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Stock market woes: how will this affect the Bay Area real estate market?

The stock market’s turmoil has been unsettling for most of the country over the last 48 hours. Reports are rolling in that close to 2.1 trillion dollars have been lost to the “indigestion” that the market is suffering from. The Dow, S&P 500 and Nasdaq have all tumbled into correction territory, their first such 10% decline from a recent high since 2011. Market dips raise red flags for homeowners, who are concerned about how these international turns will affect their home’s value. Patrick Carlisle, Chief Market Analyst at Paragon Real Estate Group offers his insight to how despite the doom and gloom headlines, and it is not time to hit the panic button yet. Carlisle weighs in below on what is happening in the market and makes a few predictions of where things are headed.

This series of helpful charts help illustrate the finer points of market trends discussed by Patrick Carlisle Chief Market Analyst for Paragon Real Estate Group.

This series of helpful charts help illustrate the finer points of market trends discussed by Patrick Carlisle Chief Market Analyst for Paragon Real Estate Group.

Paragon Real Estate Group

Worried about opening bell?

Photo Courtesy of Pixabay.com

“First of all, with all the current drama in world stock markets, it’s not unreasonable that a person will want to step back and see what happens – and trying to convince someone otherwise is a losing proposition. “- Patrick Carlisle

What We Know

Housing prices, under normal conditions, do not react at all to short-term ups and downs in the stock market, though depending on how dramatic they are, they can temporarily slow activity as buyers wait to see if something really serious, with long-term ramifications, is developing. It is generally the more affluent who step back and wait, since one they have much more wealth in financial investments (stocks), and two they are much more in tune with financial market movements. Housing prices are not a liquid bid-ask market – our area has small numbers of relatively unique homes in San Francisco, not millions of uniform shares of stock – and sellers always react more slowly to economic downturns since they don’t want to reduce prices if they don’t have to, and no one can make them sell. There is a built-in delay in sales between offer negotiations and closed transactions, so it takes a while for price movements to clarify.

Besides U.S. economic conditions, there are the existing boom economic conditions in the Bay Area, which means our housing market may react differently. The S&P 500 to begin to compare the stock market to the various Case-Shiller Index Bay Area home price tiers. Different price tiers had bubbles and crashes of different magnitude due to the subprime financing (and refinancing) fiasco. Finally, make sure to note that while the latest stock market decline is indicated, other short-term fluctuations will not show up in year to year figures.

The Big Picture

Generally, all market segments react to big, sustained, macroeconomic events as can be seen in the 3 S&P Case-Shiller charts below for the low, mid and high-priced tiers of the Bay Area home markets. However, it is interesting that when the dotcom bubble burst, only the mid and high price tiers’ home prices were affected (and then, briefly), and the high-priced tier was impacted more than the mid-tier. The buyers in the high tier were much more affected in their wealth by the crash in the Nasdaq, especially in the Bay Area, and the most affluent buyers drew back the most as they waited to assess the shake out.In the last cycle, the more expensive SF neighborhoods were the last to peak in value in early 2008, and the first to recover in late 2011- early 2012. San Francisco was generally much less impacted by the bubble’s crash than the rest of the Bay Area, state and the country though some neighborhoods were more affected than others.

“Generally speaking, San Francisco’s housing market has since appreciated well beyond its previous peak values”. – Patrick Carlisle

In the last bubble and recession, lower priced homes surged much higher and crashed much more dramatically than higher priced ones, but that was not because of the stock market, but because of the subprime loan situation which led to massive foreclosures in the lower end (with buyers who couldn’t afford the home they were buying in the first place). Subprime lending played a very small part in higher priced home purchases (which dominate in San Francisco), whose buyers also tended to be more financially savvy (and weren’t targeted by predatory loan brokers and generally didn’t buy homes they couldn’t afford).

