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San Francisco Seminars: TBA

Please email me for Q1-Q4 of 2006 and 2007. Q1 2008 will be sent out in May 2008.

     Q3 2006 Market Update

The third quarter of 2005 marked the slow down of San Francisco’s real estate market.   Comparing this year’s third quarter with last year’s, the news is this:

1. There are even more neighborhood-specific shifts.  So much so that I’m giving separate statistics for (a) Districts 7 and 8, and (c) District 5.    Also, I am going to send out a separate Market Analysis update to discuss certain areas.
2. It takes longer to sell properties, regardless of property type – with the exception of duplexes in Noe Valley.  Days on market decreased from 52 to 30.
3. Sales volume is significantly down in 7&8, but is surprisingly up in Noe Valley (District 5).  The number of duplexes sold in Noe Valley increased by 44%, while single family residence sales rose by 6%.
4. Price change ranged from -7% to 16%, depending on property type and neighborhood.
5. The biggest development has been pricing. Some sellers still set offer dates with mixed results.  Several properties still received multiple offers and sold for more than asking.  Several properties either received no offers or all their offers that were less than asking.  More important is that almost half of single family residences sold in all three districts were sold for less than their asking prices.  In Districts 7&8, 63% of duplexes and 71% of triplexes sold for less than asking.  In District 5, they were 23% and 33% respectively.
This is a major change from the last several years where sellers have priced their properties low solely for the purpose of receiving multiple offers drastically above asking.
Does this mean sellers are losing money?  No.
One unbelievable price drop was a house in Pacific Heights that was listed at $4,400,000 and sold for $3,300,000.   Did the seller suffer?  That’s relative.  He bought the property in 1987 for $800,000.
And attractive properties in desirable areas still garner premium prices as seen by the sale of a Nob Hill duplex in 37 days for $1,750,000, with a list price of $1,549,000.*
In my opinion, the only sellers who have lost money are those who overpaid in the last 2-3 years, and who are now hoping to flip their properties at a profit.  Of these recent buyers, the three most vulnerable groups are (a) condo owners, (b) owners of overpriced fixers and (c) owners who have protected tenants in their properties.
As to mixed use and multi-unit buildings of 5+ units, please call for an update.   Because of economies of scale and what the tenants-in-common market is doing, 5+ units can be interesting.
The caveat is that large cash down payments are required and most smaller investors cannot qualify for loans on these properties.

District 7 & 8:  Presidio Heights, Pacific Heights, Marina, Cow Hollow, Nob Hill, Russian Hill, North Beach.
SFR Q3/05 Median price: $2,558,750
Q3/06 Median price: $2,850,000
% Change:  11%

Q3/05 Days on Market:  45
Q3/06 Days on Market:  71
Q3/05 # of Solds:  28
Q3/06 # of Solds:  24

Duplex Q3/05 Median price:  $1,994,000
Q3/06 Median price:  $2,162,000
% Change:  8%

Q3/05 Days on Market:  32
Q3/06 Days on Market:  58

Q3/05 # of Solds:  16
Q3/06 # of Solds:   8

Triplex Q3/05 Median price:   $1,937,500
Q3/06 Median price:   $1,800,000
% Change:  -7%

Q3/05 Days on Market:  69
Q3/06 Days on Market:  85

Q3/05 # of Solds:  8
Q3/06 # of Solds:  7

Fourplex Q3/05 Median price:  $1,860,000
Q3/06 Median price:   $2,000,000
% Change:  8%

Q3/05 Days on Market:  69
Q3/06 Days on Market:  25
Q3/05 # of Solds:  5
Q3/06 # of Solds:  2

District 5:  Noe Valley, Buena Vista Park, Ashbury/Parnasus Heights, Corona Heights.

