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


San Francisco Real Estate Market – New Year Report

San Francisco Real Estate Market

Looking Back on 2017

& Forward to 2018

January 2018

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The median SF house sales price in 2017 was $1,420,000 (up from $1,325,000 in 2016), and for condos, it was $1,150,000 (up from $1,095,000). Looking just at the 4th quarter, median prices were $1,500,000 for houses (up from $1,350,000 in Q4 2016) and $1,185,000 for condos (up from $1,078,000).


San Francisco, CA, National Home Price Trends

San Francisco Median Home Prices by Quarter


Additional chart: Bay Area Median Home Price Trends by County

The chart below, based on CoreLogic S&P Case-Shiller Index data, tracks general price appreciation trends of homes in the upper third of prices in the 5-county SF Metro Area. Case-Shiller does not base their calculations on median sales price changes but uses its own proprietary algorithm. This chart has been simplified to only reflect percentage increases and decreases from various points in real estate cycles. Since it covers 5 counties, it is a very generalized illustration.

Case-Shiller San Francisco Bay Area Home Price Trends

Link to our full report on the Case-Shiller Home Price Index

Link to our report on Bay Area real estate cycles

————————————————————


Moving into 2018, there are a lot of spinning plates in the air – local, state, national and international factors that could affect markets. 2017 saw real estate markets surge and financial markets soar. After some cooling from mid-2015 to mid-2016, the Bay Area high-tech economy surged back into high speed, with companies leasing enormous spaces in newly built office buildings – which they will presumably fill with new hires. Unemployment rates have flirted with historic lows, and 2018 may see some major local IPOs, which could create great quantities of new wealth. The Bay Area still has probably the most dynamic, innovation-fueled economy in the world and indisputably remains among the great metro areas on the planet – but there are also social, economic, political and environmental challenges looming as well.

Congress delivered an unpleasant holiday present to many Bay Area residents in the form of federal tax law changes limiting the deductibility of mortgage interest and state and local taxes. The effect of these changes make living in an already high cost-of-living area more costly for many residents, and also reduce some of the financial incentives of homeownership, especially for more expensive homes. Predictions on the effect of these tax changes on local housing markets and the business environment range from one extreme (economic devastation) to the other (shrug), and the state legislature is currently working on bills that might blunt the negative financial impacts. It is too early to guess how it will all play out. We live in interesting times.

This report will range far and wide looking at real estate, and some economic and demographic issues that impact it. Most of the charts are self-explanatory, so we have kept the text to a minimum. A review of annual, year-over-year, real estate market trends in San Francisco are at the end of this report.

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San Francisco Home Sales by Property Type

San Francisco Probates Views Values

San Francisco New Home Listings Coming on Market


Link to our report on market seasonality

California Migration Trends in 2016


Link to our analysis of domestic and foreign migration trends

Link to our survey of SF and Bay Area demographics

San Francisco Employment Growth by Year

S&P 500 Index by Year

Annual Mortgage Rate Trends


Link to our report on economic context factors

San Francisco Housing Affordability Trends


Link to our report on Bay Area housing affordability

San Francisco Bay Area Rent Trends


Link to our report on the apartment building market

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San Francisco Luxury Homes Market

San Francisco Luxury House Sales by Year

San Francisco Luxury House Sales by Neighborhood

San Francisco Luxury Condo Sales by Year

San Francisco Luxury Condo Sales by Neighborhood

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SF Home Prices by Neighborhood


The following tables and charts are part of a larger survey, which can be provided upon request.

San Francisco Neighborhood & District Map

San Francisco houses under a million dollars

San Francisco 4-bedroom house prices

San Francisco 3-bedroom house prices

San Francisco 2-bedroom condo prices

San Francisco Condo Sales by Price Segment

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Annual Market Trends


Most of these annual trend charts show the market heating up again in 2017 after some cooling in 2016. Very generally speaking, since 2015, the house market has been hotter than the condo market, and the more affordable neighborhoods hotter than the more expensive. But 2017 was a strong year across virtually all market segments.


San Francisco annual median house price percentage changes

 San Francisco annual condo price percentage changes

San Francisco Listings Selling Quickly

San Francisco Home Price Overbidding

San Francisco Days on Market by Year

San Francisco Months Supply of Inventory by Year

San Francisco Supply and Demand Trends


All our real estate analyses can be found here: Paragon Market Reports

Please let us know if you have questions or we can be of assistance in any other way. Information on neighborhoods not included in this report is readily available.

If you will forgive a little celebration on our part: In 2017, Paragon became the largest brokerage in San Francisco by dollar volume sales of residential and multi-unit residential real estate (as reported to MLS, per Broker Metrics). We opened our doors in 2004.


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It is impossible to know how median and average value statistics apply to any particular home without a specific, tailored, comparative market analysis. In real estate, the devil is always in the details.

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 San Francisco and 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. Late-reported MLS activity may change certain statistics to some small degree.


