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Off-market sales spiking in high-end sector

Do you know how to keep a secret? That skill is becoming ever more popular within San Francisco’s high-end real estate market, according to the San Francisco Chronicle. The idea of a secondary secret market is nothing new – there are sellers who opt for the more discreet idea of what’s known as a pocket listing rather than putting their properties on the Multiple Listing Service. This has been particularly prevalent amongst high-end sellers, many of whom value their privacy.

However, these days we’re seeing even more of a more subtle marketing approach. A source asserted to the Chron that off-market deals now comprise more than a quarter of all San Francisco sales. “Off-market sales are on the rise, and there are substantially more this year than in years past,” Vanguard Properties agent Michael Bellings told the paper. “It’s coming to the point where there is such a presence for ‘off-market’ deals that a second market is essentially being created.”

If you’re considering this route, I highly recommend you read Paragon’s Pros and Cons of Off-MLS Pocket Listings. It outlines the three main reasons for trying to sell your home off-MLS:

1) You highly value confidentiality and privacy and do not wish to make it public knowledge that you are selling your property.

2) You are not interested in making an effort in the process of selling the property. You may not even need to sell – but if you receive a satisfactory as-is offer, you will.

3) You are of the opinion that you will get the highest sales price through this method since buyers who do learn of your property will believe they are getting a special shot at buying and thus step up aggressively.

Want more info? 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

In negotiation, the power of a “considered response”

The following negotiating tip comes from Chester Karrass— he’s the guy that advertises in airline magazines with a smug look and the pitch, “You don’t get what you deserve. You get what you negotiate.”

Negotiating–Using a Considered Response

When you are negotiating, learn to discipline yourself not to provide quick responses. When a buyer makes an offer, even if it’s acceptable, don’t respond to it with a quick ‘yes’ or ‘no.’

Instead, take your time to considering the offer. A typical offer to purchase allows at least 24 hours to respond. Take that full day and use silence and time to your advantage. Even if you find the offer immediately acceptable, you will have better footing with your buyer if you create the appearance of considering his offer before accepting it.

When you do provide a response, be it a yes, or a no, or anything else, your ‘considered response’ gives greater weight to your answer. A ‘considered response’ also commands more credibility and respect.. If you accept the offer, your “yes” to the buyer has become a more thoughtful “yes.” If you counter, the buyer will know you took time to evaluate the offer before coming back at a higher price or less favorable terms.

Coming back with a quick ‘yes’ or ‘no’ often forfeits the opportunity to create a better, more satisfying deal for both sides. In a soft market like this one, buyers and sellers can suffer from chronic second guessing. If an offer or counter offer is quickly accepted, the other party is left wondering if they should have held out for a better price. This is not a good way to establish trust and can make bumps in the road during escrow more difficult.

Let’s say, for example, a buyer and seller go into contract, with each party believing they could have struck a better price, After escrow is opened, the need for repairs is revealed during inspections. At this point, each side could quickly dig in their heels in an attempt to drive the deal they think they forfeited. These kinds of stand-offs can jeopardize a transaction, with neither party getting what they ultimately want.

If, however a buyer or seller takes the time to thoroughly evaluate an offer or counter before saying yes, it tends to enhance the satisfaction of the other side. When considered responses are employed during a negotiation, and this same need for repairs comes up, there is a higher likelihood that the parties will return to the table once again take time and care as repairs and their costs are reviewed and negotiated. Once a credit or repairs are agreed to, the escrow can move forward again, with the basis of trust between the parties still intact.

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

Updated S&P Case-Shiller Home Price Index for San Francisco Metro Area

The Case-Shiller Index for the San Francisco Metro Area covers the house markets of 5 Bay Area counties, divided into 3 price tiers, each constituting one third of unit sales. Most of the San Francisco’s and Marin’s house sales are in the “high price tier”, so that is where we focus most of our attention.” The Index is published 2 months after the month in question and reflects a 3-month rolling average, so it will always reflect the market of some months ago. The Index for February 2015 was released on the last Tuesday of April.

The 5 counties in our Case-Shiller Metro Statistical Area are San Francisco, Marin, San Mateo, Alameda and Contra Costa. Needless to say, there are many different real estate markets found in such a broad region, and it’s probably fair to say that the city of San Francisco’s market has generally out-performed the general metro-area market.

