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


The Hottest Neighborhoods in San Francisco

The Hottest Neighborhood Real Estate

Markets in San Francisco

image

All parts of the city have experienced staggering rates of

appreciation since 2011, but some neighborhoods stand out

(for a variety of different reasons)

2000 to present, different city districts experienced bubbles,

crashes and recoveries of vastly varying magnitudes

May 2018 Report

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Before discussing neighborhood values, appreciation rates and market cycles, here are 3 overview charts on the entire city market.


Citywide Home Values & Trends


On a 3-month-rolling basis, median home sales prices in San Francisco yet again hit new highs in April 2018: The median house sales price jumped $55,000 over the March price to hit $1,665,000, and the median condo sales price jumped $50,000 in April to $1,225,000 (3-month rolling sales through 4/30/18, reported by May 2). Those reflect year-over-year increases of 23% and 8% respectively. Average dollar per square foot values also reached new peak values.


San Francisco Median Home Sales Prices

San Francisco Average Dollar per Square Foot

San Francisco Home Sales Breakdown

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Highest Median House Price Appreciation Rates by Neighborhood:

Compound Annual Appreciation Percentages, 2011 – 2017


The neighborhoods and districts circled on the map below have seen compound annual appreciation rates of 12% or more over the past 6 years. As a point of comparison, the national rate over that period was about 7%, and the CPI inflation rate about 1.5%. As illustrated in the table below the map, the highest rate in San Francisco over the period was above 18%.

If the return on cash investment was calculated for purchasing with a 20% down payment (instead of paying all cash), and adjusting for closing costs (estimated at 2% on buy-side, 7% on sell side), the compound annual rate of return on the cash investment soars: A 10% annual rate of home price appreciation would then translate into an annual compound return on cash investment of just under 40%. The use of financing in homeownership is one of the reasons why it can often be such a good investment to develop household wealth over time.


Highest San Francisco Neighborhood Appreciation

SF house compound annual appreciation rates

SF Neighborhood compound annual appreciation rates

Total 6-year appreciation rates can be calculated by dividing the 2017

median house sales price by the 2011 price.


Though median home price appreciation rates throughout the city have been incredibly high by any reasonable measure, some neighborhoods have outpaced the norm. The main reason is affordability: Less expensive homes have appreciated considerably faster than more expensive homes. Also, some of the most affordable districts were hammered by foreclosure sales after the 2008 crash, which brought their sales prices down to unnatural lows by 2011 – setting the stage for dramatic recoveries. Bayview, with the most affordable houses in SF and also worst hit by the 2008-2011 distressed property crisis, has had the highest compound annual appreciation rate since that time, a staggering 18.3%, or a 6-year total rate of 174%. Other affordable neighborhoods running across the southern border of the city – such as Excelsior, Visitacion Valley, Sunnyside, Ingleside and Oceanview – also saw extremely high annual rates of 12% to 14% for similar reasons.

The dynamic in the Inner Mission was somewhat different: Its 14.7% compound annual rate of appreciation – a total of 128% over the 6 years – was because it turned into the hottest, hippest district in the city, especially among younger high-tech workers. The gentrification which had been slowly occurring for 30 years suddenly went into overdrive to catapult prices higher.

Bernal Heights – with a 13.3% compound annual rate and 111% 6-year total – is right next to the Mission on one side and to Noe Valley on another. It was perfectly situated to take advantage of the classic overflow effect for people who wanted a similar neighborhood ambiance to Noe or Eureka Valley, but could no longer afford their much higher prices. Outer Richmond was also a standout: It has the lowest house prices in the northern third of the city. And the Sunset & Parkside district is filled with mid-price 2 and 3 bedroom houses, has a variety of attractive neighborhood commercial districts, ocean or parks on 3 sides, and easy access to highways south to the peninsula. All these factors have made it into a much sought-after location to purchase a home in recent years. The market there is insanely hot now.

