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San Francisco homebuyer dynamics

Yesterday we looked at the dynamics of San Francisco real estate sellers. Today let’s swing around the lens to peek at the dynamics of San Francisco homebuyers.

A fairly informal survey of Paragon agents with regard to their last 12 months of activity revealed the following:

· 50 percent are first-time buyers, which is a very high percentage. Nationwide, this percentage is closer to 30 percent – and keep in mind that the U.S. median price is less than $200,000, while it’s more than $950,000 in San Francisco.

· The average age of San Francisco homebuyers is trending younger; currently it’s in the mid-30s.

· 47 percent of San Francisco homebuyers are in high tech. These young, often newly affluent buyers are playing a decisive role in the market.

· 20 percent of prospective San Francisco homebuyers have grown discouraged and given up on buying in the city, either for the time being or permanently, having shifted their searches elsewhere.

· Fewer than 3 percent of San Francisco homebuyers are foreign, and they are mostly investing in new or newer high-rise condo developments.

· 26 percent of homes are being bought via all-cash offers, with many buyers getting loans either before or immediately after close of escrow.

· About 10 percent of home sales are outside of the MLS, or “pocket” listings.

According to the Planning Department, the approximate number of new housing units added since 2010 is 4200. Contrast that with the U.S. census’ estimated increase in the city’s population during that time: 32,000. It doesn’t take a math genius to see where the upward pressure on rents and home prices is coming from.

Dreaming of San Francisco? Cece Blase offers local advice to San Francisco buyers, sellers and owners– and feeds the dreams of those who wish they could live in Tony Bennett’s ‘City by the Bay.’ Call 415-577-0809 or email cblase@paragon-re.com. www.ceceblase.com

San Francisco seller dynamics

Recently Paragon agents were surveyed informally with regard to their past 12 months of activity. While the analysis and survey were not rigorously controlled, Paragon is one of the four biggest residential brokers in the city and thus offer a fair sampling of what’s going on out there.

Here are some of the things they said about sellers:

· 60 percent are willing to leave the city. This is for reasons including schools, affordability, job-related reasons and retirement.

· 15 percent of sales transactions involve trust, probate or investor sales, or people moving into rentals or retirement homes, with no new home purchase involved.

· 25 percent wish to buy another property in the city, either upgrading to a more expensive home or downsizing to a smaller home.

What can we take away from this?

Perhaps the biggest single reason for selling is to relocate for what are seen as better public schools outside San Francisco, or to enroll kids in suburban public schools rather than pay the price of private schools in the city. Some city homeowners are also finding themselves motivated by high prices to cash out in the city and buy bigger or better elsewhere. In addition, frenzied market conditions are discouraging homeowners who might otherwise sell to buy other homes within the city. Many of these homeowners are instead staying, which in return pushes down listing inventory.

Tomorrow we’ll look at buyer dynamics.

Dreaming of San Francisco? Cece Blase offers local advice to San Francisco buyers, sellers and owners– and feeds the dreams of those who wish they could live in Tony Bennett’s ‘City by the Bay.’ Call 415-577-0809 or email cblase@paragon-re.com. www.ceceblase.com

Buyer-Seller Dynamics in San Francisco

This April 2014 analysis was based upon a survey of Paragon Real Estate Group agents regarding their past 12 months of activity: Paragon agents close over 1000 San Francisco home transactions per year; Paragon’s Van Ness office represents more buyers in successful city home purchases than any other brokerage office.

All percentages are approximate: This was not a rigorously controlled survey and analysis, but more an informal poll; still we believe the data below does generally reflect market dynamics in San Francisco.

San Francisco Home Sellers 

60% are selling to relocate outside of San Francisco: The main reasons, in order of prevalence, are schools (and other family-raising reasons) — which ties in with the fact that SF has the lowest percentage of children of any major city in the country — affordability (the ability to buy more home for the money elsewhere), job-related reasons (relocation, commute) and retirement.

15% involve trust, probate or investor sales, or people moving into rentals or retirement homes, and no new home purchase is involved.

25% are selling in order to buy another property within the city, typically either upgrading to a more expensive home or downsizing to a smaller home, or a divorce is involved.