The first two charts illustrate the price recovery of the Bay Area high-price-tier home market over the past year and since 2012 began, when the market recovery really started in earnest. In 2012, 2013 and 2014, home prices surged in the spring and then plateaued in the summer-autumn. The surges in prices that occurred in the springs of 2013 and 2014 were particularly dramatic, reflecting a frenzied market of huge buyer demand, historically low interest rates, increasing consumer confidence and extremely low inventory. In San Francisco itself, it was further exacerbated by an expanding population and the high-tech-fueled explosion of new employment and new wealth. As we the Case-Shiller Index begins to reflect the beginning of the spring 2015 market, significant price increases appear to be kicking in again, which mirrors what we are currently seeing on the ground in the hurly burly of deal-making.

Right now, we expect for the Case-Shiller Index reports for the next 2 to 3 months – reflecting March, April and May sales activity – to show further increases.

For more regarding how seasonality affects real estate: Seasonality & the Real Estate Market

Case-Shiller Index numbers all reflect home prices as compared to the home price of January 2000, which has been designated with a value of 100. Thus, a reading of 202 signifies home prices 102% above those of January 2000.

Short-Term Trends: 12 Months & Since Market Recovery Began in 2012

Case-Shiller_1-Year

Case-Shiller_High-Tier_2011

Longer-Term Trends & Cycles

The third and fourths charts below reflect what has occurred in the longer term (for the high-price tier that applies best to San Francisco and Marin counties), showing the cycle of recession, recovery, bubble, decline/recession since 1996, and since 1988. Note that, past cycle changes will always look smaller than more recent cycles because the prices are so much higher now; if the chart reflected only percentage changes between points, the difference in the scale of cycles would not look so dramatic.

Case-Shiller_from_1990 Case-Shiller_HT_1996-2011

Different Bubbles, Crashes & Recoveries

This next 3 charts compare the 3 different price tiers since 1988. The low-price-tier’s bubble was much more inflated, fantastically inflated, by the subprime lending fiasco – an absurd 170% appreciation over 6 years – which led to a much greater crash (foreclosure/distressed property crisis) than the other two price tiers. All 3 tiers have been undergoing dramatic recoveries, but because the bubbles of the low and middle tiers were greater, their recoveries leave them well below their artificially inflated peak values of 2006. It may be a long time before the low-price-tier of houses regains its previous peak values. The high-price-tier, with a much smaller bubble, and little affected by distressed property sales, has now exceeded its previous peak values of 2007. Most neighborhoods in the city of San Francisco itself have now surpassed previous peak values by substantial margins.

It’s interesting to note that despite the different scales of their bubbles, crashes and recoveries, all three price tiers now have similar overall appreciation rates when compared to year 2000. As of February 2015, this range has narrowed to 99% to 102% over year 2000 prices. This suggests an equilibrium is being achieved across the general real estate market.

Different counties, cities and neighborhoods in the Bay Area are dominated by different price tiers though, generally speaking, you will find all 3 tiers represented in different degrees in each county. Bay Area counties such as Alameda, Contra Costa, Napa, Sonoma and Solano have large percentages of their markets dominated by low-price tier homes (though, again, all tiers are represented to greater or lesser degrees). San Francisco, Marin, San Mateo and Santa Clara counties are generally mid and high-price tier markets, and sometimes very high priced indeed. Generally speaking, the higher the price, the smaller the bubble and crash, and the greater the recovery as compared to previous peak values.

Remember that if a price drops by 50%, then it must go up by 100% to make up the loss: loss percentages and gain percentages are not created equal.

The numbers in the charts refer to January Case-Shiller Index readings, except for the last, which reflects December 2014.

Low-Price Tier Homes: Under $529,000 as of 2/15

Huge subprime bubble (170% appreciation, 2000 – 2006) & huge crash (60% decline, 2008 – 2011). Strong recovery but still well below 2006-07 peak values.

Case-Shiller_LowTier_Longterm

Mid-Price Tier Homes: $529,000 to $859,000 as of 2/15

Smaller bubble (119% appreciation, 2000 – 2006) and crash (42% decline) than low-price tier. Strong recovery but still somewhat below 2006 peak.

