The California Association of Realtors just released its Housing Affordability Index (HAI) for the 2nd quarter of 2016, which measures the percentage of households that can afford to buy the median priced single family dwelling (house).
In this analysis, affordability is affected by 3 major factors: median house price, mortgage interest rates, and household income. (Housing Affordability Index Methodology). The HAI uses house prices exclusively and if condos were included in the calculation, median home prices would decline (in SF, from $1,375,000 to $1,200,000 in Q2), affordability would increase and income requirements and PITI costs would be reduced as well.
By definition, half the homes sold in any given county were at prices below the median sales price, i.e. there were numerous homes that were more affordable than the median prices used in this analysis. However, any way one slices it, the Bay Area has one of the most expensive – if not the most expensive – and least affordable housing markets in the country. That impacts our society and economy in a number of important ways.
Affordability Percentage by Bay Area County
Long-term Bay Area Housing Affordability Trends
Note that extremely low affordability readings converged across Bay Area counties at the top of the bubble in 2006-2007. So far, there has not been a similar convergence in our current market, though affordability is generally dropping as prices increase. Most counties now have higher, and sometimes much higher, home prices than in 2007 (see chart later in report), but their affordability percentages are higher now too, instead of lower. The reason behind that apparent contradiction is the approximate 44% decline in interest rates, 2007 to 2016, as well as some increase in median household incomes.Extremely low interest rates have subsidized increasing home prices to a large degree in recent years.
San Francisco is still 5 percentage points above its all-time affordability low of 8%, last reached in Q3 2007 (even though its median house price has increased about 50% during that period). Other Bay Area counties (except for San Mateo) have appreciably higher affordability percentages, for the time being. Generally speaking, as one moves farther away from the heart of the high-tech boom, San Francisco and Silicon Valley, affordability increases.
Monthly Ownership Cost at Median Sales Price
Minimum Qualifying Income to Buy Median Priced House
Assumes 20% downpayment and including principal, interest,
property tax and insurance costs.
Bay Area Median House Prices
Before the high-tech boom, Marin, a famously affluent county for long time, had the highest median house price. But the high-tech boom accelerated median home prices in San Francisco and San Mateo faster and higher.
San Francisco has a much larger and more expensive condo market than other local counties, and is the only county with a very substantial luxury condo market – one that is growing significantly with recent new-condo project construction.
Income, Affluence & Poverty
Marin has the highest median household (HH) income in the Bay Area, a tad above Santa Clara and San Mateo. Though the median HH income figures of these 3 counties are almost double the national figure, their median house prices are 4 to 5 times higher, an indication that income dollars can go a lot farther in other parts of the country than they do here. Indeed an income that in other places puts you close to the top of the local register of affluence, living grandly in a 6-bedroom mansion, in the Bay Area might qualify you as perhaps slightly-upper-middle class, living in an attractive but unostentatious, moderate-sized home that costs twice what the mansion did (though, this being the Bay Area, you are probably still driving a very expensive car).
On the other hand, you live in one of the most beautiful, highly educated, culturally rich, economically dynamic, and open-minded metropolitan areas in the world.
Behind median HH incomes, each county also has enclaves of both extreme wealth and poverty within its borders.
Very generally speaking, in the Bay Area counties, renters typically have a median household income about half that of homeowners. In San Francisco, where the majority of residents are in tenant households, that significantly reduces the overall median HH income figure. The picture of housing affordability for renters in the city is ameliorated or complicated by its strong rent control laws (which, however, don’t impact extremely high market rents for someone newly renting an apartment) .
San Francisco has the lowest percentage of residents under 18 of any major city in the U.S. (It is famously said that there are more dogs in the city than there are children.) It also has an extremely high percentage of residents who live in single-person households – 39% – which is a further factor depressing median household income below markets with similar housing costs.
The Bay Area has approximately 2.8 million households. Of those, approximately 124,000 households have incomes of $500,000 and above, which would generally be considered to place them in the top 1% in the country by annual income. At 7.5%, Marin has the highest percentage of top 1% households, followed by San Mateo at 6.2%. With approximately 38,000 top 1% households, Santa Clara, the Bay Area’s most populous county, has by far the largest number of these very affluent households, while San Francisco has about 22,000.
