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March 4, 2013October 22, 2016

The San Francisco Metro Area Apartment Building Market

The San Francisco Metro Area Apartment Building Market

The Reis Reports Update Provided by the Paragon Real Estate Group
for the Metro Area of San Francisco, Marin & San Mateo Counties.

MARKET OVERVIEW: The economy of the West Bay area of metro San Francisco (aka the San Francisco Metropolitan Division) had one of the most dynamic economies in the country in 2012, and is attracting more people from across the globe than its housing market can accommodate. “Having left the heavy-lifting to technology companies until early this year, San Francisco’s non-tech employers are playing a growing role in the city’s labor recovery,” Bloomberg News reported.

The dollar value of qualifying single-property apartment sales in San Francisco in 2012 was $879.2 million in 176 deals according to Reis Transaction Analytics. For the fourth quarter of 2012 Reis reports 57 deals for $253.3 million at a mean price of $230,512 per unit. A shortage of properties for sale is holding back deal volume, as demand is enormous.

The 136,650-unit market-rate investment grade San Francisco apartment market features low and falling vacancies and high and rapidly rising rents. “The San Francisco apartment market is exceptionally active,” according to Western Real Estate Business. “It features extremely low vacancies, rapidly rising rents, and tremendous demand for a very limited inventory of assets.”

OCCUPANCY: The fourth quarter 2012 vacancy rate is just 3.2% according to Reis. The rate is already lower than the 3.6% in 2008 (the low of the previous cycle), but above the 1.2% rate recorded for 2000 at the height of the dotcom boom.

RENTS

“San Francisco leads the region with an average rent of $2,741 per month,” according to our source. “This number has increased by 5.8% over the past year and 22.4% over the last 24 months. San Mateo County follows with a current average asking rate of $2,128 (up 11.6% in the past 12 months and 26.2% over the past two years).”

“Asking rents continue to soar, despite rent control laws in San Francisco,” according to Western Real Estate Business. While perhaps suppressing overall rents, of course, rent control increases the rent of the market-rate units tracked by Reis by locking up apartments and narrowing the housing stock available to meet new demand. Reis predicts another year of strong rent gains in 2013, followed by moderating but still solid gains thereafter. Reis predicts rent gains will be in the vicinity of 5% in 2013.

SUPPLY AND DEMAND: The broader Bay Area is on the brink of a new supply boom, according to Cassidy Turley. “There were 5,300 new multifamily units delivered in 2012 and we are currently tracking another 19,000 units in the development pipeline. San Francisco and Santa Clara Counties are the epicenter of this growth, though we are also seeing development levels quickly rising in the East Bay.”

Whatever level of new supply is added, and many of the huge-development units referenced above could be 10 years or more away from completion, Reis predicts it will be quickly snapped up. With modest deviations, net absorption is expected to match up with new availability through 2017, keeping the vacancy rate very low.

SELECTED SUBMARKET SNAPSHOTS

The 15,771-unit Civic Center/Downtown submarket has a fourth quarter 2012 vacancy rate of 3.7% and an average asking rent of $1,596 per month. The Civic Center/Downtown submarket led the rest in units sold in 2012 at 1,065, and dollar value of sales at $148 million.

In the 8,084-unit Marina/Pacific Heights submarket, the fourth quarter vacancy rate is reported by Reis at 2.1%, the lowest in San Francisco proper, with an average asking rent at $2,348 per month. Among submarkets with substantial sales volumes, Marina/Pacific Heights leads in price per unit at $378,532.

The 15,692-unit South of Market (SoMa) submarket has a vacancy rate of 4.3%, highest among the submarkets (though hardly high), and an average asking rent of $2,485 per month, the second highest market-wide. Out of 544 condominium units completed in the West Bay market in 2012, 473 were in SoMa.

The 8,381-unit North Marin submarket has a vacancy rate of just 1.6%, and an average asking rent of $1,601 per month according to Reis.

