Archive for March 2014 | Monthly archive page

New Case-Shiller report: SF Metro Area bumps up again

While the nation as a whole saw a tiny decrease in the S&P Case-Shiller Home Price index in the January report released today, the San Francisco Metro Area Index (for 5 northern counties) bumped up again. The C-S Index for higher priced houses has now completely re-attained the previous market peak set in 2006, as measured by January data points. The city of San Francisco itself has exceeded the rise in the 5-county area and has generally surpassed previous peak values – many SF neighborhoods by substantial margins.

Based upon what we are seeing on the ground, we expect to see further increases once the late winter/early spring selling season is reflected in the Index.

This first chart shows market cycles over the past 30 plus years. The second chart shows appreciation since our current market recovery began.

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This chart tracks the most recent market recovery which began in earnest in early 2012. In both 2012 and 2013, the spring seasons saw substantial jumps in home values. We recently thought the likelihood of yet another significant jump in 2014 to be relatively low, but the market we’re seeing on the ground – a very high demand/very low supply dynamic – is leading us to suspect otherwise.

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Case-Shiller measures a 5-county metro area comprised of San Francisco, San Mateo, Marin, Alameda and Contra Costa counties. The numbers used relate to a January 2000 value of 100; thus 184 signifies 84% home price appreciation over the past 14 years. The Index is published 2 months after the latest monthly reading, i.e. the January Index has just been published today, March 25th.

The full report can be found online here.

Newsletter Version: Neighborhood Affordability in San Francisco

Where You Can Buy for the Money You Want to Spend

San Francisco Home Sales by Neighborhood

You want to buy a house in San Francisco for under a million dollars, or for over $2 million, or you have $1,800,000 to spend on a luxury condo with a spectacular view. If you’re buying a house in San Francisco, your price range effectively determines the possible neighborhoods to consider. That does not apply quite as much to condos and TICs, except for sales in the luxury segment: generally speaking, in neighborhoods with high numbers of condo and TIC sales, there are buying options at a wide range of price points, though, obviously, size and quality will vary. Also, all the new condo projects being built in many different areas of the city is changing the neighborhood pricing dynamic for condos.

For your convenience, a neighborhood map can be found at the bottom of this report.

The charts below are based upon sales reported to MLS in the 12 months between March 1, 2013 and February 28, 2014. We’ve broken out the neighborhoods with the most sales within given price points. There are exceptions to neighborhood norms scattered throughout the city and in an appreciating market these price ranges having been moving upward.

Buying a House for Under $1 million in San Francisco

Out of the approximately 2635 house sales in the past year, about 50% sold for under $1 million. The vast majority of these sales occur in a large swath of neighborhoods forming a giant L shape, down the west side of the city, from Outer Richmond to the border with Daly City, and then sweeping east across the southern side of San Francisco to Bayview and Hunter’s Point. Generally speaking, the western and central-ish neighborhoods cost more than the southern neighborhoods in this under $1m house market.

Houses in these neighborhoods began their recovery from the market downturn a step or two behind more expensive areas in San Francisco, but now the markets here are red hot and very competitive, and home prices are under very strong upward pressure.

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Houses for $1 Million to $1.5 Million

In this price point, one moves into a big circle of neighborhoods in the middle of the city plus the Richmond District in the northwest. Within this circle, one will typically get significantly more house for one’s money in the Sunset, Central and Outer Richmond, Miraloma Park or Bernal Heights than in Glen Park or Potrero Hill, or especially, Noe or Eureka Valley.

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Houses for $1.5 million to $2 million

As the price range goes up, the number of sales begin to narrow. The neighborhoods in this house price range are similar to the previous range, but sales predominate in central Realtor District 5, which comprises the greater Noe- Eureka-Cole Valleys area. District 5 has been a white hot market for the last two years and competition for homes here is ferocious.