It should be noted that besides high incomes per se, another factor in the Bay Area housing boom of recent years has been the stupendous generation of trillions of dollars in brand new wealth from soaring high-tech stock market values, stock options and IPOs. Thousands of sudden new millionaires, as well as many more who didn’t quite hit that level, supercharged real estate markets (especially those in the heart of the high-tech boom) as these newly affluent residents looked to buy their first homes, perhaps with all cash, or upgrade from existing ones. That is something not seen in most other areas of the country, certainly not to the degree experienced locally, and is a dynamic outside typical affordability calculations. This increase in new wealth has slowed or even declined in the past 12 months as the high-tech boom has cooled (temporarily or not, as time will tell). Still, there are dozens of local private companies, usually start-ups, some of them very large – such as Uber, Airbnb and Palantir – which are considered to be in the possible-IPO pipeline. If the IPO climate improves and successful IPOs follow, a new surge of newly affluent home buyers may follow.
A look at two very different income segments in the Bay Area, those households making less than $35,000 and those making more than $200,000. The $35,000 threshold is not an ironclad definition of poverty, especially since housing costs (by area, and whether market rate, subsidized or rent-controlled), household sizes and personal circumstances vary widely, though it is clearly difficult for most area families trying to live on that income. At over 25%, San Francisco has the highest percentage of households with incomes under $35,000 and, at 22%, Marin has the highest percentage making $200,000 and above.
Amid all the staggering affluence in the Bay Area, and huge amounts of new wealth generated by our recent high-tech boom, very significant percentages of the population still live in poverty, especially if our extremely high housing costs are factored into the calculation. (The above chart calculates poverty rates by different criteria, the higher one factoring in local costs of living.) The economic boom has helped them if it resulted in new, better paying jobs, unfortunately not as common a phenomenon as one would wish for the least affluent. It hurt them, sometimes harshly, if their housing costs escalated with the increase in market rates.
Mortgage Interest Rates since 1981
Interest rates play an enormous role in affordability via ongoing monthly housing costs, and interest rates are close to historic lows, over 40% lower than in 2007. To a large degree this has subsidized the increase in home prices for many home buyers. It is famously difficult to predict interest rate movements, though there is general agreement, that rates cannot go much lower. Any substantial increase in interest rates would severely negatively impact already low housing affordability rates.
Longer-Term Trends in Prices and Rents
The same economic and demographic forces have been putting pressure on both home prices and apartment rents.
Bay Area Median House Prices since 1990
If one looks at charts graphing affordability percentages, home prices, market rents, hiring/employment trends and to some degree even stock market trends, one sees how often major economic indicators move up or down in parallel.
Monthly Rental Housing Costs
The recent economic boom has added approximately 600,000 new jobs in the Bay Area over the past 6 years, with about 100,000 in San Francisco alone – with a corresponding surge in county populations. Most new arrivals look to rent before considering the possibility of buying. The affordability challenges for renters (unless ameliorated by rent control or subsidized rates) has probably been even greater than that for buyers, since renters don’t benefit from any significant tax benefits, from the extremely low, long-term interest rates, or by home-price appreciation trends increasing the value of their homes (and their net worth). In fact, housing-price appreciation usually only increases rents without any corresponding financial advantage to the tenant. Rents in the city have been plateauing in recent quarters and may even be beginning to decline as the hiring frenzy has slowed and an influx of new apartment buildings have come onto the market – but they are still the highest in the country.
Affordable Housing Stock & Construction in San Francisco
There is probably no bigger political issue in San Francisco right now than the supply (or lack) of affordable housing: Battles are being fought, continuously and furiously, in the Board of Supervisors, at the ballot box and the Planning Department by a wide variety of highly-committed interests, from tenants’ rights groups to developers. It is an extremely complicated and difficult-to-resolve issue, especially exacerbated by the high cost of construction in the city. SPUR, a local non-profit dedicated to Bay Area civic planning policy, estimated in 2014 that the cost to build an 800 square foot, below-market-rate unit in a 100-unit project in San Francisco was $469,800 – and we have seen higher estimates as well.