© 2018 Paragon Real Estate Group

San Francisco Real Estate Market – Q3 report

Extremely Low Inventory + Continuing Strong Demand =

High-Pressure Q3 San Francisco Real Estate Market

October 2017, Q3 Review

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Year-over-year, a low inventory homes market dropped even lower, while buyer demand increased to keep the pot boiling in San Francisco through the third quarter, when activity typically cools down between the spring and autumn selling seasons. Since closed sales in each month mostly reflect the market heat in the previous month, when the offers are actually negotiated, we will not have hard data on September until October sales data becomes available in November. One thing we do know is that the number of new listings coming on market in September, which is usually the month of the year with the highest number of new listings, is down considerably from last year – but the number of listings accepting offers increased: Less inventory, but more demand.


Q3 SF Median Home Sales Price Changes since 2005

San Francisco Q3 Median Home Price Trends


The Q3 SF median house sales price was $1,365,000 and the median SF condo sales price was $1,175,000, considerable year-over-year increases over Q3 2016 prices: 7% and 11% respectively. It is not unusual for median prices to drop from Q2 to Q3, to a large degree due to the seasonal decline in luxury home sales, as well as the typical overall market cooling during the summer, and this occurred for houses, which dropped $75,000 from Q2, similar to drops in previous years. Condos bucked the trend and increased $40,000 quarter to quarter. (Q2 to Q3 change is not illustrated on this chart.) However, while the house inventory in the city has been relatively unchanged for 60+ years, tens of thousands of new condos have come into the market over recent decades, which means that comparing the basket of sales in different periods is not always apples to apples.

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Q3 San Francisco Market Trends since 2005
Comparing Q3 statistics for the past 12 years

Q3 New Listings Coming on Market since 2005


New listings hitting the market dropped appreciably year-over-year, doing no favors for buyers competing for homes in Q3 overall, and in September specifically.

San Francisco Q3 New Home Listings on Market

Months Supply of Inventory (MSI), Q3 since 2005


MSI compares demand to supply in one statistic: The lower the MSI, the higher the demand vs. the number of listings available to purchase. The MSI for the SF house market in Q3 2017 was as low as in any Q3 during the past 12 years. For San Francisco condos, the MSI was somewhat higher, but still historically low (but does not include the substantial inventory of new-project condo listings, not listed in MLS). Both are down significantly from Q3 of 2016: 2016 was a cooler market between two very hot markets in 2015 and 2017.

San Francisco Q3 Months Supply of Inventory

Average Days on Market, Q3 since 2005

San Francisco Q3 Days on Market

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Overbidding List Prices

 since December 2015


In the last 6 years, overbidding percentages have usually declined from the Q2 spring selling season to the quieter Q3 summer market. But not this year: This year overbidding increased in July and September to their highest points since mid-2015.

San Francisco Overbidding Home Prices

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Context Economic Factors to Bay Area Housing Markets


We recently completed a report placing the Bay Area housing market within the context of a wide variety of other economic and demographic dynamics, such as population growth, employment and hiring, the stock and the IPO markets, consumer confidence, interest rates, commercial lease rates, , aging homeowners (who sell less frequently), housing affordability and new housing construction. Because conditions, trends and cycles seen among them are, more often than not, closely interrelated. The full report is online here: Economic Context Report.


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San Francisco Luxury House & Condo Markets


In September, we issued 2 detailed reports on the San Francisco luxury house market, and the SF luxury condo, co-op and TIC market. Above are 2 of many updated analyses. The complete reports can be found here:

Link to our SF luxury house market update

Link to our SF luxury condo and co-op market update


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San Francisco Investment Property Market


After dropping in 2016, SF residential rents appear to be making a small recovery, though the data is still very short-term, and there are thousands of new apartments in the new construction pipeline in the city. This chart is from our latest report on the San Francisco, Alameda and Marin multi-unit residential markets:

Link to our apartment building market report


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Trends in Selected San Francisco Neighborhoods


We have dozens of analyses of appreciation trends within specific SF neighborhoods and districts, and below is a sampling, some by median sales price and others by average dollar per square foot value. Some city neighborhoods plateaued or saw declines in values in 2016, when segments of the market distinctly cooled: Generally speaking, these were more expensive home segments, and condo markets most impacted by new-project condos coming on market with major new supply. Affordable house markets largely continued to appreciate in 2016. In 2017 to date, most areas of the city have experienced further appreciation.

Changes in these statistics do not necessarily correspond exactly to changes in fair market value, as they can be affected by a variety of factors. Neighborhoods with relatively few sales and broader ranges in individual sales prices are most prone to fluctuations unrelated to changes in fair market value. Longer-term trends are always more meaningful than shorter term. If you are interested in a neighborhood not included below, please let us know.



Please let us know if you have questions or we can be of assistance in any other way. Information on neighborhoods not included in this report is readily available.

SF neighborhood home price tables: Median Sales Prices by Bedroom Count

All our real estate analyses can be found here: Paragon Market Reports

Over the past 12 months, Paragon sold more San Francisco residential and multi-unit residential real estate than any other brokerage. (Dollar volume sales reported to MLS per Broker Metrics.)


