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In the Know: Pre-Tax Edition, April 17, 2016

I N  T H E  K N O W ,  A P R I L  1 7 ,  2 0 1 6

Things are a changin’

San Francisco’s spring real estate market is proving to be one where we’re seeing the return of the R-word. But is it R for Reduction, or R for Realistic?

 

WE’RE STARTING TO see something we haven’t seen for a long time in the City: email blasts proclaiming price reductions. This is in direct contrast to many other properties that are clearly priced to entice. The market has adjusted and is still adjusting to a new reality but there are contradictions. Nevertheless, here a few points we’ve observed over the last few weeks (and they don’t necessarily mesh together seamlessly). Take a read and see how you fit in.

Bid at what you can as you never know. The precise anxiety and uncertainty we’re focusing on here can work to a buyer’s advantage especially if the sellers have owned a property for a long time and any sale proceeds they have will be subject to capital gains or they want to buy something different or they’re just happy to get an offer. But if we never bid, we’d never know (or worse, you see the property you really wanted sell for less than you were willing to pay!)
Reductions are for real…mostly. Sometimes agent will reduce a lot more than you’d think to draw attention but have no real intention of selling at that new price. These days we’re seeing agents being a little more geniune about reduced prices.
Take advantage of Buy-it-now prices. It’s hard to believe but sometimes the price is, well, the prince. No game playing.
When in doubt, ask. To see if the last two points are true it always pays to have your us ask what a seller really wants. There may be other factors at play that we have no idea about.
Teaser prices are soo last year… except for when they’re not. Too many people are self-editing themselves and not getting properties, which loops back to point number one.

Less Sales Volume in San Francisco But Not for Us and Vanguard

Vanguard has moved up the rankings in the MLS and now ranks 4th in the entire City and is closing in on Zephyr, who’s number 3. Vanguard is Number 1 in District 9 (Bernal Heights, the Inner Mission, South Beach, SOMA, Potrero, Dogpatch, Mission Bay) and often holds the number 1 or number 2 ranking in District 5 (Noe Valley, Glen Park, Mission Dolores, Eureka Valley and Duboce Triangle) with this past quarter seeing Vanguard as the silver medalist. Interestingly, real estate as a whole in San Francisco slowed over the first quarter of 2016. Reported sales on the MLS went from $3.7 billion in Q1 2015 to $3.3 billion in Q1 2016. Vanguard, though, saw our sales increase over the same period. It just goes to show that we do buck the trends.

Continued Long Delays at the Assessor’s Office Means Longer Time Until Property Tax Reassessments

Jonathan, Raffi and I are about strategic purchases and utilizing the cash you have without breaking the bank. We’ll suggest folks getting homes that aren’t their ‘forever’ home should consider getting an ARM (adjustable rate mortgage) so you don’t end up paying for the benefit of having a locked interest rate for years you won’t be owning a given property or if you’re going to remodel it, which can save hundreds of dollars a month in mortgage payments. Another fringe benefit that’s only temporary in nature is the fact that the City may take a long time to get to reassessing your property taxes. Assessor Carmen Chu spoke at the Residential Builder’s Association meeting this week and said that her department is still using green-screened, COBOL-operated computers to keep track of the nearly $2 billion property tax base. COBOL is old school and such features as “copy” or “paste” weren’t even heard of when they first created the language in 1959! Right now there are 2,500 change-in-ownership reassessments outstanding; 2,000 appeals and 12,000 new condo units that need their initial assessments.

May the Sales Be With You

So what’s going on? We’re seeing a lot of sellers who were otherwise holding back earlier this year now suddenly spurred into action. Indeed the City’s stagers are booked out at least a month in advance these days and we ourselves have been working with a lot of our sellers to get their properties ready for a May launch. Indeed, May is our favorite time of year as it’s usually sunny, breezy and flush with optimism and so it will be again this year.

What Else Would You Be Reading Next?

Subscribers of In the Know would now be reading Stories of the Week and (Shh!) Upcoming and Off-Market Listings

Exclusive inside information and perspective for our subscribers.

In the Know for Jan 10, 2016 — A New Year in SF Real Estate Begins, Right?

IN THE KNOW, JAN 10, 2016

Time for a Sweet 16?

What will the market be like in 2016? Will turmoil made in China impact Bay Area real estate?

