newsletter

Bay Area Home Price Report

Bay Area Real Estate Values

Bay Area Luxury Home Sales

San Francisco Home Prices by Neighborhood

August 2014 Report by Paragon Real Estate Group

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Bay Area Home Prices – Mapped

Our updated map of comparative house values around the Bay Area: The trend virtually everywhere around the Bay has been continued appreciation since the recovery began in earnest in early 2012. Please note that median sales prices and average dollar per square foot values are statistical generalities that may fluctuate for a number of reasons.

8-14_Map_Bay-Area_Median_House-Price

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Bay Area Luxury Home Sales

Luxury home sales have soared all around the Bay Area, but are concentrated most in the 3 counties most affected by the high-tech wealth boom – Santa Clara, San Mateo and San Francisco – as well as Marin, which has been a very wealthy county for a long time. In San Francisco, condos and co-ops make up a significant percentage of high-end sales (and generally achieve the highest dollar per square foot values), but in other counties, the luxury segment is comprised almost exclusively of houses, estates and, in the wine country, ranch/vineyard estates.

As a point of context, Santa Clara is the most populous Bay Area county with about 1,875,000 residents; then come Alameda (1.58m), Contra Costa (1.1m), San Francisco (835,000 residents, about 60% of whom are renters), San Mateo (750k), Sonoma (500k), Marin (260k) and Napa (140k). As a percentage of total sales, homes selling for $2,000,000 and above make up about 13% of Marin’s market, 11% of San Francisco’s, 10% of San Mateo’s, 7% of Santa Clara’s, 5% of Napa’s, and under 2% in Sonoma, Contra Costa and Alameda Counties. Solano had no home sales over $2m reported to MLS during this period.

Of course, $2,000,000 will buy you a lot more in some counties and neighborhoods than in others. The devil’s always in the details – and this is only a broad brush overview.

Bay-Area_Lux-Home-Sales_by-County

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San Francisco Home Prices by Neighborhood

Below are 2 of 8 updated tables breaking down the city’s 2014 YTD sales by neighborhood, property type, bedroom count, median and average sales prices, and average dollar per square foot value. Each table is in order of median sales price.

All 8 tables can be found online here: San Francisco Home Values.

8-14_3BR-SFD

8-14_2BR-Condo

 

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Market Shifts in the San Francisco Homes Market

Where to Buy in San Francisco for under $1,000,000

Shifts in the San Francisco Luxury Home Market

The Biggest San Francisco Home Sales of the Year

The Paragon August 2014 Market Report

For your convenience, a map of San Francisco neighborhoods is included at the bottom of the newsletter. Adjusting your screen-view to zoom 125% or 150% will make the charts easier to read.

Buying a Home for under $1 Million

There has been a lot of chatter in the media recently about the median home price in San Francisco hitting $1,000,000. Here’s a look at the neighborhoods where one is most likely to find something under that price.

If one wishes to buy a house for less than a million dollars, choices are definitely shrinking with the recent, huge surge of appreciation – approximately 50% over the past 2.5 years. Neighborhoods like Bernal Heights, Miraloma Park and the Richmond district are quickly dropping off the list of options. The largest selection of affordable houses is now in the neighborhoods running along the western and southern borders of the city.

Houses_Under_1m

Looking for a condo or TIC under $1 million opens up a completely different and much wider array of neighborhood options in San Francisco. Needless to say, what one can buy at a particular price point may vary tremendously between neighborhoods.

Condo-TIC-sales-Under_1m

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Shifts in the San Francisco Luxury Home Market

20 years ago, “San Francisco luxury home” referred to real estate in the northern band of old-prestige neighborhoods running from Sea Cliff/ Lake Street/ Jordan Park through the Pacific Heights/ Marina district, to Russian, Nob & Telegraph Hills (plus a few smaller enclaves like St. Francis Wood and Ashbury Heights). Those neighborhoods are still known for large, beautiful, expensive homes and, indeed, still dominate the ultra high-end. But other districts have developed footprints in the luxury market due to changing tastes and demographics, to the high-tech boom creating new centers of gravity for wealth (and changing commuting patterns), and to the formation of entirely new SF neighborhoods.

