Friday, May 22, 2015

Some Perspective on Current Market Conditions

Arithmetically, the performance of the San Francisco real estate market in the first four months of 2015 can be described as nothing short of dazzling.  Professionally, with each passing day as property sales are recorded and the specifics of each sale are revealed on our MLS, the aggressiveness of these buyers it just takes your breath away even for those of us who thought we had seen it all.

Of the 1,490 closed residential sales (both single family and condo/TICs) reported to our MLS, 883 (59.3%) sold for over $1 million.  The remainder (567 homes, 40.7% of the total) sold below that magic number.  By way of comparison in 2013 and the first nine months of 2014 only 38% of homes were selling above $1 million.

The largest single category of home sales have been in the $800-$999k range where 449 sales comprised 30.1% of all sales.  The next largest category is the $500k-$799k range with 261 sales (17.5%).  Of particular note are the top and bottom ranges where there were just 43 sales (2.9% of the market) had selling prices in the $1-$499k category.  The top range (over $2.5 million)  had 138 sales (9.3% of the total).  Of the 43 homes below $500k, seven were “below market rate” units where the city mandates the maximum selling price.

Looking at just condo/TIC listings of 1 bedroom/1bath, 2bedroom/1 bath, and 2 bedroom/2 bath properties most listings generally sell  and close in 23-35 days with an average selling price 6-15% over listing price.  Their respective average selling prices are $747k, $1 million, and $1.4 million.  Talk about “sticker shock”!  In most parts of the country, those results would be considered exception but, alas, in San Francisco they are now considered just typical.

San Francisco new construction will continue to add primarily condominiums in the next ten years.  It is estimated there are 10-20,000 “in the pipeline”.  Given the land-locked nature of San Francisco only a few single family homes will be added and condos will increase their dominance in the residential market.  This should mean that single family homes will become even more valuable as they become a smaller percentage of the market inventory.

After 16 years of keeping statistics for our San Francisco clients (, it appears that for the foreseeable future demand will continue to far outstrip available inventory with cash-laden buyers making all-cash offers with few or no contingencies and two week closes more common.  We see examples of these sales almost daily.  Just one example is a 3 bedroom/1 bath single family home on Potrero Hill (where incidentally the author has owned a home since 1974) that has not been on the market for at least three decades but in good but not updated condition.  This listed for $869k which was appropriate based on recent sales.  The winning buyer closed in 13 days with a selling price of $1.465 million!  An agent in our office has a client who offered $1.1 million, no contingencies and a 12 day close.  His offer ended up in the middle of 16 other offers.  In a normal market his offer would have been considered a slam dunk pre-empt.
Just this morning at our regular office meeting we heard from representatives from Fidelity and Chicago title companies talking about the coming changes effecting real estate transactions beginning Aug 1st and they mentioned that between 20-25% of recently closed transactions in San Francisco were all-cash deals.

So if you or your client are considering moving to San Francisco or the Bay area, we will be happy to assist you and your client in navigating this market.  It appears this is the new normal.

Thursday, May 21, 2015

Rent vs Buy?

Trulia recently published an updated report comparing costs to rent vs. buy in a number of real estate markets.
(Click on the map to embiggen).

I've highlighted the San Francisco market.  Click here to see the full Trulia article where you can play with some of the assumptions included in their calculations.  They also offer a full calculator where you can plug in numbers specific to your situation.
One of the main points of their article is to be sure to include the cost of monthly home owners association (HOA) dues.  We've noticed a significant increase in dues over the past few years and they can make a significant impact on your rent vs. buy situation.