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$3,300 a Month Gets You These Rentals in SF Now

If you have about $3,300 a month to spend on a rental place in SF, sf.curbed.com has put together a potpourri of offerings for that specific amount. It’s an interesting way to sample what different SF neighborhoods offer for specific price amounts.

First off is a 788 square-foot one-bath studio at the Wilson Building at 973 Market Street. Wilson is a really pretty building with a grass turf communal hangout space on the roof sporting a fine view. The studio is actually pretty spacious and almost feels like a full apartment. And you can bring your pet.

Next are the apartments over in the North Beach neighborhood at 1050 Columbus. Tons of tile on the floor, yet the unit include a full bedroom and bath for the price, but you can’t bring Rin Tin Tin or Paws along.

Three more interesting comparisons are featured in the article.

Click here for the full article.

San Francisco Luxury Home Market Report

After cooling somewhat in late 2015 and 2016, the San Francisco luxury home market bounced back in 2017 to hit new highs in the number of sales.

Note: Our report online contains several dozen updated analyses of the San Francisco luxury and ultra-luxury house and condo markets, of which this newsletter contains a relatively small sample. The full report is here: Paragon SF Luxury Home Report.

Increasing Sales Volumes
in 2017 and in 2018 YTD

Lux-SFD-3m_Condo-etc-1850_Sales_12-Month-Rolling.jpgLuxHome_YoY_Sales-Comp_first-6-weeks_since-2013.jpg

So far in 2018, SF luxury home sales have been quite strong, higher than in any previous year since the recovery began in 2012. The recent stock market volatility notwithstanding, the economic confidence that has been sweeping the nation is also showing up in our luxury home markets. For example, as of February 16th, the sales of condos, co-ops and TICs at prices of $2m and above has jumped 55% in the city, year over year, and luxury houses by 19%. However, year-to-date data is very preliminary and much more will be known once the spring selling season really gets started in earnest. Also, if the recent financial market volatility continues and becomes even more dramatic, that may cool high-end home markets (and IPO activity) as it has in the past.

2-18_Largest-House-Sales_MLS.jpg2-18_Largest-Condo_Co-op-Sales_MLS.jpg

Supply Growing Faster than Demand

Ultra-Lux-SFD-Avgs_Active-vs-Sales_since-2005_12-month-rolling.jpgUltra-Lux-Condo-etc-Avgs_Active-vs-Sales_since-2005_12-month-rolling.jpgExpired-to-Sales-Ratio_by-Prop-Type_Price-Segment.jpg

However, behind the positive sales statistics, inventory statistics provide a note of caution, especially for what we call the ultra-luxury home segments: houses selling for $5m+ and condos and co-ops selling for $3m+. In those segments, the supply of listings has been surging beyond demand, and many of these listings are expiring without selling. As an example of the supply and demand disconnect, ultra-luxury home sales make up about 2.5% of total MLS sales, but as of late February, they made up 12% of active SF MLS home listings (no offer yet accepted).

A big wildcard in this dynamic is the new luxury condo projects currently on market, under construction and planned. They dramatically swell supply in those areas where they are concentrated. It will be interesting to see if there is enough inherent demand to absorb, in the near future, the increasing supply of $3m, $5m and sometimes $10m+ condos. There have even been recent attempts to sell new penthouse condos in the $40 million price range. (Note: New-project marketing companies often try to keep their sales activity confidential, which can make it difficult to know exactly how well their most expensive units are selling.)

This does not mean that some very expensive houses and condos are not selling very quickly for well over asking price, as some certainly are. It all depends on the property, its specific location, appeal, preparation, marketing and, of course, pricing. Different neighborhoods are often experiencing different market conditions, some much stronger than others. This is discussed in much greater detail in the full report online.

Market Seasonality

The luxury real estate market in San Francisco is intensely seasonal. As illustrated by the 2 charts below, the high-price market wakes up and heats up as the new year gets going, with spring typically being the most active season overall for sales. It then slows way down in mid-summer, spikes back up dramatically for the short autumn selling season, and then plunges for the mid-winter holiday period.