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It is impossible to know how median and average value statistics apply to any particular home without a specific, tailored, comparative market analysis. In real estate, the devil is always in the details.

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 San Francisco and 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

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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Walking distance to San Francisco’s best boutiques, restaurants, open spaces, and cultural attractions

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Multipe Angles of a Changing San Francisco Market.



Paragon Real Estate Group
 
Paragon Real Estate Group

Multiple Angles on a Changing San Francisco Market

SF Real Estate Market Continues to Cool Unevenly
& Luxury House Sales Unexpectedly Jump in October

November 2016 Paragon Report

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San Francisco Median Home Sales Prices


Median sales prices usually jump in autumn, to a large degree because of the seasonal increase in luxury home sales, and that is what happened in October. The combined house and condo median sales price was up 6% from October 2015, but substantially unchanged from the previous peak median prices achieved in spring 2015 and spring 2016.

Click on the map below to access our updated Bay Area & SF home price maps

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Overview


The six weeks from mid-September to Halloween constitute the heart of the relatively short autumn selling season, with the market typically going into semi-hibernation from Thanksgiving through mid-January. (Sales still occur during this period and it can be an excellent time to buy with the big drop in competition.) Generally speaking, this autumn experienced further cooling in SF market conditions: October saw significant year-over-year declines in accepted-offer and closed-sale activity, and significant increases in price reductions and listings expiring without selling. Condos appear to be most affected on all these counts, with some decline in condo values: This situation is certainly being exacerbated by new condo projects coming on market at the same time that buyer demand has been softening.

The house market has continued to see declines in listing inventory and to shrink as a percentage of total home sales, thus becoming a scarcer commodity. It has performed much better, especially in more affordable neighborhoods. And sales of luxury houses suddenly spiked dramatically in October, though this appears to have been mostly driven by a huge surge in such listings in September. This jump in expensive house sales drove the median house sales price to its highest point ever in October, to just over $1.4 million. The condo median sales price in October, at $1,150,000 was above that of October 2015, but a tad below its all-time high in June. Please note that median sales prices are not perfect measures of changes in fair market value, since they fluctuate for a number of reasons, including seasonality and significant changes in the inventory of homes for sale.

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Bay Area Case-Shiller Home Price Index
Recent price changes by property type and price segment


Case-Shiller Index numbers all refer to a January 2000 price of 100, and track appreciation
since then. Thus 243 on the chart signifies a price 143% above that of January 2000.


As mentioned in earlier reports, the highest pressure of buyer demand has shifted in the past year toward more affordable homes, and that is now showing up in the different price movements of low, middle and high-price tier houses. The Case-Shiller Index does not measure median sales price changes, but has its own special algorithm to determine same-home appreciation. This short-term chart illustrates how lower-priced houses have continued to appreciate rapidly, while mid-price and high-price houses have recently more or less plateaued, and condo prices have declined. The Bay Area Index for August 2016 was published in late October.

Chart: Long-Term, Case-Shiller Bay Area Home Price Trends

Link to our complete S&P Case-Shiller Index report

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San Francisco Luxury Home Sales

Houses of $3 million+/ Condos, Co-ops & TICs of $2 million+


This report will generally consider houses selling for $3m or more, and condos, co-ops and TICs selling for $2m or more, as constituting the luxury home segment in the city. They total just under 10% of total home sales. For the ultra-luxury designation, houses are bumped up to $5m or more, and condos, co-ops and TICs to $3m or more. These price segments total 2.6% of total home sales.

Pursuant to a big jump in new high-end home listings in September, luxury house sales in October, suddenly hit their highest point in many years, if not ever. This is illustrated in the red line in the chart above. Luxury condo sales reported to MLS, as seen in the blue line, were higher than in October 2015, but far below peaks hit in previous spring selling seasons. However, this does not count new-project luxury condo listings unreported to MLS, which are playing an increasingly large role in the market and creating substantial competition for resale luxury-condo listings.

Below are 2 charts breaking out luxury home sales by city district.



Additional Chart: New high-end listings coming on market

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Further Perspective


The past 14 months has seen the Chinese stock market crash, the oil price crash, Brexit, high U.S. financial market volatility, a slowdown in the Bay Area high-tech boom, and enormous election-related anxiety. It is difficult to tell exactly how these events may have affected real estate markets. However, despite significant affordability issues and the transition to less heated market conditions – as illustrated in the analyses of this report – so far, we have seen no sign of anything approaching an impending crash in our local market.


Selected Real Estate Market Statistics
Year-over-year changes by property type and price segment


Listings vs. Sales: The overall inventory of house listings has persisted in declining, while house sales are basically even year-over-year. Condo inventory continues to climb (without including new project condos not listed in MLS), while sales have been dropping.



Percentage of Sales over Asking Price: Condos saw dramatic drops in this metric, illustrating a significant decline in buyer demand and competition. Overall, houses have seen a negligible decline, maintaining a very high percentage of sales over asking price. Luxury houses, as mentioned before, experienced a stronger October market than last year.