Case-Shiller_Mid-Price-Tier_since-1988

High-Price Tier Homes: Over $859,000 as of 2/15

84% appreciation, 2000 – 2007, and 25% decline, peak to bottom.

Now climbing well above previous 2007 peak values.

Case-Shiller_from_1990

In San Francisco, where many neighborhoods vastly exceed the initial price threshold for the high-price tier, declines from peak values in 2007 in those more expensive neighborhoods typically ran 15% – 20%, and appreciation over previous peak value has also exceeded the high-price tier norm.

San Francisco County

And then looking just at the city of San Francisco itself, which has, generally speaking, among the highest home prices in the 5-county metro area (and the country): many of its neighborhoods are now blowing past previous peak values. Note that this chart has more recent price appreciation data than available in the Case-Shiller Indices. This chart shows both house and condo values, while the C-S charts used above are for house sales only. Median prices are affected by other factors besides changes in values, including seasonality, new constructions, inventory available to purchase, and significant changes in the distressed and luxury home segments. Short-term fluctuations are less meaningful than longer term trends.

Median_SFD-Condo_by-Qtr_Short-term

And this chart for the Noe and Eureka Valleys neighborhoods of San Francisco shows the explosive recovery seen in many of the city’s neighborhoods, pushing home values far above those of 2007. San Francisco, San Mateo and Santa Clara counties are most effected by the high-tech wealth effect on home prices. Noe and Eureka Valleys are particularly prized by this buyer segment and the effect on prices has been astonishing.

Noe-Eureka_SFD_Avg-SP_DolSqFt_by_YEAR

Tips to keep the house cool

Are you sweltering? You might be, since the Bay Area seems to be experiencing a mini-heat wave. (Much of the place is in the 80s, which is high for here at least. Now, Arizona … that’s a different story.) Well, the Consumer Guide to Home Energy Savings (via Care2) has a few tips for keeping your home cool while not completely draining your pocket when it comes to utility bills. Here are a few:

1) Keep doors and windows closed during the day to prevent unwanted heat and humidity from entering. By night, ventilate either naturally or with fans.

2) Cut your cooling load by using some conservation measures such as shading east- and west-facing windows and delaying heat-generating tasks such as dishwashing until the evening. (Hey, a reason to put off chores!)

3) Ceiling fans can make you feel more comfortable at higher thermostat settings. Try a sow-turning, ceiling-mounted paddle fan, which provides a breeze of about 2.5 feet per second or 1.7 miles per hour.

4) Planting shade trees around the house can offer relief, but remember not to plant on the south side if you’re seeking to benefit from passive solar heating come winter.

5) Ventilate at night and on cooler days, using window fans and an open window in each room. Keep interior doors open as well to permit air flow.

6) High-efficiency air conditioners with an energy-efficiency ratio above 10 are helpful. For central air conditioners, look for a seasonal energy-efficiency ratio higher than 12.

7) Finally, resist the urge to use a dehumidifier while your air conditioner is operating simultaneously. This will result in increasing the cooling load while forcing the air conditioner to work harder. This isn’t what you want!

Stay cool!

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

Neighborhood Spotlight: Richmond District

If you’re seeking a neighborhood that’s convenient to the ocean and boasts plenty of activities for residents of all stripes to enjoy, you might consider District 1, otherwise known as the Richmond District. With an almost endless list of outdoor activities, cultural offerings and historical sites, the Richmond is a destination for just about anyone.

Here you’ll find any number of gorgeous Victorian, Edwardian and Marina-style homes. Often you’ll find the Victorians and Edwardians – in mansion form – around the Lake Street and Sea Cliff areas, while you’ll see more Marina-style homes in the Central and Outer Richmond.

Let’s look at a few demographics courtesy of the San Francisco Association of Realtors:

· Total population: 79,986

· Male population: 38,089

· Female population: 41,897

· Percent change since 2000: -1.3 percent

· Percent change since 2010: 1.0 percent

· Median age: 40.3 years

There are an estimated 70.6 percent white-collar employees in the Richmond as opposed to 29.4 percent blue-collar employees. With a total of 35,310 households, there are 17,523 family households and 17,786 non-family households. There are 7,594 households with children and 27,718 households without children. Richmond District households average 2.23 people.