SFR Q3/05 Median price:  $1,250,000
Q3/06 Median price:   $1,267,500
% Change:  1%

Q3/05 Days on Market:  22
Q3/06 Days on Market:  39

Q3/05 # of Solds:  53
Q3/06 # of Solds:  56

Duplex Q3/05 Median price: $1,500,000
Q3/06 Median price:  $1,450,000
% Change:  -3%

Q3/05 Days on Market:  52
Q3/06 Days on Market:  30

Q3/05 # of Solds:  9
Q3/06 # of Solds:  13

Triplex Q3/05 Median price: $1,642,000
Q3/06 Median price:  $1,900,000
% Change:  16%

Q3/05 Days on Market:  19
Q3/06 Days on Market:  49

Q3/05 # of Solds:  2
Q3/06 # of Solds:  3

Fourplex Q3/05 Median price:  $1,501,600
Q3/06 Median price:  None Sold.

Q3/05 Days on Market:  23
Q3/06 Days on Market:  None Sold

Q3/05 # of Solds:  3
Q3/06 # of Solds:  0   Q2 2006 Market Update

The general trend is slower sales, less sales and lower prices than last year.  However, good properties don’t linger if realistically priced and pricing has recovered from the winter.  Q4 2005 seems to have been the lowest price point for single family residences and 2-4 units.
There is also a short window of opportunity to pay significantly less than asking on some overpriced properties with less competition.  These tend to linger and end up selling at lower prices to the investor willing to make an offer.  This window should close once sellers’ and buyers’ expectations become more congruent.
The numbers below won’t show this, but you can still buy a house in the Sunset/Parkside for $700,000 or less.  They may be small and/or dated, but of all entry level neighborhoods, I personally think this is the nicest especially if you are willing to renovate.
A comment on your competition:  If you go on brokers’ tours though, you will see a lot of interest amongst more experienced and deep pocket investors.  This is a good time for them.

Part A:  Q2 2006 compared with Q2 2005.
Single family residence prices again showed a drop between 3-4% from this time last year. 2-4 Multiunits dropped in the Sunset and Richmond, but rose nicely in the other areas on average of more than 5%. Days on market continue to be longer and there are less sales.
Part B:  Running averages for last four quarters.
Single family residences faced the largest price drops in Q3 and Q4 of last year.  In all my covered neighborhoods, there has been a median price rise of 3% in Q2 compared with Q1 of this year.
2-4 Multiunits have been up and down.  There is more positive pricing change in Noe Valley/Pac Heights and north/Russian & Nob Hill.  Less so in the Avenues north and south of Golden Gate Park.
Days on market are faster.  I tracked the 2nd quarter of each year for the last ten years and Q2 2006 was the 4th fastest quarter.

I believe the rental market is strengthening and multiunits will become more valued as rental property and not just as a TIC play.  Please see the links to articles below.
The numbers for mixed use properties have always looked better and so I’ll follow mixed use and smaller 5-15 units as well for all over the city.  Keep in mind that not all commercial properties are reported so statistics are less reliable and comprehensive and the total numbers smaller, which can skew medians and averages.
Mixed Use:  Sale prices are generally rising.  Days on market whether over the last four quarters or comparing Q2 2006 with Q2 2005 are shorter.  This is also true for 5-15 units.
Pricing is more realistic.  Sellers are less inclined to price low hoping to get higher offers.  On average, most mixed use and 5-15 units sell for less than asking.

Specific Statistics comparing Q2 2006 with last quarter, Q1 2006, and last year’s Q2 2005: :

North of Geary, Noe/Ashbury/Buena Vista, not the Avenues.

SFR Q2/05 Median price:  $1,858,000
Q1/06 Median price:  $1,749,000
Q2/06 Median price:  $1,800,000
Duplex Q2/05 Median price:  $1,430,000
Q1/06 Median price:  $1,612,000
Q2/06 Median price:  $1,535,000
Triplex Q2/05 Median price:  $1,700,000
Q1/06 Median price:  $1,815,000
Q2/06 Median price:  $1,750,000
Fourplex Q2/05 Median price:  $1,475,000
Q1/06 Median price:  $1,535,000
Q2/06 Median price:  $2,295,000

The Avenues north and south of the Park.

