Ten San Francisco Homes That Sold Over Asking in September


# Date Days on Market Area Property Type Address Beds Baths Price Sales Price as a % of the Original Price
1 9/6/13 8 Bernal Heights SFD 324 Highland 3 1 $1,112,000 146.51
2 9/13/13 28 Glen Park SFD 12 Addison Street 3 2 $1,312,000 145.94
3 9/20/13 13 Potrero Hill SFD 837 Wisconsin 2 1 $1,301,000 144.72
4 9/25/13 20 Inner Sunset SFD 1566 9th Avenue 4 2.25 $1,395,000 142.35
5 9/4/13 38 Bernal Heights SFD 3025 Cesar Chavez 3 2.5 $1,050,000 140.19
6 9/13/13 29 Mission Dolores Condo/Coop/TIC/Loft 161 Dolores Street #3 1 1 $580,000 138.42
7 9/12/13 55 North Panhandle SFD 2133 Golden Gate Avenue 3 1.5 $1,105,000 138.30
8 9/17/13 10 Inner Mission SFD 837 South Van Ness 5 1 $1,901,000 136.27
9 9/9/13 22 Glen Park SFD 37 Elk Street 3 2 $1,282,000 135.09
10 9/27/13 12 Pacific Heights SFD 2201 Lyon Street 6 3.5 $5,250,000 134.79

Analysis – Home Ownership as an Investment

Home Prices, Inflation, Leverage & Home Equity
Paragon Real Estate Report, October 2013

First and foremost, any home purchased needs to work as a home: it fulfills your housing needs at an affordable monthly cost – ideally, a cost, after tax deductions and principal pay-down, less than or similar to that of renting the property. However, though it cannot be compared on an apples-to-apples basis to investments such as stocks, bonds and CDs (that you don’t live in), it’s worth looking at the issue of home ownership as a financial investment as well.

If you increase your screen-view zoom to 125%, the charts will be easier to read.

Home-Price Appreciation vs. CPI Inflation since 1988 
This chart compares, over 25 years, the amount of inflation per the Consumer Price Index (CPI) to price appreciation for high-price-tier homes in the 5-county San Francisco Metro Area per the Case-Shiller Index. (Most of the City of San Francisco’s housing is in the high-price tier, the upper third of Bay Area unit sales.) In this chart, 1988 equals a price-value of 100; 127 equals a price 27% higher than the price in 1988 for the same goods or house. CPI inflation is relatively slow and steady: the average across the past 25 years is a little less than 3% per year. Home prices, however, jump dramatically up (appreciation) and down (depreciation) depending on the market cycle, but average appreciation from 1988 to mid-2013 was about 5% per year – though this calculation can vary greatly by the exact start and end dates chosen.

An average SF Metro Area home purchased in 1988 appreciated by 244% as of July 2013, while the overall CPI inflation rate was 97%. If the home had been sold at the recent bottom of the market, the difference would have narrowed to 165% appreciation vs. 95% inflation. Purchase and sell timing always matters and if one has to sell at the bottom of the market, it affects the return on any investment. As the chart illustrates, home-price appreciation usually outpaces inflation by a significant margin over the longer term: this is a good thing for homeowners and doesn’t include other benefits such as living in the property and the capital gains exclusion on the sale of a principal residence.

This analysis applies well to homes purchased with all cash and no financing. Leverage alters the picture substantially.

Leverage (Financing), Inflation and Home Equity Growth
If one leverages one’s home purchase by taking out a loan, then the growth in one’s home equity dramatically outpaces inflation over the longer term. For the sake of simplicity, in the example above, we’ll assume that home price appreciation and inflation both run at 3% per year, and that the buyer put down 20% in cash plus closing costs, and financed the remaining 80% with a 30-year fixed rate loan. In this scenario, each year that the inflation/ home appreciation rate is 3%, one’s home equity asset grows by about 15%, plus the principal repayment on the outstanding loan (which is a major component – like a forced savings account – in the growth of equity over time). Indeed, the higher the inflation rate, the greater the equity growth. If home price appreciation outpaces inflation as well – as it has over the past 25 years – that accelerates the increase in home equity further. Moreover, the financing cost is currently subsidized by the mortgage interest tax deduction, if that applies to your financial situation.

This is why, using reasonable leverage, real estate is typically considered a good long-terminvestment – short-term can be much riskier – as well as an excellent hedge against inflation. Of course, if leverage is abused as it was in the years of subprime lending, underwriting standards decline, predatory lending and home-refinancing frenzy (i.e. “using one’s home as a piggy bank”), other risks arise.

In earlier times, when people didn’t move around as much, one bought one’s home, paid it off over the years and when retirement came, had a home owned free and clear – a huge financial asset to be used as appropriate.