Known for foggy weather and a chillier-than-average climate due to the ocean’s wind chills from the west, the Richmond is a place where you’ll want to wear a sweater. Here you’ll find a vast Chinese population as reflected by the commercial strips on Geary Boulevard and Clement Street, which boast a variety of highly regarded Chinese restaurants. In addition, here you’ll find deep Irish and Russian roots as well as a variety of Catholic and Orthodox churches, many quite picturesque.

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

Part Three: exploring the San Francisco apartment-building market

Throughout the last two posts, we’ve been giving an in-depth look to Paragon’s recently released report on the San Francisco Bay Area apartment-building market. Today we conclude that discussion with a look at construction, rental rates and more.

Here in the Bay Area, particularly in the city of San Francisco, you’ll find plenty of older apartment buildings – many in some of San Francisco’s most hotly desired neighborhoods, commanding rents as high as just about any of their newly built compatriots. Nearly all of the city’s buildings fall under rent control, but newer buildings often do not. Instead, they are typically being built to high-tech, ultra-luxury-amenity standards with huge rental rates to match.

Something that’s under debate is exactly how much of this high-high end apartment inventory can be absorbed by the market. At the moment, demand exceeds supply, but it certainly be speculated that we might reach a saturation point as new projects continue to come online. Only time will tell how many young professionals are willing and able to pay $38,000 yearly to rent a 500-square-foot studio or $55,000 yearly to rent a 900-square-foot one-bedroom apartment.

In San Francisco and Alameda counties, we’re seeing appreciation of dollar-per-square-foot values to the tune of more than 60 percent since the bottom of the market. Keep in mind, though, that Bay Area residential investment sales consist of a changing group of unique properties that vary widely when it comes to size, era, location and quality. This makes median and average statistics merely gross generalities and without specific analysis the impact is fairly unknown.

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

Part Two: What’s up with San Francisco’s apartment-building market?

Yesterday we started to look at Paragon’s recently released report on the San Francisco Bay Area apartment-building market. Let’s continue that discussion today, shall we?

In the third quarter of last year, we saw the San Francisco market for apartment buildings hit a sudden stop due to how the controversial Proposition G, which sought to limit the amount of speculation that could occur on residential properties in the city. Nearly 54 percent of voters vetoed the proposition, which included a transfer tax on short-term flips of residential real estate. After that, the fourth quarter saw a dramatic surge in sales, followed by another slowdown in the first quarter of this year. We’re seeing listings for sale, new listings and listings accepting offers at their lowest numbers in more than three years – and due to the fact that economic factors haven’t seen significant change, we at Paragon are assuming that this is merely reflective of an unusually busy preceding quarter. We’ll likely have more data soon since the spring sales season is typically the most active of the year.

The Bay Area is the strongest employment market in the country. The San Francisco Business Times reports that in March there were 8,600 unfilled software engineer positions in the city listed on just one recruitment site, with these jobs typically starting out at more than $100,000 even before you add in signing bonuses and stock options. Bottom line: these people need a place to live.

Unfortunately, the Bay Area has not been as strong at adding new housing over the past three decades. According to research from the California Legislative Analyst’s Office, this has been a real issue, with a new construction boom underway in the city that is still marginalizing those in need of affordable housing. We’ve got 3,500 net new units of all types that were added in 2014. While this is a huge jump from the previous five years, keep in mind that it will take years for them to actually hit the market … if indeed they are all completed.

Tomorrow we’ll finish our discussion of this report.

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 New-Housing Construction Trends

Many of the charts included in this report are based on or excerpted from the San Francisco Planning Department’s 82-page 2014 Housing Inventory report, released in April 2015, which can be accessed using the link at the bottom of this article. Much of the text below detailing housing-inventory statistics is excerpted from this report as well.

Planning-4-Steps

The process of application and review, public hearings (and sometimes ballot proposals), revisions, entitlement, permitting, construction, inspection and completion is complex and lengthy. Housing units are being planned and built, and existing units are being altered and removed. And there are many housing types: rental or sale units, market rate or affordable, social-project housing or luxury condominiums.

