The pie chart combines house and condo MLS sales for May.
This table breaks out the percentages separately for houses and condos:
The pie chart combines house and condo MLS sales for May.
This table breaks out the percentages separately for houses and condos:
June 2014 report by Paragon Real Estate Group
The construction boom that ended in 2008 changed the city and its housing market. Condos now outsell houses in San Francisco. The South Beach-Yerba Buena zip code, previously a commercial area filled with parking lots, now has SF’s highest median household income. Mission Bay was born. And our skyline has been altered with dramatic, new high-rises like the Infinity Towers and Millennium.
That boom died with the 2008 market crash. But now with the city’s economy, employment, population, rents and home prices all surging to new heights, new home construction is booming again.
Will increasing numbers of newly built condos and apartments cool our overheated real estate market? One would think it would have to – eventually. But the large projects announced weekly can take years to turn into actual housing units. What if local high-tech industry, jobs and housing demand continue to grow alongside increasing supply? And our financial and real estate markets are influenced by so many complex, fluctuating economic, political and even natural-event factors, that it is very difficult to make meaningful predictions (despite how much “experts” love to make them).
One thing we can predict: San Francisco will continue to change in unexpected ways, and it will remain an extraordinary place to call home.
San Francisco’s Most Expensive Condo Buildings
Perhaps the biggest common denominators of these properties are dramatic architecture, full service amenities (doormen and such), and the prevalence of spectacular views from many of the units. Eight of these properties didn’t even exist before 2000 and now they dominate the list of most expensive condo buildings in the city. Of course, excluding smaller buildings with only a sale or two per year rules out the vast majority of condo buildings in older neighborhoods, but it’s still astounding to see the impact of the previous construction boom on this market segment.
Luxury Condo, Co-op & TIC Sales by Neighborhood
Condo Values by Era of Construction
Condo Sales Volume by Neighborhood
A residential district that didn’t even exist 20 years ago now dominates condo sales in San Francisco (and there are big, new projects still under development there). To a large degree due to the availability of large, developable (previously commercial) lots and higher-density zoning, new housing construction is now concentrated in areas such as the Market Street and Van Ness corridors, SoMa, the Mission, Hayes Valley, Dogpatch and Hunter’s Point – and often in previously neglected or distressed corners of such areas.
San Francisco Demographics
Income, Age, Homeownership & Foreign-Born Population by Zip Code
San Francisco Median Home Price Trends
For well over 100 years, Potrero Hill’s real estate market was one thing; now it is another. Prior to the tech boom of the 1990s, Potrero was a place to find modest Victorian and Edwardian homes in various stages of disrepair. Often their spectacular views — of downtown, Twin Peaks or San Francisco Bay — were at odds with their modest price tags. Just as often as not they’d been in one family for generations or had been purchased for a song by counter culture pioneers in the 1960s.
That all changed in the 1990s, when Potrero’s proximity to tech start-ups made it a prime target for renovators and developers. “Multimedia Gulch,” a tech start-up friendly segment of SOMA, grew by 6,000 jobs between 1994 and 1998. Not coincidentally, the northern border of Potrero Hill, once crammed with warehouses, is now a hotbed of condo and apartment complexes dating back to the mid-1990s.
So comprehensive was the change that today, 20 years past the dawn of the dotcom peak, the majority of available homes on Potrero Hill is condominium units. Almost all, save for a few buildings constructed in the 1970s and 1980s and “The Hill’s” extant collection of multi-unit Edwardians, date back no further than 1993.
Potrero’s housing revolution did not end when the dotcom bubble burst. Development continued into the 2000s – up to and including the present. Business is brisk right now, with Onyx, a development located at 415 De Haro and featuring 20 one- and two-bedroom condo units, nearly sold out. Construction of Onyx Phase 2 is under way with anticipated completion in fall 2015. 12 more units are planned next to the old Double Play Bar and Grill at 2401 16th Street. Early-stage plans are underway to build 315 apartments on Mariposa Street, directly across the street from the Jackson Playground, and EQR, with 493 residential units, 39 commercial units and a park, just received its permits at 1000 16th Street (once the site of the Glidden Paint factory) after almost a decade of trying.