The most expensive neighborhoods in the city have lower, but still very high rates of appreciation. And in dollar terms, their appreciation returns are by far the highest in the city.

CONDOS: Calculating appreciation rates for SF neighborhood condo prices is an iffier process, because so many large, new condo projects have come on market, significantly impacting inventory and sales prices, and making it much more difficult to perform apples to apples comparisons. Therefore, our calculations, above and below, are performed for the entire city instead of for separate districts. It is certainly true that, due to supply and demand issues, condos have typically appreciated at somewhat lesser rates than houses, which have become the scarce commodity in SF. There has been some variation in condo appreciation rates depending on location, supply and price segment.

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Up, Down, Up: A Longer-Term Look

at SF Home Value Changes since 2000

Bubble, Crash & Recovery

by District & Price Segment


Home value appreciation in the charts below is broken down by 4 distinct time periods: 1) 2000 to peak of bubble (2006-2008, depending on price segment); 2) peak of bubble to bottom of market (typically 2011); 3) the 1st 4 years of the recovery, 2012 to 2015; and 4) 2015 to present.

House appreciation is broken down into 4 broad price segments as exemplified by the markets in 4 city regions: The least expensive segment is represented by house sales in the broad swathe of southern neighborhoods running from Bayview through Portola, Excelsior, Crocker Amazon and Outer Mission (Realtor district 10). The mid-price segment is illustrated by sales in the Sunset & Parkside district (Realtor district 2). The central Noe, Eureka & Cole Valleys district (district 5) is used to represent the expensive segment; and the very expensive house segment is illustrated by the northern, old-prestige neighborhoods running from Sea Cliff, Lake Street & Jordan Park through Pacific & Presidio Heights, Cow Hollow and Marina to Russian, Nob & Telegraph Hills (which are the very affluent parts of 3 different Realtor districts).

These areas were used because of their quantity of sales and the relative homogeneity of values within them. For condos, appreciation rates were calculated on the entire SF condo market. The calculations below were made by averaging both median sales price and average dollar per square foot appreciation rates. Present values are based on sales occurring in Q4 2017 and Q1 2018.


2000 to Peak of Bubble,

Crash to Bottom of Market


Less expensive homes saw by far the biggest bubbles (2000 to 2006-2008) and crashes (2008-2011), mostly due to the predatory lending/ subprime financing crisis. This was a phenomenon across Bay Area markets. (Note that different price segments peaked in different years from 2006 to mid-2008.)


SF Appreciation 2000 to Top of Bubble

Bottom of Market to 2015,

2015 to Present


The first 4 years of the recovery which began in 2012 saw high home-price appreciation rates across the city. In 2015, the market shifted – there was considerable financial market volatility in late 2015 and the first half of 2016, a precipitous drop in IPO activity, and the high-tech boom cooled temporarily – and appreciation rates diverged, with less expensive homes significantly outpacing more expensive neighborhoods. One factor was that buyers were desperately searching for homes they could still afford.


SF Appreciation since 2015

Overall Dollar & Percentage Appreciation
2000 to Present


By total percentage appreciation since 2000, Sunset/Parkside ranks first. By actual dollar appreciation, the most expensive home prices increased the most, typically by well into seven figures.


SF Home Price Appreciation since 2000

San Francisco Condo Appreciation

2000 to Present, All Districts


Generally speaking, the SF condo market has not seen appreciation rates as high as for houses. Mostly, this has to do with increasing supply due to the boom in new condo construction, but it was also affected by factors in 2015-2016 already described above.


SF condo price appreciation since 2000

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Percentage of Sales over List Price

by Property Type

This chart illustrates the difference in demand by property type.

Houses have been the hottest segment in recent years.

SF Home Sales - Percentage Selling over List Price

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San Francisco New-Housing Trends

New construction, projects authorized, and affordable housing figures

based on SF Planning Department data recently released for 2017

San Francisco New Home Construction by Year

San Francisco New Housing Projects Authorized

San Francisco Affordable Housing Construction

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Additional reading for those interested: Paragon Main Reports Page

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.