The general Noe, Eureka and Cole Valleys district (much of which was originally blue-collar neighborhoods) is now one of the most sought after areas of the city, and its prices have blown through the roof – more houses over $2 million now sell here than in all the prestige northern neighborhoods combined. In the South Beach, Yerba Buena and Mission Bay area, some of the most expensive condo buildings in the country have risen from formerly B-class commercial-industrial wastelands. And most recently, new $1000+ per square foot condo buildings are beginning to pop up in places like the Mission, Hayes Valley and the Market Street corridor, catering to new, young, high-tech buyers.

These two charts show the shifts that have occurred just in the past 7 years.

Lux-Condo_Market-Shifts

Lux-House_Market-Shifts

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Sales Prices Over & Under List Price

Believe it or not, this next chart, which shows an incredible percentage of San Francisco home sales selling for more, and often much more, than asking price, actually indicates a small cooling from May’s market. In May, 7% of homes sold went through price reductions before sale; in July, price reductions went up to 11%. In May, the percentage of homes selling for 20% or more over list price was 29%; in July, that dropped to 24%. In May, 8% sold more than 1% under list price; in July, it was 12%. Most of July’s sales went into contract in June and if the market is cooling further, which is not unusual in mid-summer, it won’t show up in the statistics until later.

Over-Under-at-LP_July14

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Biggest Home Sales of 2014 YTD, by Neighborhood

These two charts of the most expensive house and condo sales so far this year are not comprehensive, but simply snapshots of highest home prices achieved in a selection of neighborhoods around the city. One can’t help loving the idea that the biggest SF home sale reported to MLS so far in 2014, at $11 million, was marketed as having “tremendous potential.”

Biggest_Condo-Sales

Biggest_House-Sales

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We recently wrote an article on the underlying conditions that, we believe, have given rise to our current real estate market, which can be found here: 10 Factors Behind the SF Market. Our mid-year report on the Bay Area apartment building market is here: Paragon Apartment Market Report. And our recent update on the S&P Case-Shiller Home Price Index is here: SF Metro Area Case-Shiller Report.

Median Home Sales Price by Month

As is quite common, the overall median sales price dropped in July after the spring spike. Such short-term fluctuations don’t have much significance until substantiated over the longer term.

Median-Prices_Short-Term

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Mortgage Interest Rates

Interest rates, whose movements are famously difficult to predict, have for the time being remained very low – an important dynamic in the real estate market as people compare the costs of renting and buying.

Average_30-Year_Mortgage-Rates

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San Francisco Neighborhood Map

For your convenience, below is a map of the city’s neighborhoods.

San_Francisco_Neighborhood_Map

SAN FRANCISCO REALTOR DISTRICTS

District 1 (Northwest): Sea Cliff, Lake Street, Richmond (Inner, Central, Outer), Jordan Park/Laurel Heights, Lone Mountain

District 2 (West): Sunset & Parkside (Inner, Central, Outer), Golden Gate Heights

District 3 (Southwest): Lake Shore, Lakeside, Merced Manor, Merced Heights, Ingleside, Ingleside Heights, Oceanview

District 4 (Central SW): St. Francis Wood, Forest Hill, West Portal, Forest Knolls, Diamond Heights, Midtown Terrace, Miraloma Park, Sunnyside, Balboa Terrace, Ingleside Terrace, Mt. Davidson Manor, Sherwood Forest, Monterey Heights, Westwood Highlands

District 5 (Central): Noe Valley, Eureka Valley/Dolores Heights (Castro, Liberty Hill), Cole Valley, Glen Park, Corona Heights, Clarendon Heights, Ashbury Heights, Buena Vista Park, Haight Ashbury, Duboce Triangle, Twin Peaks, Mission Dolores, Parnassus Heights

District 6 (Central North): Hayes Valley, North of Panhandle (NOPA), Alamo Square, Western Addition, Anza Vista, Lower Pacific Heights