This fascinating graphic above, based on SF Controller’s Office estimates from late 2013, breaks down SF housing supply by rental and ownership units, and further divides rental by those under rent control. All the units labeled supportive, deed restricted and public housing could be considered affordable housing to one degree or another, i.e. by their fundamental nature their residents are not paying and will never pay market-rate housing costs. (Units under rent control will typically go to market rate upon vacancy and re-rental, though rent increases will then be limited going forward.) Adjusted for recent construction, there are roughly 34,500 of these units out of the city total of about 382,500, or a little over 9% of housing stock. Section 8 subsidized housing would add another 9,000 units.
There are currently many thousands of affordable housing units, of all kinds, somewhere in the long-term SF Planning Department pipeline of new construction, though many of them are in giant projects like Treasure Island and Candlestick Park/Hunter’s Point, which may be decades in the building. But it is generally agreed that new supply will never come close to meeting the massive demand for affordable housing, further complicated by the question of what exactly affordablemeans in a city with a median home price 5 times the national median. One corollary of increasing affordable housing contribution requirements for developers and extremely high building costs is that developers are concentrating on buildingvery expensive market-rate units – luxury and ultra-luxury condos and apartments – to make up the difference.
Other reports you might find interesting:
Our sincere gratitude to Leslie Appleton-Young, VP & Chief Economist, and Azad Amir-Ghassemi, research analyst, of the California Association of Realtors, for their gracious assistance in supplying underlying data for the CAR Housing Affordability Index calculations.
These analyses were made in good faith with data from sources deemed reliable, but they may contain errors and are subject to revision. All numbers should be considered general estimates and approximations.
These tables report median sales prices and average dollar per square foot values, along with average home size and units sold, by property type and bedroom count for a variety of San Francisco neighborhoods. If you are interested in data for a neighborhood not listed, please contact us. The tables follow the map in the following order: houses by bedroom count, condos by bedroom count, and 2-unit building sales. Within each table, the neighborhoods are in order of median sales price.
The analysis is based upon sales reported to San Francisco MLS between January 1, 2016 and July 21, 2016. Value statistics are generalities that are affected by a number of market factors – and sometimes fluctuate without great meaningfulness – so all numbers should be considered approximate. Medians and averages often disguise a huge range of values in the underlying individual sales.
“m” signifies millions of dollars; “k” signifies thousands; N/A means there wasn’t enough data for reliable results.
Note: The surge in expensive, new-condo construction sales in various areas, such as Hayes Valley, Potrero Hill, Inner Mission and the Market Street and Van Ness Avenue corridors, is significantly affecting (raising) the average and median values in those neighborhoods.
These statistics apply only to home sales with at least 1 car parking. Homes without parking typically sell at a significant discount. Below Market Rate (BMR) condos were excluded from the analysis.
As noted on the tables, the average size of homes vary widely by neighborhood. Besides affluence, the era and style of construction often play a large role in these size disparities. Some neighborhoods are well known for having “bonus” bedrooms and baths built without permit (often behind the garage). Such additions can add value, but being unpermitted are not reflected in square footage and $/sq.ft. figures.
If a price is followed by a “k” it references thousands of dollars; if followed by an “m”, it signifies millions of dollars. Sales unreported to MLS are not included in this analysis, and where abnormal “outliers” were identified that significantly distorted the statistics, these were deleted as well. N/A signifies that there wasn’t enough reliable data to generate the statistic.
Selected San Francisco District Snapshots
Illustrating the breakdown of home sales by price segment over a 12-month period.
Our full selection of district snapshot charts is here: SF District Home Sales by Price Segment
The Median Sales Price is that price at which half the properties sold for more and half for less. It may be affected by “unusual” events or by changes in inventory and buying trends, as well as by changes in value. The median sale price for an area will often conceal a wide variety of sales prices in the underlying individual sales. Every time one adjusts the analysis parameters – by date, or any other criteria – the median sales price will usually change as well. All numbers should be considered approximate.