For the 10,639-unit South San Mateo submarket, Reis reports a vacancy rate of 1.9%, second lowest among the submarkets, and an average asking rent of $1,740 per month. This submarket is near booming Silicon Valley.

POLITICAL: “San Francisco could soon be home to some of the tiniest apartments in the country: studios for up to two people that include a bathroom, kitchen, and a living area measuring 10 feet by 15 feet,” according to the Associated Press. “The Board of Supervisors approved legislation allowing construction of up to 375 micro units measuring a minimum of 220-square feet.

“Back from the graveyard of dead 2010 ballot proposals is a plan that would compel owners of ‘soft-story’ buildings to retrofit them for earthquake safety by 2020,” Curbed SF reported. “San Francisco’s Board of Supes will revisit the issue, which would apparently apply only to wood-frame buildings built before 1978, with at least three stories.

February 13, 2013July 1, 2013

Paragon’s Noe Valley/Castro/Cole Valley Market Update

San Francisco Residential Market Trends

Realtor District 5: Noe Valley/ Castro/ Cole Valley

A market overview for Noe Valley, Eureka Valley (including the Castro), Dolores Heights,
Cole Valley, Mission Dolores, Haight Ashbury, Ashbury Heights, Clarendon Heights,
Parnassus Heights, Corona Heights, Glen Park, Twin Peaks & the Duboce Triangle

Below are a variety of charts detailing market conditions and trends in the neighborhoods of San Francisco’s central Realtor District 5. District 5 is one of the more homogeneous districts in San Francisco in terms of property values, but still any analysis of an area with so many properties of different type, location, condition and quality can only be a very general overview. Changes in general statistics do not constitute exact measures of changes in values: what’s important are the trends.

District 5 real estate soared in value between 1996 and 2008 and was one of the last districts to peak in value before the market meltdown in September 2008. Values then fell 15% to 20% very quickly, stabilized in 2009 and 2010 and finally started to turn around in 2011. In 2012, the competition between buyers became ferocious for a very low inventory of homes for sale, with many listings selling very quickly in multiple-offer bidding situations. This is still the case as 2013 begins. Due to this dynamic, values here have been rapidly climbing.
Since opening our doors in 2004, Paragon has represented buyers and sellers in over 1500
transactions totaling $1.7 billion in sales in District 5, making us 1 of the top 2 brokers in
these neighborhoods we know and love so well.

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Statistics can be affected by many factors besides changes in value, including seasonality, inventory supply, buyer trends, a few very large sales, the quality of the data reported, financing conditions and distressed sales.

MEDIAN SALES PRICE is that price at which half the sales occur for more and half for less. It can be, and often is, affected by other factors besides changes in market values, such as short-term or seasonal changes in inventory or buying trends. Though often quoted in the media as such, the median sales price is NOT like the price for a share of stock, i.e. a definitive reflection of value and changes in value, and monthly fluctuations are generally meaningless. If market values are truly changing, the median price will consistently rise or sink over a longer term than just 2 or 3 months, and also be supported by other supply and demand statistical trends.

AVERAGE SALES PRICE is calculated by adding up all the sales prices and dividing by the number of sales. It is different from median sales price, but like medians, averages can be affected by other factors besides changes in value. For example, averages may be distorted by a few sales that are abnormally high or low, especially when the number of sales is low.

DAYS ON MARKET (DOM) are the number of days between a listing going on market and accepting an offer. The lower the average days on market figure, typically the stronger the buyer demand and the hotter the market.

MONTHS SUPPLY OF INVENTORY (MSI) reflects the number of months it would take to sell the existing inventory of homes for sale at current market conditions. The lower the MSI, the stronger the demand as compared to the supply and the hotter the market. Typically, below 3-4 months of inventory is considered a “Seller’s market”, 4-6 months a relatively balanced market, and 7 months and above, a “Buyer’s market.”