The new-housing landscape in San Francisco is in constant flux: new projects, developer plan changes, city plan changes, and shifts in economic and political realities. The basic reality is that the city, after its recent 2008-2012 new-construction slump, is now experiencing a huge building boom. So far, however, it has not been able to keep up with accelerating population growth, soaring employment and concomitant surging buyer/renter demand.

4-15_Planning-Dept_Units-Added_1995-2014

“The production of new housing in 2014 totaled 3,654 units, a 50% increase from 2013. This includes 3,454 units in new construction and 200 new units added through conversion of non-residential uses, alterations to existing units or buildings, or expansion of existing structures. Some 140 units were lost through demolition (95), unit mergers (20) and removal of illegal units (24).

“Some of the larger projects completed in 2014 include: 1411 Market Street/NEMA Phase II (437 market-rate units and 52 affordable inclusionary units), 185 Channel Street (315 market rate units), Rincon Hill Phase II (312 market rate units).The 1190 4th Street (100% affordable 150 units) and St. Anthony Foundation’s 121 Golden Gate Avenue (100% affordable 90 senior housing units) are two major affordable housing projects completed in 2014.”

New-Construction_Authorized-Completed

“The Planning Department approved and fully entitled 57 projects in 2014. These projects propose a total of 3,756 units. In 2014, 3,834 units were authorized for construction. This represents a 21% increase from 2013. New housing authorized for construction over the past five years continues to be overwhelmingly (90%) in buildings with 20 or more units. In 2014 the average project size was 16 units.”

“Some of the major projects authorized for construction during the reporting year include: 2801 Brannan Street (434 units); 3350 8th Street (408 units); 250 4th Street (208 units); and 588 Mission Bay Boulevard (200 units).”

4-15_Housing-Inventory_Looking-Forward-Numbers

“In 2014, 269 projects with about 8,030 units were filed with the Planning Department. This number is higher than the count in 2013 by 66% and is a little over double that of the five year average of almost 3,690 units.

Residential Development by City District

4-15_Housing-Inventory_Map-New-Units-Added

New-Construction_by-SF-District

New construction has been concentrated in a few specific districts of the city, mostly where there are commercial lots able to be converted to residential use and where higher density housing projects are most viable. The ability to take under-utilized commercial property sites and turn them into multi-unit or even high-rise residential projects is particularly prized. Generally speaking this describes the quadrant of San Francisco around and to the southeast of the Market Street corridor.

New Development Pipeline

We also have an overview of the quarterly San Francisco Planning Department’s Pipeline Report, which complements the annual Housing Inventory reports with a longer term perspective: The San Francisco Residential & Commercial Development Pipeline Report. Below is one chart from this report.

There are over 50,000 housing units of all kinds currently in the pipeline – and the pipeline is growing and changing quickly now – but some of the bigger projects (such as Treasure Island and Hunter’s Point/Shipyard) may take decades to complete.

12-14_Residential-Pipeline-by-District

Construction vs. Conversion

New-Housing_Construction-Conversion

“Thirty-three single-family units were added in 2014: Single-family building construction made up a very small proportion of new construction in 2014 (1%).” Very few new houses are built in San Francisco, as developers prefer to build higher density housing projects on our limited supply of land. The houses that are built are typically big and expensive.

“New condominium construction in 2014 dropped to 1,977 units from 2,586 units in 2013. Condominium conversions were up by 98% in 2014 (730 from 369 conversions in 2013). This number is 20% higher than the 10-year average of 606 units.” The rules governing condo conversion in San Francisco are byzantine, politically-wrought and, seemingly, ever-changing, and the changes affect the ability to convert existing multi-unit properties and TICs into condominiums. .

Affordable Housing Construction

4-15_Affordable-Housing-vs-Market-Rate

Affordable-Housing_Construction

Very generally speaking, the city requires that new home developers either dedicate 15% of their units to affordable housing, which could be built on-site or on another city site, or contribute to the city’s affordable housing fund “in lieu” of building the units themselves.(The rules are more complicated than that, but that’s the general idea.) There are few subjects more politically charged in San Francisco than affordable housing: how much should be built where and who should be responsible for the costs.