Dollar per Square Foot is based upon the home’s interior living space and does not include garages, storage, unfinished attics and basements; rooms and apartments built without permit; decks, patios or yards. These figures are typically derived from appraisals or tax records, but can be unreliable, measured in different ways, or unreported altogether: thus consider square footage and $/sq.ft. figures to be very general approximations. Size and $/sq.ft. values were only calculated on listings that provided square footage figures. All things being equal, a house will have a higher dollar per square foot than a condo (because of land value), a condo’s will be higher than a TIC (quality of title), and a TIC’s higher than a multi-unit building’s (quality of use). All things being equal, a smaller home will have a higher $/sq.ft. than a larger one.
Many aspects of value cannot be adequately reflected in general statistics: curb appeal, age, condition, views, amenities, outdoor space, “bonus” rooms, parking, quality of location within the neighborhood, and so forth. Thus, how these statistics apply to any particular home is unknown without a specific comparative market analysis. Data is from sources deemed reliable, but may contain errors and is subject to revision.
These links below can be used to access other real estate reports and articles.
SAN FRANCISCO REALTOR DISTRICTS
District 1 (Northwest): Sea Cliff, Lake Street, Richmond (Inner, Central, Outer), Jordan Park/Laurel Heights, Lone Mountain
District 2 (West): Sunset & Parkside (Inner, Central, Outer), Golden Gate Heights
District 3 (Southwest): Lake Shore, Lakeside, Merced Manor, Merced Heights, Ingleside, Ingleside Heights, Oceanview
District 4 (Central SW): St. Francis Wood, Forest Hill, West Portal, Forest Knolls, Diamond Heights, Midtown Terrace, Miraloma Park, Sunnyside, Balboa Terrace, Ingleside Terrace, Mt. Davidson Manor, Sherwood Forest, Monterey Heights, Westwood Highlands
District 5 (Central): Noe Valley, Eureka Valley/Dolores Heights (Castro, Liberty Hill), Cole Valley, Glen Park, Corona Heights, Clarendon Heights, Ashbury Heights, Buena Vista Park, Haight Ashbury, Duboce Triangle, Twin Peaks, Mission Dolores, Parnassus Heights
District 6 (Central North): Hayes Valley, North of Panhandle (NOPA), Alamo Square, Western Addition, Anza Vista, Lower Pacific Heights
District 7 (North): Pacific Heights, Presidio Heights, Cow Hollow, Marina
District 8 (Northeast): Russian Hill, Nob Hill, Telegraph Hill, North Beach, Financial District, North Waterfront, Downtown, Van Ness/ Civic Center, Tenderloin
District 9 (East): SoMa, South Beach, Mission Bay, Potrero Hill, Dogpatch, Bernal Heights, Inner Mission, Yerba Buena
District 10 (Southeast): Bayview, Bayview Heights, Excelsior, Portola, Visitacion Valley, Silver Terrace, Mission Terrace, Crocker Amazon, Outer Mission
Some Realtor districts contain neighborhoods that are relatively homogeneous in general home values, such as districts 5 and 7, and others contain neighborhoods of wildly different values, such as district 8 which, for example, includes both Russian Hill and the Tenderloin.
Financial markets worldwide have seen dramatic volatility in this past 12 months, the Bay Area economy and new hiring have cooled, and the San Francisco house and condo market started to normalize after 4 feverishly overheated years. From a wide variety of sources, we are hearing of a big jump in apartment vacancy rates, with more apartments for rent than in many years, and the beginning of a decline in rent rates from recent all-time peaks. As would be expected, preliminary indications of a transition to a cooler market appear to be starting to show up in apartment building sales activity, but as illustrated in the charts below, no significant change is yet showing up in the statistics. The second half of 2016 will undoubtedly provide more insight regarding the speed and scale of any changes in market conditions.
Generally speaking, in the analyses below, we break out the 2-4 unit market from the 5+ unit market, as the two have some fundamental differences in market dynamics. The smaller buildings are often purchased by owner-occupiers, or, in San Francisco, by investors planning to sell the units separately as TICs. This significantly changes the financial evaluation of such properties.
This first chart gives an idea of the sizes of the markets in San Francisco, Alameda and Marin Counties.
