Posts Tagged ‘Russian Hill’

Just Passed: Build Rent-Controlled In-Law Units

 

The San Francisco Board of Supervisors just unanimously passed legislation allowing for the addition of new in-law units throughout Districts 3 & 8. This affects the following neighborhoods: Chinatown, Nob Hill, Russian Hill, North Beach, Fisherman’s Wharf, Polk Street, the Financial District, Union Square, Castro, Eureka Valley, Upper Market, Noe Valley, Duboce Triangle, Diamond Heights, Glen Park, College Hill, Corona Heights, Buena Vista, Twin Peaks, Mission-Dolores, and parts of the Inner Mission.

This comes in the wake of city-wide legislation passed earlier this year allowing unlimited density to be added to residential structures within a building’s existing footprint when ‘structural upgrades’ (such as seismic retrofitting) are also made. While the legislation passed today does not stipulate structural upgrades, new in-law units must be added within the existing envelope of the building.

“It’s great to know we can add housing without changing the exterior configuration of buildings, and of course the possibility to add rent-controlled housing in 2015 is exciting.” – Julie Christensen, Supervisor, District 3

 

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Meredith Martin is a Broker Associate at Paragon Real Estate Group and can be reached at Meredith@OpeningDoors.me

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To Buy or to Rent: That is the Question

I was recently introduced to an international all-cash home buyer who had come to San Francisco for one week on a mission to find housing for his two young adult children. Initially looking at rentals in the Infinity, Ritz Carlton and AVA Nob Hill in addition to some properties on Nob Hill and Russian Hill, it wasn’t long before I was asked the question: Does it make more sense to buy a place?

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Unless you are fortunate to live in a rent controlled building, you may have noticed your monthly rent rise dramatically in recent years. Since July 2014, the annual growth rate of rents has in fact outpaced that of home prices in San Francisco. Checking in at $3,500 per month, the median rent for a one-bedroom has been the highest in the country for four months following a 13.5% rise last year (and up as much as 29.2% in Noe Valley). For many renters, what they pay out every month could easily be a mortgage payment on a comparable place– the monthly Principal + Interest on a $1,000,000 home is $3819.32, assuming 20% down and a 30-year mortgage fixed at 4%. Now consider that nearly half the properties for sale right now are listed for under $1,000,000.

Plugging in local San Francisco data (June 2015 sales figures) to the New York Times’ Rent vs. Buy calculator reveals some compelling numbers. Buying a condominium at June 2015’s $1,100,000 median sale price or a single-family home at the $1,301,000 median is a better financial decision even if you could rent for free!

 

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The assumptions I made in the above calculations are as follows:

  • Purchase price: $1,100,000 for condos, $1,301,000 for single-family homes
  • Length of time in home: 5 years
  • Mortgage Rate: 4%
  • Down payment: 20%
  • Length of Mortgage: 30 years
  • Home price growth rate: 14.3% for condos, 19.4% for single-family homes (12-month y-o-y average, the NYT calculator maxes out at 15%)
  • Rent growth rate: 13.5% (median one-bedroom increase in 2014)
  • Investment rate of return: 7% (approx. long-term average annual ROI of stocks)
  • Inflation Rate: 2%
  • Property tax rate: 1.19%
  • Marginal tax rate: 28%
  • Taxes filed on a Joint Return
  • Costs of buying a home: 3% (approx. closing costs)
  • Costs of selling a home: 8% (approx. closing costs + marketing + customary 5% commission to brokers)
  • Maintenance/renovation: 1%
  • Homeowner’s insurance: 0.1% (approx. $50-$100+ per month depending on property type)
  • Monthly utilities: $100
  • Monthly common fees: $600 for condos, $0 for single-family homes
  • Common fees deduction: 0%
  • Security Deposit: 1 month
  • Broker’s fee: 0%
  • Renter’s Insurance: 0.1%

Not a stranger to the costs involved in carrying a property (and the long-term wealth-building benefit of homeownership), my client weighed the trade-offs of buying in San Francisco vs. renting at a maximum $10,000 per month. And… drum roll, please… he found that buying was the better option for him!

San Francisco condominium median price growth, 2005 to present:

San Francisco single-family home median price growth, 2005 to present:

 

Meredith Martin is a Broker Associate at Paragon Real Estate Group and can be reached at Meredith@OpeningDoors.me

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Quantifying the ROI of San Francisco Real Estate

 

Just how much have San Francisco home values increased since the market recovery began? Try 76 percent!

 

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Clocking in at $1,160,000 and up half a million dollars since 2011, the growth of the city’s median combined home & condo price is nothing short of dramatic — and it’s not even the highest percentage appreciation in the Bay Area. Solano, Alameda and Contra Costa counties measure up with growth over 80%, and Oakland takes the cake at 133%. Checkout how median home and condo prices have increased across San Francisco neighborhoods:

 

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Year to date, there’s been a 144% increase in the number of single-family homes sold in San Francisco for $5,000,000 and above (44 units compared to 18 YTD in 2014). Consumer confidence is riding high and there’s a new breed of luxury homebuyer that favors comfort over opulence, as evidenced by neighborhoods like The Mission, Glen Park and Bernal Heights leading in appreciation.

The number of condo resales in the $2,000,000+ range is also up significantly YTD compared to last year. A total 107 units have sold so far in 2015 representing a 78% increase. Keep in mind that this number would be larger if sales at new luxury developments like LUMINA, 72 Townsend, Amero and Rockwell were counted. As it stands, Russian Hill holds its place as the most coveted neighborhood for condo buyers:

 
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CNN Money recently launched this interactive calculator below allowing homeowners to compare the appreciation of their property to the returns of stocks, bonds and the average US home. Click here to plug in your numbers and see the results.

 

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With so much hype in the media about the unaffordability of San Francisco real estate as the prices reach new record highs month after month, there’s a surprising truth: the annual cost of a mortgaged median price house is actually lower now than at the last peak in 2007. You can thank historically low mortgage interest rates for that!

 

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Meredith Martin is a Broker Associate at Paragon Real Estate Group and can be reached at Meredith@OpeningDoors.me

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