Luxury Home Segment Cools | “Affordable” Homes Market Remains Competitive

In case you don’t get sfnewsletter (I posted this there), here is our November 2015 San Francisco Real Estate Market Report, including 11 Custom Charts:
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San Francisco led the Bay Area and the nation when its real estate recovery began in early 2012. Within the city itself, the more affluent neighborhoods led the rebound from the 2008 – 2011 recession and saw the highest rates of home price appreciation. That dynamic began to shift in 2014, when the more affordable neighborhoods began to take the lead in demand and in appreciation. All price segments in San Francisco have cooled off from the overheated frenzy of the spring 2015 selling season – this cooling is a common seasonal phenomenon – but while lower and mid-priced homes in the city have continued to remain solidly in “seller’s market” territory, in the luxury home segment, the dynamic between buyers and sellers has fundamentally shifted, at least for the time being.

A number of reasons may explain this: Firstly, the affluent are much more invested in the stock market than other groups, and the volatility of late August, early September may have encouraged more wealthy homeowners to sell (before things might possibly get worse), and more wealthy homebuyers to postpone buying until things clarified. As of very early November, the S&P 500 has regained its lost ground from August, so this effect may fade. Secondly, it’s certainly possible that sellers and listing agents have finally pushed the envelope on prices a little too far: San Francisco’s high prices have clearly motivated some buyers to look at options outside the city (which has helped pressurize the markets of other counties). Last but not least, more and more luxury condos are being built in San Francisco: Growing supply not only gives buyers more options and more negotiating room, but it decreases the urgency to write strong offers quickly or the motivation to compete with other buyers.

However, the luxury home market hasn’t “crashed”: there are still high-end homes selling very quickly for very high prices amid competitive bidding. But it has markedly cooled and the number of luxury home listings in San Francisco hit a new high in October, so correct pricing has becomes increasingly vital. It remains to see if this change is just a transitory market blip – such blips are not uncommon in financial or real estate markets – or the beginning of a longer term reality.

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Median Sales Price by Month

Even with the general cooling in the market since spring and the significant slowdown in higher end home sales, the overall median sales price for houses and condos bounced back up to $1,200,000 in October. Median prices are impacted by seasonal trends: typically peaking in the spring, dropping in the summer, up again in the autumn and then plunging during the winter holidays. This has more to do with inventory than with changes in fair market value. Short-term fluctuations are not particularly meaningful: It is the longer-term trend that gives a sense of what’s going on in the market.

For houses alone, the median sales price in October was $1,300,000 and for condos, it was $1,100,000.

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Supply & Demand Statistics
by Price Segment, October 2015

Months Supply of Inventory (MSI) is a classic measurement of supply and demand, calculating the time it would take to sell the existing inventory of homes for sale at the current rate of market activity. The lower the MSI, the greater the demand as compared to the supply, i.e. the hotter the market. The house market in San Francisco has been stronger than the condo market since the recovery began – though the condo market has been crazy hot as well – because the supply of houses is more limited and is dwindling as a percentage of sales because virtually no new houses are being added to inventory. However, new condos are being built in quantity. This chart above illustrates the dramatic difference in the markets for homes up to the median price ($1.3 million for houses, $1.1 million for condos) and in the next price segment higher, versus the luxury home segment, defined here as houses selling for $2,000,000+ and condos for $1,500,000+. (By this definition, luxury sales currently make up about 20% of San Francisco’s home sales.)

Because SF has been so hot for so long, we’ve adjusted the thresholds for what MSI readings define “seller’s market” and “buyer’s market” to better reflect the psychology of the current market.

Luxury Home Listings for Sale

As mentioned earlier, the number of high-end house and condo listings hit all-time highs in October, while sales numbers are well below levels hit in the previous 2 years. Even more so than the general market, the luxury segment is dramatically affected by seasonality and typically goes into deep hibernation from Thanksgiving to mid-January. Having so many active listings on the market just prior to the winter holiday doldrums is one of the reasons why we designate the luxury-home segment as currently having moved into “buyer’s market” territory.

The Luxury Home Market: Months Supply of Inventory
Year over Year over Year Comparisons

This chart above illustrates the change in the luxury home market supply and demand balance over the past three Octobers. As a further point of context to what has happened in the past year, during the feverish market of this past spring, the MSI for luxury houses hit a low of 1.6 months of inventory and the MSI for luxury condos hit a low of 1.7 months. Since 2012, spring has consistently been the hottest, most competitive, selling season of the year and most home price appreciation has occurred during that time.