Median Percentage of Sales Price over Final List Price: All market segments saw year-over-year drops as buyers refused to overbid list prices on the scale of previous years. However, the general house segment still saw a 9.3% median overbid of list price, which is huge, even considering that some agents are consciously underpricing their listings. The other segments, with overbid percentages shrinking toward zero, are seeing a much greater quantity of sales negotiated below list price. And this does not include the increasing number of listings that are simply expiring, i.e. with no sale taking place.


Sales Price to Original List Price Percentage Overview
All San Francisco residential sales


Months Supply of Inventory (MSI): MSI measures how long it would take to sell the current inventory of listings for sale at the average annual rate of sale. All segments ticked up, indicating some market softening, but the general house market is still well within seller market territory. The biggest change is in the luxury condo market, where inventory has been hitting new highs, while sales have generally been declining, thus putting the segment in buyer market territory. Again, these figures do not include the large number of new-project listings and sales unreported to MLS, which would probably increase the condo MSI readings.



Average Condo Dollar per Square Foot Values by Era of Construction: Newer condos sell for higher average dollar per square foot values than older condos. Generally speaking, in 2016 there has been a tick down in this measure of value, which, as seen in the chart at the beginning of this report, correlates with the conclusion of the Case-Shiller Index as well. According to The Mark Company, which specializes in the marketing of new-construction condo projects (for which statistics are usually not available), average dollar per square foot values for brand new condos have dropped about 8% over the past year. This would presumably reflect the fierce competition between projects to sell out their inventories of units.


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The two following charts are from our recent report on the Bay Area Apartment Building market, mostly focusing on San Francisco, Alameda and Marin Counties.


Median Sales Prices for Multi-Unit Properties
by building size and submarket

Average Asking Rents by Bay Area County


Rent rates in San Francisco have been dropping in 2016 after peaking in 2015, with estimates of the decline generally running in the range of 3% to 6.5%, but with some city rental agents saying that certain districts have seen slumps of more than 10%. We believe there are 3 big factors at work: a rush of large, newly built apartment buildings coming on market; a softening of demand as hiring trends have fluctuated; and affordability issues that have caused more prospective renters to simply turn away from living in the city, their first choice, and look elsewhere. However, even with the recent decline, the city still has the highest rents in the country.

Link to our full Apartment Building Market report

Link to our full Rent Trends report


Our Best Autumn Ever


We hope you will forgive our celebrating the fact that Paragon, which opened its doors in 2004, represented buyers and sellers in closing more in San Francisco home sales in October than any other brokerage. [Total dollar volume residential sales reported to MLS, per Broker Metrics.]

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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 value statistics apply to any particular home without a specific comparative market analysis.


© 2016 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
 

Could you guess the hottest neighborhood in San Francisco right now?



Paragon Real Estate Group
 
Paragon Real Estate Group

The Hottest Neighborhood Market in San Francisco
and Other Real Estate Analyses

October 2016 Paragon Market Report


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Before jumping to neighborhood market dynamics and the hottest market in the city, here are a few overview analyses:


San Francisco Median Home Prices by Quarter
2012 – 2016


Median sales prices typically fall in Q3 from Q2 due to seasonal inventory and demand issues, and that occurred in 2016 as well. Year over year, the Q3 2016 house price is running above that of Q3 2015, while the condo median price has stayed essentially flat.

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San Francisco Median Home Prices by Year
1993 – 2016

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Biggest Surge in New Luxury Home Listings Ever


Even more so than the general market, the luxury home market is fiercely seasonal, with spring and autumn being much more active than summer and, especially, the mid-winter holiday doldrums. September is typically the single month with the highest number of new listings, which fuels the relatively short autumn selling season before the luxury market starts to go into hibernation in mid-late November. This year saw a particularly large jump in the number of new listings of homes of $2.5 million and above, to by far the highest level ever.

Because the time between listings coming on market, offers being negotiated and accepted, and then the transactions actually closing sale is 4 to 6 weeks or more, it will be a little while before we have hard data on how the market responded to this feast of expensive homes hitting the market.

The Hottest, Most Competitive Market in San Francisco

A Shift from Prestigious, Expensive, High-Tech and Hip

to Normal, Middle-Class, Working-People Affordable


Since the market recovery began in 2012, various districts have taken the lead as the hottest markets in San Francisco: The affluent and prestigious Noe-Eureka-Cole Valleys district and Pacific Heights-Marina district led the recovery out of recession. Later South Beach/SoMa, Hayes Valley and, especially the Mission, went white hot as the high-tech boom surged (though, honestly, high appreciation rates became general throughout the city). In mid-2015, price appreciation in many of the more expensive and fashionable districts started to slow down and plateau.

