Archive for July 2015 | Monthly archive page
These charts show the breakdown of San Francisco home sales as reported to the city’s Multiple Listing Service, year to date 2015. We picked this period because, generally speaking prices appreciated again in late winter/ early spring 2015. These analyses are sorted by city districts and neighborhoods by the number of transactions in different sales-price segments. Note that median sales prices will change every time the time period or neighborhoods included in an analysis change.
The first chart below the San Francisco neighborhood map is an overview for the entire city.
These 2 charts below track San Francisco luxury home sales by price range and neighborhood. Rather arbitrarily, we designate the luxury segment as those condos, co-ops and TICs selling for $1,500,00 or more, and those houses selling for $2,000,000 and above. Considering the appreciation of the market in recent years, we may have to adjust those thresholds soon.
2-4 unit residential buildings contain about 80,000 or 21% of the housing units in San Francisco. This report will assess only such smaller apartment buildings that have not been converted to condos or exclusive-use TIC units: Condos and TICs are considered different property types than unconverted 2-4 unit buildings and are valued differently. The variety in units in these buildings is enormous and includes some of the most appealing and gracious apartments ever built.
In San Francisco, 2-4 unit buildings exist at the overlapping intersection of 2 different market segments: tenant-occupied, income property and owner-occupied,residential real estate. Values of such buildings are affected not only by the usual factors – location, condition, parking, views and so on – but also by issues such as income and expense, and rental upside potential; tenant profile, “protected” tenants and eviction history; vacant units, owner-occupancy suitability and the feasibility to convert to TICs and/or condos; and by the city’s ever-changing rent and eviction control regulations. With real estate, the devil is always in the details, and this property type in particular involves a lot of details to consider.
Sales by Era of Construction
San Francisco’s market for smaller apartment buildings is dominated by Victorian and Edwardian architecture, followed by the subsequent Spanish-Mediterranean/ Art Deco/ Marina Style era. The 3-flat Edwardian and the 2-flat Marina-Style buildings are classics of these periods. After WWII, builders generally shifted to single family home construction, and once condominiums started being built in the 1970’s, construction of multi-unit, income buildings in the city virtually ceased, because condos sell for higher prices. (It’s only recently, with the boom in rents, that larger – often very large – rental apartment buildings are being constructed once again.)
Residential buildings constructed before 1979 are almost universally subject to San Francisco’s ordinance strictly regulating rent increases and tenant evictions.
Sales & Values by Neighborhood
Pursuant to the previous chart, sales are concentrated in those districts of the city mostly built out prior to 1940. Many of these areas were considered “working class” neighborhoods at the time of construction, such as the Richmond district, the Noe Valley area and the Inner Mission, however these buildings were also constructed in areas that have always been highly affluent, such as Pacific Heights. (A 6081 square foot, 2-unit Edwardian in Cow Hollow recently sold for $6m.)
Median Sales Prices by Number of Units
This chart tracks the trend in median sales price appreciation since the current recovery began, breaking out buildings of 2, 3 and 4 units. Two-unit buildings typically sell at a premium (on a dollar per square foot basis) in San Francisco due to condo-conversion rules. Dramatic short-term fluctuations in prices, such as what occurred for 3-unit buildings in Q1 2015, should not be taken too seriously until substantiated over the longer term. Since there aren’t that many sales of any one type of building in any one quarter, median prices can jump up or down simply because of the particular basket of unique properties that sold in the time period.
Longer-term trends are always the most meaningful. The recent upward trend in values is clearly illustrated below.
Sales Volume since 1994
The quantity of 2-4 unit building sales fluctuates due to the booms and recessions that affect all types of real estate. But it is also affected by distinctive factors. Over the past 40 years, many of these buildings have been converted into condos or, more recently, exclusive-use TICs, both of which are considered different (and more valuable) property types: With hardly any new 2-4’s being built, inventory declines. Also, properties that in the past would have been sold as a single 2-4 unit building are sometimes now being sold as separate TIC units to multiple buyers.