San Francisco Home Buyers 

50% are first-time buyers. This is a very high percentage: In the U.S. the percentage is about 30% (and, of course, the U.S. median price is under $200k, while the SF median is over $950,000).

Average age of SF home buyers is generally getting younger and is currently in the mid-thirties.

47% of SF home buyers are employed in high tech. This is a distinctly San Francisco phenomenon related to the first 2 points above: An influx of relatively young, often newly affluent, high-tech employed, often first-time buyers – who can afford SF home prices – is playing a decisive role in the market.

20% of prospective SF home buyers have become discouraged and given up on buying in the city, due to the competitive environment and rapidly appreciating prices. They’ve either given up for the time being or shifted their home searches elsewhere.

Less than 3% of SF home buyers are foreign – exposes the myth of foreign money playing a significant role in the SF market. What purchases/investments they are making seem to be mostly in new or newer, high-rise condo developments. (There are cities in the U.S. in which large numbers of foreign buyers are having a significant impact on the market – Miami may be the most dramatic example – but SF is not one of them at this time.)

26% of homes are being purchased via “all cash” offers, though many of these offers are structured this way solely for strategic reasons to get their offers accepted in an exceedingly competitive environment. That is, many of these buyers end up getting loans either before or immediately after close of escrow. (This is a different phenomenon than investors paying all cash for distressed homes in other parts of the country – San Francisco has had very few of these sales in the past 2 years.)

Approximately 10% of home sales occur outside of the multiple listing service, i.e. as so-called off-market/ off-MLS/ pocket listings. This agrees with other analyses Paragon and others have performed.

Conclusions: To a greater extent than is probably normal, there is an exchange process occurring in San Francisco, with existing residents moving out and new residents moving in. One of the biggest reasons for selling is to relocate for better public schools outside SF or to save money by enrolling children in suburban public instead of city private schools; high prices are motivating some city homeowners to cash out to buy bigger/better homes elsewhere; frenzied market conditions are discouraging homeowners who might otherwise sell to buy other (larger, better) homes within the city – many of these homeowners are staying put out of trepidation. This last situation is affecting/lowering the supply of homes for sale.

Population/ Employment Growth and Housing

According to the latest U.S. census data, the estimated increase in the city’s population since 2010 is 32,000; over the same period, the number of employed residents has jumped by over 55,000. Per the Planning Department, the approximate number of new housing units added since 2010 is 4200. With 38% of SF’s households consisting of 1 person, and an average household size of 2.3 persons, we’re looking at over 22,000 new residents who have been looking for homes that don’t exist. This is one of the biggest factors behind the huge upward pressure on rents and home prices.

With the market recovery that began in 2012, another 6000 housing units are currently under construction and most should be ready sometime in the next 2 years. Housing units include condos (sales), apartments (rentals), houses (a very few) and community housing projects.

A few thoughts on overbidding …

Our market analyst recently studied trends in overbidding during a five-week period beginning in early February and ending in mid-March. A few things he learned:

· 2 in every 5 sales sold for 10 percent or more over list price

· 1 in every 6 sold for 20 percent or more over list price

· 1 in 3 closed between 1 to 10 percent above asking

· 1 in 5 sold at asking or within 1 percent of list price

· 1 in 9 sold below asking price by at least 1 percent.

What can we learn from this pattern?

  1. If you are buying, start your search in a price range below what you are willing to pay.
  2. If you have been waiting to sell until your home’s value hit a particular price, now may be the time to make a move.
  3. If you are selling, list your home below its anticipated selling price. Listing it right where you expect it to sell could be a mistake. Case in point: a stunning three-plus bedroom/three-bath home west of Twin Peaks worth more than $1.5M is sitting because it was listed for $1.6 million. And a condo in the Castro worth between $750,000 and $800,000 just went through a price reduction after being listed north of $800,000. These properties now have a stigma and will likely sell for less than top dollar because they weren’t positioned for a bidding war.

For buyers, a corollary to number three is to study inventory that has been sitting instead of selling. There may be values among these properties as the rest of the market shifts its focus to the next new hot listing.

Dreaming of San Francisco? Cece Blase offers local advice to San Francisco buyers, sellers and owners– and feeds the dreams of those who wish they could live in Tony Bennett’s ‘City by the Bay.’ Call 415-577-0809 or email cblase@paragon-re.com. www.ceceblase.com

What’s in the pipeline?

