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15 May San Francisco Neighborhood Home Prices Continue to Break Records

 Hello Everyone!

I've been back from my sabbatical for a full 4 weeks and I think I am just now really getting used to the pace of life here. It's all good, but it has taken time. I have been able to get some very good habits into place that are really making a difference in how I feel each day and for that I'm very proud and thankful. Now I really am ready to sell some homes!! I wish I could say that this report was encouraging for buyers -it's not, but it is interesting and it helps to be informed. I will say that in past years, many buyers (and sellers) checked out of the market to go on vacation in the summer and often there are some deals out there to be had. If you hang in there and keep working, a good agent will find you something. Just remember it takes a motivated buyer and a darn good agent to get you into contract! 87% of my buyers are getting into contract within the first two offers and in an average time of 6 weeks, even in a tough market. But if you're not doing your part, the agent can't MAKE it happen. For those of you that are my luxury clients, (5 million and above) the majority of the summer months' inventory will most likely be sold OFF market, so let's stay in touch if you want to buy something. For those of you that are looking to sell, let's talk! We desperately need inventory and I can help you prepare your home in a way that will make you a lot of money. I'm still doing double takes on the 33% appreciation that these stats are showing for Glen Park, this spring alone. Something has to be off there! If you need any help with anything, give me a ring! I love to help! All my best, Ruth Ps- Stay tuned for a new listing with great views coming soon near the Glen Park border ;-)  
San Francisco Neighborhood Home Prices Continue to Break Records
Median Sales Prices; Luxury Home Sales; Housing Affordability Index; Home Values by Neighborhood; Investment Real Estate; New Development
May 2015, Paragon Real Estate Group
Adjusting your screen-view to zoom 125% or 150% will make the charts easier to read.
Median House & Condo Sales Prices
As the 2015 market has accelerated, median home sales prices have been hitting new highs in neighborhoods across San Francisco. Link to San Francisco Neighborhood Map
------------------------------------------------------------Home Price Appreciation
      The chart above graphs monthly house and condo median price appreciation in the city since the market recovery began in early 2012. The 2 charts below are snapshots of changes in median sales prices in a sampling of 6 different SF neighborhoods from early 2013 to early 2015, one for houses and one for 2-bedroom condos. (The 2015 prices in these charts below may vary from those earlier in this report, because slightly different parameters were used.)
Median Price Changes, 2013 – 2015

Bayview, Bernal Heights & Glen Park Houses

Hayes Valley, Inner Mission, South Beach 2-Bedroom Condos


Luxury Home Sales

High-end home sales continue to hit new highs in San Francisco: Last spring was the hottest on record; spring 2015 is blowing through last year's numbers. The chart above is from our updated luxury report, which can be found here: SF Luxury Home Market Report



Housing Affordability Index

This CAR Housing Affordability Index (HAI) is calculated using median sales price, household income, interest rates and other financial criteria to determine the percentage of local households which can afford to buy a median priced home. At 12% to 14%, San Francisco and San Mateo have very low affordability readings in comparison to other places – the Index reading is now 23% for the general Bay Area, 34% for CA (house market), and 61% for the U.S.. Affordability calculations are a complex and nuanced issue, especially in San Francisco*. However, one can’t argue with the general trend lines. When the market heats up and prices rise, affordability goes down; when the market goes into a recession (or crashes), affordability bounces up. If affordability declines beyond a certain point, it may become an indicator of an overvalued real estate market. As of Q1 2015, SF’s Index reading is still a little above the historic lows it hit in 2001 and 2007, but please see the footnote for special SF factors. Changes in mortgage interest rates, in particular, can quickly and significantly affect affordability. Currently, as of May 2015, interest rates are a little above the historic low hit in 2013, but still far below the rates in 2006 - 2008, when they averaged in the 6% to 6.5% range. "Experts" have had a very difficult time correctly predicting interest rate movements in recent years.
------------------------------------------------------------ New Listings & Buyer Demand The above chart illustrates the seasonal ebb and flow of the market as new listings come on the market and buyers react by putting properties under contract. Spring is typically the biggest selling season of the year, followed by a large spike in autumn. Market activity usually slows in summer and plunges during the winter holiday season.
------------------------------------------------------------ Multi-Unit & Investment Real Estate The two charts below are from our recently issued reports on the multi-unit building market, the first on properties of 2 to 4 units, and the second on larger apartment buildings of 5+ units. The second chart illustrates the parallels between rents and home prices in counties around the Bay Area. Regarding affordability: If someone’s choice is between paying a very high rent or buying an expensive home at today’s low interest rates and with all the tax advantages of homeownership, buying is typically the much better option financially over the longer term. But the devil is always in the details.