“It’s interesting to note that all 3 Bay Area housing price tiers, according to Case-Shiller, are now showing a uniform 117% appreciation rate since the year 2000.” – P. Carlisle

It is important to keep in mind that as markets cycle up and down, that reviewing data regularly with seasoned professionals will help consumers weather most storms. Based on current economic activity and conditions in the U.S. – there is very little chance of a U.S. stock market crash occurring in the near future (though the scale of an “adjustment”, if such happens, is unknown) and it’s quite possible the current dramatic volatility may soon become a distant and irrelevant memory, as other short-term economic events often have.

“I don’t profess to be a Nobel Laureate in Economics, so take my analysis for what it’s worth – one point of view based on one assessment of the data. So let’s see how things shake out.” –

Patrick Carlisle Chief Market Analyst for Paragon Realty Group

And now for the fine print. . .

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.

Sources:

Paragon Real Estate Group

CNN Money

Older Millennials and young Boomers are the generations to watch in real estate

The San Francisco housing market is in full recovery mode, but the formation of new households is changing in the area. New household formation slowed during the recession as “multigenerational” households became necessary for survival during hard economic times. Two factors that are affecting this market are the booming tech industry and the rising cost of rents in desirable neighborhoods.

The Terner Center for Housing Innovation at UC Berkely recently released a new study called “Who is Actually Forming New Households”. The study brings to light the changing definition of a household across the country. The study revealed that new households are not being formed by the traditional group of very young adults and explored which age groups are forming new households. The two key groups the study highlighted were older Millennials and young Baby Boomers. These two groups were the focus of small concentrated growth in new household formation.

The San Francisco Association of REALTORS® regularly provides the public demographics about the changing population. Occupational Employment in San Francisco is made of up 73. percent of White Collar employees. The median age for the area is 38.68 and 51.5 percent of residents are reporting that they have never married before. The average household has 2.2 people and the median household income is $77,734.00.

The “Older Millennials” 25-35

The Terner Center’s study revealed that older Millennials are looking to purchase a home independently before starting a family. Younger millennials still do not have the income to support becoming a head of household. They are staying with their parents longer or doubling up in tiny rentals. The study also noted that the link between employment and living with parents is not black and white. Employed 25-34-year-olds are less likely to live with their parents while the under or unemployed Millenials cannot afford independent housing.

Zillow.com recently released their updated data on first-time home buyers that agrees with what the Terner Center found.

“Millennials are delaying all kinds of major life decisions, like getting married and having kids, so it makes sense that they would also delay buying a home,” said Zillow Chief Economist Dr. Svenja Gudell.

According to Zillow, the average first-time homebuyer is about 33. Their median income is $54,340, which is about the same as what first-time homebuyers made in the 1970s, when adjusted for inflation. Zillow also found that more new homeowners are single. In the late 1980s, 52 percent of first-time homebuyers were married. Today, only 40 percent were married.

“Millennials are delaying all kinds of major life decisions, like getting married and having kids, so it makes sense that they would also delay buying a home,” said Zillow Chief Economist Dr. Svenja Gudell. “We know millennials value home-ownership and want to buy. The next challenge will be figuring out how they can save for a down payment and qualify for a mortgage, especially while the rental market is so unaffordable all over the country. The last hurdle will be finding a home they like amidst very tight inventory, especially among starter homes.”

The “Young Baby Boomers” 65-74

The first wave of aging Baby Boomers reached full retirement age in 2011. Over the next 20 years, 74 million Boomers will retire. The Terner study found that this population accounted for more than two-thirds of overall new household formation across the country. According to the SFAR, these boomers have a median income of $57,502.00. This median compared to young millennials under 25 who report a median income of $48,613.00 shows a significant difference in buying power.

As these new households come together, inventory drops and pricing rises. The study wrapped up by stating that millennials face housing challenges, and this is the new “normal”. This “normal” is the lingering effects of the recession. The study also hinted that if boomers keep pushing for new households, that construction may be more focused on urban options and less focused on single family needs.

Review the full UC Berkeley study and its findings in its entirety here, and visit the San Francisco Association of REALTORS® Housing Demographics page for more statistical information.