Potrero’s 1990s real estate reinvention ranged past the mass introduction of high-end condominiums; concurrent with the arrival of developers was the discovery of the neighborhood’s single-family homes as historic gems ripe for restoration and renovation. Faced with the reality of enormous profits, many long-time residents chose to cash out, raising the neighborhood profile to the point it remains at today: as a stylish, sunny, convenient, family-friendly place practically overflowing with beautiful historic homes and sleek modern condos.
The incredible views –Potrero properties feature some of the city’s finest downtown skyline views — don’t hurt, either.
In 2014, Potrero Hill’s for-sale real estate market is dominated by condominiums. In May, the ratio of sold condos to sold single-family homes was 16:3 (the district also recorded sales of two multi-unit buildings; it had no closed sales of Tenants-in-Common units, though there are some TICs on Potrero Hill). Potrero condos come in a variety of sizes, from studios all the way up to three- and four-bedroom units larger than some neighborhood single-family homes. They command prices above the citywide median. Seven-figure condo price points are becoming the norm on Potrero Hill, not the exception.
As for single-family homes, there are some spectacular examples of both historic and ultra-modern architecture on Potrero. Modern homes tend to capitalize more on The Hill’s spectacular views and maximize square footage, often employing unique solutions to steep hillside lots.
Meanwhile, Potrero’s original Victorians no longer fit into the “working-class” paradigm, routinely commanding prices well over $1 million. Many have become showplaces.
Potrero Hill is a long way from becoming the next Pacific Heights or even the next Russian Hill, but it might be on its way to becoming the next Noe Valley. With a great location and a lack of fog, great views, a thriving commercial strip featuring a broad range of restaurants and an eclectic combination of housing including Victorians, Edwardians, historic multi-unit buildings and new condos, it’s journey of the past 20 years appears to have ended with it taking its place among San Francisco’s desirable neighborhoods.
Source : Parascopesf.com
Over the past 30+ years, the period between a recovery beginning and a major “market adjustment” (or bubble popping) has run 5 to 7 years. We are currently about 2.5 years into the current recovery.
Periods of market recession/doldrums following the popping of a bubble have typically lasted about 4 years. (The 2001 dotcom bubble and 9-11 crisis drop being the exception.) Generally speaking, within about 2 years of a new recovery commencing, previous peak values (i.e. those at the height of the previous bubble) are re-attained – among other reasons, there is the recapture of inflation during the doldrums years and simple pent-up demand.
Our complete article on market cycles can be found online here.
In the 1700s, Spanish missionaries named the hill overlooking the new village of Yerba Buena “Potrero Nuevo,” in English “new pasture.” At the time, that’s what Potrero Hill was: a pasture, untouched except for the cattle using it as grazing ground. Plenty has changed about Potrero Hill since then.
The cattle are gone and Yerba Buena is now San Francisco, but clues as to Potrero’s past – the 150 years it spent as a working-class neighborhood, its stretch as the favored neighborhood of the 1990s dotcom boom, its continued bohemian bent – are everywhere. Change may be constant in Potrero Hill, but its roots are always showing.
From the start, the neighborhood locals like to call “The Hill” gained popularity because of two things: first, it’s one of the sunniest neighborhoods in San Francisco. The view from the hill’s western slope is not only of Twin Peaks; it is also of the fog, rolling in from the ocean but never reaching Potrero. Second, Potrero Hill is conveniently located. In the 1800s it was convenient for workers on San Francisco’s waterfront – ship-builders, longshoremen, laborers. Each evening they’d climb Potrero’s western slope, to their boarding houses and the ramshackle cottages some had built, often using plans from a Sears catalog.