The full reports can be found here:

SF 2-4 Unit Building Market

Bay Area 5+ Unit Apartment Market



Housing Inventory & New Home Construction

The first chart below and the map following it depict the current boom in new-home construction and the districts where new development is clustered. The second chart illustrates the growth of the condominium segment of the city’s housing inventory via both construction and conversion.(A lot more is coming.) The new-home development situation in San Francisco is fascinating – and a fierce political issue.

Our full report on the topic is here: Paragon Housing & Construction Report

New home development often goes through gigantic boom and bust cycles. What complicates the issue for SF developers is that from start to finish, from creating plans for city review to completing construction, the process can easily take 4 to 6 years. Right now, both residential and commercial developers are making enormous bets on a long, sustained, up cycle in the SF economy and real estate market.
New residential construction is heavily concentrated around the Market Street corridor, the Van Ness corridor just north of Market, and in the large quadrant of the city that lies to the southeast of Market. This is due to the availability of large, previously commercial/industrial-use lots that can be changed to residential use, and the zoning that allows for large – sometimes very large – projects to be constructed in these areas.
Though only about 40 years old, the condo sales market in the city is now larger than the house market. And 99% of all new construction being built for sale consists of new and usually high-end condos.
* A few "peculiarities" that may skew the housing affordability calculation in San Francisco are: 1) the city has an abnormally high percentage of single-resident households, 38%, which affects median household income figures, 2) unlike most counties, the majority of SF residents are tenants not owners, and the greater part of those are under rent control, and 3) the SF market is currently being fueled in no small part by large numbers of people moving into the city for very well-paid jobs and by the big surge in new-wealth creation occurring in the Bay Area.Short-term median prices may fluctuate due to a number of different factors, including seasonality, inventory available to purchase, interest rates and significant changes in the luxury and new-home segments of the market.Longer-term trends are always more meaningful than short-term ups and downs.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 how they apply to any specific property is unknown without a tailored comparative market analysis. Sales statistics of one month generally reflect offersnegotiated 4 – 6 weeks earlier, i.e. they are a month or so behind what’s actually occurring in the market as buyers and sellers make deals. All numbers should be considered approximate.Please contact us with any questions or concerns.
© 2015 Paragon Real Estate Group
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15 Apr The Story Behind Low Inventory