Median Sales Price and Dollar per Square Foot Trends
2-4 Unit Buildings: San Francisco, Alameda & Marin
2011 to 2016 YTD
Cap Rate & Average Dollar per Square Foot Trends
5+ Unit Buildings: San Francisco, Alameda & Marin
2012 to 2016 YTD
Price per Unit, Gross Rent Multiples, Median Price Trends
5+ Unit Buildings: San Francisco Only
2007 to 2016 YTD
Further information regarding San Francisco neighborhood submarkets can be found in our last 2 reports: Q1 2016 & 2015 Market Reports
Below is one section of our list of 5+ unit apartment building sales reported to MLS in the first half of 2016. The full list is here: San Francisco Apartment Building Sales
Inventory, Demand, Price Reductions & Expired Listings
Multi-Unit Apartment Buildings in San Francisco
As seen in the second chart above, most of the SF multi-unit buildings that closed escrow in the first half of 2016 sold relatively quickly and averaged 5% over the original asking price. Buildings that went through price reductions before selling took much longer and sold at significant discounts. And quite a few listings expired or were withdrawn without selling, a clear indication of a substantial disconnect between what many sellers wanted and what buyers were willing to pay.
San Francisco Housing Inventory & Era of Construction
San Francisco New Housing Construction Pipeline
One of the big dynamics playing out in both the SF residential home and residential investment markets is the large number of new housing projects that have recently come on market or expected soon. Note that of projects under construction or approved by Planning (and leaving aside the long-term mega-projects such as Treasure Island), rental units outnumber condo (sale) units by about 2 to 1. This is a very recent development in SF housing construction, which saw virtually no market-rate rental housing construction for decades. (See era of construction chart above.) This expected rush of new rentals, most of which are at the (very) high end of rental cost, is coming just as the rental market is clearly softening in the city.
The chart above is based upon the San Francisco Business Times superb in-depth analysis of the many housing projects, rental and sale, market rate and affordable, currently in the Planning Department new construction pipeline, mapping and describing major projects of 60 units or more. Our chart attempts to summarize some of their data. Please note that projects are constantly being added, revised, sold to new developers, or even abandoned, and the median time from filing a plan to building completion is 3 to 6 years depending on the size of the project. Our full report is here: SF Housing Inventory and Pipeline Report.
Changes in San Francisco Employment Trends
What has been supercharging the Bay Area rental market for the past 5 years has been the incredible increase in new jobs, estimated at over 600,000 in the Bay Area, and 100,000 in San Francisco alone. This has put enormous pressure on rents throughout the metro region (the most expensive in the country) as new hires, many with very well paying jobs, desperately searched for housing. However, since 2016 began, it appears that the trend in new hiring has reversed, just as new rental housing inventory has been hitting the market in quantity: Significantly less demand, extremely high rents and increased supply of apartments for rent is creating a new reality, at least for the time being. The most expensive segment, especially in those areas where new construction is clustered, is probably most affected: Almost all the new, market-rate inventory is concentrated in the highest price ranges.
Our report on rental market trends is here: Bay Area Rent Report
Broker Performance: Residential Multi-Unit Sales
Please contact me with any questions or if I can be of assistance in any other way.
These analyses were made in good faith with data from sources deemed reliable, but they may contain errors and are subject to revision. Statistics are generalities and all numbers should be considered approximate. Properties not listed on or reported to MLS are not counted in these statistics, though they often affect market dynamics. Sales statistics of one month generally reflect offers negotiated 6 to 8 weeks earlier.
© 2016 Paragon Commercial Brokerage
Analyzing new data (preliminary May numbers) from the CA Employment Development Department indicates a significant shift in Bay Area employment numbers. As seen in the first chart below, looking at the 4 central Bay Area Counties, comparing the first 5 months of last year to the same period of this year, the change in the number of employed residents during each 5-month period went from an increase of 28,100 last year to a decline of 5,000 in this past December to May.
(Santa Clara County continued to grow in number of employed residents, but at a substantially reduced rate from the previous year).
This is the first time since 2009 that the number of employed residents in this area has declined instead of increasing during this period, though this is still relatively short-term data and doesn’t prove a lasting, long-term trend.
These next 2 charts give longer-term perspectives of year-over-year changes in San Francisco itself.