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Buying a Luxury Home in San Francisco

Rather arbitrarily, houses selling for $2 million and above, and condos, co-ops and TICs selling for $1.5 million and above are designated as luxury home sales in San Francisco: these homes now make up about 14% of total home sales (up from about 10-11% a few years ago). Once again, what you get in different neighborhoods for $2 million can vary widely – a large, immaculate house in one place, a fixer-upper in another.

Luxury home sales in San Francisco are dominated by the swath of established, prestige northern neighborhoods running from Sea Cliff through Pacific Heights and Russian Hill to Telegraph Hill, by the greater Noe-Eureka-Cole Valleys district, and, to a lesser extent, the smaller neighborhoods around St. Francis Wood. For luxury condos, the greater South Beach-Yerba Buena-Mission Bay area has a large and growing presence as big, expensive condo projects have sprouted there over the past 15 years.

Luxury Condo, Co-op and TIC Sales

As one can see, no area has more luxury condo, co-op and TIC sales overall than the Pacific Heights-Marina district, but the Russian Hill-Nob Hill-Financial District area has more sales of $2 million and above, and again the South Beach-Yerba Buena area is the fastest growing luxury condo market and will probably take first position in the not too distant future. The average dollar per square foot values for luxury condos in the major neighborhoods below run $918 in the Noe, Eureka and Cole Valleys district, $961 in the Pacific Heights-Marina district, $1147 in the Russian-Nob-Telegraph Hills district, and $1229 in the greater South Beach-Yerba Buena area (think newer construction, high floor units and spectacular views).

With the construction of new high-end, high-tech-amenity condo projects on Market Street and Van Ness, and in neighborhoods like the Inner Mission, Hayes Valley and Inner Richmond — often selling for more than $1000 per square foot — luxury condos are now spreading into new areas of the city.

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Luxury House Sales in San Francisco

It wasn’t so long ago that houses selling in Realtor District 5, the greater Noe/Eureka/Cole Valleys area (which includes Clarendon, Corona and Ashbury Heights), for over $2 million were an exception. But that is certainly not the case any longer. If we looked closer at the sales in the $2 million to $5 million, we’d find the higher end of the range dominated by Realtor District 7, the Pacific Heights-Marina area, the most expensive house market in the city. Though District 5 does see sales in the $3.5 to $5+ million range, most of its luxury houses sell between $2 million and $3.5 million. There are several other significant areas for these high-end houses, such as Lake Street/Sea Cliff, St. Francis Wood/Forest Hill and Lower Pacific Heights.

Most luxury houses in the city were built in the period between 1905 and 1950, reflecting the era of construction dominating these neighborhoods of San Francisco — and a gracious, elegant era it was. However, there are a small number of big, new houses built each year, as well as some beautiful fifties houses scattered here and there, and, of course, many of the older houses have been extensively renovated over the years.

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And, as illustrated below, at the very top of the luxury house market, the district of Pacific & Presidio Heights, Cow Hollow and Marina completely dominates sales. Here mansions can sell for up to $20 million or $30 million. Houses in Russian Hill are also exceedingly expensive, but there are very few houses in that area: Russian & Nob Hills are dominated by high-end condos and co-ops. Two additional house sales (both listed by Paragon) in the $5 million to $7 million range closed in Noe Valley in the first half of March 2014 (after the time period of this analysis) — another indication of what’s happening there, often driven by young, high-tech wealth. It should be noted that a fair percentage of these ultra high-end home sales occur privately, outside of MLS, and are not reflected in this chart.

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San Francisco Neighborhood Map

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March Newsletter: Price Pressure Builds Once Again

March 2014 Report

Upward pressure on home prices is based on one basic dynamic: more demand than there is supply to satisfy it. Various factors can supercharge demand, such as extremely high rents and low interest rates, which make homeownership more attractive, as well as a sudden, large influx of new, affluent buyers (our high-tech boom) piling into what is basically a relatively small, inventory-constrained market. When there are 5, 10 or sometimes 20 qualified buyers chasing after every attractive, reasonably priced, new listing, prices typically go up, sometimes quite quickly.