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4 Neighborhood Snapshots

Much more information regarding SF neighborhood prices and trends can be found here: San Francisco Neighborhood Values

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Average Asking Rents in San Francisco

The real estate market has been challenging for homebuyers these past few years, but for anyone looking to rent a home in the city, it has been distinctly more difficult financially. Homebuyers have the benefit of historically low interest rates, multiple tax advantages and, hopefully, substantial appreciation gains over time; renters enjoy none of those advantages (though admittedly there can be long-term benefits to rent control for renters that qualify). Even with the big jump in home prices over the past 4 years, factoring in the 35% – 40% decline in interest rates and adjusting for inflation, the ongoing monthly cost of homeownership (for someone putting 20% down) is roughly the same as it was in 2007. But average monthly asking rents in the city have surged over 50% during the same period.

This has made rental property ownership an increasingly lucrative proposition, which we discuss in more detail in our last Commercial Brokerage report: Bay Area Apartment Building Market

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Median Household Incomes

In Selected San Francisco Zip Codes

By Bay Area County

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Mission To Millennium | SF’s Top 10 Underbids of the Week

The top underbid of the week goes to an Outer Mission single family home that (dare we say) needs a bit of work. Listed for $699,000 and sold for $575,000 after 62 days on the market. According to our data from last week, single family homes continue to take up the majority of the top 10 underbid slots: 50% single family homes, 30% multi-units, and 20% condo.

As we get into the winter months, we are seeing luxury homes cooling down but affordable homes remaining competitive. One other notable Underbid is this wonderful Millennium Tower residence with million dollar water and landmark views on both sides of the Bay. Listed at $4.588M and sold for $4.18M after 122 days. Still a win, IMO.

As for the rest, here you go:

Address BR/BA/Units List Price Sold Price Underbid
2220 Cayuga Avenue 1/1/1 $699,000 $575,000 -17.74 %
161-165 Cook Street 2-4 Units $2,395,000 $2,150,000 -10.23 %
2287 16th Avenue 4/2/2 $1,388,000 $1,250,000 -9.94 %
18 Kronquist Court 4/2/1 $1,899,000 $1,725,000 -9.16 %
301 Mission Street #49D 2/3/2 $4,588,000 $4,180,000 -8.89 %
78 Gladys Street 3/2/0 $1,195,000 $1,100,000 -7.95 %
1437 47th Avenue 1437A 2-4 Units $1,275,000 $1,175,000 -7.84 %
2829 Pierce Street 2831 2-4 Units $2,970,000 $2,750,000 -7.41 %
3260 Baker Street 3/2/2 $2,999,000 $2,800,000 -6.64 %
2040 Franklin Street #506 0/1/1 $575,000 $540,000 -6.09 %

As is always the case, if you have any questions about the market, your home, homes in your area, or real estate referrals around the world, I am here to help. Just give me a shout by choosing any of the “contact” options all over this site.

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August Case-Shiller Index | San Francisco Bay Area

The new S&P Case-Shiller Index for August was just released on Tuesday. The prices for homes in the upper third of prices – which dominate in most of San Francisco, central and southern Marin, and central Contra Costa – ticked down a tiny bit in summer, exactly as they did last summer. These short-term fluctuations are common and not particularly meaningful until substantiated by a longer-term trend.

Since Case-Shiller’s SF Metro Area covers 5 counties, it should be noted that not all the markets within the Area move in lockstep: activity and appreciation rates can vary significantly.

As is clearly illustrated below, for the past 4 years, spring has been the big driver of home-price appreciation. Prices generally plateau in subsequent seasons until the next spring arrives. For the past couple years, the spring selling season has started very early, in late January or early February, due to the incredible weather we’ve had in those months. El Niňo, if it arrives, might move the spring pick-up in sales back to mid-March/early April in 2016.

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This second chart illustrates the huge burst in prices this past spring. It’s not unusual for the market to slump a little during the summer holidays, almost in exhaustion after the spring frenzy. We’ll have more autumn statistics soon when October’s MLS data comes in, but Paragon has been experiencing its most active autumn selling season in its history in 2015.

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And here are 3 longer-term charts for each of the 3 Case-Shiller price tiers for the 5-county San Francisco metro statistical area. As can be seen, the different price tiers had bubbles and crashes of radically different magnitudes in 2006 – 2009, but as far as total appreciation since the year 2000, all of them display very similar appreciation rates.

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That ought to do it for your data craving for a while. You might consider following this blog via email (link below) or get on the Twitter train @theFrontSteps, so you don’t miss a beat of San Francisco Real Estate.