Note the delay between new listings coming on market and listings accepting offers: For example, September is typically the single month with the highest number of new listings, leading to the big October spike of listings going into contract. Sales then usually close 3 to 5 weeks after going into contract. Right now is the period when new luxury listings start pouring on the market for the spring season.

LuxHome_2500-Plus_SFD-Condo_Co-op_New-Listings_by-Month.jpgLuxHome_Units-UC_by-Month-V2-Area-Chart.jpg

New Listings Coming on Market
Long-Term Trends since 2005, 12-Month Rolling Figures

The supply of luxury homes available to purchase plays a huge roll in market dynamics. Supply is affected by 3 large factors: 1) the number of new listings coming on market, 2) how quickly these new listings sell, and 3) how many listings are taken off the market because they cannot find buyers (expired and withdrawn listings). The chart below looks at longer term trends for new listing activity: The number of new listings hitting the market accelerated in early 2016 as the luxury segment was cooling due to financial market volatility (Chinese stock market crash, oil price crash, Brexit vote).

LuxHome_New-Listings_2500-Plus_SFD-Condo_Co-op_12-month-rolling.jpg

Sales & Average Dollar per Sq.Ft. Values

Luxury House Market by District

Sales of houses $3 million and above have soared in the central Noe, Eureka & Cole Valleys district (red line in first chart below) in recent years, to jump ahead of, by a tad, the wealthy, old-prestige, Pacific Heights-Marina district (blue line). These rapidly increasing sales have been fueled by younger, very affluent, high-tech industry buyers, who prefer the lower-key neighborhood ambiance, as well as the proximity to the hot Mission district and to highways south to the peninsula. However, the Pacific Heights district still utterly dominates house sales of $5 million and above – that chart can be found in the full report online – and its houses achieve by far the highest average dollar per square foot values, as illustrated by the blue line in the second chart below.

LuxHouse_Sales-Vol_Top-Districts_12-Month-Rolling.jpgLuxHouse_AvgDolSqFt_Top-Districts_12-Month-Rolling.jpg

Luxury Condo Market by District

The older, high-prestige neighborhoods running across the north of the city from Pacific & Presidio Heights-Marina through Russian, Nob and Telegraph Hills have been dominating the sales of luxury and ultra-luxury condos and co-ops (the top 2 lines in the next chart). The greater South Beach, SoMa, Yerba Buena, Potrero Hill and Mission district (the third, red line) saw its sales plunge from mid-2016 to mid-2017, but has had a significant recovery since. All three of these districts see very high dollar per square foot values (second chart below). And of course, some individual sales see much higher values than the averages.

LuxCondo_Sales-Vol_Top-Districts_12-Month-Rolling.jpgLuxCondo_AvgDolSqFt_Top-Districts_12-Month-Rolling.jpg

How the 2018 market plays out depends on a number of factors that are susceptible to change: financial markets, interest rates, the course of the high-tech boom, whether our big, local start-ups proceed with IPOs, political developments, and so on. (Positive & Negative Factors in Bay Area Markets) For the time being, the San Francisco market appears to be off to a heated start characterized by robust demand. Here at Paragon, our 2018 SF sales volume is up 30% year over year, though admittedly we are outperforming the general market, which is up about 5%.

Again, the full report online contains many more analyses: Paragon SF Luxury Home Report.

All our reports and articles are available here: Paragon Main Reports Page

Please contact us if you have any questions, or we can be of assistance in any other way.

It is impossible to know how median and average value statistics apply to any particular home without a specific, tailored, comparative market analysis. In real estate, the devil is always in the details.

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. Late-reported MLS activity may change certain statistics to some small degree.

© 2018 Paragon Real Estate Group

Stunning Video Showing San Francisco Skyline Over Past 128 Years

Very nice CGI graphics tricks enable us to have a view no San Franciscans have experienced before: the time lapse (and rotating) unfolding of tall buildings being erected through computer animation in our city from 1890 up to year 2016. That is 128 years of skyscraper growth in the Financial District, Market Street area and in SoMa.