With the search for affordable homes, and houses in particular, becoming ever more challenging (or desperate), the greatest pressure of buyer demand moved to a large, lopsided curve of historically less expensive neighborhoods running along the western-most edge of the city from Outer Richmond south to Lake Merced, then east across the southern border with Daly City, and up through Bernal Heights and Bayview. Of these, we believe Realtor District 2, Sunset/Parkside, with its quiet streets; its closeness to the beach, GG Park and highways south to Silicon Valley; and its attractive, modest-sized houses built mostly in the decade before and decade after WWII, is now the hottest, most competitive market in San Francisco.



In the charts below, notice how year-over-year statistics have generally cooled somewhat in most areas of the city from the frenzied market prevailing in the first part of 2015: higher days on market, lower percentages of listings selling over asking price, higher months-supply-of-inventory figures, and so on. The most affordable districts are those generally showing the least, or even no, change year over year, and some of them are still sizzling. However, the 2016 statistics for SF house sales in no way suggest what would be described as a weak market in any of the city districts. (Some of the condo markets have softened more significantly.)


Overbidding Asking Prices: SF House Sales

Percentage of House Sales Selling over Asking Price

SF House-Price Appreciation Rates

Average Days on Market

Months Supply of Inventory:
Buyer Demand vs. Supply of Listings for Sale

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San Francisco District Condo Markets


For a number of reasons, including a significant increase in new-construction projects, the condo market in San Francisco is not as strong as its house market, but without any hint of an impending crash: The median SF condo price has simply plateaued after years of feverish appreciation. Based upon our analyses of underlying market dynamics shown via the charts below, we believe the condo markets of the Noe, Eureka and Cole Valleys district, and the Richmond/Lake Street district are currently the most dynamic in the city. It is probably no coincidence that these areas are seeing comparatively little new condo construction adding to inventory.

The cooling of the condo market is clearly reflected in the 2016 vs. 2015 statistics. The first chart also illustrates, as mentioned in earlier reports, how the luxury condo segment ($2m+), especially in District 9 (greater SoMa/South Beach/ Yerba Buena) where the majority of new, luxury condo construction is occurring, has softened the most. These charts do not include the many hundreds of newly built or under construction condos listed, accepting offers or sold, which are not reported to MLS, as exact data on that activity is hard to verify.

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District Sales Overview
Sales Volumes and Sales Prices


Chart: Average San Francisco House Sizes by Neighborhood

As illustrated above, the 3 most affordable districts for buying a house in San Francisco are also 3 of the 4 districts with the most house sales.



25 years ago, the greater South Beach/ SoMa/ Mission-Bay area did not even have an appreciable amount of residential housing. Now, if we add new-condo sales not reported to MLS (which are not reflected in the chart above), it is the area with the greatest number of condo sales in the city, more than twice as many as the second ranking district. It is also now the foremost area for luxury condo sales, having leapt ahead of the old-prestige Pacific Heights and Russian Hill districts. This is the only place in the city where high-rise construction is currently allowed, and there is much new construction in the works.


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New Bay Area Hiring Surge?
Employed Resident Count in 4 Central Bay Area Counties


Hiring and the population growth it engenders play a huge role in buyer and renter demand. After peaking in December 2015, the number of employed residents in the 4 middle Bay Area counties fell by 6000 through June 2016, the largest sustained drop in 5½ years. This seemed to correlate with an apparent cooling in the high-tech boom. Then in July & August 2016, a sudden, new hiring surge added almost 38,000 to the employment numbers, hitting a dramatic new high. We will have to wait for the data of future months to see if this is part of a sustained second wind in Bay Area hiring (especially in high-tech), or simply an unusually large, short-term fluctuation.

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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 apply to any particular home without a specific comparative market analysis.


© 2016 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
 

Transitioning into Autumn Market

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Paragon Real Estate Group
 
Paragon Real Estate Group

San Francisco Real Estate Market Report:
Heading into the Autumn Selling Season

Long-term home price appreciation, San Francisco neighborhood prices,
Bay Area housing affordability, seasonality, market dynamics statistics,
the S&P 500 vs. the Shanghai composite index

September 2016 Update


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Annual Median Sales Price Appreciation since 1994
for San Francisco houses, condos and TICs
(Prices in thousands of dollars)


2015 to 2016 YTD, the overall median price for condos, which now comprise the majority of home sales in the city, remained exactly the same at $1,100,000: Among other issues, this market segment is clearly being impacted by an increase in new-project condos coming on market, altering the supply and demand dynamic. The house median price increased 6% to $1,328,000: This is far below the appreciation rates of the previous 4 years and is being driven mostly by continued demand for "more affordable" houses selling below $2 million. TICs, which only comprise 4% to 5% of home sales basically stayed flat year over year.

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Where to Buy a Home in San Francisco
for the Money You Wish to Pay


We just issued our semi-annual update on home prices by property type and neighborhood. Below are 3 of the 8 charts in the analysis. The complete report is here: San Francisco Neighborhood Home Prices

26% of SF house sales were under $1 million so far in 2016;
In 2011, that percentage was 75%.