Grace Cathedral, Nob Hill

For Sale | 1177 California #304 | Gramercy Towers | Nob Hill, San Francisco

This exquisitely remodeled luxury Nob Hill condominium with views West/Southwest to Twin Peaks & outlooks onto Jones Street, located in the heart-center of San Francisco’s premiere postcard neighborhood is for sale, and you get the first look.

Featuring one bedroom, one bath, one car parking, 24/7 attended lobby, pool, spa, workout area, onsite management, a gracious lobby & courtyard entry, with world famous landmarks at your doorstep (Grace Cathedral, Huntington Park, Fairmont, Mark Hopkins & Huntington Hotels, cable cars), and a short walk to Union Square, Hyde & Polk Streets, this is the A+ Nob Hill lifestyle so many crave. Blending old world San Francisco charm with a new school WALKSCORE of 100 points, Liebherr refrigerator, Miele Dishwasher, and Fagor Range/Oven, does it get any better?!

To add to the wonderful appeal of this home and location, Gramercy Towers is expertly managed.

Listing Details:
$779,000
1 bed
1 bath
1 car parking
Remodeled Kitchen and Bath
Views
Liebherr Refrigerator
Miele Dishwasher
Fagor Range/Oven
Caesarstone Countertops
Designer Cabinets
Custom Closets
Bar seating
Views
HOA Dues: $848.83 (Includes earthquake insurance, PG&E, heat, water, garbage, common area maintenance, 24/7 lobby, onsite management, and reserves.)

Showing Schedule:
Broker Tour: 10/20/15 from 9-10:30am
Private Showings Available upon request
Offer date (if any) TBD

MLS Listing Information

Representing buyers and sellers of amazing and unique property is what I do. This property is no exception. Please come take a look or contact me for further details.

Exclusively listed by:
Alexander Clark
Paragon Real Estate Group
theFrontSteps.com
alexclark@gmail.com
415-254-5351

You can also contact me with the form below:

Walking Distance to a “Wet Woody”

View from the Carnelian Bay Lakefront

If incredibly convenient access to Garwoods restaurant and bar and its iconic drink, the Wet Woody, is your cup of tea (or your cup of Wet Woody – and yes, that’s the last time I’ll use that phrase in this article), this lakefront property may be for you. Not only is this house right next door (stumbling distance) to Garwoods, but like the Carnelian Bay favorite, it is also right on the Lake.
A nice place to relax

The most amazing part of this story? You can own a prime piece of Tahoe north shore lakefront property for $1,325,000, or maybe less, $1.325 mil is the “asking” price.
Carnelian Bay Tahoe Lakefront

One million three hundred twenty five thousand dollars is a screaming deal for anything on the lake, let alone on the north shore in a protected and centrally located bay. While some may not appreciate having Garwoods as a next door neighbor, it doesn’t diminish the fact that the property sits on one of the most beautiful sections of one of the world’s most beautiful alpine lakes.

Carnelian Bay Lakefront Interior

Obviously its owners have come to the point where they are very, very serious about selling, but looking at its asking price history, that has not always been the case. The 4 bedroom, 2 bath home (with a 2 car garage) was originally listed at $2.5 million on March 6th, with the price coming down to $1,999,000 on July 28th. Its current price reflects a huge drop from the almost $2,000,000 asked in July, and a gargantuan drop from the original 2.5 million dollar original asking price! I asked Paul Smith, the listing agent, about these very substantial price drops, and his answer was simple: “They just want to get it sold!” If this price doesn’t do that, I don’t know what will.

Carnelian Bay Lakefront, Lake Tahoe, $1,325,000 [Lake Tahoe MLS]

[Chris Anderson is a Tahoe based writer and real estate professional. You can contact him at chris@tahoetruckeehomes.com or go to TahoeTruckeeHomes.com.]

When Thinking Real Estate, Think About Your Neighbors

It’s no wonder people want to live in the San Francisco Bay Area, because of our climate and general awesomeness, but did you ever stop for a second and take a look at some of your neighbors that also want to live here? Neighbors that just happen to be inventing products and services that are changing the world.

Haute Living has compiled their list of The 100 Most Influential People in the World’s Most Golden City…you know, the “most important entrepreneurs, thinkers, entertainers, creators, philanthropists, socialites, power couples, and, of course, billionaires” that just happen to be your neighbors. It’s some of these people that are buying our best slices of pie in the sky, creating jobs, and changing the world. Why wouldn’t you want to live where they live? Things are good here.

