San Francisco Neighborhoods Hit New Peak Values

Paragon Market Report, June 2013

New highs in home prices have not yet been reached in every San Francisco neighborhood, but the majority has either regained the value lost since the 2008 market meltdown, or now exceeded the previous high points of 2006-early 2008. (Different neighborhoods peaked at different times, just as they are now recovering at different speeds). This does not mean that every property bought at the height of the bubble in feverish multiple-offer bidding wars has now regained peak value. Nor does it mean that values might not fluctuate or drop in future months due to seasonal and/or other economic factors.

Though virtually every market in the country is now on a similar upward trajectory, San Francisco’s has recovered more quickly than most in the Bay Area, state and country. The city’s neighborhoods, with a few exceptions, were never hit as hard as most other areas by the tsunami of distressed property sales: our home values generally fell in the 15-25% range compared to huge declines of 40-60% elsewhere and so we have had less ground to recover. That said, the city has always been an exceptional real estate market and the confluence of economic factors both general (such as the lowest interest rates in history) and unique (such as the local, high-tech boom) jumpstarted and supercharged our recovery beyond most others.

It should be noted that, looking at past recoveries in the early eighties and mid-nineties, it is not unusual once a recovery gets underway after years of recession and repressed demand, for the market to regain previous peak values within a couple years of the turnaround beginning. Recoveries often start with a dramatic surge and that is what has happened with this one.
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City, State & National Long-Term Overview

In this chart, one can see the recovery occurring everywhere, but most dramatically in San Francisco. For this analysis, we’ve calculated the 2013 SF median house sales price for the 5 months since the year began; if we looked at just the last 3 months (reflecting offers accepted in 2013, when the market accelerated further), the SF median house price jumps to about $1,000,000. (Note: State and national data sources are behind those we can access for the city, and the last median prices reflect that disparity.)

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SFD_Median-Averages_ChangeSF Houses: Previous Peak Values to Present
In this chart, since we’re also calculating average statistics, we’ve capped the sales price at $3,000,000 because ultra-high-end sales usually distort averages. We see the previous peak value in 2007 (for SF houses in general), the drop to the bottom of the market in 2011, and the rebound starting in 2012 and accelerating in 2013. By all 3 main statistical measures of value, San Francisco houses have met or exceeded previous peak values. To adjust for seasonality, the comparisons are for the spring months of each year.

This link goes to the same analysis for SF condos except it starts in 2008 when condo values peaked and sales are capped at $2m:
Condos: Previous Peak Values to Present

Median_SFD-Condo_by-Qtr_Short-termShort-Term Appreciation Trends
This chart breaks down the rise in SF home values occurring over the past 2.5 years. Though it appears that 2013 prices surged after the first quarter, the surge actually started in March, which is when the market really started to reflect offers negotiated in 2013. January and February sales mostly reflect the holiday season market, when the higher-end home market typically checks out. We prefer quarterly or longer time periods because they make for more reliable statistics: monthly statistics often fluctuate without great meaning. The high overall median prices achieved in March-May may drop somewhat during the summer due to seasonal and other factors.

This link goes to an overview of the past 30 years: it helps give context to what we’re experiencing today:
30 Years of SF Real Estate Cycles

Median-SFD_Multi_Areas2006-Present: House Values by Neighborhood
These 4 SF Realtor districts generate a lot of house sales, so they’re good for statistical analysis. For 2013, this chart looks at the last 5 months of sales-if assessing just the last 3 months, 2013 numbers would typically be higher. The central Noe-Eureka-Cole Valleys district, a hot bed of high-tech buyer demand, has soared well beyond its previous peak value in 2008. The very affluent northern district of Pacific Heights-Marina has also exceeded its previous peak. Sunset-Parkside in the southwest has regained its 2007 peak, and the southeast Bayview-Portola-Excelsior district, which was hit hardest by distressed sales, while recovering rapidly, has not yet made up the value lost since its 2006 peak. This district, with more house sales than any other, lost more percentage value in the downturn (25-45% depending on neighborhood) and so has more ground to make up. But it’s well on its way.

2BR_Condos_Medians_Multiple_Areas-V22006-Present: SF Condo Values by Neighborhood
These 6 areas of the city generate high numbers of condo sales, which is why we chose them for this analysis. Condos in all these areas have increased in value beyond their previous peaks in 2006-2008; some of them, such as South Beach, dramatically so.