“In 2014, 757 new affordable housing units were built. These new affordable units made up 21% of new units added to the City’s housing stock. This count includes 267 inclusionary units and 59 units added to existing structures. About 83% of the new affordable units are rentals affordable to very-low and low-income households.” These units are allocated, rented and sold under rules and formulas pertaining to social and economic circumstances and housing cost. Large projects are also built on an ongoing basis by private-public social organizations for dedicated purposes such as senior housing.

“In 2014, a total of about $30 million was collected from developers as partial payments of in-lieu fees for projects.”

Major affordable housing projects completed in 2014 include: 1190 4th Street (150 units); 121 Golden Gate Avenue (90 units); 378 5th Street (44 units); 833-871 Jamestown Avenue (96 units); 1600 Market Street (23 units); and 63 West Point Road (15 units).

Housing Units Demolished, Merged and Abated

Housing-Units_Lost

“Dwelling units are gained by additions to existing housing structures, conversions to residential use, and legalization of illegal units. Dwelling units are lost by merging separate units into larger units, by conversion to commercial use, or by the removal of illegal units. The net gain of 155 units from alterations in 2014 is comprised of 200 units added and 45 units eliminated.”

The Context behind San Francisco New-Housing Development
Population, Employment, New Supply vs. Demand

What ultimately underpins new housing construction is demand. San Francisco is seeing surging population and employment that has been far outpacing new supply. Below are 3 charts we made up plus one from the CA Legislative Analyst’s Office.

3-15_LAO-CA_Built-vs-Needed_1980-2000

Employment_SF-by-year

New-Home-Construction_SF_by-Decade

Population-Growth_SF

Insufficient Housing = Increasing Prices & Rents

Below are two of our charts illustrating the white hot rental and sale markets in San Francisco, which are motivating investors and developers to build new homes, and motivating the city and non-profits to try and accelerate the construction of affordable housing units as well.

Median-Price_SF_SFD-Condo-Combined_by-Qtr

Rents_Avg-SF_by-year

New Housing Construction by Bay Area County

As can be seen below, Santa Clara has taken the lead in new home construction in the Bay Area. “In 2014, Bay Area counties authorized 21,090 units for construction, 8% more than the 2013 authorizations of 19,551 units. In San Francisco, 98% of new housing is in multi-family buildings.”

New-Construction_by-County

SF Housing Stock by Building Size

4-15_Housing-Inventory_by-Bldg-Type

Condo Values by Era of Construction

AvgDolSqFt_Condo-by-Era-Built

The first golden age of SF apartment buildings, many of which were later turned into condos, was in the period of 1920 – 1940: The units in these buildings are large, light, gracious and filled with elegant detail. Pacific Heights and Marina are filled with these buildings. Though there are beautiful condos built in other eras (Edwardian flats, Art Deco apartments), the second golden age really arrived with the latest burst of new-condo construction, built for an increasingly affluent population: These units are ultra-modern, high-tech and feature highest quality finishes and amenities. They are exemplified by the new, luxury high-rises of the greater South Beach-Yerba Buena area, though variations on this theme, in non-high-rise form, have been springing up all over the city.

The units in these newer buildings command a premium both when rented or, as seen in the chart above, when sold – now surpassing an average dollar per square foot value of $1000. This is the major motivator for developers today.

Housing Unit Construction by Bedroom Count

Micro-Units-Quote

New-Condo_Construction-by-BR-Count

We haven’t found an easy place for construction data by unit size, so this first chart above is extrapolated from SF MLS sales of condos built 2001 -2015. It may not apply perfectly to units built as apartment rentals or affordable housing.

Typically, the smaller the unit, the higher the dollar per square foot value on sale or rental, however in San Francisco, 3+ bedroom condos are often high-floor units with spectacular views that sell for extraordinary sums – but these would be outliers to the general rule. The city plan appears to have a bias for 2-bedroom units, which it designates as “family units” – this may be an anachronism considering that 38% of city residents live alone and that SF has the lowest percentage of children of any major U.S. city.Lately there has been a push by developers (and some housing advocates) toward smaller or even “micro” units, but other segments in the decision-making chain in the city, such as supervisors and neighborhood community groups, often push back against allowing this trend to gain traction in the city.