Hello Friends, I have just returned from a wonderful sabbatical with my family and as of TODAY, I'm back at it and ready for action! The trip was a wonderful opportunity to put my family first for a while and focus on a bit of a reset. I enjoyed lots of snuggle and reflection time and some challenges too, but it was all worth while. I missed being in the middle of all of the action surrounding the sizzling spring market in SF, but have no doubt that I will be able to pick right back up where I left off. Below is my latest newsletter and as usual is packed full of amazing info and stats. Let me know if you have any questions about the current market or if you know anyone looking to buy or sell, I'd love an introduction. All my best, Ruth
The San Francisco Real Estate Market
Median Price & Dollar-per-Square-Foot Appreciation; Prices & Price Reductions; Comparing Bay Area County Markets; the Story behind Low Inventory
1st Quarter Update, April 2015, Paragon Real Estate Group
------------------------------------------------------------San Francisco Home Value Appreciation
  The chart above illustrates the continued march upward of median home sales prices in San Francisco. However, if we separate out house from condo sales, an interesting trend appears: The median house sales price basically stayed flat from Q4 2014 to Q1 2015, but the median condo sales price jumped from $995,000 to $1,080,000. Drilling down further, the median sales price for SF 3-bedroom houses in Q1 was $1,200,000; for 2-bedroom condos, it was $1,199,000, i.e. effectively the same. Much of this is due to the fact that the greatest number of houses in the city exists in the less expensive western and southern neighborhoods, while 1) condos are mostly found in more expensive areas, and 2) new home construction in San Francisco for the last 10 years has been dominated by very high-end condo projects. That trend is only accelerating in the current building boom.This is illustrated below in a comparison of house and condo average dollar-per-square-foot values in the first quarters of 2008 - 2015. For the first time, overall SF condo sales just hit an astounding average of $1000 per square foot. Much of this increase is being fueled by recently built condos selling for far higher figures.
------------------------------------------------------------ More Affordable Neighborhoods Take Off When the SF market recovery began in 2012, the more affluent neighborhoods led the way in rapid home-price appreciation, but in 2014, the more affordable neighborhoods took the lead. Of course, there are few places outside San Francisco where houses of $1.2 million would constitute the "affordable" segment of the market, but as median house prices in the greater Noe, Eureka & Cole Valleys area accelerated over $2 million (and over $4 million in the Pacific Heights-Marina district), buyers started to fan out, desperately looking for less expensive options. That sparked increased competition and the chart below illustrates the resulting year-over-year appreciation rates in
some of those neighborhoods. This is not to suggest that the higher-end markets in the city are languishing. That is not the case - it's crazy there too - but generally speaking, recent appreciation rates have not been as high as in the less costly districts. Information on home prices around the city can be found here: SF Neighborhood Values.
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25 Mar Taking the Temperatures of Bay Area Real Estate Markets

Taking the Temperatures of Bay Area Real Estate Markets
Across the Bay Area, how many listings sell without price reductions, how quickly do they sell, and at what percentage of asking price? What role does employment play in the real estate market? Which are the biggest and smallest county markets, and how do prices and rents compare?
March-April 2015 report by Paragon Real Estate Group Including 8 custom charts
The white-hot – some would say overheated – core of the Bay Area homes market is San Francisco and Silicon Valley, and the heat radiates out from there, diminishing as one gets further away. This core is defined by the incredible strength of the economy, much of it supercharged by the high-tech boom. However, there are also cultural and lifestyle factors, as well as what might be called the creativity/innovation-cluster effect, all of which have almost gravitational attractions. Indeed, San Francisco is almost a perfect example of the “super city” concept, drawing in people from all over the country and the world like a giant magnet.Because it’s close and a (relatively) easy commute to these areas, and so affordable by comparison, Alameda County (which includes Oakland) is also crazy hot. Marin has a strong market but is less feverish, firstly because getting to Silicon Valley isn’t as easy – one has to fight one’s way across the whole city to get to Highways 101 and 280 south – secondly, because it’s a very wealthy and expensive county, so it doesn’t offer quite the attraction of big home price discounts, and perhaps thirdly, because Marin has the highest median age in the Bay Area (45 years), and much of the high-tech employment boom is characterized by (pre-family forming) youth who prefer a more urban environment. As one gets further north, east and south of the inner core, the markets become less overheated: It’s not that these markets are weak – in fact, some are quite hot and they’ve all been strengthening for the last 3 years. It’s simply that they’re not characterized by a feeding frenzy of almost overwhelming demand meeting limited inventory. Except for sellers eager to maximize their homes’ sales prices, that’s not necessarily a bad thing.
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12 Mar March: Another Feverish Spring Market?