DOLLAR PER SQUARE FOOT ($/sqft) is based upon the home’s interior living space and does not include garages, unfinished attics and basements, rooms built without permit, lot size, or patios and decks — though all these can still add value to a home. These figures are usually derived from appraisals or tax records, but are sometimes unreliable or unreported altogether. All things being equal, a house will sell for a higher dollar per square foot than a condo (due to land value), a condo higher than a TIC (quality of title), and a TIC higher than a multi-unit building (quality of use). Everything being equal, a smaller home will sell for a higher $/sqft than a larger one. (However, things are rarely equal in real estate.) There are often surprisingly wide variations of value within neighborhoods and averages may be distorted by one or two sales substantially higher or lower than the norm, especially when the total number of sales is small. Location, condition, amenities, parking, views, lot size & outdoor space all affect $/sqft home values. Typically, the highest dollar per square foot figures in San Francisco are achieved by penthouse condos with utterly spectacular views in prestige buildings.

November 13, 2012July 16, 2013

SF Luxury Home Report

The San Francisco Luxury Home Market

A Market Overview by the Paragon Real Estate Group

The luxury home market in San Francisco – typically defined as houses, condos, co-ops and TICs selling for $1,500,000 or more – experienced a big surge in activity in the second quarter of 2012. The third quarter saw a decline typical for the summer months, but was still 50% higher than the third quarter of last year. With the increased demand has come a significant increase in values throughout the city.

The SF luxury home segment is currently made up of three dynamics: 1) general-appeal (often spectacular), well-priced listings that buyers are jumping all over and often bidding up far over the asking price, 2) listings that the market has deemed considerably overpriced – by hundreds of thousands or even millions of dollars – that the market is generally ignoring, and 3) niche or special-circumstance properties for which there is an extremely limited buyer pool – even if priced fairly, these can take some time to sell.

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Sales Over, Under & At List Price

In the third quarter, a high percentage, 44%, of luxury home sales in San Francisco sold for above asking price; 15% sold for at least 10% over asking price – an indication of very strong demand; 42% sold below original list price; and 14% closed at list price. It should be noted that a fair number of high-end homes have sold off-market in 2012, i.e., not listed or reported to MLS, from which we derive our data.

Average Dollar per Square Foot

Luxury homes throughout the city have seen a substantial jump in dollar per square foot values since 2011. Values vary widely by neighborhood and property type, and can generally range anywhere from $500 to $2000 per square foot. The highest per square foot values are typically found in the most prestigious mansions on the north side of town and in penthouse condos in the South Beach/ Yerba Buena and Pacific Heights/ Russian Hill areas. Absolutely spectacular views are a common aspect of these sales.

Luxury Home Unit Sales

The second and third quarters of 2012 saw the highest number of luxury home sales of any quarter since 2008. The decline in the third quarter was typical for this market segment during the summer months, and was over 50% higher than the third quarter of 2011.

Sales Price to Original List Price by Days on Market

Most of the luxury homes that sell are sold relatively quickly after the listings arrive on market, and these sales are selling for an average of 102% of list price. Those listings that go through price reductions sell at a significant discount to original price and spend almost 3 months longer on market. And even in a strong market, a solid percentage of listings don’t sell at all, almost always due to being perceived as overpriced.

Inventory of Available Listings

As is typical, September was the month with the highest number of new listings hitting the market, which often leads to an autumn surge in closed sales. It is almost certain that the number of new listings and available inventory will now continue to dwindle until the new year begins. More often than not, the luxury home market goes into a semi-hibernation from Thanksgiving to mid-January.

San Francisco Luxury HOUSE Sales by District and Price Range

Home sales with a price of $1,500,000 and above now take place across the city, but the sales cluster in certain areas and prices vary widely by location. These 4 charts break the luxury home market into price segments and property types by Realtor district.

SF HOUSES Selling for $1,500,000 to $1,999,999