THESE are the questions we keep getting these days. The answer we give is that it’s still going to be busy and prices will still be strong. Annual figures and continuing trends show that San Francisco’s real estate market will be marked by low inventory, high demand and fast escrows; prices may not be growing as fast as they have over the past 4 years but they should continue to outpace inflation.  And while we’ve said it before, the following factors continue to suggest San Francisco’s real estate market will remain strong with moderating growth and real property holding value.

It looks Chinese to me. China’s stock markets dropped precipitously last week and are attention-grabbing for sure but are contained to, well, China. The last time we checked our retirement funds we never saw a single-Chinese company traded in Shanghai being in the portfolio. This is, in part, due to the fact the Chinese stock market is a bit of a fiction if you really think about it. While all markets have a bit of fiction in them (value is, after all, in the eye of the willing buyer) many of the companies listed on the Chinese stock market are indirectly owned by the government or are derivative of countless state-owned enterprises (i.e., non-vetted paper companies). But when viewed in the context of China’s continuing relaxation of capital export controls, the real impact of Chinese financial and economic instability may be an accelerated push by Chinese companies and individuals to send their money overseas so as to diversify their wealth into non-Chinese assets such as foreign real estate.
I got mine and I’ll hold on to it. A lot of the property that was sold over the past few years was bought all-cash or with extremely affordable mortgage rates that are barely above inflation rates. These benign purchase methods keep down carrying costs, which are locked by fixed mortgages and by Prop 13’s restriction on property tax rates. Because holding a property poses little risk to an owner and because property has usefulness not only as someone’s home but also as a rental, properties that have traded over the past few years may be locked up for a lot longer than they would otherwise.
Let me get mine now while I can. We’ve made this point before that there may be a lot of buyers who want to act quickly to lock-in mortgage interest rates for 30 years before rates get too high. While the Fed won’t move rates up to astronomical levels any time soon there’s still an undercurrent that low mortgage rates won’t last forever. So, you’d better get something now even if that means you’re paying a little more for a property in today’s dollars if it means you end up with the property over the long term.
It’s still tough to build in San Francisco. Because of highly restricted development regulations and complex building requirements will still mean that new inventory will still be hard to come by. And, this doesn’t’ even consider the question if you’d even want to live in a new high-rise!
Real stallions vs. unicorns. There’s been much ballyhooed about declining IPO valuations and softening exuberance for the City’s tech sector. While tech jobs make up about 8% of all jobs in the City there are other industries here after all. Even within the startup/tech sector there are a stallion of solid, banal, ho-hum companies that continue to be part of the steady transition away from an analog/paper society to a digital/paperless society. Some of the sectors that help the area chug along are bio-tech, robotics, automation (e.g., self-driving cars), better apps and hardware, etc. It’s a jeannie that can’t be put back in the bottle.
Even if the market chills where prices actually go lower over a sustained period of time,  chill in the air will mean better affordability. Don’t forget that slower price growth will nevertheless encourage buying — especially if prices hold steady or grow slower. Folks who were priced out of real estate or were otherwise holding out on buying may now finally wade into real estate.

Subscribers of our Newsletter also got to read:

  • Stories of the Week: find out what really happened behind the sales that got into contract recently
  • (Secret?) Off-Market Listings: see which ones are new this week as there are lot of new ones; and,
  • News Stories of the week

Subscribe today to see what others are learning while you aren’t!

In the Know for December 7th 2015 — A Decidedly December Market Shows What’s to Come in 2016!

In the Know: December 7, 2015

So, It’s December, Right? 

Details of what 2016’s San Francisco real estate market will look like start to emerge now.             

It’s the first week of the bottom part of the year which means people are distracted away from real estate, right? Well, if you’re the agent at 4 Ord Court over at the base of Corona Heights/Castro (whom we know well) you’d be surprised, which she is. That cute bungalow that’s been updated ever so smartly and cleverly had fifty — 50 — disclosures sent out before her Wednesday offer date. Of course the property, which is a bungalow just shy of 1200 sqft, is one of the most ingenious, thoughtful and efficient properties I’ve seen recently. Even though there are ikea cabinets the charm, thoughtfulness, light and location made it a hit. But it is December and the property was a teaser price. The $1.2M list was only an afterthought for seriously interested buyers. In the end, there were multiple offers but the sellers only wanted to take cash offers of which there were just three. The winning one is in the mid-$1.5M range with a backup in the $1.45M range but the financed offers were even above the winning cash offer of note.