Eventually, the work moved inland, to the warehouses and factories “South of the Slot,” and in the flatlands just north of the hill. Several of the Potrero buildings still exist. A few still house traditional businesses but most have evolved, becoming design studios (Showplace Square, the hub of San Francisco’s design and furniture scene, is nearby), artists’ studios, a few restaurants and, significantly, tech firms.
Between 1860 and World War II, Potrero welcomed waves of Scottish, Irish, Russian, Chinese, Mexican and African-American arrivals. Each group left its imprint on the Hill, as did the counter-culture generation that followed in the 1960s.
The 1990s tech boom permanently changed Potrero Hill. Suddenly, developers found the neighborhood. They built lofts and condominium buildings in the flats and on the north and south slopes, all the way to where Potrero meets the Bayview at Cesar Chavez Street. Property values skyrocketed and they’ve yet to lose momentum. World-class restaurants began popping up on sleepy 18th Street, the district’s commercial core. Today you can find more than a dozen eateries in a three-block stretch, including favorites like Chez Papa and Chez Maman, Rocket Fish, Aperto and longtime neighborhood favorite Goat Hill Pizza, along with specialty shops and coffee shops. On warm days it seems like everyone’s dining al fresco on Eighteenth Street.
Potrero is not what it once was but its bohemian core is intact. It’s not just that Lawrence Ferlinghetti, Beat poet and founder of City Lights Bookstore, has lived in the neighborhood for 60 years or that in the 1970s the Pickle Family Circus used an old church at 400 Missouri Street as their headquarters; Potrero is where free spirits are constantly creating, be they artists, writers, programmers working out of a garage near the Anchor Steam Brewery or musicians playing at Thee Parkside or The Bottom of the Hill.
All of this creating keeps Potrero vibrant, but the neighborhood’s true heart comes from its residents. Locals on “The Hill” care deeply about community. They attend neighborhood association meetings and festivals, donate time and resources to neighborhood schools and make a habit out of patronizing local businesses, be they unique galleries like Collage or old-time watering holes like Bloom’s. Many are like Ferlinghetti – long-time residents who’ve seen plenty of change during their tenure, and almost all come to 20th Street every October for the Potrero Hill Festival, this year celebrating its 25th anniversary.
Still, little reminders of Potrero Hill’s past keep poking through, like the Double Play, a corner restaurant and bar that once sat across the street from Seal’s Stadium, home of the San Francisco Seals (and later the San Francisco Giants) until it was razed and replaced with a shopping center; or the circa-1920s gym at the Portrero Rec Center, where local legend turned pariah O.J. Simpson spent much of his childhood. All around are homes from the Victorian and Edwardian era, some brilliantly restored, others still in original condition.
Mixed in among these relics are dazzling new homes, built by visionaries looking to take advantage of Potrero Hill’s incredible views. Potrero residents enjoy some of the finest views in the city – downtown, San Francisco Bay, Twin Peaks and, from the south slope, Candlestick Point and Bernal Heights. They also enjoy excellent cardio workouts, thanks to their neighborhood’s steep streets. A walk through Potrero Hill is an exercise in… exercise.
It adds up to a unique neighborhood that, while no longer exclusively working class, has sacrificed none of its color in becoming desirable to all manner of San Franciscans.
Source : Parascopesf.com
The youngest zip codes in San Francisco are those that are 100% rental: the Presidio and Treasure Island. The oldest zip code is the area of the North Waterfront and Barbary Coast, just north of the financial district along the Embarcadero. Second oldest is Chinatown (47 years) and the third oldest is the St. Francis Wood-Miraloma Park area.
Zip Code Demographics Data Table
Zip codes in the table below are in order of median household income.