SFR Q2/05 Median price:  $875,000
Q1/06 Median price:  $810,000
Q2/06 Median price:  $837,000

Duplex Q2/05 Median price:  $1,195,000
Q1/06 Median price:  $1,084,000
Q2/06 Median price:  $1,180,000
Triplex Q2/05 Median price:  $1,428,000
          Q1/06 Median price:  $1,339,000
Q2/06 Median price:  $1,190,000
Fourplex Q2/05 Median price:  $1,167,000
Q1/06 Median price:  $1,267,000
Q2/06 Median price:  $1,205,000

Mixed Use & 5-15 Units in Districts 1-9:
Mixed Use: Q2/05 Median price:  $1,237,000
Q1/06 Median price:  $1,763,000
Q2/06 Median price:  $1,340,000
5-15 Q2/05 Median price:  $1,760,000
Q1/06 Median price:  $1,500,000
Q2/06 Median price:  $1,798,000

Articles on the rental market:
1.  http://sanfrancisco.bizjournals.com/sanfrancisco/stories/2006/07/24/story6.html?f=et180&b=1153713600^1318613&hbx=e_vert
2.  http://www.realfacts.com/7262006.html
  Q1 2006 Market Update

Statistics

1. Comparing Q1 2006 with Q1 2005:

Single Family residences:  The average price dropped by -2.3%
Duplexes:  Average price increase of 7.4%
Triplexes:  Average price increase of 6%
Fourplex:  Average price decrease of -9%
Mixed use:  Average price increase of 33%

2. Comparing average price movement over a longer period of time

(a) 1st Quarter Results:  2000-2006
SFR:  average price increase was 8.63%
Duplexes:  average price increase 9.81%
Triplexes:  average price increase 3.69%
Fourpelxes:  average price increase 11.7%

There were too few mixed use units to give accurate quarterly results.

(b) Annually 2000-2005

Duplexes:  average price increase 9.81%
Triplexes:  average price increase 7.42%
Fourplexes:  average price increase 10.38%
Mixed Use units:  from 2003-2005 average price increase of 9.26%

There were too many SFR’s for annual numbers.  Please call or email me if you want statistics for a specific neighborhood.

3. Properties’ days on market are about 15-20% longer.

4. Sales prices are closer to list prices.  For those sellers still using offer dates, they are getting mixed results.

Comments:
The reason I went as far back as 2000 for statistics is that over the six year period, most neighborhoods showed at least one year where prices dropped or flattened.
So we’re back to old fashioned basics:  buy and hold.  You have a great chance of bouncing back from any bad year, i.e. price drop, over a 5+ year period.
Here is a dramatic example:  Noe Valley duplexes.
In Q1 2001, the average price jumped almost 57% to $1,276,000.
In Q1 2002, the average price fell by over 26% to $934,000.
However, by Q1 2006, the average price was $1,491,000.

Also, the annual average price increase for Noe Valley duplexes has been over 10% since 2000.

List price versus sales price is trickier.  You can’t tell if a property sold for over ORIGINAL asking price unless you look at the history of a specific property.

Example:  A property is originally listed for $1.4M.  Then it was withdrawn and then put back on the market the next day at $1.299M, and sold for $1.3M.  The general statistics show that this property sold for more than the list price.

Caveats:

1.  This is a top level RAW DATA analysis, which means that I didn’t factor in trust sales, fixer uppers, particularly small or large or very nicely remodeled properties.
2.  To truly compare apples to apples, you need square footage, # of rooms, $/sq ft, and some details on amenities, e.g. close to park, view, etc.
3.  The larger number of properties, the more accurate the general percentages.
4.   Average price = average property.
5.  Statistics only give you trends and does not tell you what your specific property is doing exactly.
Change one factor and the picture can be totally different.   I read a report citing that San Francisco homes had appreciated 54% since last May.  In my own analysis, Bernal Heights’ average duplex appreciation since 2005 was 21% in one case and 12% in another.
6.  Trends and statistics can be affected by several factors, some unknown.