The list definitely worth a look and a consideration as to why real estate in the San Francisco Bay Area continues to outshine the rest of the nation and remains a very solid long term investment.

-<a href="The 100 Most Influential People in the World’s Most Golden City [Haute Living]

I Am A Top Producer! ~ B…F…D…!

topdog

It’s that time of year again…the time for the announcements and excitement amongst brokerages across the land of their “Top Producers”. Those two words send shudders down the spine of many Realtors as they conjure up thoughts of, “I’m good enough, I’m strong enough, and gosh darn it, people like me.” Given last year’s real estate environment, “Top Producer” status is being touted even more now as a reason to work with one Realtor over another, because if you made it in 2009, you must be a rock star.

We’ve always had a bit of an issue with the whole “Top Producer” thing. First of all, every real estate company has different thresholds that put their real estate agents on that pedestal. For example, a brokerage with two agents that each sell one property per year could call those agents “Top Producers”. Some brokerages determine “Top Producers” on the amount of commission earned (could be $50k, could be $150k). Still others determine their “Top Producers” on the dollar volume sold (could be $2 million, could be $20 million.) There is no industry standard, and the criteria change every year. Certainly a “Top Producer” in Kansas is selling less (or maybe more) real estate than a “Top Producer” in California. So you see, it’s a bit misleading if you ask us, and frankly we don’t think it carries much weight with buyers and sellers. We would be happy doing away with the whole thing altogether.

So why then is it such a big deal amongst agents and their brokerages? We tend to think it’s that old competitor in every agent that is striving to outdo their colleagues, and it’s just another way to say, “I kick more ass than you, because I sell more real estate than you.” Reality is, the buying and selling decisions aren’t up to the real estate agent, and if you’re being pushed into a deal in this environment by a “Top Producer”, especially if you’re buying, there might be some ulterior motives to “getting you in the home of your dreams”.

Bottom line, “Top Producer” in our eyes isn’t something that should carry as much weight as it does and you (the buyer and seller) certainly shouldn’t base your decision on working with an agent on whether they’re a “Top Producer” or not. You’re going to need to like the person first and foremost, because you just might be in that relationship for quite some time before you “close the deal”. ;-)

Just sayin’…..

[Editor’s Note: I am a Top Producer.]

Metallica’s Kirk Hammett Finds Buyer For His Pacific Heights Monster Den

After what must seem like an eternity (we lost track of the days on market), we’re told the metal lair on top of Pacific Heights at 2505 Divisadero (originally asking $12,500,000 now just $8,995,000…it is on top of Pacific Heights and does include a sound studio and party room built for, and occupied by, Metallica for chrissakes!) has found a buyer.

Hammet

Was “The Black Album” conceived in this room…their worst album if you ask us, and all down hill from there. Give us “Master of Puppets” again!

hammetsound1

“Is that…Is that James? Is that James in the mixing room?”-Bonus points if you know which PUNK band has that quote. And no, it does not refer to James Hetfield (of Metallica).

hammetstudio1
Picture “Garage Days” and picture the parties…Metallica did party didn’t they? ;-)

hammettparty1

Who is the lucky buyer catapulting themselves into the home of one of the largest rock bands ever? Enquiring minds want to know….

If you want to see the party room pre staging and fancy photos, this is what we snapped back in 2007 upon first taking a look at the property.

Congrats to all involved in this one, especially Kirk Hammett.

[Update: We asked our source about the price and got this (no surprise) reply: “It’s a “confidential” sale… although we all know who sold it [Nina Hatvany], just no one is saying who bought. Word on the street is that Ronnie Garfield rep’d the buyer, but I don’t know for sure.”]

2505 Divasadero [Property Website and Details]
Fly On the Wall, 2505 Divisadero hits the market [sfn BLOG]

Who Is Tom Perkins And WTF Does He Have To Do With Us

Our recent scoop on the sale of both Grand Penthomes at the Millennium Tower (one that sold to mega millionaire venture capitalist Tom Perkins) has been getting quite a bit of press lately, and oddly enough we received this email today:

This is all great [referring to the sale of a ~$9,000,000 condo] I suppose, but who is Tom Perkins?

Apparently, theFrontSteps is more responsive and accurate than a quick and easy Google search on “who is Tom Perkins”, so, since you asked, we thought this video would give you some idea about the man, and his (former) yacht:

Don’t get us wrong, we love your emails and especially your tips (keep them coming to thefrontsteps@gmail.com), but sometimes we worry about some of you readers….in a good way, of course.