The below charts and table are based upon U.S. Census surveys from 2010 – 2013. Please note that zip codes often contain neighborhoods of widely different demographics. For example, 94115 includes Pacific Heights, one of the most affluent areas of the city, as well the Western Addition, which is less affluent: when mixing areas such as these in one zip code, you end up with statistics that don’t really apply to either. Data like this is constantly changing and zip codes are blunt instruments for demographic investigation, but we still found the analysis to generate interesting, new insights into San Francisco.
The neighborhoods associated with zip codes in the charts and table below are simply representative of each area; other neighborhoods are often included within one zip code and many neighborhoods are divided between different zip codes.
Foreign-Born Percentage of Population
Of major metro areas, San Francisco ranks 4th in the country in percentage of foreign-born residents.
Residents with Bachelor’s, Graduate & Professional Degrees
San Francisco ranks 2nd in the country for percentage of residents with bachelor’s degrees and ranks 3rd for percentage of residents with graduate or professional degrees. Not surprisingly, when looking at zip codes, educational attainment and household income typically go hand in hand.
Percentage of Housing Units Owner-Occupied
San Francisco has approximately 70% more housing units occupied by renters than by homeowners.
Average Size of Household
San Francisco has the lowest percentage of children of any major U.S. city and 38% of residents live alone. This brings the city’s average household size down, however the statistic varies widely by neighborhood.
Below is the table with all the San Francisco zip code demographic data we collected. It will be easier to read if you adjust your screen-view to zoom 125% or 150%.
The zip codes in the table are in order of median household income.
Below is a half-serious, semi-whimsical look at how San Francisco is ranked by a number of objective and subjective criteria, according to a wide (and not necessarily reliable) variety of authorities. Typically, these rankings were made within the last 2 or 3 years. Many should be taken with a large grain of salt.
The new Case-Shiller Index report for the 5-county San Francisco metro area , for March, is showing the same acceleration in home prices that buyers and sellers are experiencing in the market. The 2.4% increase from February to March 2014 is the largest since spring 2013, and further significant increases are expected in the Index reports for April and May when they come out in the next two months. Nationally, home prices saw only a .17% increase month over month, and Case-Shiller’s 20-City Index showed a .87% increase, so San Francisco and the Bay Area is strongly outperforming the rest of the country in home price appreciation.
Since the market recovery began in earnest in early 2012, northern Bay Area home prices have appreciated approximately 37.5% through March, according to Case-Shiller.
Return on Investment: 1994 – 2014
May 2014 Report
We recently put together an analysis comparing the comparative investment returns of buying a San Francisco Bay Area house, gold, Apple stock, an S&P 500 Index fund or putting money into a bank CD in January 2012 (Of Real Estate, Gold & Apple Stock). Not unreasonably, the issue arose regarding returns over a longer term. Now, whatever time period is used will always be fundamentally arbitrary, and different periods will often generate dramatically different results. Twenty years is a round number, which allows a nice mix of recessions, bubbles, crashes and recoveries to be encompassed within our inquiry.
Stock and home purchases cannot really be compared apples to apples: This is a simplified, good faith illustration pertaining to the investment of $100,000 in January 1994. February 2014 was chosen as the home sale date because that is the last published Case-Shiller Index (as of 5/20/14). Home prices in San Francisco have actually surged yet again in the past few months, but this is not reflected below. April 2014 was chosen for the stock sale date because that was last published update for the DQYDJ S&P 500 calculator.
S&P 500 Index Investment, 1994 – 2014
In hindsight, 1994 was an excellent time to put money into the stock market.
If hindsight investing was viable, we would all be rich as Russian oligarchs.
Bay Area Home Purchase, Buy in 1994, Sell in 2014
1994 was an even better time to purchase a San Francisco Bay Area home.
Return on Cash Investment: S&P 500 vs. Bay Area Home
Certain benefits to U.S. homeownership boost return on investment over stock market.
Including dividend reinvestment, the S&P 500 appreciated approximately 9% per year for a total of 473% over the 20 year period. (If account and transaction fees were deducted, the return would be somewhat reduced.)