District 7 (North): Pacific Heights, Presidio Heights, Cow Hollow, Marina

District 8 (Northeast): Russian Hill, Nob Hill, Telegraph Hill, North Beach, Financial District, North Waterfront, Downtown, Van Ness/ Civic Center, Tenderloin

District 9 (East): SoMa, South Beach, Mission Bay, Potrero Hill, Dogpatch, Bernal Heights, Inner Mission, Yerba Buena

District 10 (Southeast): Bayview, Bayview Heights, Excelsior, Portola, Visitacion Valley, Silver Terrace, Mission Terrace, Crocker Amazon, Outer Mission

Some Realtor districts contain neighborhoods that are relatively homogeneous in general home values, such as districts 5 and 7, and others contain neighborhoods of wildly different values, such as district 8 which, for example, includes both Russian Hill and the Tenderloin.

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Prices Cycles and Trends in SF Real Estate

Of Seasons, Factors, Prices, Cycles & Trends
in San Francisco Real Estate

July 2014 Mid-Year Market Report by Paragon Real Estate Group

After perhaps the most frenzied market since the gold rush this past spring, in this mid-year report, we’ll step back and look at the San Francisco homes market from a variety of angles. The market typically slows during the summer months due to vacations, family stuff and buyers being exhausted by the spring market. None of which necessarily means that summer might not be a good time to act, since whether buying or sSpringtime Market Dynamics

Springtime Market Dynamics

Why has spring seen such ferocious markets these past few years? Buyers have been jumping aggressively back into the market much earlier in the year and in much greater numbers than sellers, creating a fierce high-demand/low-supply dynamic that fosters competitive bidding. This chart tracks the median house sales price by quarter.

Spring_Median-Price_Jumps

Though there is no doubt that this past spring saw significant jumps in home values, median sales prices are also affected by other factors besides straightforward increases in value, such as seasonality, inventory available to purchase, interest rates and surges in new construction sales and luxury home sales. (See the luxury sales chart later in this report.)

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Market Cycles

This chart is a simplified, smoothed-out and very approximate look at real estate cycles in San Francisco, illustrating estimated percentage changes in home prices from peak to bottom to peak. The years between these high/low points are depicted here as straight lines, which does not reflect the bumpy reality. This is from our article on underlying factors behind current market conditions (recently featured in the Chronicle business column, “The Bottom Line”): Supply, Demand, Money and Demographics

Case-Shiller_Simpl-Percentages

And as a comparison to the simplified overview above, below is a look at actual average dollar-per-square-foot house values over the last 20 years in the northern Pacific Heights-Marina District of San Francisco. This very expensive area fell less in value than the city as a whole after the 2008 financial markets crash, and since the recovery began has surged well above its previous peak values of 2007.

District_7_SFD-AvgDolSqFt_by-Year

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Sales Prices above List Prices

The large majority of SF home sales this past spring sold quickly, without price reductions and for over asking price. This chart breaks down, by neighborhood, the average percentage over list price those homes sold for: Historically speaking, these are astounding percentages. This statistic will also be affected if large numbers of agents adopt a strategy of underpricing their listings to artificially boost demand. Note that the South Beach-Yerba Buena-Mission Bay district has by far the most listings and sales in the city, and that relative abundance of inventory affects this statistic.

SP-OP_by_Neighborhood

And this chart is an overview of San Francisco’s trend on a month by month basis.

SP-OP_Percentage-Over_Trend-B

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Median Prices by Neighborhood

Comparative values for 3-4 bedroom houses and 2-bedroom condos with parking.

Median_Price-3-4BR-SFD_Comp

Median_Price-2BR_Condos_by-Neighborhood

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San Francisco Luxury Home Market

This last spring saw the highest volume of SF luxury home sales in history. We just updated our report on this market segment, which was featured on KGO Radio and the front page of the Chronicle’s business section. Below are 2 charts, but the full report can be found here: Luxury Home Report

LuxHome_Unit_Sales_by_Qtr

Lux-SFD_Sales_2m-plus

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Average Dollar per Square Foot

Comparative dollar per square foot values by neighborhood and property type.