The video was produced by Commercial Café, a national website for commercial real estate listings, and can be seen on YouTube. See the link below.

The tallest building now in SF is the Salesforce Tower at 1,070 feet, part of the 3 million square feet of office space that’s opened up over the past year.

Over the next five years there are a number of projects slated to appear on our skyline, including the Park Tower, the Oceanwide Center and the Transbay Block 8.

Click here for bizjournals.com story and video.

Racist Statue at Civic Center Closer to Official Removal

The Pioneer Monument at the Civic Center is an 1894 sculpture ensemble that features as one of its multiple scenes a down-on-the-ground Native American Indian (dressed in plains tribes’ attire, not California native attire) cowering before a conquering Spaniard and a self-righteous missionary. Native American groups have been lobbying for decades to have the offensive scene (called Early Days) removed.

Now, the seven-person Historic Preservation Commission voted en masse to remove this particular statue from the Pioneer Monument which also features gold rush miners and classical goddess figures representing commerce and agriculture.

The next step for the official removal is the sign off from the San Francisco Art Commission. It is expected that they will agree that the Early Days statue on the eastern part of the ensemble needs to be removed. Many San Franciscans over the past decades have labeled the statue racist, stating it whitewashes the conquering of California tribes by depicting the conquest as their salvation.

SF Spring Events Calendar

There are plenty of fun things to enjoy in the city this Spring. Take a peek at these events in our Spring 2018 events guide.

Middle Class Home Buying in SF Needs $303,000 Yearly Income

A new report out from Paragon Real Estate makes a startling conclusion: that if you’re middle class in San Francisco, working toward buying a median-priced home in the city, then you’re going to need to be making $303,000 a year, as of December 2017. Either as an individual or as a couple. Not surprisingly, this is an all time high.

In terms of the households in San Francisco, this works out to 12% of them being able to afford a median-priced house or condo. A median-priced home is now about $1.5 million and with a 20% down payment, affordability is available only to the few.

The takeaways from this report includes the observation that low housing affordability is the most critical economic and social issue in San Francisco and the Bay Area, and tech workers who have to have housing when they come here to work can’t even afford to live in the Bay Area.

4 San Franciscan Make Forbes 30 Under 30 Food List

The Forbes 30 Under 30 food and drink list is pretty well appreciated by its audience and well coveted by those who make the list: recognizing young game changers and innovative thinkers in the food sphere. This year the Forbes 30 Under 30 food and drink list included four outstanding denizens of San Francisco. That’s four out of six in the Bay Area right here in our beloved city.

The list goes beyond chefs in that it recognizes innovation in general food enterprise. For instance Benjamin Chesler and Ben Simon have taken off-grade produce to new heights by selling “ugly” produce to buyers at steep discounts, thus putting a dent in our city’s food waste.

Another food waste recycling duo are Daniel Kurzrock and Jordan Schwartz of Regrained who are turning grain leftover from beer crafting into edible bars super dense with nutrients and sold at popular retail outlets. They’re trying to hit $1 million in revenue.

Click here for the full article and slide show.

Still Going Up: Bay Area Home Prices Zoom 12% in January

Easy to predict this: the cost of buying a home in the Bay area went up a staggering 12% in January compared to last year’s January prices. So, if you bought a home in SF for $1 mil last year in January, that same home would cost you $1,120,000 now. So, why? Because of the lack of homes or condos to buy in the city or the rest of the Bay Area. Inventory is at a 3-year low. Too few houses available with a lot of money chasing those few dictates much higher prices.

The median price for a Bay Area home is now $880,000. For a home or condo in San Francisco, the median is $1.2 million.

Reports from Zillow state that inventory in the Bay Area has dropped 27% over the past year. Homes and condos under $2 million are particularly hard hit, with those around $1 million being the least in supply, while homes or condos between $2 million and $3 million went up in inventory.

Housing Affordability in the San Francisco Bay Area

The California Association of Realtors recently released its Housing Affordability Index (HAI) for the 4th quarter of 2017, which measures the percentage of households that can afford to buy the median priced single family dwelling (house).

