From Billionaires in Mansions to Flippers & Fixer-Uppers


From Billionaires in Mansions

to Flippers & Fixer-Uppers


A Comprehensive Survey

of Bay Area Real Estate Markets 


73,000 Bay Area home sales worth $76 billion

 were reported to MLS over the past 12 months


June 2018

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Bay Area Home Value Appreciation Rates

since 2011 (the post-crash bottom of the market)

Bay Area Home Appreciation Rates


The county and city appreciation percentages in the chart above were calculated by averaging changes in both median sales prices and average dollar per square foot values. We also incorporated S&P Case-Shiller SF metro area calculations based upon its algorithm breaking the market into thirds by price segment. Each city and county includes within itself a wide variety of individual real estate markets of different price segments and varying dynamics, so these percentages are broad generalities. It is impossible to know how they apply to any particular home without a specific comparative market analysis.

IMPORTANT NOTE: As with stock market (or bitcoin) performance, comparative appreciation rates in housing markets vary wildly depending on the exact start and end dates of the analysis.


Bay Area Median Home Price Trends

since 1990

Bay Area County Median Home Price Trends

Major Factors in Bay Area Appreciation

The appreciation rate and market dynamics of each individual Bay Area market since 2011 has each been affected by a mix of different factors – to greater or lesser degrees:

1) Being at the center of the high-tech boom (San Francisco, San Mateo, Santa Clara); 2) proximity to the central counties, but with significantly lower housing costs (Alameda County and especially Oakland are prime examples): 3) being affected to an outsized degree by subprime financing and the 2008-2011 distressed-property price crash (Oakland and many outlying, less expensive areas); 4) relative affordability: in recent years, as home prices soared, the highest pressure of buyer demand moved to less costly markets within and between counties; 5) substantially increased supply due to new construction (SF condo market); 6) increases in the average size of homes sold (+13% in SF); and 6) the general national economic recovery: U.S. home prices have appreciated by about 49% since hitting bottom in 2011.

This chart illustrates the dynamics of the enormous appreciation rate in Oakland since 2011, following its drastic crash in prices during the market recession: Chart: Oakland median price changes. And this chart based on Case-Shiller data illuminates the vast differences in the magnitude of bubbles, crashes and recoveries of different home price tiers: Chart: Appreciation Trends by Price Segment.

Generally speaking, the most affluent neighborhoods, with the most expensive homes, have appreciated less on a percentage basis (but more on a dollar-increase basis) than more affordable neighborhoods – especially over the past 2-3 years. This dynamic also occurred in the latter period of the last housing boom.

There were sometimes specific local factors, such as the terrible fires in Sonoma, or the opening of the new Apple spaceship headquarters, which played roles in boosting home prices in their locales.


Bay Area Average Price per Square Foot Values

SF Bay Area Average Dollar per Square Foot values

San Francisco County Median Price Trends

since 1993

Within SF, appreciation rates have diverged between houses

and condos due to classic supply and demand factors.

SF Median house and condo price appreciation


Many more analyses specific to San Francisco County and its neighborhood markets can be found here: San Francisco Market Report


Bay Area Median Condo Prices by County

Year-over-year changes


Condos are the distinctly more affordable home purchase option, though that is less true in San Francisco than in other counties. Indeed, overall in the city, condos sell at higher price per square foot values than houses, but, of course, average condo size is much less.

Bay Area condo markets and prices


The high-tech boom has led to a considerable divergence between Bay Area and national home price appreciation rates, as illustrated in this graph based on Case-Shiller data: Long-Term Home Price Appreciation Trends


Fixer-Uppers: Median Sales Prices

Bay Area Fixer Upper Prices

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Bay Area Luxury Home Markets


There are very expensive neighborhoods and enclaves throughout the Bay Area, but the fabulous creation new wealth has supercharged Silicon Valley high-end real estate sales above all others.

Bay Area luxury home markets by county


How much luxury home one gets for the money varies considerably between counties. On a dollar per square foot basis, the highest values are found in San Francisco luxury condos, often high-rise units with utterly spectacular views.


SF Bay Area luxury home values by county

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Bay Area Real Estate Market Dynamics

Sales by Price Segment


These next 2 charts break out house and condo sales in the 9-county Bay Area by price segment. (We roughly estimate another 10 to 12% of such home sales were not reported to MLS, and not included below.)