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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 such as median sales prices, to some small degree.


© 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

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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

A Survey of San Francisco Bay Area Real Estate Markets & Demographics



Paragon Real Estate Group
 
Paragon Real Estate Group

Income, Employment, Education, Poverty & Home Prices

A Survey of San Francisco Bay Area
Real Estate Markets & Demographics


Which counties are most expensive or most affordable, have the highest overbidding and appreciation rates? Which are healthiest, most educated, have the highest incomes or worst poverty percentages? What cities have the biggest, most expensive homes? And where do Bay Area residents come from?

August 2017 Report


Median House Price Appreciation since 1990


Appreciation trend lines are largely similar across the Bay Area, but some counties have outperformed others. Solano is still well below its previous peak price ten years ago, and Sonoma and Napa are just now coming back up to their previous highs. However, most of the other counties have exceeded their 2006-2007 peaks, sometimes by very wide margins. As will be explored further below, proximity to the heart of the high-tech boom has been one of the major factors in recent appreciation rates. However, it is worth noting that in the past year and a half, appreciation rates in less expensive towns and neighborhoods have typically been higher than in more expensive areas, an indication of the sometimes desperate search for affordable housing – however that might be defined within the context of any given market.


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Average Dollar per Square Foot Values

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The Most Expensive Places in the Bay Area

By clicking on map, you can also access our full collection of home price
maps delineating current city home prices throughout the Bay Area.


Note: Diablo in Contra Costa with 6 sales at a median price of $2.73m, and Penngrove in Sonoma with 13 sales at a median price of $919,500, had higher prices than Alamo and Healdsburg in the period measured, but because of their very low number of sales, we highlighted the larger markets on the map above.


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Annual Home Price Appreciation Rates
since 1996 and 2011


This table below illustrates annual compound appreciation trends going back to the post-recession recovery that began around 1995, and also from the current post-2008-crash recovery which started in 2012. This is based upon someone purchasing their home all cash: If one had purchased with a 20% downpayment, then the annual compound rate of appreciation of that cash investment would be much, much higher.



There are 3 big factors behind local appreciation rates: 1) the emergence of the Bay Area in the past 20 years as an international, economic powerhouse, which generally lifted all markets, 2) how close the specific market is to the white-hot centers of the high-tech boom (SF and Silicon Valley), and, 3) how badly the county was hammered by the foreclosure crisis, since those markets whose prices fell 50% or more to unnatural lows bounced back more on a percentage basis than those counties less affected by the subprime catastrophe.

SF has had the highest compound annual rate since 1996: It is the epicenter of the Bay Area high-tech, bio-tech and fin-tech economic miracle. But Oakland soars above all other markets in appreciation since 2011, because of a combination of factors: It is the closest affordable alternative to much higher SF prices; it is a lively, multi-cultural urban area appealing to high-tech workers; and its housing prices dropped an astounding 60% after the 2008 crash, which set them up to fly upward once the heavy anchor of distressed property sales was removed.

Having complete confidence in our ability to predict what will happen in the past, we now recommend that all our clients go back in time to 1995 or 2011 and buy as many homes as possible.

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Economic & Demographic Factors


Underpinning the Bay Area real estate market and general economy are often amazing, but sometimes worrisome statistics. Below are tables and charts ranking counties, zip codes and cities by a variety of parameters. The Bay Area ranks extremely high in income, education, employment rates and general health factors, often grabbing almost all the top rankings, but it is also unhappily high in income inequality, housing unaffordability and poverty.


Bay Area City & Zip Code Income Rankings


Atherton has the highest median household income and the highest median income per worker in the state, followed by a handful of other nearby, highly affluent, Silicon Valley communities. In San Francisco, South Beach and the Presidio zip codes make the top rankings, but note that several of the most expensive neighborhoods in SF are in zip codes that mix highly affluent with less affluent areas (such as Pacific Heights and Western Addition, or Russian Hill and the Tenderloin). SF also has much higher percentages of residents who are tenants, and generally speaking, renters have lower incomes than homeowners.