Ongoing Homeownership Costs vs. Rental Costs over Time 
In this chart, the increase in the annual cost of homeownership with a fixed-rate loan is compared with the increase in rent at a 3% inflation rate, and the increase in rent of a home subject to San Francisco rent control, where annual rent increases are limited to 60% of CPI. As seen, if one locks in a fixed mortgage interest rate, the increase in ownership cost is limited to the increase in property tax costs (limited under Prop 13) and maintenance expenses, while the entire rental cost may be subject to annual raises. Over the longer term, one’s ownership costs become more and more attractive when compared to rental housing costs subject to inflation. If one owned the home for the full 30-year loan period, the monthly mortgage payment itself would disappear.

We have generated two sample rent vs. buy scenarios for San Francisco here:

2-BR Apartment Rental vs. Condo Purchase and 3-BR House Rental vs. Purchase

And you can perform your own rent vs. buy scenario calculations here, using your own financial circumstances, assumptions and projections: Rent vs. Buy Calculator

Important caveats: Trying to compare buying a home to other financial investments on an apples-to-apples basis is impossible, because there are so many other variables at play: the use and enjoyment of the home, how the cost of homeownership compares to renting, physical condition decline over time (without further investment), risks and returns on other types of investments, home tax deductions, the capital gains exclusion on profit from a principal residence sale ($250k for single owner/ $500k for couple), market timing and other factors. All the analyses above are simply sample scenarios, looking at homeownership from a number of angles using a variety of assumptions. It is unknown whether they will apply to future trends.

As said in the first line of this report, first and foremost, any home purchased needs to work as a home: it fulfills your housing needs at an affordable monthly cost. If that’s where you start, with a fixed rate loan, and you don’t refinance out growing home equity, and you don’t have to sell during a market downturn (which, admittedly, isn’t always possible to avoid), then you should come out all right and more often, very well.

Should a Seller Order Pre-Sale Inspection Reports

The question: Should a Seller should incur the cost of supplying property inspection reports — such as structural pest control inspections and the more general contractor’s inspection performed by a home-inspection specialist – to buyers prior to soliciting offers, part of what is typically called a buyer disclosure package?  Though it is true that this cost is usually borne by a buyer subsequent to their offer being accepted, there are large advantages for the seller to do so for buyer’s review before any offers are made. Advantages that we believe far outweigh the additional costs.

  • Getting pre-sale inspections up front helps preclude due-diligence renegotiations – which are almost always for amounts (far) greater than the cost of the reports – and makes it much less likely that the transaction will fall out of escrow (most often due to new issues being discovered, post-offer-acceptance).
  • If material issues are uncovered by these inspections, it gives the seller time to remediatethem appropriately or the listing agent to quantify them with professional estimates – which may be very important to prospective buyers – prior to going on market.
  • It allows for buyers to make no-inspection-contingency offers without the dangerous liability worries a listing agent and seller should have when there are no recent pest and contractor inspections. Any transaction allowed to close without recent inspection reports is asking for post-closing trouble, trouble that will embroil all the parties and will always cost more in time, energy, aggravation and money than the cost of having the inspections proactively.
  • Pre-marketing inspection reports may help price the property properly to begin with, and may even help substantiate a higher asking price. It’s always good to make prospective buyers as comfortable as possible regarding the condition of the property, because that comfortableness helps generate higher sales prices, especially in competitive bidding situations.

Remember: Always use the most widely respected inspectors in the area and have them do complete and comprehensive inspections.


Interactive Map, May 2013-Sept 2013 Home Value Review

Click the map below to explore neighborhood home values based on sales from May 2013 to September 2013.

The median sales price can be, and often is, affected by other factors besides changes in market values, such as short-term or seasonal changes in inventory or buying trends.

The average dollar per square foot is based upon the home’s interior living space which doesn’t include garages, unfinished attics and basements, rooms built without permit, lot size, or patios and decks – though all these can still add value.

From our NorCal network : The Artisan Group

1852681 266 James Canyon Loop,
Genoa, NV
Offered at $3,300,000

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

The Truth about Home Pricing

Fair Market Value

Neither agents nor sellers determine a property’s market value: Fair market value is determined by that (highest) price a qualified, reasonably knowledgeable buyer is willing to pay at a specific point in time, to a seller not under duress, after the home has been properly exposed to the market.

An agent’s comparative market analysis (CMA) attempts to estimate today’s fair market value by an honest assessment of the following:

  • General Area and Specific Location within Neighborhood
  • Size, Appearance, Condition & Emotional Appeal
  • Attributes & Amenities: Views, Parking, Yard, etc.
  • Recent Comparable Sales
  • Competitive Properties on the Market
  • Properties that Did Not Sell
  • Current & Projected Market Trends
  • Likely Buyer Profile

Property Strengths & Weaknesses

The purpose of this analysis is to price the property appropriately to maximize market response and the final sales price.

Buyers – for any product, including homes – don’t find the issues of what a seller wants, needs or has invested germane to fair market value, so those issues shouldn’t play a role in a CMA or pricing the property.

Older appraisals or refinancing appraisals performed by appraisers not intimately acquainted with the property’s specific market area often do not accurately reflect current fair market value.

