Archive for April, 2011

Median Price Down; Cue the ‘I told ya so’s…’

Distressed home sales have had an impact on the overall median sales price in San Francisco.  The median sales price in March 2011 dropped 5% from March 2010, (declining from $710,000 to $675,000), and it is mostly because of the increasing number of distressed sales otherwise known as bank owned properties and short sales.

Even though our city is much less impacted by such ‘distressed’ transactions than the greater Bay Area or California as a whole; the numbers of such sales HAS increased in San Francisco during the first quarter of 2011.  All of which lends credence to the advocates of the impending double-dip theory, and the generally schadenfreude inclined.   

However, if one were to break down the statistics – and we did; they would find the median price for distressed sales over the past year dropped from $470,500 to $441,000, but the median price for regular home sales stayed virtually the same – actually going up a tad from $750,000 in March 2010 to $759,500 in March 2011. That is, distressed sales are impacting the overall SF median price due to their increasing numbers and decreasing prices, but not the overall, regular, non-distressed median home price. The regular median-home price has been generally stable for the last 20 – 24 months, and shows no sign of declining.

Buyer demand — as measured by months’ supply of inventory, average days on market, percentage of listings accepting offers and other statistical parameters – has significantly improved since 2011 began, for both distressed homes (albeit with declining prices) and for non-distressed homes (with generally stable prices to date, and perhaps the beginning of a slight upward pressure on values).

Districts 3 & 10 make up about 60% of all ‘distressed’ house sales, and their home values have been hugely affected as a result, much like the greater Bay Area. Other areas, such as Districts 5, Noe/Castro/Haight, and 7, Pacific Heights/Marina, have had very few distressed sales on a percentage basis, and as a result they have had virtually no impact on values there. Condo sales in distress are primarily clustered in SOMA/ South Beach/ Mission Bay where the huge new developments went up in the past 10 years, and predictably is where condo values have been impacted the most.  Even there however we are seeing a sharp contrast between the have’s and have nots.  Whereas some buildings are rife with bank owned activity other’s even 1/2 block away, seen as more desirable either due to location, views, or amenities; are holding their value nicely thank you very much. 

I suppose the fire could keep burning and eventually take over all of San Francisco; declining property values from Pacific Heights to Noe Valley and engulfing all of South of Market regardless of building or outlooks.  I have more than a few buyers who would be thrilled to see that finally happen; but thus far the competition for good properties, has been as fierce as ever – with only the overpriced or fundamentally flawed (which really means, it’s overpriced too) not being invited to the ball.

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Did you just Double-Dip?

Case-Shiller Index results for January have recently been published with news of a continuing fall in home values in the United States and most of its metropolitan areas. According to Case-Shiller, home values in the San Francisco Metro Area (5 counties with wildly different markets) have continued to fall – the kicker being that C-S determined the total decline over the past 12 months to be a whopping 1.7%. (January sales reflect accepted-offer activity in November-December, so the data is already 3-5 months old.)

Even the most competent and experienced agent, concentrating on a single market area, seeing virtually every home available and sold, would be hard pressed to estimate the fair market value of any given house – what one reasonably knowledgeable, willing and able buyer would pay for it – within less than a 5% range of value. To those of us in the market day in and day out, prices have appeared relatively stable in San Francisco over the past 20 – 24 months (ever since the big decline of late 2008/ early 2009). It also appears that the employment situation is improving and that optimism regarding the general direction of the economy is growing, which if true, and if it continues, will play a large role in future market conditions.

It may be that home values are falling in the country, state and greater Bay Area – that is beyond our competence to assess – but in San Francisco, 2011 has seen a surge in home-buying demand, and a resultant change in the supply and demand equation. If it continues, it is unlikely to result in a further decline in values. Indeed, the recent changes in market dynamics would typically start to produce an upward pressure on prices. There are many reasons why not to expect a “double dip” in San Francisco values. For the past 2 years, new predictions for additional, significant (10-30%) price declines – the so-called double-dip in home values – have been made on an almost weekly basis. The reasons: turmoil in financial markets, foreclosures, shadow inventory, debt crises, jobs, China, oil, the groundhog saw its shadow. For many of these pundits, analysts and bloggers, the market is always bad and about to get worse. Good stuff for headlines.