Hi Everyone! It appears that we are going to have our fourth spring with A LOT of appreciation! It will be tough for buyers, but not impossible if the have a great realtor. Inventory is very low right now, but my team will be bringing on a great home in Noe this weekend. It will be a great opportunity for someone looking to put their own special finger print on a large single family home. Stay tuned for more exciting info on that one! I hope everyone is enjoying the spring. Let me know if there is anything I can do to help you or anyone you know that may be looking to buy or sell a home. All my best, Ruth
San Francisco Real Estate: Here We Go Again? Preliminary Indications Signal Another Feverish Spring Market March 2015 Report, Paragon Real Estate Group Including 10 custom charts
Preliminary statistics and, even more so, indications on the ground in the current hurly burly of deal-making are sending strong signals of another very competitive real estate market in San Francisco as we approach spring. If it continues to develop as it's looking right now, this would make the 4th intense spring season since the market recovery began in early 2012.Once again, buyer demand has surged early in the new year without a corresponding increase in listing inventory: High demand meets low supply generates competitive bidding - sometimes fiercely so - and upward pressure on home prices. This doesn't mean every listing is selling over asking price or even selling at all - even in a red hot market, 20% - 30% of homes are price reduced before selling or withdrawn from the market without a sale taking place (usually due to overpricing). There are also hotter and cooler pockets within the market: Right now, more affordable homes - for example, condos under $1 million - appear to be in particularly high demand.Sales volume in January and February was down 20% year over year, reflecting a market that pretty much shut down in the last two weeks in December, and then started the year with extremely low inventory.
Overbidding List Prices
This chart above illustrates seasonal trends in competitive bidding, which underlies the phenomenon of homes selling for over asking price. For the last few years, the average percentage of sales price to list price has been peaking in spring. But already in February, prices averaged a whopping 8% above asking - very few other markets in the country are seeing anything similar. Drilling down by property type, SF house sales in February averaged 12% over asking, condos averaged 7% over, and 2-4 unit buildings 2%. Houses are becoming a smaller and smaller percentage of city home sales (since virtually no new ones are being built), which has generally made them the most competitive market segment. In recent years, the percentage over asking has hit its highest point in May, reflecting offers negotiated in late March, April and early May.
------------------------------------------------------------ Bay Area Median House Prices This map gives a very general idea of comparative home values around the Bay Area. Remember that median prices will often disguise enormous variety in the underlying individual home sales. We've also updated our SF neighborhood map for house and condo prices, which can be found online here: San Francisco Median Home Price Map
------------------------------------------------------------   Inventory
Seasonality in the Bay Area often has more to do with winter and summer holidays than the actual weather since, unlike back east, January and February can seem more like spring here. New listings and overall inventory bottom out in December, and then slowly rise in the new year. What is super-charging the market is that buyers woke up after the holidays and jumped back in the market much earlier than sellers have put homes up for sale in quantity. For the past 3 years, this unbalanced dynamic between the high pressure of buyer demand pushing against an insufficient supply of listings continued through spring, causing dramatic home-price increases, until the market slowed during the summer. We shall soon see if prices can jump higher again in coming months.
------------------------------------------------------------ Days on Market before Acceptance of Offer Months Supply of Inventory
The greater the demand, the faster listings go into contract (i.e. accept offers), and the lower the average days on market (DOM) and months supply of inventory (MSI). Both these statistics are currently in deep "seller's market" territory. Of course, this could change dramatically if we get a sudden tsunami of new listings or if a large, negative economic event happens, but right now, we don't have any reason to expect either to occur in the next few months. As points of comparison, the national average days-on-market is more than twice that of San Francisco's (approximately 69 days vs. 30), and the national MSI figure is almost 3 times higher than the city's (approximately 4.7 months of inventory vs. 1.6). Many new listings in San Francisco are going into contract within 7 to 14 days of coming on market, as eager buyers swarm over them.
------------------------------------------------------------ Renting vs. Buying in San Francisco