In Marin County, Belvedere, Tiburon, Kentfield and Mill Valley make the lists; in Contra Costa, the Diablo Valley & Lamorinda communities of Blackhawk, Alamo, Lafayette, Orinda and Moraga rank highest; in Alameda, Piedmont is in the top 10 cities for median worker earnings.


Bay Area zip codes utterly dominate the CA rankings for higher education, taking 14 of the top 15 spots out of about 2600 zip codes. Unsurprisingly, high positions in income usually correlate with the same in education (and having UC Berkeley and Stanford in our midst was a help): Top Zip Codes for Higher Education

If you wish to explore Bay Area rankings by other criteria: Top 25 Rankings in California

Employment & Unemployment

High-tech employment in SF & San Mateo Counties illustrates
broader trends in hiring: massive growth and some recent cooling.

Unemployment rates are bumping against historic lows.

Bay Area Poverty Rates & Housing Affordability

Beneath surging affluence, significant percentages of county populations
are living in poverty. High housing costs are a big factor.

Housing affordability percentages are approaching historic lows in some counties,
a huge Bay Area political, economic and social issue. If interest rates start to go up
considerably, the picture will worsen, but so far they have remained quite low.

Link to our mortgage interest rate chart

Link to our full report on Bay Area housing affordability

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Bay Area Luxury Home Markets


Santa Clara is by far the biggest luxury home market in the Bay Area by the number of homes selling for $2m+, but then its overall market is also the largest, more than 2½ times larger than that of San Francisco. Average dollar per square foot values for luxury house sales are surprisingly similar across Santa Clara, San Mateo and San Francisco, with Marin County just a notch lower. Moving further out, one gets considerably more luxury house for the money.

Generally speaking, SF luxury condos and co-ops command the highest dollar per square foot values in the Bay Area: Think fabulous units on high floors of prestige, ultra-amenity buildings with absolutely staggering views.

Calculating luxury markets by the top 10% of sales, the thresholds for the luxury designation vary widely: For example, in Sonoma, the threshold is about $1,125,000 for houses, while in San Francisco, it is about $3m.

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Other Angles on Bay Area Market Dynamics

Bay Area Condo Markets

Overbidding

Average Days on Market

Bay Area Market Sizes

Bay Area Rents

Rents are even more sensitive to hiring trends than home prices.

Link to our apartment building market report

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Additional Demographic Snapshots


The foundation of the Bay Area economy is a richly multi-cultural society constantly infused by many of the best and brightest from around the world.

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S&P Case-Shiller Home Price Index
for the San Francisco Bay Area


Case-Shiller charts are complicated, which is why we have put them at the end of the report, but they do give perspectives on home price appreciation by price segment. The different price tiers had bubbles, crashes and recoveries of very different magnitudes, with the low-price tier having an extravagantly enormous subprime bubble and a disastrous crash, while more costly home tiers having lesser bubbles and crashes. The end result now is that all three tiers are relatively close in their current prices as compared to 2000 values, but are in very different circumstances when compared to their 2006-2007 bubble peaks. Around the Bay Area, generally speaking, San Francisco, San Mateo, Marin, Santa Clara and Diablo Valley-Lamorinda have high-price tier markets with smaller mid-price segments; Alameda, Sonoma, Napa, Solano and non-central Contra Costa have mixes of low-price and mid-price markets (though there are, of course, pockets of high-price homes as well).

All C-S data points refer to a January 2000 home price of 100. Thus a reading of 250 signifies a price 150% higher than in January 2000.

More affordable homes have been appreciating much more quickly
in the past 15 months than more expensive price segments.

Link to our full S&P Case-Shiller Index Report


All our reports, including dedicated analyses of the SF luxury home segment, and of the Marin, Sonoma and Diablo Valley-Lamorinda markets, can be found here: Market Trends & Analysis


————————————————————————–


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. All numbers in this report are to be considered approximate.