Curious about the state of San Francisco construction? Check out the latest version of the San Francisco Pipeline Report, which covers the fourth quarter of 2013.

A few highlights:

  • As of the report, there are 857 projects in the pipeline. Of that amount, 74 percent are exclusively residential and 17 percent are mixed-use with both residential and commercial components. Just 8 percent of the projects are non-residential.
  • That means a total of 50,400 units are set to be added to the city’s stock. This is considered high relative to historical figures.
  • About 18 percent of projects are currently under construction.
  • Around 20 percent have received the necessary approvals.
  • One in three projects have filed building permit applications with the city.

Wondering what to do with your own piece of San Francisco paradise? Get in touch!

Dreaming of San Francisco? Cece Blase offers local advice to San Francisco buyers, sellers and owners– and feeds the dreams of those who wish they could live in Tony Bennett’s ‘City by the Bay.’ Call 415-577-0809 or email cblase@paragon-re.com. www.ceceblase.com

South Beach: Part 1

southbeach2In 2010, when the San Francisco Association of Realtors re-drew their city district map, it split what had been one massive district (SoMa) into three more manageable ones (SoMa, Yerba Buena and South Beach). In the wake of this decision, some self-labeled “purists” cried “foul,” suggesting that the “new” neighborhoods were “made up.”

In the case of South Beach, they couldn’t have been more wrong. No one with a sense of local history would have blamed the SFAR if they’d take their task a step further, splitting the new District 9H into at least three separate mini-districts: the South End, South Park and Rincon. If these names sound familiar, they should; each played a role in early San Francisco history.

There was a time when a South Park or Rincon Hill address meant more than one on Nob Hill or Pacific Heights. Long before “little cable cars climb(ed) halfway to the stars” San Francisco’s elite built their mansions “south of the slot,” on Rincon Hill, located in the northeast quadrant of today’s South Beach and in South Park, a gated development located on Rincon’s southern slope, modeled after a neighborhood in London, England. South Park featured San Francisco’s first paved streets, along with mansions and elegant row homes.

Rincon Hill was the Pacific Heights of its day. During the 1850s and 60s, says historian Charles Lockwood, “dozens of large, comfortable homes were built (on Rincon Hill) that reflected the era’s popular architectural styles: Greek Revival, Gothic Revival, Italianate and Second Empire.” Unfortunately, its reign atop the San Francisco class heap was short. In 1869, the neighborhood was literally cut in half by the Second Street cut (an effort to make it easier for wagons to get from downtown to the southern waterfront). By the 1880s, author Robert Louis Stevenson was referring to Rincon as “a new slum.” The transition of Rincon/South Beach from wealthy to working-class had begun.

It’s difficult now to imagine Rincon Hill not only as a residential neighborhood of free-standing mansions but also as an actual hill. In fact, it was once 120 feet tall. The Second Street cut started a process that eventually leveled it.

Following this, Rincon, South Beach and the South End (which was from conception a waterfront neighborhood of warehouses and docks) spent the next century as blue-collar places of work. The latter neighborhood, bounded by Harrison and Townsend Streets, The Embarcadero and Fourth Street, is now a Historic District boasting “an extraordinary concentration of buildings from almost every period of San Francisco maritime history.”

The Southern end of South Beach also contains a game-changer for the entire district: AT & T Park. After several years of flirting with other sites, including the railroad yards at Seventh and Townsend Streets, the San Francisco Giants broke ground for their new stadium at King and Third Streets in 1997, transforming sleepy South Beach into a vibrant neighborhood of middle- and high-end apartments and condos, restaurants, bars and shops. On game days, Second and Third Streets teem with baseball fans. Hot spots like MoMos and Pete’s Tavern overflow with patrons wearing black and orange.

This end of South Beach was created in a manageable scale, mixing mid- and high-rise blocks with The Embarcadero’s open space and breathtaking bay and bridge views. Not so the rebirth of Rincon Hill. The northern sector of South Beach, was developed after the southern end and chose a flashier approach more in keeping with its proximity to San Francisco’s Financial District. The new Rincon features spectacular residential towers, world-class restaurants, street-level buzz and a seemingly non-stop appetite for growth and action.

