view

Maximum Underbid | Russian Hill Property Wins | List $3.2M, Sold $2.6M

Closed on the last day of 2015 was this 3 bedroom Russian Hill condominium with dramatic views. Listed for just shy of $3.2M and sold 18% under asking, at $2.6M, it takes top spot on the top 10 Podium Underbids of the week for San Francisco.

Interesting to note is that out of the top 10 underbids that closed in the past two weeks, 7 of them are condos and 3 of them are single-family homes (That’s R.E. 101 in college…supply/demand).

And here are the rest.

Happy New Year everyone!

Address BR/BA/Units List Price Sold Price Underbid
1070 Green Street #1402 3/2.5/1 $3,195,000 $2,600,000 -18.62 %
151 Everglade Drive 3/3/2 $1,599,000 $1,400,000 -12.45 %
68 Landers Street 2/2/1 $1,499,000 $1,315,000 -12.27 %
400 Beale Street #1407 2/2/1 $1,150,000 $1,053,000 -8.43 %
3315 Pierce Street 3/3.5/3 $2,699,000 $2,500,000 -7.37 %
33 Perine Place 2/2/1 $1,500,000 $1,400,000 -6.67 %
425 28th Street 3/2/1 $1,695,000 $1,588,888 -6.26 %
355 1st Street 2/2/1 $1,595,000 $1,500,000 -5.96 %
739 48th Avenue 3/2/1 $995,000 $945,000 -5.03 %
1760 Ofarrell Street San Francisco, CA 94115 2/2/1 $879,000 $835,000 -5.01 %
image003

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.

image001

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.

image002

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.

image003

image004

image005

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.

San Francisco Home Prices Remain High, affordability index stays low

What an interesting Summer! We are still in the midst of a hot real estate market where homes are getting quickly snatched up, buyers are stretching to pay over asking. The recent stock market gyration and Chinese currency devaluation add some uncertainty to the economy, and later this month the Fed is going to tell us where interest rates might go, but the San Francisco real estate market is steaming along.

The Housing Affordability Index (HAI), an index released periodically by the California Association of Realtors to measure the percentage of households that can afford to buy the median priced single family dwelling, shows all Bay Area counties saw declines in their affordability index reading, and San Francisco is now only 2 percentage points above its all-time low of 8%, last reached in Q3 2007.

The median house price, mortgage interest rates, and household income are the 3 major factors affecting the Housing Affordability Index. A picture is worth a thousand words, so here are the graphs:

0901

0902

0903

0904

0905

Interest rates play a huge role in affordability, and it is certainly reasonable to be concerned that affordability percentages are now hitting such depths while interest rates are also close to historic lows. For example, in 2007, when affordability percentages hit previous low points, prevailing mortgage interest rates were approximately 50% higher than today’s. When interest rates start to rise – when and how much being the real questions – there will be potentially dramatic effects on affordability, which could presumably affect demand and prices.

0906

As the HAI is approaching the record low, don’t hit the panic button yet. I’d like to show a unique perspective from John H Dolan, the sole market maker for the Case Shiller home price futures contracts that are traded (very infrequently) on the Chicago Mercantile Exchange.

San Francisco home prices have been rising sharply but how much higher might they run? Are they in a bubble? When, and how, will we know? Homeowners want to stay on top of expectations, while potential home buyers don’t want to see the market run away from them. While there may be many opinions, there is also one public market that home owners and buyers can access, to see what the market “thinks”.

The CME (Chicago Mercantile Exchange) has listed futures contracts for a number of the Case Shiller indices, including San Francisco (SFR), since 2006.^1 Essentially, the contracts allow participants to either view, or place a bet, on where the Case Shiller SFR index will be at various points over the next few years.^2 Since these housing contracts cash-settle on the value of the index in the settlement month (much like the S&P 500) it has been argued that traders may be “betting” on where they expect the index to be.^3 People can freely view the contract prices as a component of their own home price forecasts.^4

The graph below shows both the historical Case Shiller SFR index (in black), bids (blue axis), offers (red pluses), and contract closes (in purple). Finally contract values for Dec ’14 are shown in red.

image001

There are sets of 11 contracts (one for the Case Shiller 10-city index, and one for each of the ten components. San Francisco (SFR) is one of those ten.) While index levels react more slowly, and are backward looking, contract prices can change daily. While forward prices have been rising over the last few years on better-than-“expected” home price gains (at least as expected by this market), contract prices (particularly longer-dated expirations) have fallen this month.

While the SFR home price index has nearly doubled over the last five years (from a low of 117.42 in May 2009 to 214.53 this month), forward market prices are consistent with much more muted gains in 2016 and 2017. For example the 225.0 bid and 229.0 offer on the Nov ’16 contract are 4.9% and 6.7% above today’s level. The Nov ’17 contract is priced for an additional 4.3% gain the following year.

