and Alameda Counties: Bay Area Apartment Building Market. Below is one of its many analyses.

All our reports can be found on our redesigned website: Paragon Market Reports

Using, Understanding and Evaluating Real Estate Statistics

If you will forgive a little celebrating on our part: In the last two quarters, Paragon sold more San Francisco residential and multi-unit residential real estate than any other brokerage (as reported to MLS, per Broker Metrics), even though we have far fewer agents than many of our competitors.

If you have any questions or comments regarding this report, or if assistance can be provided in any other way, please call or email.

It is impossible to know how median and average value statistics apply to any particular home without a specific comparative market analysis, which we are happy to provide upon request.

These analyses were made in good faith with data from sources deemed reliable, but may contain errors and are subject to revision. It is not our intent to convince you of a particular position, but to attempt to provide straightforward data and analysis, so you can make your own informed decisions. Median and average statistics are enormous generalities: There are hundreds of different markets in San Francisco and the Bay Area, each with its own unique dynamics. Median prices and average dollar per square foot values can be and often are affected by other factors besides changes in fair market value. Longer term trends are much more meaningful than short-term.

© 2017 Paragon Real Estate Group

An Incredible Literary Journey Through San Francisco Mapped

How often is San Francisco (and other Bay Area locations) mentioned in literature—fiction, nonfiction and poetry? Well, a lot, and certainly often enough to make a very edifying and fun interactive online map at the sfchronicle.com site (see link below). Or who are the writers currently living in SF and the Bay Area, and what are their works? Just several of many questions that SFer’s often think about while sipping good coffee and contemplating our the cultural wonderland of our city.

From the Sunset over to Fisherman’s Wharf, from the Mission over to South Park there are “passages” on specific neighborhoods of SF from books by 19th century to 21st century writers. And these are well-written passages. Click the tab for passages and click on the floating icons and up pops the relevant passage correlating to that area of SF. Nice.

And that’s not all. Beside passages and authors, you can also look up booksellers and places, like where Allen Ginsberg gave his first public reading of his breakout beat poem, “Howl”—considered to be the birthplace of the Beat Generation.

Go to The Literary City interactive map