This first chart below, again, compares changes in employed-resident numbers in San Francisco alone in the first 5 months of each year. (Early 2010 saw a much greater increase, +27,000, but was not included in the first chart for reasons of scale.)
This chart shows long-term annual changes in employed-resident numbers in San Francisco.
Changes in employment figures, up or down, typically affect the rental market relatively quickly and dramatically – more so than the real estate purchase market – and that certainly appears to be the case in San Francisco, where softening demand and rents have been widely reported. The big increases in employment, and thus of population, in the past 5 years put immense pressure on rental rates around the Bay Area.
The decreases in employment we’re seeing in 2016 have also been coupled with recent, increased rental inventory construction, albeit most of which has been at the very high end of rent rates. In other words, a possible significant decrease in demand is being coupled with increased supply of apartments available to rent.
Average asking rents have plateaued over the last 3 quarters (first chart below), for the first time since 2011. This may disguise a decline in actual rent rates which have not yet showed up in the statistics. Comparing the annual employment chart above and the second, annual rent-rate chart below illustrates how employment numbers and rent-rates typically move in parallel.
You might also find our market report from earlier in June of interest: Wealth, Employment, Demand, Inventory, Affordability and San Francisco Home Prices
These analyses were made in good faith with data from sources deemed reliable, but they may contain errors and are subject to revision. It is not our intent to convince you of a particular position, but to attempt to provide straightforward data and analysis, so you can make your own informed decisions. Statistics are generalities, longer term trends are much more meaningful than short-term, and we will always know more about what is actually going on in the present, in the future.
© 2016 Paragon Real Estate Group
Many of the charts included below are based on the San Francisco Planning Department’s excellent 75-page 2015 Housing Inventory report, released on May 27, 2016, which can be accessed using the link at the bottom of this article. We are very grateful for the enormous effort put into creating that report by Audrey Harris and other Planning Department personnel.
Numbers in different charts below will not always agree: This is due to the vagaries of how and when condos and other housing units are counted as filed, authorized, permitted or completed by the different agencies who compile this data. As far as the real estate market is concerned, the situation is complicated by the fact that new construction condos are often marketed and “sold” (offers accepted) well before they finish construction, i.e. market dynamics of supply and demand may be significantly affected by units that do not yet exist.
The politics of new home development in San Francisco are not for the weak of heart. There are vociferous disagreements between neighborhood and homeowner associations, developers, affordable housing advocates, tenant’s rights groups, business groups, and pro-, slow- or no-growth advocates regarding how it should best proceed (or not proceed). The battles are non-stop in every political or legal venue available.
Comparing total inventory (illustrated above) to annual sales reveals that condos and TICs turnover about twice as often as houses in San Francisco. About 2% to 2.5% of all SF houses are now sold each year, an extremely low turnover rate, which has exacerbated the city’s inadequate, house-listing inventory situation. For condos, turnover runs in the 4.5% to 5% range, which is roughly in line with national averages for home sales, and for TICs, turnover is in the 5% to 6% range. These are all very general approximations. Since condos and TICs are typically smaller than houses, and often purchased by younger buyers and/or smaller households – singles, couples, beginning families – it’s not surprising they sell more often than houses, whose owners are often older, more settled in life, and have larger households.
The process of application and review, public hearings (and sometimes ballot proposals), revisions, entitlement, permitting, construction, inspection and completion is complex and lengthy. Housing units are being planned and built, and existing units are being altered and removed. And there are many housing types: rental or sale units, market rate or affordable, social-project housing or luxury condominiums.
The new-housing landscape in San Francisco is in constant flux: new projects, developer plan changes, city plan changes, and shifts in economic and political realities. The basic fact is that the city, after its recent 2008-2012 new-construction slump, is now experiencing a huge building boom. However, it should be noted that booms can slow dramatically or even come to a screeching halt if economic circumstances significantly change.
Residential Development by City District
New construction has been concentrated in a few specific districts of the city, mostly where there are commercial lots able to be converted to residential use and where higher density housing projects are most viable. The ability to take under-utilized commercial property sites and turn them into multi-unit or even high-rise residential projects is particularly prized. Generally speaking this describes the quadrant of San Francisco around and to the southeast of the Market Street corridor.