The politics of new home development in San Francisco is not for the weak of heart. There are very, very strong opinions and pressures regarding how it should best proceed.

San Francisco Planning Department
Pipeline & Housing Inventory Reports

Below are links to the SF Planning Department Pipeline and Housing Inventory report webpages. They contain huge amount of data, which we have attempted to represent accurately.As noted by their authors, who did an incredible job, the original reports themselves are “compiled and consolidated from different data sources and subject to errors due to varying accuracy and currency of original sources.”

2014 SF Planning Department Housing Inventory Report, Issued April 2015

San Francisco Planning Department Pipeline Report

SF Development Pipeline Map

And this image-link goes to a flowchart of the Planning Department’s
review and approvals process:

SF-Planning-Flowchart

This report was created in good faith and is based on data from sources deemed reliable,
but may contain inadvertent errors and misrepresentations, and is subject to revision.

© April 2015 Paragon Real Estate Group

What’s going on with the San Francisco apartment-building market?

Paragon has just released a report on the San Francisco Bay Area apartment-building market, and there are some intriguing findings there. This report covers the first quarter of 2015 and looks at factors including market activity, inventory and sales, median prices and cap rates, average dollar per square foot values, price per unit and rental rates.

We’re seeing two major factors that underlie the Bay Area real estate market: population growth that’s driven by a substantial increase in well-paying jobs as well as the incredibly inadequate housing supply available to meet a surging demand. While developers are jumping on the bandwagon to build new housing stock, we’re looking at another four or five years on average for these projects to move from initial plan submission to project completion. Also, keep in mind that the great majority of new housing that’s planned or under construction is extremely high-end, so expect that the desperate shortage of affordable housing will continue to persist in our fair city.

Let’s look at some fundamentals of the Bay Area (and particularly San Francisco) apartment market. It’s a boutique market that’s dominated by sales of smaller, older buildings. We’re still seeing the highest median sales price and price per unit in the Pacific Heights-Marina district, with the bigger buildings of the Downtown-Tenderloin area second in median price but far lower on a dollar-per-square-foot or price-per-unit basis. Across the bay in Oakland, values are still rising, but remain far below those found in the city.

That said, we’re seeing huge appreciation on both sides of the bay, particularly over the past 15 months. We saw this begin to get steady over the course of last year, with a continuing rise this year. Rents are also continuing to increase, with a 13 percent year-over-year appreciation in San Francisco’s average asking rent (despite a slowing in these increases over the past two quarters) and an increase in Oakland’s rents as well to the tune of 22 percent year over year. We’re seeing the nation’s highest rents in San Francisco – even outpacing New York City by quite a bit.

Tomorrow we’ll continue our look at this report.

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 Luxury Home Market Report

In this report, we will define luxury homes in San Francisco as houses, condos, co-ops and TICs selling for $2,000,000 or more. Homes selling in this price range currently make up a little more than 10% of the SF residential market; those selling for $5,000,000 and above constitute about 1% of the city’s home sales.

In the past 12 months, 671 home sales of $2m+ above (414 houses, 220 condos, 23 co-ops, 14 TICs), and 67 sales of $5m+ (56 houses, 7 condos, 3 co-ops, 1 TIC) were reported to San Francisco MLS.

San Francisco Luxury Home Sales by Month
March 2015 saw the highest monthly number of luxury home sales in San Francisco’s history. Typically, this segment of the market doesn’t really hit its stride until April and May, which may indicate that spring 2015 is going to be very active.

Not shown on the chart, but if we compared our recent market with the previous peak of the market prior to the 2008 crash, home sales of $2m+ have more than doubled: Part of this speaks to the surge in affluence in the Bay Area, and part of it is due to recent home price appreciation.

1

Median Sales Prices
for San Francisco Luxury Homes
As seen below, the Pacific & Presidio Heights neighborhoods still rule the roost for highest home prices. Part of this is pure location, but this is also an area where one finds very large houses, true mansions, and that naturally affects sales prices as well. Many of the runners up in this chart are very small markets, i.e. the number of luxury house sales can average less than 1 or 2 per month in Sea Cliff, Russian & Telegraph Hills, Jordan Park, Lower Pacific Heights and St. Francis Wood.

