FOR YOUR CONSIDERATION

YOU MIGHT AS WELL PRICE IT AT $1.

Take Away Item 1: List Price is Irrelevant As the Market Will Find the ‘Right’ Value 

We live in a market where 75% of properties sell over list price. 

Every market has its own rules, customs and practices. In San Francisco, agents tend to price property listings less than what these properties are worth. Right or wrong it’s the way it’s done here. There are instances of ‘transparent’ pricing but for every listing that is ‘transparently’ priced we can show you 10 more that are radically underpriced and purposely so. The strategy is behind this practice is to serve sellers by creating the potential for multiple competitive offers that drive a property’s final sale price — much like an auction boosts sale prices. 

IT WON’T BE CHEAP.

Take Away Item 2: It’s Expensive Here, But It’s Always Been (and there’s room to go) 

We live in a market where $1,000/sqft is the norm that’s moving towards $1,200/sqft. 

There have been housing crunches and booms since the very beginning. Apart from gold, the big attractions to live here have been: our temperate climate, the entrepreneurial spirit, the diversity of people from Chinese immigrants, Latino populations and LGBT folks, the area’s natural beauty, universities and, of course, the tech economy among more. Think about all those tourists flocking here every day and what a prominent role real estate plays in tourism — one of the biggest tourist attractions are the Painted Ladies on Alamo Square, a group of houses. 

San Francisco has drawn entrepreneurs and innovators alike as it has done so since its founding. Population booms and housing crunches (and crises) have been as much a part of San Francisco as the fog has been. Because it’s been a boom town, it has attracted folks from far and wide seeking opportunity which has led to diverse architecture, housing patterns and market patterns as a result.

Combine the above with strong historic protections, tax policies that favor long-term ownership, rent control laws and heavily regulated building regulations all combine to make the place even more valuable than it would otherwise already be.  

OPTIONS ARE LIMITED.

Take Away Item 3: There are Fewer and Fewer Properties for Sale

We live in a market where it’s hard to build and where inventory is ever more scarce 

PRICE VARIATION.

Sale Prices by Housing Type

Average Sale Price

(Single-Family Homes)

This type of property is more sought-after by most folks because a home is, well, a person’s castle. In most cases, there aren’t any HOAs to worry about (except for St. Francis Wood and Miraloma Park for example) but you have to take care of all your property’s insurance, bills and maintenance. Single-family houses are the primary inventory class in the Sunset, Parkside, Richmond, Miraloma Park, Mid-Town Terrace, Sunnyside, West Portal and in District 10 generally.

Average Sale Price

(Condominiums)

Now this isn’t your divorcee’s house at the edge of town. Instead condominiums in the City can be luxurious, expensive and amazing. They range from the studio in-law to the penthouse in the sky that will sell for millions. Just as the prices and quality vary so do the prices, HOA dues, HOA proactiveness and facility amenities. They are ubiquitous in the following neighborhoods: South Beach, Mission Bay, SoMa, Yerba Buena, North Beach and Dogpatch.

YOU SAY ‘SOMETHING’ HAPPENED IN REAL ESTATE … 

Spot the Trend Lines: SF’s Real Estate Market from 2012 to present 

San Francisco real estate prices have trended positively over the long haul. Starting in 2012, San Francisco’s real estate market turned the corner from the 2008 crash (with its bottom being some time in mid-2009) Its most recent tear peaked somewhere in May 2015 — with average prices more than doubling from 2009 to 2015.

At the start of 2014, we saw the average median price push past $1M for both single-family houses and condominium homes in the San Francisco. By the time 2015 rolled around, sellers were certainly in control with buyers clamoring to take advantage of low interest rates and to avoid outlandish rental rates bidding property prices up along the way.  In 2016, we saw some balance come back to the marketplace with price appreciation holding steady at 2015 levels — whew! But before you thought there was going to a bust there wasn’t as prices went up, up and more up until November 2018 which was when the market took an abrupt price leveling in many segments of the market (but not all of them mind you). 

So, what’s next?

Buyers who bought during the past few years often locked in their mortgage rates at 4% or less, paid cash, or will be successful enough in the future that they’ll be able to keep their first purchased home as a rental property thus locking down inventory rates that much longer. But this new owner profile is just one factor among many that will keep San Francisco real estate prices strong for the long haul. So expect more of the same unless one or more of the following changes:

1. Historic preservation laws renders tearing any building older than 45 years next to impossible without a prolonged approval process
2. Rent control and eviction control laws distort the market considerably
3. There is a scarce amount of available land that can be built upon in the City with many folks unwilling to consider the western parts of the City in their home search
4. Artificially low property tax rate locks and very high capital gains tax obligations also make it difficult to sell a property for those whose property have gained in value markedly
5. The Bay Area economy has created so many more jobs than there are places for these folks to live and the trend like the economic power of Silicon Valley looks to keep going up.

If you know anything about San Francisco politics or the staying power of Silicon Valley you know how unlikely any of the 5 reasons above will change.

Median Days on Market

(All Types, Time from Market Launch until Offer Accepted)

Multi-Units

From LoopNet (Commercial MLS)

Office Leases

From LoopNet (Commercial MLS)

You hear all about office spaces and tech companies. Take a look at the prices these companies are paying, per square foot.

Office Space

From LoopNet (Commercial MLS)

No, not the movie but the actual number of office spaces available in the City.