Pricing and Buyer Dynamics 

The vast majority of buyers and agents will not make offers on homes they consider significantly overpriced. The vast majority of home sales in San Francisco do not sell more than 3% to 5% under the last asking price (including any price reductions): If the home is not priced within that narrow range, buyers simply move on to other listings.

If priced outside that range, the listing is generally ignored by the market and generates no offers, regardless of the quality and appeal of the property.

Well-priced homes create a sense of urgency in the buyer/broker communities to act quickly with strong, clean offers—and help produce the competitive bidding situations that generate the highest sales prices. 

The Effects of Overpricing 

Overpricing wastes the optimum period of buyer and broker attention: when a listing first comes on the market. This level of attention cannot be recaptured or recreated later.

Overpriced homes kill any sense of buyer urgency to act and spend much longer periods of time on market, on average 2 to 3 months longer, than well priced properties. This significantly reduces perceived value in buyers’ minds and makes competitive bidding unlikely.

This sample breakdown of San Francisco home sales below illustrates the large discount off original list price and the big increase in days on market, as well as the significant proportion of listings that don’t sell at all, when the listing is overpriced to begin with. The exact sales price percentages and days-on-market figures will change based upon market conditions, but the differences in results between properties priced correctly and incorrectly stay relatively the same over time.


“Ironically, instead of getting more money… [Over-pricing] usually stigmatizes a property and reduces the eventual sale price to less than it would have been with more realistic pricing.” 

Brown & Tyson, House Selling for Dummies

Overpricing actually helps sell competitive listings—which stand out as good values in comparison.

Choosing a Listing Agent

In order to win the listing, some agents suggest a list price considerably higher than what they believe market conditions and comparable sales justify—believing this is what the seller wants to hear. This dishonesty is a violation of both the Realtor Code of Ethics and agents’ fiduciary duty: they are putting their interests – winning the listing – above the client’s interests, i.e. achieving the best price and terms within a reasonable period of time.

Do not choose an agent based upon how high he or she is willing to price your home. That’s analogous to choosing a stock broker by whoever quotes the highest value for your stock portfolio. In both cases, the market alone — what a buyer is willing to pay — determines value.

Choose an agent based upon experience; the results they’ve generated in the past and the client references that substantiate those results; the quality and honesty of counsel delivered; the quality of the market analytics they provide to help you in your decision making; the comprehensiveness of their marketing and home preparation plans; their transactional and negotiating skills; and the explicit commitment to work hard to protect your interests.

Whatever the market conditions, the quality of agent representing you in the large and complicated financial transaction of selling real estate can make a difference of tens or even hundreds of thousands of dollars in your net proceeds.

SF Fleet Week – October 10 – 14, 2013


San Francisco Fleet Week celebrates the rich naval tradition in the Bay Area, honors the men and women serving in today’s armed forces and facilitates annual disaster preparedness training with the Navy, Marines and local first responders. A tradition since 1981, Fleet Week is the most anticipated Fall event in San Francisco.

With an estimated audience of 1 million, spectators are drawn every year to the city’s northern waterfront to be awed by a parade of Navy ships, along with a spectacular aerial show that includes the world renowned Navy Blue Angels. With breathtakingly precise maneuvers, the Blue Angels sweep the San Francisco Bay and over the Golden Gate Bridge with their signature blue aircraft and tight formations. Also on hand are a variety of other nighttime entertainment venues that kick off just as the sun sets over San Francisco Bay.

Tickets to events vary in price. See website for ticket information.

For more information go to www.fleetweek.us/


745 Shrader Street

Seller Represented
Read more

Hardly Strictly Bluegrass Festival

The free Bay Area festival, Hardly Strictly Bluegrass, returns to San Francisco’s Golden Gate Park from October 4th through the 6th. Last year’s festival was the first since the event’s billionaire founder and bluegrass enthusiast Warren Hellman passed away. From its outset, the HSB festival has been funded by the venture capitalist who, prior to his death just over a year ago set in place a plan that would ensure the event receives necessary funding for at least 10 years after his passing. The site of the festival has been named “Hellman’s Hollow” in his honor.

October 4th through the 6th, 2013
Hellman Hollow, Lindley & Marx meadows in Golden Gate Park, San Francisco
Free admission

For more information go to www.hardlystrictlybluegrass.com/

Castro Street Fair – October 6, 2013

Always the first Sunday in October, the Castro Street Fair is a community celebration that was founded by Harvey Milk in 1974. Hundreds of local artists, vendors, craftspeople and organizations line the streets and celebrate the diversity of the neighborhood. Stages with live entertainment and dance stages can be found throughout the fairgrounds.

The Fair is a nonprofit 501 ( c ) (3) organization and all proceeds go directly to charitable causes important to the Castro community. Additionally, the Fair funds the rainbow flag that flies over the intersection of Castro and Market.

Sunday, October 6th, 2013 from 11:00 AM to 6:00 PM PST
Castro District, intersection of Market & Castro Streets and into the surrounding area
Free admission

For more information go to www.castrostreetfair.org