AvgDolSqFt_by-Neighborhood_Comp

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District Home Sales by Price Range

These are 2 of 14 charts in a full analysis of San Francisco home sales by price range, property type and neighborhood, which gives an idea of the actual sales behind overall median sales prices. The full report is here: District Sales Breakdowns

District_5-Price-Range

Potrero-Bernal-Mission-Price-Range

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Months Supply of Inventory, Average Days on Market
& Inventory-Level Trends

Several standard statistical measures of market strength have hit historically low points in the past few months. (Low points = extremely high demand coupled with extremely low supply, which is the classic cause of rising prices.)

MSI-SFD-Condo-Co-op

DOM_Blended_SFD-Condo-Coop_Month

 

2011-2014_FS-New_Qtr-Comp

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Trends in Home Sales by Property Type

Comparing the percentage make-up of San Francisco home sales – house, condo, co-op, TIC and multi-unit properties – between 2008 and 2014: condo sales are way up due to extensive new construction over the past 10-15 years, house sales (as a percentage of total sales) are somewhat down as very few new houses are built in the city, and TIC sales are way down due to political and financing issues.

Prop-Type_Percentages-Changes

Neighborhood Map & Realtor Districts

For your convenience, below is a map of San Francisco neighborhoods and a breakdown of neighborhoods in each Realtor district.

San_Francisco_Neighborhood_Map

SAN FRANCISCO REALTOR DISTRICTS

District 1 (Northwest): Sea Cliff, Lake Street, Richmond (Inner, Central, Outer), Jordan Park/Laurel Heights, Lone Mountain

District 2 (West): Sunset & Parkside (Inner, Central, Outer), Golden Gate Heights

District 3 (Southwest): Lake Shore, Lakeside, Merced Manor, Merced Heights, Ingleside, Ingleside Heights, Oceanview

District 4 (Central SW): St. Francis Wood, Forest Hill, West Portal, Forest Knolls, Diamond Heights, Midtown Terrace, Miraloma Park, Sunnyside, Balboa Terrace, Ingleside Terrace, Mt. Davidson Manor, Sherwood Forest, Monterey Heights, Westwood Highlands

District 5 (Central): Noe Valley, Eureka Valley/Dolores Heights (Castro, Liberty Hill), Cole Valley, Glen Park, Corona Heights, Clarendon Heights, Ashbury Heights, Buena Vista Park, Haight Ashbury, Duboce Triangle, Twin Peaks, Mission Dolores, Parnassus Heights

District 6 (Central North): Hayes Valley, North of Panhandle (NOPA), Alamo Square, Western Addition, Anza Vista, Lower Pacific Heights

District 7 (North): Pacific Heights, Presidio Heights, Cow Hollow, Marina

District 8 (Northeast): Russian Hill, Nob Hill, Telegraph Hill, North Beach, Financial District, North Waterfront, Downtown, Van Ness/ Civic Center, Tenderloin

District 9 (East): SoMa, South Beach, Mission Bay, Potrero Hill, Dogpatch, Bernal Heights, Inner Mission, Yerba Buena

District 10 (Southeast): Bayview, Bayview Heights, Excelsior, Portola, Visitacion Valley, Silver Terrace, Mission Terrace, Crocker Amazon, Outer Mission

Some Realtor districts contain neighborhoods that are relatively homogeneous in general home values, such as districts 5 and 7, and others contain neighborhoods of wildly different values, such as district 8 which, for example, includes both Russian Hill and the Tenderloin.

 

 

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New Construction Is Transforming San Francisco

June 2014 report by Paragon Real Estate Group

The construction boom that ended in 2008 changed the city and its housing market. Condos now outsell houses in San Francisco. The South Beach-Yerba Buena zip code, previously a commercial area filled with parking lots, now has SF’s highest median household income. Mission Bay was born. And our skyline has been altered with dramatic, new high-rises like the Infinity Towers and Millennium.