As such, expect headlines to note the slowdown in SFR home price appreciation (HPA) over the next year.

While contract prices for Nov ’16 and ’17 are higher than where they were at Dec ’14, they are off 4-5 points in the last few weeks as news of the Yuan devaluation and stock market gyrations have dampened expectations. The recent decline in prices is indicative that futures contracts are not predicators of the future, but reflective of expectations (that change as news occurs). That is, just as prices for oil futures dropped $50 in the last year as expectations changed, home price futures contracts also move.

In addition to just viewing bids and offers, those that either want to hedge an exposure (or future purchase), or who have a strongly different view of forward index levels can trade contracts to lock in forward prices. For example, someone thinking that SFR index levels will be lower by Nov 2016 might look at selling Nov ’16 contracts, while someone expecting another 10% annual gain might prefer to buy contracts.

Contracts have notional value of $250 * index price, so at a price of 225.0, the notional value is $56,250. A one point move in the futures price (e.g. from 225 to 226) is worth $250.

A trader would have to have a futures account, but the CME would be the legal counterparty to any trade. Margins tend to be less than 10% of the notional value.

As such, someone with a more bullish outlook in 2014, or someone looking to buy a house in 2015/16, could have (hypothetically) bought Nov ’16 SFR futures near 198 (mid-market price that day). With the contract 225 bid today, the buyer wouldíve made $6,750/contract

The contracts have been extremely thinly traded (e.g. there was only one SFR contract traded last month) so caution and patience are important. The markets are often quoted 1×1 (one contract bid/ one contract offered) so market orders for more than one contract are discouraged. The market-maker has expressed willingness to trade larger size, so best to contact him for larger orders.

Finally, contracts are traded on the SFR index which covers a wide area. Prices in any one neighborhood might diverge from the overall index levels. In addition, there’s (of course) no hedge for over-paying for a house.

Net, CME Case Shiller home price futures offer a useful tool for forecasters in framing their housing outlook. Unlike surveys, prices are continually updated, and traders are putting their money behind their bids and offers. The current thinness (limited trading) of the market suggests that CME prices might be one tool (but not the only) that homeowners can use to see what the market “thinks” about where home prices are headed.

1-For those new to home price indices, the Case Shiller index is the grand-daddy of home price indices. The indices were originally introduced in the early 1990’s by Nobel Laureate Robert Shiller and Carl Casein, and remain one the oldest that are currently being used. CS indices are often cited in news reports and in the financial press (e.g. CNBC). The CME has contracts for the Case-Shiller 10-city index (CUS) and, in addition to SFR, each of the other 9 components: (BOS, CHI, DEN, LAV, LAX, MIA, NYM,SDG, and WDC).

2- There are 11 expirations that today range from Nov 2015 to Nov 2019 (although some contracts do not often have posted prices).

3- Case Shiller indices are released on the last Tuesday of every month

4- e.g. Bloomberg

Big thanks to John H Dolan for the information, and new point of view! Visit HomePriceFutures.com for more analysis on home price derivatives.

That’s it. My head is spinning.

Ocean Beach Gem

SOLD | 624 46th Ave | Outer Richmond

I am pleased to announce the successful buyer representation on this awesome ocean view home in the Outer Richmond at 624 46th Ave.

The day it came on the market my client sent me a text, and I got him in a couple hours later. While I was standing on the bluff checking the surf, we wrote an offer, I contacted the listing agent, and I presented our offer via mobile device. I went surfing, and by the time I got back on land, our offer was accepted…and why wouldn’t it be!?

Great work and thanks to everyone involved in this sale, particularly my assistant, and congratulations to my buyer that is going to make this one amazing home. I’m totally jealous, and can’t wait to see what becomes of it.

Act fast, go big, and you too can prevail in this insane real estate market of San Francisco.

624 46th Ave, Outer Richmond Buyer Representation

IMG_3961

2191 32nd Ave, San Francisco CA Hits MLS

[Update: Sold! Sales Price $871,500. Six offers.]

It doesn’t get better than this in the Parkside. Twenty one ninety one (2191) 32nd Ave hits MLS tomorrow, and you are all getting the first look. That is unless you’ve been following me on Instagram (@theFrontSteps).

Asking price for this most excellent home in the Avenues of San Francisco will be $785,000, and we’ll be open this Sunday from 2-4pm. Come take a look, and send your friends and family. It goes in MLS tomorrow, but we aren’t opposed to loyal readers getting a jump on the rest of the buying population.