© 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

————————————————————

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.

————————————————————

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.


————————————————————

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.

————————————————————

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
 

Just Sold! A commercial condo in the heart of Noe Valley.

I was fortunate to represent my client in a recent purchase of a commercial condo right in the heart of Noe Valley. And, what a deal we got for my client! 3953 24th st. #C2, 490 sq.ft. was listed for $299k, we were able to get it down to $280k. At $571.24 a square foot, this place is a steal!

The condo has amazing light, high ceilings, a balcony and is located on the ground floor in the middle of of the 24th street  action. See the pictures below. 443354 443354_02 443354_04 443354_06 443354_07 443354_08 443354_11

My client, who seems to have an extremely good real estate karma, is a very talented and accomplished pianist. She will be opening a piano studio at the space, specializing in working with children. She should be up and running in a month or so. Highly recommend her! Check out Schumann Music Studio.

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.


————————————————————


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
 

San Francisco Real Estate Update: Interesting Autumn Market


Paragon Real Estate Group
Paragon Real Estate Group
 

San Francisco Real Estate Report

 

Heading into the Holiday Slowdown
after an Interesting Autumn Market

 

December 2015 Update, including 11 custom charts

Median home prices, over-bidding, housing affordability,
luxury home sales, the new-home construction pipeline,
and comparing the Shanghai and S&P 500 stock indices

————————————————————

Median sales prices in October and November jumped back up to levels similar to the spring peak selling season. It’s important to remember that median prices are not a perfect reflection of changes in fair market value: They often fluctuate due to seasonal inventory and buyer-profile trends, as well as issues such as an influx of new-construction listings. It is the longer-term trend that is most meaningful – however we can say with confidence that there was clearly no significant “crash” in prices this past autumn.

One indication of the heat of the market is the extent to which sales prices are bid up over asking prices. As is not untypical, the market becomes less competitive in November as it heads into the winter holidays. Still, an average sales price 6% over asking price would be considered crazy-hot in any other market in the country (though one also has to adjust for the fact that serious underpricing has become a not uncommon listing strategy in the SF market).

This chart based on S&P Case Shiller Home Price Index data illustrates the seasonality of home price appreciation in the past 4 years: surging in our feverish spring selling seasons, and then generally plateauing through the rest of the year. Note that Case-Shiller looks at home prices in a totally different way than median sales price trends, and probably reflects changes in fair market value more accurately. Case-Shiller Index numbers refer back to a January 2000 value of 100, thus the current Index reading for higher-priced Bay Area homes of 217 signifies home prices 117% above January 2000.

As we enter the winter holiday market slowdown, the next real indication of the direction of the market will come in the first quarter of 2016. Will spring 2016 repeat the overheated, high demand/ low supply frenzies of previous springs or has the market finally reached a longer term plateau or even an affordability inflection point? We shall soon know more.

Our full report is here: S&P Case-Shiller Index for SF Metro Area

In 2015 YTD, the dominant price segment for home sales in San Francisco was $1,000,000 to $1,499,000. As seen in the first chart above, the median sales prices for both condos and houses fall within this range. Note the change from just two years ago.

————————————————————

San Francisco Luxury Home Market

The high-end home market is the most seasonal segment in the city (as well as the most sensitive to sudden, large, negative movements in the financial markets). Market activity starts to plunge in November, hits its nadir in December, begins to pick up in the first quarter and then usually hits its peak in spring. Much of the center of gravity in the luxury market has been shifting in recent years from the city’s prestige northern neighborhoods to other districts of the city, such as the greater Noe Valley area and the South Beach/Yerba Buena district. This is not to say that the northern districts are not still both very expensive and considered highly desirable, and the greater Pacific Heights area still dominates the market for the most expensive houses in the city, i.e. those selling for $5m and more.

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After the semi-hysteria – already half forgotten – that erupted in late August and September regarding the Chinese stock market and its impact on the U.S. stock market and economy, and possibly the Bay Area housing market, we thought it interesting to take a look back at how it has played out so far.