That boom died with the 2008 market crash. But now with the city’s economy, employment, population, rents and home prices all surging to new heights, new home construction is booming again.

Will increasing numbers of newly built condos and apartments cool our overheated real estate market? One would think it would have to – eventually. But the large projects announced weekly can take years to turn into actual housing units. What if local high-tech industry, jobs and housing demand continue to grow alongside increasing supply? And our financial and real estate markets are influenced by so many complex, fluctuating economic, political and even natural-event factors, that it is very difficult to make meaningful predictions (despite how much “experts” love to make them).

One thing we can predict: San Francisco will continue to change in unexpected ways, and it will remain an extraordinary place to call home.

Premium Values for New Construction 
New-Condo_Premium_AvgDolSqFt
Much of the city’s new construction is occurring on parcels that were previously commercial-industrial, often on busy urban streets and/or in relatively neglected sections of the city – places that not so long ago might have been considered subprime locations for residential development. That has flipped 180 degrees: Wherever they are, most of these new projects are selling for prices rarely, if ever, seen before in their respective neighborhoods and bringing in new populations of typically young, affluent buyers. For good or ill, or both, depending on how you feel about this phenomenon, these developments are altering the cultures, demographics, commercial districts and home values of the neighborhoods they’re sprouting up in. 

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San Francisco’s Most Expensive Condo Buildings

Condos_Most-Expensive-Buildings

Perhaps the biggest common denominators of these properties are dramatic architecture, full service amenities (doormen and such), and the prevalence of spectacular views from many of the units. Eight of these properties didn’t even exist before 2000 and now they dominate the list of most expensive condo buildings in the city. Of course, excluding smaller buildings with only a sale or two per year rules out the vast majority of condo buildings in older neighborhoods, but it’s still astounding to see the impact of the previous construction boom on this market segment.

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Luxury Condo, Co-op & TIC Sales by Neighborhood

Condo-Sales_1500k-plus
Even though the newer South Beach-Yerba Buena district dominates the list of most expensive condo buildings, older-prestige neighborhoods such as Pacific Heights and Russian Hill still have more luxury condo sales – for the time being. Though there is the odd high-rise, they’re typically in smaller, older (though beautiful) buildings, with a completely different architectural feel from the developments of the last 10 – 20 years.

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Condo Values by Era of Construction

AvgDolSqFt_Condo-by-Era-Built
The first golden age of SF apartment buildings – some of which were turned into condos and many of which remain rent-controlled apartments – was from 1920 to 1940: The units in these buildings are large, light, gracious and filled with elegant detail. Pacific Heights, the Marina, Russian Hill and Lake Street are filled with these buildings. Though there are beautiful apartments built in other eras (Edwardian flats, Art Deco apartments), the second golden age really arrived with the latest burst of new-condo construction since 2000: These units are ultra-modern and feature highest quality finishes and amenities. They are exemplified by the luxury, full-service high-rises of the South Beach-Yerba Buena area, though variations on this theme, in non-high-rise form, have been springing up all over the city. As seen in this chart, they command a premium in dollar per square foot value.

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Condo Sales Volume by Neighborhood

Condo-Unit-Sales_by-District

A residential district that didn’t even exist 20 years ago now dominates condo sales in San Francisco (and there are big, new projects still under development there). To a large degree due to the availability of large, developable (previously commercial) lots and higher-density zoning, new housing construction is now concentrated in areas such as the Market Street and Van Ness corridors, SoMa, the Mission, Hayes Valley, Dogpatch and Hunter’s Point – and often in previously neglected or distressed corners of such areas.