Bay Area house sales by price

Bay Area condo sales by price

Respective Market Sizes

By unit sales volume, the Bay Area is utterly dominated

by Santa Clara, Alameda & Contra Costa Counties.

SF Bay Area House and Condo Sales by County

San Francisco & San Mateo close the gap in dollar

volume sales due to their high home prices.

Bay Area dollar volume home sales by county


The above chart tracks dollar volume sales for houses, duets, condos, co-ops, TICs and 2-4 unit residential buildings. If the sales of larger multi-unit residential buildings and commercial buildings were included, sales volumes would soar for some counties. For example, in San Francisco, 74% of all transfer taxes collected in 2017 related to property sales of $10m+, the vast majority of which were larger apartment buildings and commercial properties.

Home and Lot Sizes


As the economy recovered from the recession, people began to buy larger houses, which is one factor in increasing median home sales prices. The average size of houses sold in San Francisco increased 13% over the period, but is still far below those in Marin, and in Diablo Valley & Lamorinda in Central Contra Costa County.


Bay Area Average House Sizes

Marin & Diablo Valley also have the largest median lot sizes.

Bay Area median home lot sizes by county

Homeownership & Tenant-Occupancy Percentages


Of the 9 Bay Area counties, only San Francisco has a higher percentage of renters than of homeowners (though certain cities of other counties do as well).


SF Bay Area homeownership rates


On the issue of rent and eviction controls, people have a tendency to vote their own financial interests (and not according to their opinions on macro-economic housing-supply theory): Tenants for controls, and landlords and homeowners (potential landlords) generally against them. This is why strong rent control measures are typically found only in CA cities with majority tenant populations, such as SF, Oakland, Berkeley and Santa Monica. Upwardly spiraling rents, as illustrated in the below chart, has made this one of the most intense political issues of the day, to be voted on at the ballot in November.

Bay Area Rent Trends

The Bay Area has the highest rents of any metro area in the nation.

Bay Area rents historical trends

Supply, Demand & Market Seasonality


Most Bay Area markets will now start to transition from the more heated spring sales season to the less active summer season. Part of this dynamic is a marked increase in price reductions. Seasonal trends do vary by county: Sonoma, for example, has a strong second-home market which can peak in mid-summer. San Francisco and Marin typically see dramatic spikes in sales during the short autumn selling season. All markets head into big slowdowns for the mid-winter holidays, before waking up and beginning the cycle again in the new year.

Bay Area Active Listings historical trend

Bay Area Real Estate Seasonality

Price Reductions

As the spring market ends, the major period

 for listings reducing their asking prices begins.

Bay Area price reductions historical trend

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Bay Area Population & Housing Statistics

Bay Area population by county

Bay Area Population Growth since 1969

Bay Area Square Miles by County

Bay Area population density by county


Our report on local demographics is here: San Francisco & Bay Area Demographics. We guarantee you will learn surprising and interesting things you never knew before.

Bay Area Housing Statistics


In recent years, some counties have embraced growth in housing supply, and others have resisted it. For better or worse, no county has resisted growth more than Marin. Any way you slice it, housing supply has not come close to keeping pace with the surge in population, a major factor in our real estate markets.

Bay Area Housing Construction since 1967

Bay Area Housing Construction by County


According to a recent report by Turner & Townsend, San Francisco has the second highest construction costs in the world, behind only New York, and these costs continue to accelerate due to a number of factors: land and labor costs; the long planning, approval & permitting process; political opposition to growth; and affordable housing requirements.

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Income, Poverty & Housing Affordability

SF bay area median household income increases


According to the above calculations by the CA Association of Realtors, Bay Area median household income has increased by 23% since 2015, as compared to a 7% national increase (as calculated by Seeking Alpha). Among other factors, it has been reported that people moving into the Bay Area earn considerably more than those moving out.

Poverty percentages in the Bay Area


The Bay Area high-tech boom has been one of the greatest new-wealth-creation machines in history, but many residents have not shared in its benefits, or, indeed, been negatively affected by its impact on housing costs. The Bay Area ranks third for its number of billionaires (after NYC and Hong Kong, according to Wealth-X), but, on the other hand, over a million local residents live in poverty (according to the Public Policy Institute of California). We have one of the great luxury home markets in the country, and one of the worst problems with homelessness.