That is not to say they’re never right, much less those real estate agents who believe it’s always “the best time to buy.or sell.” What’s missing most often from the articles, blogs and predictions is context; in-depth market expertise; and understanding of location, inventory, seasonality and how buying trends can change (without necessarily affecting values). Instead, typically a single statistic, poorly understood, is seized upon to trumpet a conclusive unified theory of US, California, Bay Area or SF markets.

Is a double-dip possible? Yes, the future is full of unknowns.  But Ever since the large drop from 2007-2008 peak values – 15% – 25% in most of the city’s neighborhoods – median prices in SF have been generally stable: indeed, median prices for both houses and condos in 2009 vs. 2010 were virtually unchanged. Which suggests we may have hit the bottom of this cycle.

MONTHLY FLUCTUATIONS IN MEDIAN PRICE ARE MEANINGLESS.

Even in a stable market, median prices will jog up and down by 1-5%, because there are a number of factors besides value which affect them in the short term. It is what occurs consistently over the longer term that indicates a verified market trend. The computer generated algorithm one constantly hears about, the Case-Shiller index, may be the best available, but is still a very blunt analytical tool for something as diverse as the values of specific (relatively unique) homes in specific (relatively unique) locations. Yet it’s treated as a precision measurement – “According to Case-Shiller, home values fell [exactly] 3.7% last month” – when, at minimum, a 5% +/- margin of error should be assumed.

Consider this: the Case-Shiller index for the “San Francisco Metro Area” comprises 5 counties, encompassing wildly different markets from Pacific Heights to Martinez, Hillsborough to the Tenderloin, areas with 50%+ foreclosure rates and those with less than 3%, but every month, a percentage change calculated to one tenth of one percent is delivered as generally applicable to all.

Statistics without informed context are worthless. (“There are 3 kinds of lies: lies, damned lies and statistics.”) SF home market, median price charts and the distress sales chart show long term stability. Every single one of the other market dynamics charts describes a strengthening market.

Still, predicting the future is tricky. And it’s still too early to identify a lasting, definitive trend. As always, it is up to you to reach your own conclusions and act accordingly.

Meredith Martin is a real estate professional with 17 years of Sales and Marketing experience in the San Francisco Bay Area. For more information about her subscribe to her Facebook Page here. Search for propertoes on StreetsofM.com or see what her clients have to say about her on MeredithMartin.com.

 

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US Record Residential Sale — $100 Million in Los Altos

Russian billionaire buys Silicon Valley home

In a transaction which set a new record for most expensive U.S. residential sale, Russian billionaire Yuri Milner (who heads Digital Sky Technologies) has reportedly paid $100 million for a 25,500-square-foot Los Altos Hills (CA) home which was not even listed for sale.  According to The Wall Street Journal, the sellers, Fred and Annie Chan took back a $50 million note on the home.

This record-setting sale is just one indication that the wealthy have opened their wallets and are shopping for homes again.  The million dollar and above housing market rose 4% in February year-over-year as luxury buyers snapped up homes, often for all cash. Earlier this month a Palm Beach (FL) home sold and closed for a reported $24.6 million.  The jump in luxury purchases is counter to the real estate resale trend in general.  In February, total residential sales dropped 2.8% as compared to February a year ago.

Why the rise in luxury sales?  According to Laurie Moore-Moore, Founder of The Institute for Luxury Home Marketing, “The number of wealthy U.S. households is almost back to where it was before the downturn.  Add the fact that many affluent pulled money out of investments and have been waiting in the wings with cash in hand while deciding where to invest.  Residential real estate is now attracting many of these dollars.”  Moore-Moore goes on to say, “This bodes well for the luxury home market in the short term.  Luxury may well be the real estate segment that leads the recovery.”