Last year, after the spring feeding frenzy, the market generally stabilized through the end of the year: It continued to be a strong market by any measure, but prices mostly plateaued, albeit often at new peak levels. We recently speculated on tentative signs that suggested a further market normalization, but now the indicators are pointing in a different direction. The inventory of homes available to purchase on any given day is even lower than before last year’s furious market; buyer demand has emerged from its midwinter hibernation like a hungry bear; and prices are under increasing pressure once again.

The spring selling seasons of 2012 and 2013 saw huge spikes in home price appreciation. Now we enter the third spring since our market recovery began in earnest, and the desire to live in our small, beautiful, expensive city continues unabated. We shall see how it plays out in the coming months.

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Median Sales Prices: Heading Up Again
There is an aspect of seasonality to median home prices – typically up in spring, down in summer, up in autumn, down during the holidays — which explains some of the fluctuations seen on this chart, though the upward trend since 2012 began is very clear. It’s common for median prices to fall in January and February: This reflects offers accepted during the holiday season, when the higher end of the market often checks out. But not in 2014: median sales prices for houses and especially condos jumped dramatically in the past two months, which may suggest another white-hot spring market. Note that median sales prices are often affected by other factors besides changes in values, such as inventory, and longer term trends are much more meaningful than short term fluctuations.

This link below illustrates the longer-term trend in median sales prices in San Francisco for houses, condos and TICs, by year since 1993:
Longer Term Trends

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3-Bedroom House Values by Neighborhood
This is one of 8 updated tables on San Francisco home values by median and average sales price, and average dollar per square foot. The full analysis looks at houses, condos and TICs by neighborhood and number of bedrooms throughout the city and can be found via this link below. All general statistics typically disguise a huge variety of values in the underlying individual sales, but can give a good idea of comparative home values.
Full Report

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2-Bedroom Condo Values
2-bedroom condo values by median and average sales price, and average dollar per square foot, sorted by neighborhood. Again, the full report can be found here:
Full Report

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Sales Price over Asking Price: A Sudden Spike
Last month, we pointed to the decline in the percentage of sales price over list price for homes selling without price reductions in December and January as a possible indication of a cooling market. February completely reversed that trend (though one should never make too much of one month’s data).

5Home Values around the Bay Area
This map illustrates overall median sales prices for houses in cities all over the Bay Area. In San Francisco, median prices by neighborhood can vary from under $500,000 to over $4,000,000; other cities will often display a similarly wide range of home prices in different neighborhoods.

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Sales by Property Type: Condos Up, TICs Down
As shown in this first chart, condo sales now outnumber house sales, a trend that will only continue to accelerate as new condo developments are built. Very few new houses are built in San Francisco and they generally simply replace older homes.

This link illustrates the decline in sales for TICs and 2-4 unit buildings, which is occurring due to a variety of factors, including financing issues, rental units converting to TICs, TIC units converting to condos, and complex tenants’ rights and eviction issues.
TIC & 2-4 Unit Building Sales

8Case-Shiller Price Trends by Price Segment since 2000
All numbers relate to a January 2000 value of 100: A reading of 182 signifies a home value 82% above that of January 2000. These 3 charts illustrate how different market segments in the 5-county SF metro area had bubbles, crashes and now recoveries of enormously different magnitudes, mostly depending on the impact of subprime lending. The lower the price range, the bigger the bubble and crash. The upper third of sales by price range (far right chart) was affected least by the subprime fiasco and has now basically recovered peak values of 2006-2007. In the city itself, where many of our home sales would constitute an ultra-high price segment, if Case-Shiller broke it out, many of our neighborhoods have risen to new peak values. The lowest price segment (far left chart), more prevalent in other counties, may not recover peak values for years. If one disregarded the different bubbles and crashes, home price appreciation for all three segments since January 2000 is almost exactly the same, in the range of 75% to 82%.

A more detailed report on the Case-Shiller Home Price Index can be found here:
Case-Shiller Index Report

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