Bay Area home prices appreciated much less than the S&P 500 during this period, approximately 5.5% per year for a total of 189%, but the return on cash down-payment investment would be approximately 733%, significantly out-performing stocks. This difference increases when taxes on gain are included in the equation.
Note: Adjusting for inflation, investment returns would be about 2.5% lower per year (the approximate, average inflation rate over the past 20 years). Both stocks and home investments significantly outpaced inflation.
Financial Advantages Peculiar to American Homeownership
1) Leverage: 189% appreciation of a $500,000 home = over 900% appreciation, before closing costs, of the $100,000 down-payment. If one pays all cash this advantage disappears, but one’s monthly cost of housing plunges (though probably not close to making up for losing the supercharging that leverage adds to investing).
2) Long-term, fixed-rate home loans: Which substantially lock in monthly housing costs (while other costs, such as rents, continue to increase) and can be refinanced at opportune times. When one can get a 30-year mortgage at what is, historically speaking, an extremely low interest rate, it makes an enormous difference in total interest expense and monthly housing costs. As an example, in 1994, the average 30-year rate was 8.4%; now, in mid-May 2014, it’s 4.2%, (in 2013, it dipped to below 3.5%) i.e. today’s million dollar loan charges the same interest as 1994′s $500,000 loan.
3) Multiple homeownership tax deductions: Such as the mortgage interest deduction, which effectively subsidize monthly housing costs. (Consult with a qualified accountant regarding your own tax situation.) These deductions, along with low interest rates and ongoing principal repayment of the loan, generally make net monthly homeownership costs comparable to and often less than the cost of renting the same home. (Rent vs. Buy Calculator)
4) The huge, capital-gains exclusion on the sale of a primary residence: $250,000 for singles/ $500,000 for couples. It’s a rare investment that allows you to walk away with large, untaxed profits. For a couple selling their home in the above investment scenario, it means an extra $75,000.
It’s worth noting that advantages 2, 3 & 4 above are not found in most other countries, and indeed some of them remain issues of political contention in our country as well.
Homeownership as Investment & Homeownership as Housing
In this analysis, home-ownership is divided into two distinct financial spheres: 1) the investment return on the $100,000 down payment: you put in $100k cash and upon sale, you receive a certain amount of cash proceeds back. And 2) the cost of living in the home you purchase, i.e. the monthly net homeownership cost (principal, interest, taxes, insurance and maintenance, after tax deductions and principal pay-down), which is minimally assumed to be, over the course of time, comparable to the cost of renting.
Upon purchase in 1994, with interest rates at over 8%, the net homeownership cost probably exceeded the cost of renting by a good margin. But interest rates then started to decline: to under 6%; then under 5%; and in 2013, to under 3.5%. As of mid-May 2014, it is 4.2%. Refinancing at selected times over the 20 year period would have dropped net monthly homeownership costs substantially, while San Francisco rents over the same period have soared to historic highs. Ultimately, the monthly cost of owning would be far below – probably more than 50% below – the market rental rate for the same home.
The cost of housing issue is not figured into the return on investment scenario, because the equation simply gets too complicated. This is one of the ways in which comparing homes to stocks is not an apples to apples comparison.
Asset Building One Loan Payment at a Time
This analysis does not adjust proceeds of home sale for the reduction of outstanding loan balance over the 20 years, i.e. of the original $400,000 loan, only $153,000 remains due and payable upon sale. If this was done, then cash after-tax proceeds of sale would be almost $250,000 higher.
Homeownership over time — especially longer periods of time — not only typically delivers a good return on investment, but as long as one doesn’t refinance out increasing home equity to buy yachts or finance a child going to college, it acts as a lay-away savings account that grows each month as your loan payment reduces the principal loan amount due. In earlier generations, this was a classic strategy: buy a home, live in it for 30 years, retire, and then either live in it at a very low cost, since there is no longer a mortgage payment, or sell it and recoup not only appreciation but the initial purchase loan amount which has turned into home equity. Many of us are not that good at saving: Mortgage repayment can act as a “forced” savings account to be tapped far in the future, such as upon retirement.