Sources:

Terner Center for Housing Innovation UC Berkeley

Demographics San Francisco Association of REALTORS®

Zillow “Today’s First-Time Homebuyers Older, More Often Single”

This weekend: Bark and Meow around the Block

What are you doing this weekend? Are you interested in helping the Berkeley Humane Society promote an excellent cause? If so, don’t miss Bark and Meow around the Block, which takes place this Saturday, Aug. 15 from 10 a.m. to 4 p.m. at Ninth and Carleton Streets in West Berkeley.

On tap will be the shelter’s annual Adopt-A-Thon and street fair, featuring reduced adoption fees, tasty food and entertainment for the entire family. Admission is free! In excess of 100 dogs and cats will be available for adoption not only from Berkeley Humane, but more than 20 partner rescues – you’re bound to find your new best friend! In addition, you’ll enjoy great food, beer and wine from local restaurants, breweries and wineries as well as kids’ games and activities, live music and entertainment, a raffle and vendor with pet-related and other products.

“Our goal,” the Berkeley Humane site proclaims “is to find well-matched homes for as many animals as we can and clear our shelters.” The event is part of a greater effort to “clear the shelters” throughout the country, something achieved through heightened public relations efforts, events such as Bark and Meow and reduced adoption fees.

Attendees’ pets are also welcome at the event, so long as they’re “well-behaved dogs and fearless cats on leash”, according to the Humane Society. For more information, call (510) 845-7735 ext. 228 or email information@berkeleyhumane.org.

The Berkeley-East Bay Humane Society was first founded in 1927 by a trio of three concerned citizens. Originally known as Animal Rescue Haven, the organization has seen its priorities shift with the needs of the community’s animals over the years, eventually adding education programs, community pet support programs and a veterinary hospital. The latter was closed in 2009 in order to focus on providing medical care exclusively for shelter dogs and cats. In the 1970s, the group’s board of directors committed to a revolutionary adoption guarantee model that no healthy or treatable shelter animals in its care would be euthanized – setting the stage for a nationwide movement that continues to develop to this day.

Realtor.com ranked San Francisco as the #1 Hottest Housing Market in July

SFStock

The U.S. housing market may be finding more balance, according to a new report from realtor.com®. For the first three weeks in July, the median list price rose to $234,000 nationwide, up 7 percent year-over-year, while inventories of for-sale homes rose and the median days on the market increased to 69 days.

“This year we’re seeing inventory continue to grow in July, albeit at a slower pace than this spring,” says Jonathan Smoke, realtor.com®’s chief economist. “And while demand overall is strong, the trend in median days on market is suggesting that the market is finding more of a balance, which bodes well for more moderate price appreciation in the months ahead.”

However, some housing markets continue to see rapid growth. Realtor.com® found that 20 markets receive 1.5 to three times the number of views per listing compared with the rest of the nation. Inventory in those markets is moving 24 to 41 days quicker than the national average.

“These hottest markets are the best in the country from both a supply and demand perspective,” Smoke says. “Sellers are seeing listings move much more quickly than the rest of the country and at an accelerating pace from just last month. Meanwhile, these markets are clearly attractive to buyers as the listings in these markets are viewed as much as three times more often than the national average.”

Here is realtor.com®’s list for hottest housing markets in July:

San Francisco, Calif.
Denver, Colo.
Dallas, Texas
Vallejo, Calif.
Santa Rosa, Calif.
San Jose, Calif.
Midland, Texas
San Diego, Calif.
Ann Arbor, Mich.
Santa Cruz, Calif.
Detroit, Mich.
Sacramento, Calif.
Stockton, Calif.
Yuba City, Calif.
Columbus, Ohio
Austin, Texas
Los Angeles, Calif.
Oxnard, Calif.
San Antonio, Texas
Fort Wayne, Ind.

Source: “The 20 Hottest Real Estate Markets in July 2015,” realtor.com® (Aug. 3, 2015)

San Francisco tops Realtor Magazine’s hot housing market list

Besting such urban hotbeds as Santa Rosa and Midland, Tex., our fair city by the bay is at the top of Realtor Magazine’s hottest housing markets for July. With the median list price across the country rising to $234,000, up 7 percent year over year, and inventories of for-sale homes rising as well, the magazine muses that the U.S. housing market may be finding more balance at the moment.