This link illustrates how, over the past 5 years, the SF market has switched from being dominated by house sales to condo sales; with the continuing construction of large condo projects, we expect this trend to continue. TIC sales have dropped significantly, both as a percentage of sales and in actual unit sales: This is due to a number of complex issues such as changes in city condo conversion and tenant protection regulations.
Sales by Property Type

Unit-Sales_by_Price-Range_Year-Year_CompPrice Range Dynamics
There are 3 main underlying currents occurring in San Francisco. First is the rapid dwindling of distressed property sales: Thus, sales under $500,000, the price range of most distressed sales, have dropped by 62% since last year. This segment is on the verge of disappearing completely in SF. Second is the dramatic resurgence in luxury home sales: the affluent have profited most from the economic recovery and the city also has large numbers of the newly affluent (often high-tech) who wish to buy homes. So, sales of homes costing $1,500,000 plus have surged by 76%. The third dynamic is simply the general appreciation of home values. All 3 factors add up to a large migration from lower-priced to higher-priced sales. Note: The medians quoted on this chart are for many different property types combined.

May-Snapshot_Sales-UC-ExpiredMay Listings/Sales Snapshot
A clear indication of the red-hot heat of our market: 90% of SF home sales closing in May sold without going through any price reductions, at an average sales price 7% higher than the asking price and a very low average days-on-market of 29 days. These are very dramatic statistics illustrating the high demand/low supply situation here in the city.

TICs: Price and Sales Volume Trends

As Reported to San Francisco MLS

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All data from sources deemed reliable but subject to error and revision. © Paragon Real Estate Group
Statistics are generalities that may be affected by other factors besides changes in value and only a specific comparative market analysis can estimate value for any particular property.

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Pier 39 Waterfront Celebration – July 4, 2013

4th-of-July_fireworks

Thursday, July 4th, 2013, at Pier 39, the City of San Francisco will treat spectators to an elaborate fireworks display over the San Francisco Bay. More than 10,000 fireworks are set off from the foot of the Municipal Pier and from barges north of Pier 39, affording an amazing 360-degree Bay view replete with the thunder and thrill of Independence Day pride.

Pier 39 celebrates Independence Day with fun for the whole family. Spend the day rocking out to live bands in the Pier’s Entrance Plaza, watch for sea lions, enjoy the street performers and browse local shops and eateries. Family friendly and free to attend, Pier 39’s Independence Day Celebration is a full-day festival with a truly grand finale. Fireworks start at 9:30 PM.

Thursday, July 4th, 2013 – All day. Fireworks start at 9:30 PM PST
Pier 39 and The Embarcadero
Free to attend

For more information go to www.pier39.com/

Case-Shiller: Different Bubbles, Different Accelerating Recoveries

Note: Case-Shiller Home Price Indices for “San Francisco” are for a 5-county area, of which the city’s housing market is a very small part. Since they are published 2 months after the month of the Index, are 3-month rolling averages, and the time between offer acceptance and closed sale typically runs 4-8 weeks, Case-Shiller is generally 3-6 months behind the market itself, i.e. when offers are being negotiated in the present. Case-Shiller publishes 4 main indices for SF Metro Area houses: an aggregate index for all price ranges, and then one index for each third of unit sales – low price, middle price and high price tiers.

When the market fell from its peak in 2006-early 2008 (different areas and different market segments peaked at different times), the scale of the decline varied widely, mostly by price point. With the recovery that began in 2012 and accelerated in 2013, the magnitude of the price recovery, as compared to previous peak values, has also varied by price point and area.

The lowest price range (terribly affected by foreclosures and distressed sales) fell most dramatically – approximate 60% decline – and though recovering dramatically on a percentage basis, is still way below its peak. It simply has much more loss to make up.

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The upper price range (the top third of unit sales) in the 5-county metro area fell much less during the bubble pop and with the recovery is getting close again to peak values:

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This chart below illustrates the short-term changes in the C-S high tier index: the recovery in 2012 accelerating in 2013:

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And then looking just atthe city of San Francisco itself, which has, generally speaking, among the highest home prices in the 5-county metro area: 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 and that the rate of appreciation accelerated in the March-May timeframe. This is also for both houses and condos combined, when the C-S charts used above are for house sales only.

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SF Pride Celebration – June 29 – 30, 2013

parade05_

The San Francisco Pride Celebration has been said to be “one of the last remaining pride events that can truly be called a rite of passage.” This grand event happens on June 29th and 30th, 2013, in downtown San Francisco in Civic Center at the foot of San Francisco’s historic City Hall where Harvey Milk once stood and addressed Pride-goers more than 30 years ago. With over 200 parade contingents, 300 exhibitors and more than 20 stages and venues, the San Francisco LGBT Pride Celebration and Parade is the largest LGBT gathering in the nation. The Celebration at Civic Center is host to the Main Stage which has showcased such incredible acts as Lady Gaga, the Backstreet Boys, Solange Knowles, the Cliks, Margaret Cho, Kat DeLuna, Inaya Day, Crystal Waters and Big Freedia, among others.