Q1 2018 Housing Affordability Statistics

per the California Association of Realtors (CAR)

According to CAR, despite very significant increases in median home prices and interest rates, affordability rates ticked up a little year-over-year in most Bay Area counties due to increases in household incomes. This surprises us, but we have not been able to review all the underlying data employed in the CAR Index. CAR has not yet been able to incorporate the recent federal tax law changes into their calculations, which would presumably lower affordability rates due to new limits on the deductibility of state and local taxes (such as property taxes) and mortgage interest costs. Depending on specific financial circumstances, our, admittedly unqualified, back-of-the-envelope estimate is that this will probably mean the loss of tens of thousands of dollars in federal income tax deductions for someone, say, owning a San Francisco house at the current median sales price. (Get more qualified counsel from your accountant.)

According to National Association of Realtors calculations, the San Jose and San Francisco metro areas are the least affordable in the country, just a bit below Honolulu.


Bay Area Housing Affordability Percentages

San Francisco Housing Affordability Index

Bay Area Income required to buy home

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Mortgage Interest Rate Trends


Interest rates play a large role in ongoing housing costs (for those who do not pay all cash). They have risen appreciably in 2018, but so far that only seems to be motivating buyers to act more quickly before rates go higher. Still, at some point, if rates continue to rise, presumably there would be some negative impact on the market. Though considerably above the historic lows of recent years, rates are still very low by long-term standards.

Short Term Interest Rate Trends 2018

30-Year Mortgage Interest Rates since 1981

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Bay Area Employment Trends


One of the foundation stones of the current Bay Area economy and housing market has been the spectacular increase in employment over the last 7 years, often in extremely compensated jobs: It recently came out that the median salary at Facebook was $240,000. (On the other hand, Mark Zuckerberg made a salary of just one dollar in 2017: Hopefully, he has other sources of income.)

As with all economic trends, employment numbers can also decline suddenly and precipitately, as occurred after the dotcom bubble burst. Note: We are not making comparisons between the two high-tech booms.

Bay Area employment trends

Bay Area unemployment rates historical


Additional reading for those interested:

Report: Positive & Negative Factors in Bay Area Markets

Will the Last Person Leaving Please Turn Out the Lights

30+ Years of Bay Area Real Estate Cycles

All our reports and articles can be found here: Market Analysis & Trends


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These analyses were made in good faith with data from sources
deemed reliable, but 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.
Median and average statistics are enormous generalities: There are hundreds of
different markets in the Bay Area, each with its own unique dynamics. Median
prices can be and often are affected by other factors besides changes in fair
market value, and longer term trends are much more meaningful than short-term. It is impossible to know how median prices or general appreciation rates apply to any particular home without a specific comparative market
analysis. All numbers in this report are to be considered approximate.



© 2018 Paragon Real Estate Group


Gold, Google & the San Francisco Real Estate Market



Paragon Real Estate Group
 
Paragon Real Estate Group

Gold, Google, Facebook & San Francisco Homes
Return on Investment Rates since 2011

Penthouses, Probates, Fixer-Uppers & Panoramic Views
A Survey of the SF Real Estate Market in 2016

January 2017 Report
including over 20 custom charts


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This first chart is a somewhat lighthearted, but we believe accurate look at how various 2011 investments would have played out through 2016. (FB is dated from its 2012 IPO.) When calculating appreciation, purchase and sale dates are critical factors, and changing those can alter the results significantly: Using 2011, the last bottom of the real estate market, as the purchase date certainly plays to the advantage of home price increases. If you bought gold or soybeans in 2011, you really should have sold them a couple years ago at the height of the commodity price boom.

Besides the appreciation percentage noted, buying a home in 2011 with all cash would have generated large, additional financial returns in the form of extremely low monthly housing costs. Buying it with 20% down supercharges the return on cash investment, and that is before adding in other advantages: Even with an 80% loan, by 2016 your monthly housing costs, with recent low interest rates and tax advantages, would be well below market rents. Then there is the huge capital gains exclusion on the sale of a primary residence, which would not apply to other investments.

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Sales of Probates, Penthouses, Fixer-Uppers, Lofts;
Homes with Views, Elevators & Wine Cellars

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Long-term San Francisco
Median Home Price Appreciation


San Francisco median house prices continued to appreciate in 2016, albeit, at 6%, at a considerably slower rate than the previous 4 years, while condo prices basically plateaued (and indeed dipped in some neighborhoods). As with almost everything to do with real estate values, it boils down mostly to supply and demand, as discussed below.