In some ways, Rincon seems an outgrowth of neighboring Yerba Buena, with an emphasis on full-service residential communities and a “live here/work here” ethos. It features high-end and boutique hotels and has a subtle ace up its sleeve – easy access to San Francisco’s ferry building and ferry docks. Other than Yerba Buena it’s difficult to imagine a more Manhattan-like neighborhood in San Francisco – or one presently showing more obvious signs of future growth. Two corners of the intersection at Folsom and Beale Streets, for example, sport large-scale construction efforts in their early stages.

But South Beach is more than Rincon, its towers and its cranes. South Beach is also South Park’s quiet central park, King Street’s exciting commercial strip, The Embarcadero and everything in-between. The signature One Rincon towers, visible from all over the city, make Rincon hard to ignore, though. To be certain, the San Francisco Association of Realtors knew what they were doing when they gave South Beach its own designation. The only question is if they went far enough.

Source: Parascopesf.com

Home price index: How does San Francisco stack up?

MyLife.com has created a chart comparing prices in 30 U.S. cities with the aim of seeing how prices have changed both before and after the crash in 2008. It accompanies this article and offers an interesting glance at the market’s state of affairs both yesterday and today.

It won’t surprise you that San Francisco is up in the pretty high stratosphere, second only to our old friend New York and followed by Washington, D.C., Honolulu and San Diego.

Bringing up the bottom are Jacksonville, Florida, Louisville, Kentucky and Atlanta.

Dreaming of San Francisco? Cece Blase offers local advice to San Francisco buyers, sellers and owners– and feeds the dreams of those who wish they could live in Tony Bennett’s ‘City by the Bay.’ Call 415-577-0809 or email cblase@paragon-re.com. www.ceceblase.com

What do I need to know about title and escrow fees?

So you’ve finally hit that point of pride (and a little bit of nervousness): you’re headed to the title or escrow company and preparing to take official ownership of your new house. This will also be the day when both you and the seller are expected to pay closing costs, which are a bundle of separate charges that go to different entities for all the services associated with the purchase and sale of a property.

Here are a few questions and answers courtesy of the California Land Title Association:

Q: What services do closing costs cover?

A: Items including loan fees, advance payments such as property taxes and homeowners insurance, and appraisal fees.

Q: What should I expect to pay in closing costs?

A: While these will vary, expect to get an estimate after you submit your loan application. This is considered a good-faith estimate and is mandatory under the Real Estate Settlement Procedures Act.

Q: Can I pay my closing costs in installments?

A: Uh, no.

Q: Can I pay closing costs with a personal check?

A: Nope. Try a cashier’s check issued by a California institution. Personal checks may either delay the process or be unacceptable to the title or escrow company.

Q: Must I by law buy title insurance when I buy or refinance a home?

A: There is no such law in California. However, nearly all lenders require title insurance for the face amount of their deed of trust in the case of both purchase and refinance.

Dreaming of San Francisco? Cece Blase offers local advice to San Francisco buyers, sellers and owners– and feeds the dreams of those who wish they could live in Tony Bennett’s ‘City by the Bay.’ Call 415-577-0809 or email cblase@paragon-re.com. www.ceceblase.com

New listing: 451 Kansas Street #458

With high-quality inventory at a critical low in the city, every great new listing that comes on the market is a reason to celebrate. I present to you 451 Kansas Street #458, a two-bedroom, two-bathroom condo offered at $850,000.

This Potrero Hill gem has parking for one car, a washer/dryer, and closets for days. A professionally managed building, The Potrero offers ideal floor plans with this particular unit featuring bedrooms set to either side of the living room with their own ensuite baths.

Extra features include walk-in closets, hardwood floors, stainless GE Profile appliances, glass shower doors, and custom window coverings. Outside features include mature landscaped courtyards, a fully equipped gym and spectacular roof deck with stunning city views.

Interested? Get in touch!

Dreaming of San Francisco? Cece Blase offers local advice to San Francisco buyers, sellers and owners– and feeds the dreams of those who wish they could live in Tony Bennett’s ‘City by the Bay.’ Call 415-577-0809 or email cblase@paragon-re.com. www.ceceblase.com