This year’s event theme is “Embrace, Encourage, Empower” as selected by Pride’s Membership at the Annual General Meeting on September 9, 2012. San Francisco Pride is committed to maintaining an event that is accessible to people of all economic backgrounds, so attendance is free. Donations are encouraged, so take a stand for Pride by donating as generously as you can at the event gates. Pride requests a minimum donation of $5 to provide crucial support to this important community event.

Saturday, June 29th from Noon to 6:00 PM PST in San Francisco’s Civic Center*
Sunday, June 30th from 11:00 AM to 6:30 PM PST, SF Civic Center*
Between Van Ness Avenue and Leavenworth Street, Turk and Hayes Streets
Free to the public, donations appreciated.

For more information go to www.sfpride.org/

*Times and map are subject to change.

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762-764 Cole Street, No.1


Seller Represented
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From our NorCal network : The Artisan Group

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6401 Castle Drive
Oakland, CA
Offered at $1,480,000

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

Interest Rates: Is the Sky Falling on the Housing Market?

The pundits are making dramatic, even doom-laden pronouncements about what is going to happen with interest rates (and the housing market), though they’ve been wrong so many times over the past few years, these “expert” predictions might be taken with salt-shaker’s worth of salt, perhaps with lemon and a nice shot of tequila.

Obviously, interest rates are an important component of the real estate market. But this chart gives a little context to what has occurred recently: the blue column is the average 30-year interest rate for the first 5 months of 2013, when everyone was dancing with glee at how low the rates were; the black line at the end represents the interest rate on Friday, June 6th, though it is true that it briefly hit 2 tenths of a percentage point higher earlier in the week (so if you like, add the tiniest smidgeon more to the black line).

I don’t know where interest rates will go, though they will probably rise over time—and perhaps there will be an upcoming interest-rate shock. But terror seems a bit premature.

http://my.paragon-re.com/Docs/General/SixtyFortyImages/Average_30-Year_Mortgage-Rates.jpg

Average_30-Year_Mortgage-Rates

Int’l LGBT Film Fest TBA

Founded in 1977, the San Francisco International LGBT Film Festival (Frameline) is the longest-running, largest and most widely recognized LGBT film exhibition event in the world. As a community event with an annual attendance of over 55,000, the Festival is the most prominent and well-attended LGBT arts program in the Bay Area. Frameline37 is a competitive film festival with cash prizes attached to each of our Audience Awards for Best Feature, Best Documentary and Best Short. Frameline37 also has two juried awards for Outstanding First Feature and Outstanding Documentary Feature.

Framelines’s mission is to strengthen the diverse lesbian, gay, bisexual and transgender community and further its visibility by supporting and promoting a broad array of cultural representations and artistic expression in film, video and other media arts. Locals know that this is a fantastic event, so advance tickets are suggested but at-the-door tickets are available until seating runs out. Reserve your seats early so as not to miss out on the event featuring directors, actors and other queer media icons.

June 20th to June 30th, 2013

For more information go to www.frameline.org/festival/

The Economist on Bubbles — Neat Interactive Chart Feature

The Economist has a good article (about the US real estate market not being in a bubble) and created a terrific interactive graph that allows you, by metro area (you have to click on San Francisco to add it to the graph), to compare home price changes in real terms over time, versus average incomes, and versus rents, from 1987 to 2013. San Francisco is at the top of the chart in percentage increase and increases in prices in real terms, but still rates right at the long-term average in home prices versus income and versus rents. The Economist was one of the very first to identify the housing bubble inflating – running strongly against the then current opinion of other pundits – so I think their opinion on whether another bubble is about to burst in the U.S. is worth hearing. (FYI: The do believe there are serious housing bubbles in certain other countries.)

”The verdict: in most markets houses are near or above their long-run values, but none looks bubbly. Price rises in Phoenix, Tampa and Miami have restored values only to their long-run averages. In Las Vegas they are still below that long-run average. Many things could trip up the housing recovery, from stalling job growth to higher mortgage rates; at the moment, a bursting bubble is not one of them.”

You can play around with the interactive chart, and you should read the article below the chart widget:

http://www.economist.com/node/21578927

Here are 3 of their charts with San Francisco added:

Home Price Appreciation in Real Terms (Adjusting for Inflation):

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Home Prices Against Average Income:

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Home Prices versus Rents:

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