More coverage on the sale:
Forbes
MSNBC

U.S. record residential sale — $100 million [luxuryhomemarketing.com]

Meredith Martin is a real estate professional with 17 years of Real Estate Sales and Marketing experience. Follow her on Facebook to get the latest market trend info, find out what’s new in your neighborhood and receive San Francisco city facts and updates.
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Proposed Committee for Mandated Developer Public Art

photo by Mike Koozmin/SF Examiner

Luis Cancel, San Francisco’s Director of Cultural Affairs, would like final say on public art installations developers are required to install. Over the past 25 years, a mandate has stated that large projects in the Financial District and along upper Market spend at least 1% of their total construction budget on on public art; that can add up to millions of dollars in some cases. Cancel, however, believes chosen art of late has been sub par.

Without providing specific examples of what he regards as sub par work, Cancel said there is support on the San Francisco Arts Commission for requiring developers to obtain that body’s approval before commissioning public art. Today, the commission will consider such a proposal from its staff.

Cancel wants to put a stop to developers abuse of the policy in ways such as putting the required art on the building’s rooftop, and wants a committee to have veto power on selected works.

Of course public opinion varies on the quality of the installed art, but a committee would include several embers, hopefully with differing views of good art so that we continue to see a wide range of installations.

San Francisco may oversee downtown developers’ art selections [SFExaminer]

Meredith Martin is a real estate professional with 17 years of Real Estate Sales and Marketing experience. Follow her on Facebook to get the latest market trend info, find out what’s new in your neighborhood and receive San Francisco city facts and updates.
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No Parking, No Deal; SF Homebuyer’s Loves & Hates

 

San Franciscans love their homes–for the most part. With our legacy of notable architects, many reserve a special spot in their hearts for the innovative men and women of home design. From Julia Morgan to Willis Polk, from Bernard Maybeck to George A. Applegarth, some of the most brilliant minds in the architectural world have left a mark. Even the best intentions sometimes fail, however. Not every design is a winner. There are things people love about their homes, and things they would love to change.

I queried colleagues and friends about “loves” and “hates” in homes in an informal survey via the office intranet, facebook and other, more terrestrial locales. I’ve noticed that with nearly all home-buyers in San Francisco over a certain age, there are three essential items a home must have. I’ve termed these the “deal-killer-triad.” Most folks paying $500,000 and up, who have graced our planet for 35 years or longer, simply won’t live in a home, let alone buy it, if it does not have parking, in-unit laundry and ample closet space. It makes sense, too, that these amenities are deal killers because for the most part there is no way to remedy their absence. Not surprisingly, perhaps 40 percent of loves and hates relate to these three attributes.

Another popular love is pet-friendly buildings. About one in four San Francisco households has a dog. Throw cats (not recommended at the same time) into the mix, and it’s easy to see how the demand arises. Also increasing in demand are elevator buildings. As the first of the Baby Boomers retire, our aging society will require more housing friendly to those who cannot (or do not) want to grapple with stairs.

But enough about the love. Let’s look at what people hate about homes. Perhaps one of the most interesting qualities on the hate list is not really even a characteristic of a home at all: School-district policy that does not guarantee children attend the school nearest their homes. I can see how that would chap one’s parental hide–particularly  if a compelling factor in why your chose to live where you did is the school district.

Handfuls of others say that they hold no love for popcorn ceilings, kitchens closed off to the dining area and wall-to-wall carpeting. Well, I guess not everyone wants to feel he lives on the set of “Charlie’s Angels.”

And what of the architects who don’t seem to consider how the home they are designing will actually be used? My condo building is a great example. The wall-heater ducts are in precisely the location where people will place their couch. Hmmm, thought the architect, where should I put this mechanism that spews high amounts of heat and reaches temperatures guaranteed to ignite common household combustibles? Oh, I know. by gum! It shall go where the couch will be.

It’s fun to jest, but there are lessons behind even a casual survey of homeowners and home-buyers. As industry professionals, our goal is to give our clients what they want . And the only way to learn is by asking. It is also our job to pay attention to what sells and, also to what does not. Understanding both allows to increase our value. And isn’t that what it’s all about?

Guest Post by Rob La Eace

No Parking, No Deal : Practicality Rules [theRegistrySF.com]

Meredith Martin is a real estate professional with 17 years of Real Estate Sales and Marketing experience. Follow her on Facebook to get the latest market trend info, find out what’s new in your neighborhood and receive San Francisco city facts and updates.
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