Property Details:

Fabulous Parkside Center Patio Rousseau and Tudor Style home. Meticulously maintained to preserve original details, this home’s main level boasts beautiful hardwood floors, formal entry, formal dining room, and formal living room w/ arched doorways, high exposed beam ceilings, wood burning fireplace, original tile bathroom, updated kitchen, skylights, center patio, balcony, and ocean views. Downstairs is a large 2 car garage w/ additional storage, laundry, and bonus room (media room / master suite) w/ fireplace, hardwood floors, bathroom, and access to quaint backyard. Parkside / Sunset buyers, you will not want to miss this one. It is like nothing you would have recently seen available on our market. No joke.

Tuesday In The Avenues (442 41st Avenue Open 11-12:30)

It’s another fine Tuesday upon us. Yesterday’s stock market rally may put a glimmer of hope in everyone’s eyes, and what better way to celebrate than with a tour of a great house we just put on the market. It is officially a “broker tour” open house today, but we’re inviting all of our readers to come have a look at 442 41st Ave anytime between 11am and 12:30pm.

44241st500

This is a great single family home in the Outer Richmond with 4 bedrooms and 2 baths (1 bed, 1 bath unwarranted), hardwood floors, fireplace, formal living room, formal dining room, landscaped back yard, new redwood deck, ocean views (from the roof), 2 car tandem parking, washer & dryer, and an excellent location close to Lincoln Park golf course, the Cliff House, Land’s End, Ocean Beach, the Balboa Theatre, Chino’s Taqueria, Sea Cliff, China Beach, Sutro Baths, Louie’s Restaurant, and so much more! The house is also on the east side of the street so you can hang out in your back yard and be warm even when the wind is blowing.

This is a great house and you really should come take a look. Open today from 11-12:30 and Sunday we’ll be there from 2-4pm. Please come take a look. Tell your friends, forward this post, and spread the good word. Mama needs a new dress, so let’s get this home sold.

241 7th Ave…Make An Offer!

Signs of a real estate rebound? We’re getting various tips to confirm the reports and it is definitely good news. So why the hell have you not told your friends about this great single family home at 241 7th Ave in the Inner Richmond? (NOTE: Tax records are not accurate on square footage…Curbed. ;-) )

2417thfront

We have been told to encourage buyers to “bring a reasonable offer”. That means, tell your friends. This is a chance to have a single family home at a condo price and the seller is extremely motivated. What you might be reading on tax records is pretty much useless. There are two large bedrooms and a sunroom that can be a third small bedroom or office. There is a formal dining room, formal living room, Edwardian details galore, and the entire lower level could either be a large media room, office, playroom or anything really. There is tons of storage space, a huge front yard, the home is detached on all sides and full of light, and it is a wonder this house is still available. The lot is zoned RH-2. We have reduced the price 5% already, and we’re encouraging any reasonable offer.

You know we rarely plug listings on this site, but this is truly an opportunity that will pass someone by if they don’t make a move. Make an offer on this home, or tell your friends about it!

241 7th Ave, SFR, 2+ bed, 1.5 bath, 2pk, $1,129,550 [listing details]

“This Is The One”, 565 Clipper Gets Into Contract

Right on the heels of our recent post a la Sophie, “A walk up the hill”, we learn that one of the little nugs she reported on went into contract as of yesterday, 565 Clipper being that little 4 bed, 3.5 bath, $2,149,000 single family nug (originally listed 10/08 for $2,599,000):

565clipper
The deets, with a little RealSpeak for good measure:

Breathtaking, recently rebuilt home w/ hi ceilings & dramatic dark walnut floors. Enormous living room w/ FP & city vus. Top shelf kit w/ 6-burner Viking & CesarStone + huge bfast bar. Dramatic DR is surrounded by windows & adjacent outdoor living space. 3BD/2BA upper level includes a luxurious master suite w/ FP & vu deck + an add’l south facing deck adjacent to 3rd BD overlooking the garden.Ground level has huge family/media room w/ wet bar + 4th BD, full BA & 2 car sxs gar. This is the one!

565clipperkit

It “is the one” for someone, and is a good comparable for 469 Clipper (future version), which just so happens to still be available.

So what gives? Bad market, busy street, nothing but doom on the horizon, yet somebody pulled the trigger on a $2+Million property on Clipper? Let’s hope it closes.

Stay tuned for reports of multiple offers on multiple properties. No kidding.

[Update: Closed escrow for $2,090,000.]

In The Heart Of Noe, Marina Style (3917 26th St.)

3917noefront

Asking $1,398,000, this 3 bed, 2 bath, 2 car parking Marina style home at 3917 26th St “in the heart of Noe” is certainly one for the masses, so it will be interesting to see how quickly it sells.

3917noekit

We’re fans. The difference this time around (no it wasn’t previously listed as far as we can tell)…offers as they come. Gone are the days of setting an offer date.

[Update: Price reduced to $1,349,000]

[Last sold in 2004 for $986,000.]

3917 26th St [MLS]