For buyers of larger houses, the greater St. Francis Wood-Forest Hill area offers comparably large and elegant homes, often on larger lots, at significantly lower dollar-per-square-foot prices. (See the following section below the next chart.) And many of the large, gracious, 3 to 5 bedroom Edwardians found in Inner/Central Richmond and Inner Sunset now sell for over $2m, but usually at lower prices than in the Lake Street and Cole Valley neighborhoods nearby.

2

Average Dollar per Square Foot Values
for San Francisco Luxury Homes
Average dollar per square foot is a very general statistic, but this chart gives an idea of the extraordinary values now being achieved by San Francisco luxury properties in different neighborhoods of the city. The new, ultra-luxury, high-amenity, high-rise condo buildings of the South Beach/ Yerba Buena district now generate the highest average values: Think large, gorgeous, high-floor units with staggering views.

Some homes are selling far beyond the average values seen here: A 15,000 square foot penthouse in South Beach is now on the market at $3000 per square foot, and a Pacific Heights penthouse of 5400 square feet reportedly just sold off-MLS for over $5000 per square foot, an all-time high in the city.

3

Shifts in Gravity
This chart tracks changes in percentage luxury-home market share by different districts of the city, and it illustrates a slow shifting of the market. The swath of established, prestige, northern neighborhoods running from Sea Cliff and Lake Street through Pacific & Presidio Heights to Russian & Nob Hills has historically utterly dominated high-end home sales. This area will always be highly prized and valued – it’s full of beautiful streets, homes, views and commercial districts – but now luxury sales are increasing much more rapidly in places like the Noe, Eureka and Cole Valleys district, and for luxury condos, the greater South Beach, Yerba Buena and Mission Bay district.

Part of the reason is proximity to where high-tech workers work in San Francisco and on the peninsula; another part is that many of the newly wealthy are relatively young and prefer a different neighborhood ambiance; and last but not least, the vast majority of new luxury condo construction is occurring in the quadrant of the city near to and southeast from Market Street. There is very little new housing construction occurring on the north side of the city.

4

Not included in the chart above, but over the 7-year period, home sales of $2m+ also increased in the Richmond/Lone Mountain neighborhoods from 1.5% to 3% of total luxury home sales, and from 0% to 2% of sales in Inner Sunset.

Sales Prices to List Prices, Days on Market & Price Reductions
93% of Q1 SF luxury home sales sold without prior price reductions, averaging 7% above asking price and a very low 25 days on market: Indications of a strong, competitive market. However, this housing segment is also one prone to overpricing by sellers and listing agents, sometimes egregiously so: Of the 73 active $2m+ listings on the market as of 4/15/15, 51 have been on the market for 50 to 505 days. So buyers are snapping up many new luxury listings very quickly, but ignoring many others until price reduced (or simply withdrawn from the market).

Last but not least, it should also be remembered that the more expensive the home, the smaller the pool of qualified, prospective buyers: Sometimes, it simply takes longer to find the right one for a particular property, especially if it’s a little outside of the norm in some way.

5

Luxury Home Sales by Bay Area County
Santa Clara County has by far the biggest luxury home segment in the Bay Area for two reasons: 1) Silicon Valley wealth, and 2) its population and housing market is well over twice the size of San Francisco’s, in an area 27 times larger.

Of San Francisco’s home sales of $2m+ in Q1 2015, 43% were condos, co-ops and TICs. SF is the only Bay Area county where luxury condos and co-ops play a significant (and increasing) role in the market. Less than a handful sold in all the other counties combined.

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For your convenience, below is a map of San Francisco neighborhoods and a breakdown of neighborhoods in each Realtor district.

San_Francisco_Neighborhood_Map
These analyses pertain to sales reported to MLS: off-MLS sales and new project condo sales unreported to MLS are not included.

All data from sources deemed reliable, but may contain errors and is subject to revision. Statistics are generalities and how they apply to any specific property is unknown without a tailored comparative market analysis. Outlier sales that would distort the statistics were deleted from the analysis when identified. All numbers should be considered approximate.

© 2015 Paragon Real Estate Group