In this analysis, affordability is affected by 3 major factors: county median house price, mortgage interest rates, and the distribution of household incomes within the county. (Housing Affordability Index Methodology). The HAI uses house prices exclusively and if condos were included in the calculation, median home prices would decline, affordability would increase and income requirements and PITI costs would be reduced as well. (SF now has more condo sales than house sales, but that is not the case in other Bay Area counties.)

If the HAI Index incorporates changes to the federal tax code (effective 1/1/18) limiting the deductibility of interest expenses and property taxes, it will presumably have a negative effect on affordability percentages in 2018. By definition, half the homes sold in any given county were at prices below the median sales price, i.e. there were numerous homes that were more affordable than the median prices used in this analysis. However, any way one slices it, the Bay Area has one of the most expensive – if not the most expensive – and least affordable housing markets in the country. That impacts our society and economy in a number of important ways.

Since many of the figures don’t change that much quarter to quarter, we’ve only updated some of the charts in this report with Q4 2017 data.

Link to our Survey of Bay Area County Markets, Trends & Demographics

Link to our Main Reports Page

Long-term Bay Area Housing Affordability Trends

Affordability Percentage by Bay Area County

Note that extremely low affordability readings converged across Bay Area counties at the top of the bubble in 2006-2007. So far, there has not been a similar convergence in our current market, though affordability is generally dropping as prices increase.

Having dropped approximately 40% from 2007 to mid-2016, extremely low interest rates have subsidized increasing home prices to a large degree in recent years – but they’ve begun to rise in early 2018.

San Francisco is still 4 percentage points above its all-time affordability low of 8%, last reached in Q3 2007 (even though its median house price has increased about 50% during that period). Other Bay Area counties (except for Silicon Valley) have appreciably higher affordability percentages, for the time being. Generally speaking, as one moves farther away from the heart of the high-tech boom, San Francisco and Silicon Valley, affordability increases.

Monthly Ownership Cost at Median Sales Price

Minimum Qualifying Income to Buy Median Priced House

Assumes 20% downpayment and including principal, interest,
property tax and insurance costs.

Bay Area Median House Prices

San Francisco-Only Median House Price Appreciation
by Quarter since 2012

Before the high-tech boom, Marin, a famously affluent county for long time, had the highest median house price. But the high-tech boom accelerated median home prices in San Francisco and San Mateo faster and higher.

Additional chart: Median condo sales prices by county

San Francisco has a much larger and more expensive condo market than other local counties, and is the only county with a very substantial luxury condo market – one that is growing significantly with recent new-condo project construction.

U.S. Metro Area Housing Affordability
by the National Association of Realtors
This national affordability chart above employs a different methodology than the CA county charts above: The graphed chart values (percentages) have totally different meanings. The two metro areas at the bottom of the rankings make up 7 counties around the Bay Area.

Mortgage Interest Rates since 1981

Short-Term Changes in Mortgage Interest Rates

Interest rates play an enormous role in affordability via ongoing monthly housing costs, and interest rates, after their recent post-election jump are about 35% lower than in 2007. To a large degree this has subsidized the increase in home prices for many home buyers. It is famously difficult to predict interest rate movements, though there is general agreement. Any substantial increase in interest rates would severely negatively impact already low housing affordability rates.

Income, Affluence & Poverty

Santa Clara, San Mateo and Marin Counties have the highest median household (HH) income in the Bay Area. Though the median HH income figures of these 3 counties are almost double the national figure, their median house prices are 4 to 5 times higher, an indication that income dollars can go a lot farther in other parts of the country than they do here. Indeed an income that in other places puts you close to the top of the local register of affluence, living grandly in a 6-bedroom mansion, in the Bay Area might qualify you as perhaps slightly-upper-middle class, living in an attractive but unostentatious, moderate-sized home that costs twice what the mansion did (though, this being the Bay Area, you are probably still driving a very expensive car).