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Autumn & the Expected Surge
in New Home Listings


Autumn is the second biggest selling season of the year, and September is typically the single month with the highest number of new listings. Autumn is a relatively short market season, running from after Labor Day until mid-November, when the market begins its slide into its winter-holiday slowdown. It is particularly important for the luxury home segment as its market activity usually plunges to an almost standstill at Thanksgiving and doesn’t revive until February or early March, i.e. this 2-month window is basically it for the next 5 to 6 months.

At this point, we are waiting to see if the expected, dramatic spike in new listings occurs as usual, and how buyers react to it if it does.

Our full report on seasonality is here: Seasonality & the SF Market

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After 6-Month Decline in 2016,
a Sudden Surge in SF Employment Numbers


From the middle of 2015, the Bay Area high-tech boom appeared to appreciably cool down in hiring, IPOs coming on market, venture capital flow and general economic optimism, and that was one factor in the cooling in the SF real estate market. (One local economist predicted "blood in the streets" of San Francisco from a crash in both high tech and real estate.) As to hiring, from 2010 through 2015, San Francisco added an astounding 100,000 new jobs (the Bay Area added 600,000), putting enormous pressure on home prices and rents, but then in the first six months of 2016, that trend reversed itself and the number of employed residents in the city dropped by over 3000. Well, whether it is a short-term, seasonal fluctuation will become clearer soon, but in July, the trend line reversed itself again and the number jumped by 9000 to hit a new all-time high, as illustrated in the above chart.

The SF market definitely shifted gears this past year, from ludicrous overdrive (as Tesla might describe it) to a more reasonable cruising speed, and it has become much more balanced between buyers and sellers, but we certainly haven’t seen any blood in the streets so far. One question now is whether the Bay Area high-tech boom is getting something of a second wind. The change in employment trends is one of the indications we are seeing that it might be, hopefully without the irrational exuberance, but it is far too early to come to any definitive conclusion.

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Paragon Special Reports on San Francisco
and Bay Area Markets & Housing Affordability


In August we issued 2 reports that received extensive media coverage in Bloomberg News & BusinessWeek, WSJ Mansion Global, San Francisco Business Times, KGO, KTVU, KCBS, SFGate, Curbed and others, even some international publications. Below is a sampling of the many analyses in the reports, as well as links to the full articles.



Full report: Income, Affluence, Poverty & the Cost of Bay Area Housing

Full report: Bay Area Real Estate Markets & Demographics

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A Tumultuous Time in Financial Markets
The S&P 500 vs. the Shanghai Composite Index


We initially created this chart last autumn, and thought it would be interesting to update it for a longer term perspective. Obviously, dramatic shifts in financial markets often affect real estate markets as well.

A year ago at the end of August 2015, a very volatile year began for national and international financial markets. Initially triggered by a crash in the Chinese stock market, sparking serious concerns regarding the international economy, the S&P 500 fell significantly, but then recovered completely by mid-autumn. Then the oil price crisis of early 2016 dramatically affected the S&P, but again, it recovered completely within 2 months. When the Brexit vote came in late June, the market barely reacted, and then the S&P soon hit a new all-time high, a little above its previous spring 2015 peak.

Thousands of pundit prognostications later, many predicting crash and doom, U.S. financial markets are basically back to where they were when the Chinese stock market crisis began one year ago.

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San Francisco Market
Statistical Overview


By virtually every statistical measure of supply and demand, the SF market cooled in 2016: price appreciation generally plateaued, inventory ticked up and sales ticked down, months supply of inventory and days on market increased, and the percentage of sales price over asking price declined. All the changes have been statistically significant, but, except for the luxury condo market (which has softened more dramatically), none of the recent statistics by themselves indicate what would be typically called a weak market. For example, months supply of inventory increased from an average of 1.7 months in the first 8 months of 2015 to 2.3 in 2016, but 2.3 is still quite low; days on market went up 3 days for houses and 7 days for condos, but the current figures are still not high; the percentage of sales price over asking price decreased by about 4 percentage points in 2016, but condos and houses are still averaging sales prices 3% to 8% over original list price, which would have sellers in most other places jumping up and down in glee.

Perhaps the statistic most indicative of change is that the number of listings expiring or being withdrawn from the market without selling has gone up a whopping 60% (and for luxury condos, up over 100%). This is the clearest sign possible of sellers trying to sell their homes for more money than any buyer is willing to pay.

As always, please remember that the heat of different market segments can vary dramatically by property type, price range and location. The more affordable house market, for example, is still crazy hot in many areas of the city. And more affordable markets outside the city have also generally continued to be very competitive.

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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’s actually going on in the present, in the future. New construction condos not listed or sold on MLS are not counted in these statistics, though they often affect market dynamics.