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San Francisco Demographics

Income, Age, Homeownership & Foreign-Born Population by Zip Code

SF_Zip-Income
We recently completed a study of San Francisco’s changing demographics by zip code and this is one of 7 charts and tables assessing income, age, education and other issues. This report has recently been featured in many local media outlets such as the Chronicle’s website, SFGate.com (where it became the most popular article of the day). We found it to be fascinating information and the full analysis can be accessed via this link: San Francisco Demographics Report

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San Francisco Median Home Price Trends

1993-2010_SF_Median_Sales_Prices
A glance at the last 20 years of San Francisco median home prices for houses, condos and TICs: Our recovery since 2012 has made up all the lost ground from the 2008 crash, and then some. Note that median prices are often affected by other factors besides changes in existing home values – new-construction condos hitting the market in large quantities, for example – and should be considered as generalities only. Still, the overall trend lines do illuminate the recent cycles in the city’s housing market. TICs are a relatively small portion of the market and their huge 2014 YTD surge should be taken in context: Just deleting 8 extremely expensive sales at 1100 Sacramento on Nob Hill drops the TIC median price by almost $50,000. read more →

San Francisco Demographics by Zip Code

A statistical breakdown by household income, education, homeownership, foreign-born population, household size, age and other criteria.
June 2014 Report
The below charts and table are based upon U.S. Census surveys from 2010 – 2013. Please note that zip codes often contain neighborhoods of widely different demographics. For example, 94115 includes Pacific Heights, one of the most affluent areas of the city, as well the Western Addition, which is much less affluent. A number of SF zip codes are like this and when mixing very different neighborhoods together, you often end up with statistics that don’t really apply to any of them. Zip codes are relatively blunt instruments for demographic investigation, but we still found the analysis to generate interesting, new insights into San Francisco, our ever-changing city. Each chart illustrates the data for 10 to 12 SF zip codes. Below the charts is a complete table of all the data collected. The neighborhoods associated with zip codes in the charts and table below are simply representative labels; other neighborhoods are contained within each zip code and many are divided between two or more zip codes.
Median Household Income 
Many factors impact this statistic: household size, level of education, percentages of homeowners vs. renters, whether the rental units are subject to rent control, median resident age, quality of housing, and cost-of-housing issues besides rent control. The South Beach-Yerba Buena zip code takes top place for median household income in San Francisco. Interestingly, it is at the bottom of the ranking for average household size. This zip code is dominated by newer condo projects, many of them at the top of the price scale and the rental units here, which make up over half the housing, are typically not under rent control. The second ranked zip code for income is quite different: the St. Francis Wood-Miraloma Park area has a completely different ambiance, very few condos or renters, older residents and bigger households. And number 3 is the Presidio Trust zip code with no homeowners, all renters but no rent control, and younger residents than either of the first two. All 3 of the top zip codes, however, have very high percentages of residents with bachelor’s, graduate and professional degrees.
SF_Zip-Income
Foreign-Born Percentage of Population  Of major metro areas, San Francisco ranks 4th in the country in percentage of foreign-born residents. In three of the city’s zip codes, foreign-born residents constitute a small majority.
Zip-Code_Foreign-Born
Residents with Bachelor’s, Graduate & Professional Degrees  San Francisco ranks 2nd in the country for percentage of residents with bachelor’s degrees and ranks 3rd for percentage of residents with graduate or professional degrees. Not surprisingly, when looking at zip codes, educational attainment and household income typically go hand in hand.
Zip-Code_Education-Degrees
Percentage of Housing Units Owner-Occupied  San Francisco has approximately 70% more housing units occupied by renters than by homeowners. By zip code, homeownership percentages in the city range from 0% (100% renters) to over 80%.
Zip-Code_Homeownership
Average Size of Household  San Francisco has the lowest percentage of children of any major U.S. city and 38% of residents live alone. This brings the city’s average household size down, however the statistic varies widely by zip code, ranging from 1.6 to 3.6 residents per household.
Zip-Code_Household-Size
Median Age of Residents 

The youngest zip codes in San Francisco are those that are 100% rental: the Presidio and Treasure Island. The oldest zip code is the area of the North Waterfront and Barbary Coast, just north of the financial district along the Embarcadero. Second oldest is Chinatown (47 years) and the third oldest is the St. Francis Wood-Miraloma Park area. 
Zip-Code_Avg-Age

Median sales prices and dollar per square foot values may be affected by number of diverse factors, 
and how they apply to any particular property is unknown without a specific comparative market analysis. 