On the other hand, you live in one of the most beautiful, highly educated, culturally rich, economically dynamic, and open-minded metropolitan areas in the world.

Behind median HH incomes, each county also has enclaves of both extreme wealth and poverty within its borders.

Very generally speaking, in the Bay Area counties, renters typically have a median household income about half that of homeowners. In San Francisco, where the majority of residents are in tenant households, that significantly reduces the overall median HH income figure. The picture of housing affordability for renters in the city is ameliorated or complicated by its strong rent control laws (which, however, don’t impact extremely high market rents for someone newly renting an apartment) .

Additional chart: Homeownership Rates by County

Additional chart: Population Demographics – Children & Residents Living Alone

San Francisco has the lowest percentage of residents under 18 of any major city in the U.S. (It is famously said that there are more dogs in the city than there are children.) It also has an extremely high percentage of residents who live in single-person households – 39% – which is a further factor depressing median household income below markets with similar housing costs.

The Bay Area has approximately 2.8 million households. Of those, approximately 124,000 households have incomes of $500,000 and above, which would generally be considered to place them in the top 1% in the country by annual income. At 7.5%, Marin has the highest percentage of top 1% households, followed by San Mateo at 6.2%. With approximately 38,000 top 1% households, Santa Clara, the Bay Area’s most populous county, has by far the largest number of these very affluent households, while San Francisco has about 22,000.

It should be noted that besides high incomes per se, another factor in the Bay Area housing boom of recent years has been the stupendous generation of trillions of dollars in brand new wealth from soaring high-tech stock market values, stock options and IPOs. Thousands of sudden new millionaires, as well as many more who didn’t quite hit that level, supercharged real estate markets (especially those in the heart of the high-tech boom) as these newly affluent residents looked to buy their first homes, perhaps with all cash, or upgrade from existing ones. That is something not seen in most other areas of the country, certainly not to the degree experienced locally, and is a dynamic outside typical affordability calculations. This increase in new wealth has slowed or even declined in the past 12 months as the high-tech boom has cooled (temporarily or not, as time will tell). Still, there are dozens of local private companies, usually start-ups, some of them very large – such as Uber, Airbnb and Palantir – which are considered to be in the possible-IPO pipeline. If the IPO climate improves and successful IPOs follow, a new surge of newly affluent home buyers may follow.

Additional chart: Bay Area Populations by County

A look at two very different income segments in the Bay Area, those households making less than $35,000 and those making more than $200,000. The $35,000 threshold is not an ironclad definition of poverty, especially since housing costs (by area, and whether market rate, subsidized or rent-controlled), household sizes and personal circumstances vary widely, though it is clearly difficult for most area families trying to live on that income. At over 25%, San Francisco has the highest percentage of households with incomes under $35,000 and, at 22%, Marin has the highest percentage making $200,000 and above.

Amid all the staggering affluence in the Bay Area, and huge amounts of new wealth generated by our recent high-tech boom, very significant percentages of the population still live in poverty, especially if our extremely high housing costs are factored into the calculation. (The above chart calculates poverty rates by different criteria, the higher one factoring in local costs of living.) The economic boom has helped them if it resulted in new, better paying jobs, unfortunately not as common a phenomenon as one would wish for the least affluent. It hurt them, sometimes harshly, if their housing costs escalated with the increase in market rates.

Longer-Term Trends in Prices and Rents
The same economic and demographic forces have been putting
pressure on both home prices and apartment rents.

Bay Area Median House Prices since 1990

If one looks at charts graphing affordability percentages, home prices, market rents, hiring/employment trends and to some degree even stock market trends, one sees how often major economic indicators move up or down in parallel.

Monthly Rental Housing Costs

The recent economic boom has added approximately 600,000 new jobs in the Bay Area over the past 6 years, with about 100,000 in San Francisco alone – with a corresponding surge in county populations. Most new arrivals look to rent before considering the possibility of buying. The affordability challenges for renters (unless ameliorated by rent control or subsidized rates) has probably been even greater than that for buyers, since renters don’t benefit from any significant tax benefits, from the extremely low, long-term interest rates, or by home-price appreciation trends increasing the value of their homes (and their net worth). In fact, housing-price appreciation usually only increases rents without any corresponding financial advantage to the tenant. Rents in the city have been plateauing in recent quarters and may even be beginning to decline as the hiring frenzy has slowed and an influx of new apartment buildings have come onto the market – but they are still the highest in the country.