Stay tuned for our Annual Review next issue where we’ll go over what happened in 2015 and how 2016 will be different. Among our top predictions/observations:

  1. Price growth will continue but not as fast of an appreciation rate we saw in 2014 and 2015;
  2. That said, popular properties will still be, well, popular with multiple bids and over-asking closes;
  3. We’ll see greater price accuracy from list price to sale price;
  4. Inventory will will be tight for properties that people want but there will be a lot of Grade C and B properties out there as late-comers to the party try to peddle their flipped properties and/or the stream of hastily-built mass projects comes on line (these may be Grade A of course but that depends on your perspective);
  5. Escrows will take longer as there are new lending practices in place and because buyers will take their time more than they’ve allowed to have been over the past 2 years; and,
  6. Everyone will be waiting to see when the Fed does its second and third rate increases. 

As per usual, here’s what’s in this edition of our newsletter: 

  • Stories of the Past Two Weeks: find out what really happened behind the sales you read about for the past week and from the week before. 
  • Data of the Week: find out how many homes sold and which sold for most over the list price; 
  • (Secret?) Off-Market Listings: see which ones are new this week; and, 
  • News Stories of the week

It should go without saying, but it’s worth saying anyway: thank you for reading our newsletter and for your continued patronage, trust and referrals. We love what we do and we love seeing our clients succeed and we’d like to see even more success in the days ahead. 

Congrats of the Week!

Showing that patience and resilience are true virtues Jonathan, Raffi and I have, we wanted to congratulate our buyer Todd on finally closing on a home after a 4-year search. Todd got the great home at 2300 Leavenworth Street, which is a tall, 4-story home is perched right at the foot of the crooked part of Lombard Street in Russian Hill. It was worth the wait as the home has more than 2,000 sqft of room, 3-4 bedrooms, 2 bathrooms, elegant finishes and views of SF’s skyline and Marin from pretty much every level that all lead to a rooftop deck that has a 300-degree view. 

Listed for $2.825M we scooped up the property at $2.828M and beat out two other ‘circling offers.’ We found out that one of the other buyers who failed to act in time offered the seller $2.9M but it was too late.  We can’t wait to see the updates and the views.

 

sold-blank-600x400-2300leaven

JUST SOLD!

2300 Leavenworth: Russian View home! 3 Beds, 2 Baths, views galore! $2.828M

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SF Real Estate News Happenings for the Week of December 7, 2014

December 10, 2014 weekinreview

Happenings & Highlights

D E C E M B E R  7 ,  2 0 1 4

High Prices, Higher Disapproval Ratings. This pent-up buyer demand plus increasingly inaccessible housing prices have pushed down Mayor Lee’s approval ratings by 16% from this time a year ago according to the San Francisco Chronicle and KCBS.

Hollywood-style, giga-sized NIMBY Battles. For those of you who have encountered the interruption of neighbors remodeling construction (or for those of you who are doing the construction) consider that things could be worse; on a much larger scale at that. In the NYTimes, a feature on the Gigamansion (note, not mega, but giga) phenomena taking place in Bon and and Beverly Hills, shows neighbors complaining about 80,000-sqft projects with scores of dump trucks going in and out every day. Of course these neighbors are complaining from the comfort of their more modest 28,000-sqft mansions. Even Mr. Spock is getting in on the action against a ‘starship’ that was going up in this neighborhood. Indeed. Read the story here.

An interesting idea that would be absurd anywhere else but potentially viable here. Taking the Parklet phenomenon too it’s a illogical next step some housing advocates are suggesting homelets — micro portable housing units — be installed in San Francisco now. Read about it here.

The SF Business Times reports that average rents for a one-bedroom apartment in San Francisco $3,350 per month, compared to $3,000 in New York. The most expensive neighborhood in the most expensive city in America? Russian Hill. Prices for a San Francisco 2-bedroom apartment increased to $4,600 quarter-over-quarter. For comparison, a 2-bedroom in New York City costs an average of $3,500/month.

A couple of closings of note. The massive big baptist church at 601 Broderick at Grove Street with 6500 sqft of re-finished space and a spectacular staircase but somehow lacked a certain sparkle nevertheless did decently. Listed at $5.875M it closed at $4.995M (@$758/sqft) or 85% of list price after 45 days on the market. The most expensive house that closed this week is at 549 El Camino Del Mar in Sea Cliff with 4 bedrooms, 3.5 bathrooms and nearly 5,000 sqft. Listed at $6.390M and selling for $6.08M, cash after 3 month on the market (@$1231/sqft).

 

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