“This year we’re seeing inventory continue to grow in July, albeit at a slower pace than this spring,” Realtor.com chief economist Jonathan Smoke said in a statement. “And while demand overall is strong, the trend in median days on market is suggesting that the market is finding more of a balance, which bodes well for more moderate price appreciation in the months ahead.”

The country’s hottest markets, Smoke said, proved to be the best performers in terms of both supply and demand, with the top 20 seeing 1.5 to 3 times the number of views per listing as compared with the rest of the nation. Inventory in these markets is moving 24 to 41 days more quickly than the national average.

“Sellers are seeing listings move much more quickly than the rest of the country and at an accelerating pace from just last month,” Smoke said. “Meanwhile, these markets are clearly attractive to buyers as the listings in these markets are viewed as much as three times more often than the national average.”

A few of the other cities on the list include Denver (no. 2), San Diego (no. 8), Sacramento (no. 12), Yuba City (no. 14) and Columbus, Ohio (no. 15). Not specified, however, was the exact number of San Franciscans who appeared willing to trade in life by the Bay for any of these cities.

What’s August like for buyers?

As has been seen in Decembers past, August can also be a very good time for buyers to keep pushing on their quest, particularly when it comes to listings that have been on the market in excess of two to three weeks. In other words, listings that have been on the market beyond any offer due date are ripe for the picking at the moment since it’s (relatively) a lot less competitive out there.

By inputting a previous date in the San Francisco Multiple Listing Service, you’ll be able to search for these listings. For example, put in a day three weeks ago in the second date field after ACTIVE and you’ll be able to find properties that have been on the market for at least that amount of time. While not all these listings may meet your needs, you may be surprised at the gems that can crop up.

As of earlier this month, there were 271 active San Francisco listings with a list date of July 9, 2015 or earlier. For listings that have been on the market for 30 days or more, this link provides a quick way to review them regularly. Remember that doing due diligence as a buyer (or if representing buyers as an agent) means not simply keeping on top of what’s going on in the market in terms of what’s coming online right now. It means understanding what’s been available for a little while and thus may be a little more achievable when it comes to a sale.

Recently Paragon Real Estate found that in a 30-day span, there were 95 San Francisco listings that had expired or been withdrawn – and it is likely that many of these would-be sellers would still like to offload their properties. Don’t forget that they are still out there.

From our NorCal network : The Artisan Group

5464826

147 Yerington Circle
Glenbrook, 89413
Offered at $2,850,000

For more information about this property or a referral to other areas of Northern California, please contact me.

Progress for new Mission District development

A five-story residential development that’s been in the works for three years is now gaining a bit more traction as it moves forward. Builder JS Sullivan Development has filed a permit request to remove the final remnants of the now-closed Chevron gas station that sits at 1198 Valencia (cross-street 23rd).

The project would entail a blend of 31 one-bedroom and 21 two-bedroom units as well as 39 parking spots for cars and 52 spots for bikes, according to Socketsite. Once the thumbs-up is given, it will take an estimated year and a half for it to be completed and to hit the market.

A Preliminary Project Assessment was filed with the San Francisco Planning Department on Sept. 5, 2012. At that time, the proposed building was expected to comprise nearly 42,000 square feet of residential space, 5,850 square feet of retail, 4,800 square feet of garage parking and 4,250 square feet of onsite open space. At the time it was anticipated to include only up to 42 units, with no specified mix of types. A “mechanical stacking system” was planned for vehicular garage storage.

At the time that the document was filed, SocketSite reported that JS Sullivan, which also developed 299 Valencia Street, was “quietly testing the waters” in floating the proposed project. The lot is zoned for 55 feet and the building itself would rise to about 52 feet. SocketSite noted that it is considered a “large lot development” exceeding 9,999 square feet. Additionally, the original application sought a proposed parking rate of 0.74 spaces per dwelling in a neighborhood where only 0.5 spaces are permitted. This requires a Conditional Use Authorization from the Planning Department.

For more information, check out BuzzBuzzHome and the San Francisco Housing Action Coalition’s data on the project.

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