————————————————————

It is widely expected that the Fed will raise interest rates in December, probably by some minimal increment, but for the time being, as of the first week of December, rates have remained below 4%.

————————————————————

In November, we issued two mini-reports, one on Bay Area housing affordability and another on San Francisco new housing construction. Below are the featured charts and links to the full articles.

Bay Area Housing Affordability & Market Corrections

San Francisco New-Housing Pipeline Update

Information regarding San Francisco neighborhood prices and trends can be found here: San Francisco Neighborhood Values

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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. Statistics are generalities and all numbers should be considered approximate. How any median or average statistic applies to a particular home is unknown without a specific comparative market analysis. Sales statistics of one month generally reflect offers negotiated 3 – 6 weeks earlier. Short-term fluctuations are much less meaningful than longer-term trends.© 2015 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

 

October 2015 San Francisco Real Estate Market Report.



Paragon Real Estate Group
 
Paragon Real Estate Group

The San Francisco Real Estate Market

Home-Buying vs. Gold & Apple Stock – as an Investment,
Median Home Price Appreciation & Neighborhood Values,
the City’s Most Expensive Condo Buildings

October 2015 Report, including 11 Custom Charts

————————————————————

The autumn selling season started with a large surge of new listings right after Labor Day, but it will be another month or so before preliminary statistical data is available on home sales negotiated since then. However, it is clear that the recent volatility in national and international financial markets has not so far caused a severe adjustment to local home prices. While we wait for early autumn sales to close in quantity, we’ll review the market from a variety of angles.

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Short-Term & Long-Term

San Francisco Home Price Appreciation

2011 – 2015, by Quarter


It’s not unusual for median prices to drop in the 3rd quarter, which happened this year as well. This has less to do with fair market value, than with the fact that the market for higher priced homes slows down much more than that of the general market in summer.

1994 – 2015, by Year

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Return on Cash Investment

Comparing Buying a Home in San Francisco
to Inflation, Gold, the S&P 500 & Apple Stock


For the purposes of this analysis, we’ve broken home ownership into 2 aspects, the first being ongoing housing costs – mortgage interest, home insurance, property taxes, maintenance – which after tax deductions could be compared to the cost of renting a similar home. The second aspect, illustrated in the chart above, is the cash investment side of buying a home and the compound annual return on that investment, after closing costs and loan principal repayment are deducted, if one had purchased a median SF house in 1994.

For the San Francisco Median House calculation, we used the 1994 median price ($265,000), with a 20% downpayment ($53,000) and paying 1.5% in buy-side closing costs ($3975) for a total cash investment of $56,975. Net proceeds were calculated using the 2015 YTD median sales price ($1,250,000), deducting 6% in sell-side closing costs ($75,000) and the original 80% mortgage balance ($212,000), which equals $963,000. This equals an annual compound return on investment of 14.4% over the 21-year period.

All of us should have put every penny we had into Apple stock in 1994, but barring that, purchasing a home in San Francisco would have been an excellent alternative – particularly if you’d bought in the Mission. Three factors not included in the above analysis further increase the financial benefits of home purchase over the other investments graphed: 1) the $250,000/$500,000 capital gains tax exclusion on the sale of a primary residence (potentially saving up to $75,000 in taxes), 2) the “forced savings” effect of gradually paying off one’s mortgage (if one resists refinancing out growing home equity), which has a substantial wealth-building effect, and 3) over time, the ongoing cost of housing with a fixed rate loan, strategically refinanced when rates go significantly lower, will usually fall well below rental costs that continue to rise with inflation.

With financial assets subject to market cycles, changing the buy or sell dates in this analysis can dramatically affect the return. We picked 1994, because of the availability of MLS median price data going back to then.