In 2016, the supply (and sales) of house listings in the city continued to dwindle, while a surge of new-construction condo projects hitting the market appreciably increased the inventory of condos available to purchase. In 2003, house sales in San Francisco were over 50% higher than in 2016. According to a study by the National Association of Realtors, the median time house owners are staying in their homes has jumped from an average of 6 years in 1987-2008 to 9 years since: Owners are getting older, not changing jobs as often, and baby boomers are aging in place as NAR put it. House owners sell their homes much less frequently than condo owners, who tend to be younger. In SF, there is also the factor of a reluctance to sell when that means facing a very challenging market for buyers. And with very low interest rates, and very high rents, some owners are renting out their houses instead of selling.

It all boils down to a continuing strong demand for houses meeting a steadily declining supply: Even with a market that cooled somewhat in 2016, competition between buyers continues to push house prices up, especially in more affordable neighborhoods. The equation is different for condos, which has become the dominant property-sales type in the city: A cooling market is meeting increased supply. There has been no crash in condo prices, but areas with the greatest quantity of new condo construction have seen small declines.


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What Costs How Much Where in San Francisco


Below are a few of our many updated analyses on home sales and prices by neighborhood, property type and bedroom count.

House Sales & Values


As can be seen above, two of the most affordable districts for houses, Districts 10 and 2, also provide 37% of all the house sales in the city. Generally speaking, they have continued to experience very strong buyer demand in 2016.

Condo Sales & Values


District 9, a large district that stretches from SoMa, South Beach and Mission Bay to Potrero Hill, Dogpatch and Inner Mission, is increasingly dominating condo sales in the city. The great majority of new condo construction, especially of the largest projects, has been occurring in this district.

All our breakdowns by neighborhood and home size are here: SF Home Price Tables


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Home Sales by Price Segment by District


Behind the overall median prices often quoted is a wide range of individual sales across a spectrum of prices. Here are a few of our updated analyses for every district of the city.



Our complete collection of district analyses: SF District & Neighborhood Sales Breakdowns

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San Francisco Overview Market Statistics


The following classic measures of market heat all tell the same story: Coming out of the recession in 2011, the San Francisco market became increasingly frenzied through the spring of 2015. In late 2015, as housing affordability became a critical issue, and the local high-tech economy saw some cooling, and financial markets worldwide experienced increasing volatility, the SF real estate market began to cool and normalize. Buyer competition for new listings softened, overbidding declined, days-on-market increased, appreciation declined or plateaued, and so on. And the condo market cooled more than the house market due to issues discussed above.

2016 saw a reasonable adjustment to a desperately overheated market, but nothing that suggests, so far, an imminent, dramatic downturn. Indeed, by national standards, most of our current statistics still define a relatively robust market. In a recent interview, Ted Egan, chief economist of the City of San Francisco, put the odds of a new recession at 10% or less.

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Real Estate Market Seasonality


Listing and sales activity builds from early January, the nadir of the market, into spring, typically the most active season. Accepted-offer activity provides an excellent illustration of the heat of the market during different times of the year.


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3 Important Economic Indicators

San Francisco & Bay Area Employment Trends


After dropping a little in the first half of 2016, SF and Bay Area employment numbers jumped back up in the second half, an encouraging sign for the local economy.


Mortgage Interest Rates in 2016


Interest rates popped 22% higher since the election, though they still remain very low by any historical measure. Where they will go now is a subject of intense speculation since they are a critical component of housing affordability.


The S&P 500 Stock Index since 1994


To the surprise of many, U.S. stock markets also popped after the election to their highest points ever.


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And now on to 2017, certain to be another interesting year.

Wishing you and yours a safe, healthy, happy and prosperous New Year.

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It is impossible to know how median and average value statistics apply to any particular home without a specific comparative market analysis, which we are happy to provide upon request. Please call or email if you have any questions or need assistance in any way.

These analyses were made in good faith with data from sources deemed reliable, but 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. Median and average statistics are enormous generalities: There are hundreds of different markets in the Bay Area, each with its own unique dynamics. Median prices and average dollar per square foot values can be and often are affected by other factors besides changes in fair market value. Longer term trends are much more meaningful than short-term.


© 2017 Paragon Real Estate Group
 
No one knows San Francisco real estate better than Paragon.
Paragon Real Estate Group
www.paragon-re.com/
Irina Luck
Lic# 01927187
1400 Van Ness Avenue
San Francisco, CA 94109
Direct 415.738.7206
Cell 415.722.4461
iluck@paragon-re.com
 

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