Someone moving to or within San Francisco basically has 2 choices: Renting at market rate or buying at market rate. And rents have gone up so much locally that after accounting for multiple tax benefits, low interest rates, principal loan-balance pay-down (which adds to home equity) and estimated long-term appreciation, buying often looks like the financially attractive course. Above is one chart of a much more detailed analysis comparing the cost of renting a 2-bedroom San Francisco apartment at the current median asking rent, with the monthly cost of buying an SF home at the current median sales price after adjusting for tax deductions and principal pay-down. As seen above, the net monthly cost of buying can be less renting. There are many personal and monetary issues that pertain to this decision and our analysis is based on a number of financial assumptions - interest, inflation, appreciation and tax rates; downpayment amount; maintenance and insurance costs - that you may not agree with or might not apply to you. You can review our full analysis and also perform your owncalculations here: Renting vs. Buying in San Francisco
Selected U.S. City Median Rents Chart courtesy of California Association of Realtors
------------------------------------------------------------ Different Markets, Bubbles, Crashes & Recoveries* The real estate market is often spoken about as if it was a single monolithic entity performing in a consistent way - but nothing could be further from the truth. Markets vary enormously between states, cities, neighborhoods, property types and price segments. The S&P Case-Shiller Index looks at the Bay Area market* by breaking all house sales into 3 price segments - low, mid and high price tiers - each containing one third of the total number of sales. The exact price range of each tier changes as the market appreciates or depreciates, or more sales occur in one price range than another: Right now, the "high-price tier" starts at $872,000. In February of 2012, the high tier started at a threshold of $537,000. Breaking down the market by price segment is a vast over-simplification - there are many other factors at play - but generally speaking, the lower the price range, the more the housing segment was impacted by subprime/ predatory lending in 2003 - 2006. In turn, that caused the larger price bubble, and then the bigger crash as the foreclosure/ distressed-property crisis took hold. Most Bay Area counties are dominated by homes in 2 price tiers, low and mid, or mid and high, but there are pockets of homes in all tiers within most counties. The numbers in the 3 charts below all relate to a January 2000 value designated as 100. Thus a reading of 199 indicates a home price 99% above that of January 2000.
Bay Area Low-Price-Tier Houses - Currently under $542,000
The low-price third of sales was massively impacted by subprime lending - people buying homes they couldn't actually afford. It experienced an insane appreciation rate of 170% from 2000 to 2006, creating an enormous bubble. It then crashed by a catastrophic 60% due to the distressed-home phenomenon. As distressed sales dwindled, the recovery since 2012 has been spectacular, up 81%, but prices are still well below peak values and may not re-attain them for years. (If prices go down 60%, they must go back up 148% to get back to where they started.) Many homes in Alameda, Contra Costa, Napa, Sonoma and Solano* counties fall into this market segment. Interestingly, this price segment was not impacted by the popping of the dot-com bubble, perhaps because these homeowners were less likely to be speculating in the technology stock market.
Bay Area Mid-Price Tier Houses - Currently $542,000 to $872,000 The mid-price segment was less hammered by subprime, but still significantly impacted. Its appreciation rate was 119% from 2000 to 2006 and its market then crashed about 42% before starting its recovery in 2012. This segment is now up 55% from the bottom and close to its 2006 peak value. Many homes in northern Marin, the southern border neighborhoods of San Francisco, northern San Mateo and various areas of the other counties fall into this price segment.
Bay Area High-Price Tier Houses - Currently over $872,000 Most of the houses in San Francisco, San Mateo and southern Marin, as well as affluent areas in other counties, fall into the high-price third of Bay Area sales, which was not deeply affected by subprime lending and foreclosure sales. Though its bubble and crash seemed dramatic enough to those experiencing them, they were much smaller: It appreciated 84% from 2000 to 2006, including a hiccup drop in 2001 after the popping of the dot-com bubble, and then fell about 25% (compared to 60% for the low-price tier). Its strong recovery since 2012, up about 44%, has now put this segment approximately 8%above its previous peak value in 2006.
Many neighborhoods in San Francisco, Marin and San Mateo would easily qualify for an "ultra-high" price segment, and it remains generally true that the higher the price, the smaller the crash. For example, most of the more affluent neighborhoods in the city peaked in value in 2007 or early 2008, then dropped 15% to 20% after the 2008 financial-markets crash. Due to the high-tech boom, many areas of San Francisco and San Mateo have significantly outperformed their price-tier in recent years. Though the price tiers had radically different bubbles, crashes and recoveries, all 3 are now almost exactly the same in relation to the year 2000, showing appreciation of 97% to 99% over the past 15 years. This suggests equilibrium is once again being achieved between them. * Technically the Case-Shiller San Francisco Metropolitan Statistical Area is comprised of San Francisco, Marin, San Mateo, Alameda and Contra Costa counties, but we believe its general trends apply to other Bay Area counties as well.
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