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Median Sales Prices by Neighborhood

2-Bedroom Condos in San Francisco

3-Bedroom Houses in San Francisco

————————————————————

Market Dynamics

Sales Price to List Price Percentages
& Average Days on Market


These two charts above illustrate both how competitive the market has been – the average SF home selling without a price reduction sold very quickly for 13.5% over asking price in the 3rd quarter – and the significant difference between homes that get an immediate market response and those that have to go through one or more price reductions before selling.


Months Supply of Inventory

Seasonality, Luxury and Non-Luxury Homes


The lower the Months Supply of Inventory, the stronger the buyer demand as compared to the supply of homes available to purchase. This chart illustrates the seasonality of the real estate market – typically strongest in spring (especially) and autumn, and slowing down during the summer and especially the winter holidays. It also shows that the lower-priced home segment is generally hotter than the higher priced – as shown by the lower MSI readings – and finally, how much more the luxury home segment is affected by seasonality. The dramatic slowdown in the highest-priced segment during summer and winter is one of the big reasons why median home prices usually drop during those seasons.

————————————————————

Condo Average-Dollar-per-Square-Foot Values
by Era of Construction

The Most Expensive Condo Buildings in San Francisco


This doesn’t include brand new luxury condo developments – some of which are selling at very high prices – nor many very expensive and very prestigious condo and co-op buildings which simply have too few sales for meaningful statistical analysis.


————————————————————

3rd Quarter Market Snapshot

————————————————————

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. How any median or average statistic applies to a particular home is unknown without a specific comparative market analysis. We are not qualified to render legal or tax advice of any kind. Sales statistics of one month generally reflect offers negotiated 4 – 6 weeks earlier.


© 2015 Paragon Real Estate Group
 
No one knows San Francisco real estate better than Paragon.
Paragon Real Estate Group
(415)738-7000 | (415)565-0500 | 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
 

Autumn Home Selling Season and Market Volatility

Autumn Home Selling Season Begins
against Backdrop of Market Volatility

September 2015 Report for San Francisco
Including 12 custom charts

————————————————————

Real estate markets are essentially determined by the balance – or imbalance, as is often the case – between buyer demand and seller supply of homes to purchase. Underlying that dynamic are economic, political and demographic factors – some local, some not – such as population growth, employment, new home construction, high-tech booms, consumer confidence, interest rates, affordability, IPOs, stock market movements, shenanigans in Congress, and SF ballot proposals, to name a few. Even environmental factors, such as droughts and earthquakes, can jump in and affect the market. These factors are all jostling for effect, ebbing and flowing, sometimes appearing out of nowhere to shake things up, or suddenly shrinking and quickly forgotten.

We are neither blithe optimists, for whom boom times will never end, nor inveterate pessimists, who see bubbles and crashes behind every shrub. For what it’s worth, based on our survey of current economic fundamentals, we don’t expect an imminent crash in the U.S. stock market or in Bay Area real estate values. (This short New Yorker article is excellent on recent market volatility: Drop in the Bucket) However, economies and markets naturally experience fluctuations – short-term ups and downs, times of slowing and flattening – and it’s certainly possible that the balance between buyers and sellers might shift, that the frenzy in our market may subside, and that home prices may plateau or even tick down to some degree. On the other hand, due to the scale of our high-tech boom (another area of exuberantly conflicting predictions) and our deeply inadequate supply of housing, demand may continue to exceed supply, and the pressures of recent years may continue until new-home construction makes a more significant contribution to inventory.

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New Listings Coming on Market


September is usually the single month with the greatest number of new listings, and those that hit the market in the 4 to 5 weeks after Labor Day feed the vast majority of autumn sales activity until the market goes into hibernation mode in mid-late November. Preliminary indications are that this may be a very big new-listing month, even for a September. If this is true, and especially if it marks the beginning of a trend of more listings coming on market, that could cool the ferociously competitive, low-inventory, “seller’s market” of recent years. If buyers are more hesitant due to recent financial-market volatility, that would also cool the market. But, in our opinion, neither factor is likely to flip us into a crashing or recessionary market.