It is also true that there are few political issues more furious in San Francisco now than tenant evictions, housing affordability, TIC conversions and condo conversions, and how it plays out – in public opinion, changes to city regulations, legislative efforts and ballot proposals – significantly affects this market.
The net result is that, even with the huge market recovery of the past 3 years, sales are down over 40% from 15 years ago.
Sales Prices to List Prices, Days on Market, Price Reductions
83% of the sales of these buildings in Q1 2015 sold without going through price reductions. They sold quickly and averaged a sales price 7% over asking price – all of which indicates a strong market of high buyer demand and inadequate supply of inventory to purchase. In April, as Q2 began, the market got hotter still (not shown on chart).
Note that overpricing not only means that the property takes much longer to sell subsequent to price reductions (if it does sell), but typically means it will sell at a lower price than if it had been priced correctly to begin with.
Sales by Price Range
As in the type, size and quality of buildings, the range in sales prices for 2-4 unit buildings in San Francisco is enormous: In the past year, it has run from under $500,000 to over $6,000,000. As mentioned before, factors include location, condition, parking, views, era of construction, vacant units, tenant profile, protected tenants, rents, past evictions, owner-occupancy and condo conversion potential, and possible future changes to tenant eviction laws.
New Listings, Properties for Sale, Listings Accepting Offers
Market activity to a large degree ebbs and flows with the seasons: The spring selling season is typically the most active, followed by the autumn. Activity usually drops off during the summer, and, especially, the winter holidays.
Days on Market
A look at trends in average dollar per square foot values in different city districts: The greater Richmond district area; the greater Noe, Eureka and Cole Valleys district; and the prestige, northern neighborhoods running from Pacific Heights and Marina to Russian, Nob & Telegraph Hills.
Note that every time the time period or the exact neighborhoods being analyzed are changed, even by a little bit, very general statistical values such as median price and average dollar per square foot may also change, sometimes significantly.
How the values in this report apply to any particular property is unknown without a custom comparative market analysis. Please call or email with any questions or if you’d like information on properties currently on the market.
All information is from sources deemed reliable, but may contain errors, is not warranted and is subject to revision. Numbers should be considered approximate.
© 2015 Paragon Commercial Brokerage & Paragon Real Estate Group
The S&P Case-Shiller Index for the San Francisco Metro Area covers the house markets of 5 Bay Area counties, divided into 3 price tiers, each constituting one third of unit sales. Most of the San Francisco’s and Marin’s house sales are in the “high price tier”, so that is where we focus most of our attention.” The Index is published 2 months after the month in question and reflects a 3-month rolling average, so it will always reflect the market of some months ago. The Index for April 2015 was released on the last Tuesday of June.
The 5 counties in our Case-Shiller Metro Statistical Area are San Francisco, Marin, San Mateo, Alameda and Contra Costa. Needless to say, there are many different real estate markets found in such a broad region, and it’s fair to say that the city of San Francisco’s market has generally out-performed the general metro-area market.
The first two charts illustrate the price recovery of the Bay Area high-price-tier home market over the past year and since 2012 began, when the market recovery really started in earnest. In 2012, 2013, 2014 and now 2015, home prices have dramatically surged in the spring (often then plateauing or even ticking down a little in the following seasons). The surges in prices that have occurred in the spring selling seasons reflect frenzied markets of huge buyer demand, historically low interest rates and extremely low inventory. In San Francisco itself, it was further exacerbated by a rapidly expanding population and the high-tech-fueled explosion of new, highly-paid employment and new wealth creation. From what we are seeing on the ground in the feverishly competitive hurly-burly of deal-making, we expect further increases to show up in the May and June Index reports.
For more regarding how seasonality affects real estate: Seasonality & the Real Estate Market
Case-Shiller Index numbers all reflect home prices as compared to the home price of January 2000, which has been designated with a value of 100. Thus, a reading of 214 signifies home prices 114% above the price of January 2000.