© 2016 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
 

Wealth, Hiring and SF Home Prices – June 2016 Report



Paragon Real Estate Group
 
Paragon Real Estate Group

Wealth, Employment, Demand, Inventory,
Affordability and San Francisco Home Prices

The San Francisco Market Report
including 12 custom charts, June 2016

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An Astounding Recovery since 2011


Chart: Long-term SF Rent Trends

Two of the biggest drivers of local real estate demand in recent years have been increasing employment and new wealth creation, both of which exploded in San Francisco and the Bay Area. Approximately 600,000 new Bay Area jobs and 100,000 SF jobs have been added in the past 6 years. IPOs, unicorns and surging stock valuations created thousands of millionaires, dozens of billionaires and trillions of dollars in new wealth. The S&P 500 roughly doubled in the 5 years to mid-2015. Interest rates plummeted. And there was an exuberant optimism that the boom would only continue to soar. Add those ingredients to a deeply inadequate supply of housing and the result is a real estate market boiling over, with skyrocketing home prices and rents.

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Market Transition, Lull or Short-Term Fluctuation?


But in mid-2015, fears regarding the world economy burgeoned; Bay Area IPOs started to dry up, (over 80 in 2013 to mid-2015; 1 so far in 2016); the valuations of many high-profile IPOs and unicorns declined; and the firehose of venture capital investment slackened. The S&P 500 is now flat year over year and housing affordability has dropped close to historic lows. Hiring slowed and then in early 2016, employment numbers started to decline a little in San Francisco. Some of the wild exuberance leaked out of the general economic optimism, and in the city, demand began to soften a little, while listing inventory started to tick up.



Chart: Long-term SF Employment Trends

In the first 4 months of 2016, after 6 years of heated growth, the trend in increasing employment numbers in San Francisco reversed itself. This aligns with stories of local start-ups starting to slow hiring and trim staff as venture capitalists have become more demanding. However, this change in hiring could be a short-term phenomenon.



Since 2012, the spring selling season has been the most dynamic period of median home price appreciation. In spring 2016, after years of major increases, year-over-year house and condo price appreciation basically plateaued.

Note: Virtually every time the analysis is changed even slightly, the result will change. The combined house-condo median sales price ($1,280,000) was 5% higher year-over-year, still way down from its 23% jump seen in 2015. Median sales prices can be and often are affected by other factors besides changes in fair market value.



In 2016, the supply and demand dynamic shifted somewhat, with the number of listings available to purchase increasing, but the number of closed sales declining. (There was also a significant increase in listings expiring or being withdrawn from the market without selling, an indication of sellers demanding more than buyers were willing to pay.)

Slowing or plateauing appreciation does not imply a crash, and the cooling of a desperately overheated market to something closer to normal is not bad news. Indeed, an improvement in housing affordability (and supply) would be good news, both socially and economically. Likewise, a shift from irrational exuberance in the local economy to rational optimism would be a healthy change.

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San Francisco Luxury Home Market


As mentioned in previous reports, it appears the luxury segment has softened to a greater degree than more affordable segments (some of which remain very competitive): The number of high-end listings in MLS has jumped, while sales have plateaued or declined. Why the more dramatic change in the luxury condo market? Firstly, increased competition from new, big, luxury-condo projects may be taking a toll (more supply). Secondly, a significant percentage of these very expensive units are usually purchased as second or third homes, not primary residences: When economic uncertainty swells, this is a market segment often affected first (less demand). Note: We do not have access to up-to-date statistics on new-project, luxury condo sales activity, so do not know if that segment has also cooled or is simply cannibalizing the resale market illustrated above.

Based on preliminary data, it appears that accepted-offer activity in May for luxury houses was very strong, possibly even exceeding levels of Spring 2015, suggesting that buyers took advantage of the greater selection of listings to jump in. If so, this will show up in the sales data for June.

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Rental Market Trends


The rental market is especially sensitive to changes in hiring, and, as illustrated above, asking-rent appreciation has plateaued. It is quite possible that actual lease rents have already started to decline, though no decline has yet shown up in the above statistics. (There is no MLS for reporting actual rents paid, so we have to rely on advertised asking-rent data, which is a lagging indicator.) Clearly, available apartment inventory has grown, and renter demand has softened. Large new apartment buildings have been entering the SF market, with more in the pipeline. This quote is from a June 1 Bloomberg article: Softening apartment rents in New York and San Francisco have forced landlord Equity Residential to lower its revenue forecast for the second time this year, as newly signed leases are not meeting company expectations.


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Important Caveats & Perspective


This recent data measures relatively short-term changes and may reflect only a temporary economic lull or market fluctuation (which is not uncommon). Also, different neighborhoods, property types and price segments in San Francisco are experiencing varying market conditions, from still-quite-hot (non-luxury houses) to cooler (luxury condos).

A staggering amount of wealth yet remains in the Bay Area. Hundreds of local companies worth hundreds of billions of dollars, including the likes of Uber, Airbnb, Palantir and Pinterest, remain in the near-future, possible-IPO pipeline, and economic optimism can shift quickly. Our business environment continues to be the envy of the world, and unemployment rates persist at near-historic lows. San Francisco ranks with the greatest cities of the world in quality of life, even if stressed by growth and housing-affordability issues. Overall city and Bay Area housing supply remains acutely inadequate to recent population increases.

Compared to almost any other in the country, our real estate market remains quite strong as measured by a wide variety of standard supply and demand statistics, and a substantial percentage of San Francisco home listings still sells quickly for well over asking price.