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Percentage of Listings Accepting Offers


This chart illustrates the surge in buyer demand from the end of the last recession through the 2012 – 2015 recovery. Having the percentage of listings accepting offers over 50% and sometimes well over 60% in a given quarter – extremely high percentages historically – has applied consistent upward pressure on home prices. Demand usually peaks during the spring and autumn selling seasons, i.e. in the 2nd and 4th quarters.

Additional market indicator analyses can be found here: SF Market Overview Analytics

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S&P Case-Shiller Home Price Index


An updated Case-Shiller Index chart for the 5-county San Francisco Metro Area, outlining the real estate market cycles going back to the 1980’s. (The June Index was released on August 25th.) It is noteworthy that over the past several decades, we’ve never seen a crash or significant “correction” in our real estate market that was not in conjunction with a major, sustained, national economic event. This chart also suggests that SF buyers who purchase homes 1) they can afford in the first place, 2) using fixed-rate mortgages, and 3) for longer-term ownership, usually come out all right, and often fabulously well, despite periodic market declines.


“Renting can make sense as a lifestyle choice or because of income constraints. 
As a means to building wealth, however, there is no practical substitute for homeownership.” 


Homeownership & Wealth Creation, 11/30/14, NYT op-ed article


The Case-Shiller chart above reflects sales in the upper third of Bay Area home sales (i.e. “high-price-tier”) – which applies best to SF homes. Even in the high tier, the city has generally outperformed the Bay Area in home price appreciation. The numbers on the graph refer to a January 2000 price of 100; thus, the number 217 signifies a price 117% above then. It is interesting to note, that as of the June Index report, all three Bay Area home-price tiers – low, mid and high – have readings of 117% appreciation since 2000, which may be a sign of an equilibrium being reached in the market. Our full report: Case-Shiller for SF Bay Area

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Bay Area Housing Affordability


The California Association of Realtors recently released its Housing Affordability Index (HAI) for the 2nd quarter of 2015. All Bay Area counties saw declines in their affordability index reading – which measures the percentage of households that can afford to buy the median priced single family dwelling (house) – and San Francisco is now only 2 percentage points above its all-time low of 8%, last reached in Q3 2007.

VERY LOW AFFORDABILITY AT A TIME OF VERY LOW INTEREST RATES IS CERTAINLY A CONCERN, BUT HOUSING AFFORDABILITY IS A COMPLEX SUBJECT AND THERE ARE OTHER FACTORS AT PLAY IN SAN FRANCISCO. OUR FULL REPORT, which also charts median home prices, rents, interest rates, inflation-adjusted housing costs and household income by county is here: Bay Area Housing Affordability

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Where to Buy at What Price Point


We’ve recently updated our report on where one is most likely to find a house or condo in one’s price range. The chart above is 1 of 7 delineating San Francisco neighborhoods with homes from under $1 million to over $5 million: San Francisco Neighborhood Affordability

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Median Home Prices and Economic Indicators


A glance at recent movements in San Francisco’s median home sales price, as well as at a few longer-term local and national economic indicators.


Monthly fluctuations – often seasonally related – have been common since

2012, but home prices have consistently climbed higher over the longer term.

National and San Francisco unemployment trends: Very positive.

Over 100,000 new SF jobs – many of them very well paid – have been created since 2009.

(The housing supply has increased by less than 15,000 units.)

Household debt to GDP and mortgage debt service ratios – huge issues

 in the 2007-2008 crash – have significantly declined since then.

Sustained movements in the S&P 500 Index largely correlate to SF home-

price trends. Short-term financial-market fluctuations typically have no effect.

Price to Earnings (PE) Ratios of the S&P 500 Index climbed a bit high

 in mid-2015, but not egregiously so compared to historical averages.

Our goal is not to convince you of a certain position, but to provide you with what we believe to be reliable data, so that you can make your own informed decisions.

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. Sales statistics of one month generally reflect offers negotiated 4 – 6 weeks earlier.


© 2015 Paragon Real Estate Group