Short-Term Trends: 12 Months & Since Market Recovery Began in 2012
Longer-Term Trends & Cycles
The third and fourths charts below reflect what has occurred in the longer term (for the high-price tier that applies best to San Francisco and Marin counties), showing the cycle of recession, recovery, bubble, decline/recession since 1996, and since 1988. Note that, past cycle changes will always look smaller than more recent cycles because the prices are so much higher now; if the chart reflected only percentage changes between points, the difference in the scale of cycles would not look so dramatic.
Different Bubbles, Crashes & Recoveries
This next 3 charts compare the 3 different price tiers since 1988. The low-price-tier’s bubble was much more inflated, fantastically inflated, by the subprime lending fiasco – an absurd 170% appreciation over 6 years – which led to a much greater crash (foreclosure/distressed property crisis) than the other two price tiers. All 3 tiers have been undergoing dramatic recoveries, but because the bubbles of the low and middle tiers were greater, their recoveries leave them below – a little bit for the mid-price-tier and well below for the low-price-tier – their artificially inflated peak values of 2006. It may be a long time before the low-price-tier of houses regains its previous peak values. The high-price-tier, with a much smaller bubble, and little affected by distressed property sales, has now significantly exceeded its previous peak values of 2007. Most neighborhoods in the city of San Francisco itself have now surpassed previous peak values by very substantial margins.
It’s interesting to note that despite the different scales of their bubbles, crashes and recoveries, all three price tiers now have similar overall appreciation rates when compared to year 2000. As of April 2015, this range has narrowed to 109% to 114% over year 2000 prices. This suggests an equilibrium is being achieved across the general real estate market.
Different counties, cities and neighborhoods in the Bay Area are dominated by different price tiers though, generally speaking, you will find all 3 tiers represented in different degrees in each county. Bay Area counties such as Alameda, Contra Costa, Napa, Sonoma and Solano have large percentages of their markets dominated by low-price tier homes (though, again, all tiers are represented to greater or lesser degrees). San Francisco, Marin, San Mateo and Santa Clara counties are generally mid and high-price tier markets, and sometimes very high priced indeed. Generally speaking, the higher the price, the smaller the bubble and crash, and the greater the recovery as compared to previous peak values.
Remember that if a price drops by 50%, then it must go up by 100% to make up the loss: loss percentages and gain percentages are not created equal.
The numbers in the charts refer to January Case-Shiller Index readings, except for the last as labeled..
Low-Price Tier Homes: Under $549,000 as of 4/15
Huge subprime bubble (170% appreciation, 2000 – 2006) & huge crash (60% decline, 2008 – 2011). Strong recovery but still well below 2006-07 peak values.
Mid-Price Tier Homes: $549,000 to $903,000 as of 4/15
Smaller bubble (119% appreciation, 2000 – 2006) and crash (42% decline) than low-price tier. Strong recovery but still a little below 2006 peak.
High-Price Tier Homes: Over $903,000 as of 4/15
84% appreciation, 2000 – 2007, and 25% decline, peak to bottom.
Now climbing well above previous 2007 peak values.
In San Francisco, where many neighborhoods vastly exceed the initial price threshold for the high-price tier, declines from peak values in 2007 in those more expensive neighborhoods typically ran 15% – 20%, and appreciation over previous peak value has also exceeded the high-price tier norm.
San Francisco County
And then looking just at the city of San Francisco itself, which has, generally speaking, among the highest home prices in the 5-county metro area (and the country): 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. This chart shows both house and condo values, while the C-S charts used above are for house sales only. Median prices are affected by other factors besides changes in values, including seasonality, new construction projects hitting the market, inventory available to purchase, and significant changes in the distressed and luxury home segments.
And this chart for the Noe and Eureka Valleys neighborhoods of San Francisco shows the explosive recovery seen in many of the city’s neighborhoods, pushing home values far above those of 2007. San Francisco, San Mateo and Santa Clara counties are most effected by the high-tech wealth effect on home prices. Noe and Eureka Valleys are particularly prized by this buyer segment and the effect on prices has been astonishing.