New Housing Construction by Bay Area County
Affordable Housing Construction
Very generally speaking, the city requires that new home developers either dedicate 15% of their units to affordable housing, which could be built on-site or on another city site, or contribute to the city’s affordable housing fund “in lieu” of building the units themselves. (The rules are more complicated than that, and there’s something on the June ballot that will change them further.) There are few subjects more difficult and politically charged in San Francisco than affordable housing: how much should be built where and who should be responsible for the costs.
Affordable housing units are allocated, rented and sold under rules and formulas pertaining to social and economic circumstances and housing cost. Large projects are also built on an ongoing basis by private-public social organizations for dedicated purposes such as senior housing. Looking at the number of units actually being built, there is a general consensus that current construction is deeply inadequate to needs.
In 2015, a total of about $73 million was collected from developers as partial payments of in-lieu fees for projects.
Bay Area Housing Affordability Trends
San Francisco Housing Units Demolished,
Merged and Removed
Housing units are gained by additions to existing housing structures, conversions to residential use, and legalization of illegal units. Dwelling units are lost by merging separate units into larger units, by conversion to commercial use, or by the removal of illegal units.
New Development Pipeline
We also have an overview of the quarterly San Francisco Planning Department’s Pipeline Report, which complements the annual Housing Inventory reports with a longer term perspective: The San Francisco Residential Pipeline Report.
There are over 60,000 housing units of all kinds currently in the pipeline – and the pipeline is growing and changing quickly now – but some of the bigger projects (such as Treasure Island, Hunter’s Point/Shipyard, Candlestick Point) may take decades to complete. Also, just because a project is in the pipeline does not mean it will be built as planned, or even built at all.
Pipeline Analysis, Based on SF Business Times June 2015 Project Breakdown
(A little outdated but still providing useful insight)
San Francisco Housing Stock Breakdown
A Fascinating 2014 Analysis by the San Francisco Controller’s Office
The Context behind San Francisco New Housing Development
What ultimately underpins new housing construction is demand. San Francisco has been experiencing surging population, employment and new wealth creation, that has so far been outpacing new housing supply. However, as of spring 2016, it appears that new hiring has slowed, at least in the short term.
Insufficient Housing = Increasing Prices & Rents
Below are two of our charts illustrating the rental and sale markets in San Francisco. As of spring 2016, it appears that appreciation rates may have begun to finally slow or plateau.
Condo Values by Era of Construction
The first golden age of SF apartment buildings, many of which were later turned into condos, was in the period of 1920 – 1940: The units in these buildings are large, light, gracious and filled with elegant detail. Pacific Heights and Marina are filled with these buildings. Though there are beautiful condos built in other eras (Edwardian flats, Art Deco apartments), the second golden age really arrived with the latest burst of new-condo construction, built for an increasingly affluent population: These units are ultra-modern, high-tech and feature highest quality finishes and amenities. They are exemplified by the new, luxury high-rises of the greater South Beach-Yerba Buena area, though variations on this theme, in non-high-rise form, have been springing up all over the city.
The units in these newer buildings command a premium both when rented or, as seen in the chart above, when sold – now surpassing an average dollar per square foot value of $1000, and sometimes far above that. This is the major motivator for developers today, many of whom are now concentrating on luxury or what might be called ultra-luxury condo construction. There is a question as to whether the luxury segment is being overbuilt considering the size of the buyer pool for such expensive units.
Housing Unit Construction by Bedroom Count
We haven’t found an easy place for construction data by unit size, so this first chart above is extrapolated from SF MLS sales of condos built 2001 -2015. It may not apply perfectly to units built as apartment rentals or affordable housing.
Typically, the smaller the unit, the higher the dollar per square foot value on sale or rental, however in San Francisco, 3+ bedroom condos are often high-floor units with spectacular views that sell for extraordinary sums – but these would be outliers to the general rule.
Below are links to the SF Planning Department Pipeline and Housing Inventory report webpages. They contain a huge amount of data, which we have attempted to represent accurately. As noted by their authors, who did an incredible job, the original reports themselves are “compiled and consolidated from different data sources and subject to errors due to varying accuracy and currency of original sources.”