Bay Area Rent Report

Affordable Housing Stock & Construction in San Francisco

Additional Chart: Affordable Housing Construction Trends in San Francisco

There may be no bigger political and social issue in San Francisco right now than the supply (or lack) of affordable housing: Battles are being fought, continuously and furiously, in the Board of Supervisors, at the ballot box and the Planning Department by a wide variety of highly-committed interests, from tenants’ rights and neighborhood groups to anti-growth factions and developers (to name a few). It is an extremely complicated and difficult-to-resolve issue, especially exacerbated by nimby-ism and the high cost of construction in the city. SPUR, a local non-profit dedicated to Bay Area civic planning policy, estimated in 2014 that the cost to build an 800 square foot, below-market-rate unit in a 100-unit project in San Francisco was $469,800 – and we have seen higher estimates as well.

This fascinating graphic above, based on SF Controller’s Office estimates from late 2013, breaks down SF housing supply by rental and ownership units, and further divides rental by those under rent control. All the units labeled supportive, deed restricted and public housing could be considered affordable housing to one degree or another, i.e. by their fundamental nature their residents are not paying and will never pay market-rate housing costs. (Units under rent control will typically go to market rate upon vacancy and re-rental, though rent increases will then be limited going forward.) Adjusted for recent construction, there are roughly 34,500 of these units out of the city total of about 382,500, or a little over 9% of housing stock. Section 8 subsidized housing would add another 9,000 units.

There are currently many thousands of affordable housing units, of all kinds, somewhere in the long-term SF Planning Department pipeline of new construction, though many of them are in giant projects like Treasure Island and Candlestick Park/Hunter’s Point, which may be decades in the building. But it is generally agreed that new supply will never come close to meeting the massive demand for affordable housing, further complicated by the question of what exactly affordable means in a city with a median home price 5 times the national median, typically well beyond the means of people such as teachers and members of the police force. One corollary of increasing affordable housing contribution requirements for developers and extremely high building costs is that developers are concentrating on building very expensive market-rate units – luxury and ultra-luxury condos and apartments – to make up the difference.

Other reports you might find interesting:

Survey of SF Bay Area Real Estate Markets

10 Factors behind the San Francisco Real Estate Market

30+ Years of San Francisco Bay Area Real Estate Cycles

San Francisco Neighborhood Affordability

All our analyses can be found here: Paragon Market Reports 

Our sincere gratitude to Leslie Appleton-Young, VP & Chief Economist, Oscar Wei, Senior Economist, and Azad Amir-Ghassemi, research analyst, of the California Association of Realtors, for their gracious assistance in supplying underlying data for the CAR Housing Affordability Index calculations.

These analyses were made in good faith with data from sources deemed reliable, but they may contain errors and are subject to revision. All numbers should be considered general estimates and approximations.

© 2018 Paragon Real Estate Group  

SF’s New Transbay Transit Center Delayed to Summer Opening

The much ballyhooed, and mega price-tagged Transbay Transit Center is San Francisco’s mass transit hub to all Bay Area destinations served by the system. It will bring 11 transit systems into a central station. Coming in at $2.4 billion, the now-named Salesforce Transit Center began construction in 2011 toward a five-story building with bus plaza, an eye-popping 5.4 acre rooftop park and cavernous retail pop-up spaces and 6 million square feet of office space. It’s estimated 7,000 new residents will come into the center’s architecture.

It was supposed to open in June with great areas of construction done in late 2017, but that date could be pushed back to August or September this year because of construction challenges. That was the announcement from the Transbay Joint Powers Authority a few days ago. There is some hope the facility will open its doors on June 1st, but the certainty of construction timelines is not quite dead on.