If you want to read even more analysis regarding leverage, inflation and home equity, please see our October 2013 article: Home-Buying as Investment
For a district that covers so much ground, the Inner Mission has a dearth of available for-sale real estate. While it’s true that this may in part be due to a region-wide housing inventory shortage, this neighborhood’s situation is nothing new. The situation in the Inner Mission is this: it’s a long-time neighborhood of renters, full of multi-unit housing. The Inner Mission has within its borders a smattering of single-family homes, but it’s not unusual to find only one or two for sale at any time.
Why are there so many hot restaurants and bars in the Inner Mission? Because it’s very popular with young San Franciscans; why is it so popular with young San Franciscans? Because there is so much happening in the Inner Mission! It’s a “chicken vs. egg” situation; one hand feeds the other.
This is not to say that there are zero options for homebuyers in the Inner Mission. Besides the odd single-family home, interested parties will find a handful of Tenants-in-Common units, condominiums and lofts for sale there, a combination of rehabbed and non-rehabbed vintage properties (many dating back to the 19th-century) and recently built condos generally ranging in size from studio to three bedrooms. What’s missing of late are the bargains that drew pioneering buyers to the Mission in the past.
A recent check of the Multiple Listing Service (MLS) revealed this: the least expensive for-sale property in the Inner Mission is a one-bedroom unit at VIDA, a new condo building at 2558 Mission, next to the old Mission Theater. It lists for $579,000, well below the neighborhood condominium median of $749,000. The same MLS perusal shows four condo and TIC units listed for more than $1 million, along with three more at $995,000 and above. This is what happens when a neighborhood becomes popular.
And popular the Inner Mission is, because of its vibrant nightlife and its central location, three BART stops from the Financial District, close to SOMA and a short drive from the nearest Highway 101 on-ramp. As a result, a district once known for real estate in a state of disrepair is now white hot among ambitious, would-be rehabbers, restoring properties either for themselves or for their would-be tenants.
Along with the Western Addition, the Inner Mission boasts San Francisco’s largest concentration of Victorian and Edwardian buildings. Until recently, these beautifully -detailed, spacious living spaces lived lives of slow decline and deferred maintenance, housing longtime owners or generations of short-term renters. With the district’s gain in popularity, buyers are targeting the Inner Mission’s aged housing inventory, snapping up condos, TICs, multi-unit buildings and single-family homes on Bartlett, Capp, Shotwell, Treat and other Mission streets.
Developers found the Inner Mission during the first dot-com explosion, adding low- and mid-rise condominium and apartment complexes to the neighborhood. Expansion continues with recent construction at 1501 15th (known as Fifteen Fifteen, for-sale condominiums under construction), 2258 Mission (known as VIDA, for-sale condominiums under construction), 1600 15th (known as Vara, apartments for rent), 3500 19th Street (new condominiums, sold out) and 299 Valencia (new condominiums, sold out) finding buyers and renters almost immediately.
As for those rental properties, a recent study by Trulia.com named San Francisco the fourth-most expensive city for rentals. A two-bedroom apartment in the city requires 51 percent of the average local wage, a figure trailing only Miami, New York and Los Angeles. As of this writing, two-bedroom apartments and houses in the Inner Mission fetch between $3,500 and $5,000, one-bedroom units between $2,000 and $3,000.
The Inner Mission has taken its place among San Francisco’s most popular neighborhoods, especially with young professionals. Its home prices reflect this, but that doesn’t mean it’s become completely devoid of bargains. Those with the time and resources can still find gems hidden both in its quiet side streets and its bustling main thoroughfares. Either way, those who choose to live in the Inner Mission find no shortage of vibrancy, architectural diversity and local color.