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Advice for Buyers


Buy a home that is affordable now and in the foreseeable future, keeping an appropriate reserve for the unexpected. Buying for the longer term is usually safer than for the shorter term. Lock in a low, fixed, interest rate for an extended period. Expand the list of neighborhoods you are willing to consider and do not just run after brand new listings, but look at those the market has passed by: There will often good buying opportunities with greater room to negotiate. Do not be afraid to make offers below asking price and to negotiate, but carefully review the most recent comparable sales and market indicators. During the summer and mid-winter holiday seasons, the competition for listings significantly declines, and can be excellent times to buy. Be patient: New homes come on the market every day.

Historically, homeownership in the Bay Area has been a good investment, because of long-term appreciation trends, the advantages of leverage, what is called the forced-savings effect (each mortgage payment including principal pay-down), and the many tax advantages. Talk to your accountant or financial planner regarding how these factors might impact you specifically. Admittedly, if one has to sell at the bottom of a down cycle, it can be painful.


Advice for Sellers


There are still plenty of motivated, qualified homebuyers in San Francisco, but do not take for granted that mobs of desperate buyers will show up waving over-asking offers. Price your home correctly right from the moment of going on market as overpricing can have significant negative ramifications. Prepare your home to show in its best possible light: You only have one chance to make the right impression on buyers. Hire an agent who will implement a full-court marketing plan to reach every possible prospective buyer and seize their attention. Stay up to date on comparable listings and sales, market conditions and trends, and adjust appropriately. If you receive an unacceptable offer, do not be insulted: It almost always makes more sense to issue a counter offer instead of outright rejection.

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San Francisco Housing Inventory & New Home Construction

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’s actually going on in the present, in the future. New construction condos not listed or sold on MLS are not counted in these statistics, though they often affect market dynamics.


© 2016 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
 

May 2016 SF Market Report: Are you in the market for a condo? Great time to be a buyer.



Paragon Real Estate Group
 
Paragon Real Estate Group

San Francisco Real Estate Market Report

Midway through the Spring 2016 Selling Season

May 2016 Update

San Francisco Median Home Price Appreciation
Short-Term & Long-Term Trends


As seen in the first chart below, the combined house-condo median sales price hit a new high in April. However, as the second chart illustrates, so far this year, while median house prices continued to appreciate, condo and TIC prices appear to have generally plateaued. 2012-2015, spring was the most dynamic, high-demand/low-supply selling season of the year.


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Market Dynamics by Property Type & Price Segment


As mentioned in our April report, different segments of the market appear to be diverging. The below charts separate the San Francisco homes market into house and condo/co-op/TIC segments, then further subdivide each into 4 price segments. The lowest, most affordable, price segments are defined by the median sales prices for the first 4 months of the year. The highest price segments (or luxury home sectors) are defined, approximately, by the top 10% of sales.

Very generally speaking, the house market has remained hotter than the condo market, which appears to have cooled to some degree (but nothing remotely approximating a crash), and more affordable homes are seeing significantly more demand than luxury homes, where the pool of potential buyers is much smaller. The luxury condo market, in particular, may be being impacted by an increase in large, new, luxury-condo projects arriving on market, especially in those districts where they are mostly being built. The number of resale luxury condo listings in San Francisco hit an all-time high in April.

These analyses do not include new-project condo activity unreported to MLS, which is now a significant portion of the market: Unfortunately, our access to definitive data regarding current activity in new condo sales is limited.



More on the luxury market: SF Luxury Home Market Analytics


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Percentage Changes in Median Sales Prices
& Average Asking Rents, 1994 to Q1 2016


The first chart tracks year-over-year changes in annual median sales prices for San Francisco houses. The year of greatest percentage appreciation was 2000 at the height of the dotcom bubble (though on a dollar appreciation basis, recent years far exceeded earlier periods). This is a generalized overview: Homes in different neighborhoods and in different price segments often saw wide variations in annual appreciation rates.



More on real estate cycles: 30+ Years of Bay Area Real Estate Cycles

This second chart illustrates appreciation in average asking rents. Note how much rents declined after the dotcom bubble ended, while the effect of the 2008 financial markets crash was much milder. We have heard from multiple city sources that available rental inventory has significantly increased and renter demand significantly decreased in recent months, which may reflect a possible softening in new, high-tech hiring. We shall see if this begins to show up more definitively in upcoming rent and employment statistics. Or it may simply be a temporary lull in the market.



More on SF & Bay Area Rents: Rent Trends Report

Our Q1 report on the apartment building market: Bay Area Apartment Market

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. New construction condos not listed or sold on MLS are not counted in these statistics, though they often affect market dynamics. Sales statistics of one month generally reflect offers negotiated 4 to 6 weeks earlier. Last but not least, different analytical systems sometime calculate standard real estate statistics differently, which can deliver variable results.


© 2016 Paragon Real Estate Group
 
No one knows San Francisco real estate better than Paragon.
Paragon Real Estate Group
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Irina Luck
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