Zip Code Demographics Data Table 

Zip codes in the table below are in order of median household income. 
Zip-Code_Demographics_Table_Complete
SF_Zip-Code_Map

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Of San Francisco Real Estate Gold & Apple Stock

May 2014 Report

On January 1, 2012, you woke up to find $200,000 on your bedside table, which you decided to invest. Then, on May 2, 2014, you sold your investment. Below are approximate returns depending on where you placed your cash.

Investment-Return_RE-vs-Stock

Assumptions:

Gold: you bought at $1566 per ounce and sold at $1300 per ounce: Bad timing.

Certificate of Deposit: 1% annual interest rate; interest taxed as ordinary income: It seemed like the safe thing to do in an uncertain world.

Stock purchases: Apple stock jumped 46% and the S&P 500 50%; plus an estimated dividend yield of 5%; profit taxed as long-term capital gains. (No transaction costs included in calculation.)

Home purchase: $200,000 down-payment on $1 million home; 35% home-price appreciation per Case-Shiller; 2% closing costs on purchase and 7% on sale deducted from gain. No capital gains tax due to the $250,000/$500,000 exclusion for sale of primary residence. The estimated $28,000 reduction in loan principal was not included in gain, as it pertains to monthly home payments made after initial investment.

It is assumed that the net monthly home cost – principal, interest, property taxes and insurance, after tax deductions and reduction in loan principal – at an estimated $3250/month, was comparable to cost of renting. This has generally been true in San Francisco due to high rents and low interest rates.

There are 3 big reasons why real estate dramatically outperformed the stock market, though both markets boomed: 1) leverage – 35% home-price appreciation equals 175% appreciation of your 20% cash down-payment (before closing costs); 2) big tax deductions subsidize home ownership costs, and 3) the capital gains exclusion on the sale of a primary residence.

Important: Timing is everything in investing. In this analysis, the chosen buy date was January 2, 2012 when the financial and housing markets were poised for big rebounds. Picking a different purchase date, such as January 2, 2008, would completely alter the results. *

SP-OP_DOM_by-MonthWhite Hot Spring Market
The hotter the competition between buyers, the higher home prices are bid up. The great majority of SF home listings are selling quickly and for over – sometimes far over – asking price.

This link charts the trend over the past 2+ years.
Sales Price over List Price Trend

 

Paragon-Survey_Home-BuyersCurrent Buyer & Seller Dynamics
Since Paragon does so much business in San Francisco – our Van Ness branch represents more successful SF home-buyers than any other office – we surveyed our agents on what they were seeing in the market. This chart looks at buyers, and this link goes to our full survey report:
Paragon Agent Survey

 

 

New-Home_ConstructionNew Housing Construction
A look at the ebb and flow of new housing development in the city – which is generally very inadequate to growing demand.

And this link looks at the “pipeline” of projects under construction or planned for future years:
New Homes Pipeline

 

 

Ranking_San-Francisco_4-14Ranking San Francisco
On a lighter note, we recently collected rankings by dozens of “authorities” – some more reliable than others – regarding San Francisco. This link goes to the full list:
The Full Ranking Report

 

 

Invest_SF-Rents_by-NeighborhoodApartment Building Market Report
We just issued our quarterly update on Bay Area residential investment real estate. This chart looks at current asking rents by neighborhood, and this link goes to the full report:
Paragon Apartment Update

 

 

Since opening our doors in 2004, the Paragon Community Fund has donated over $500,000 to local charities and social services. The San Francisco Bay Area isn’t just where we do business; it’s our home and our community.

* The investment analysis above is simply one scenario based on specific circumstances. It was performed in good faith, but may contain errors or assumptions you may disagree with, or may not apply to your specific tax situation. Investment and tax issues should be investigated with a qualified accountant or financial planner.

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Prices Jumping Across San Francisco

April 2014 Real Estate Market Report
The San Francisco real estate market grew increasingly frenzied as the first quarter of 2014 progressed, leading to another surge in home prices in virtually every neighborhood in the city. The high-demand/ extremely-low-inventory/ competitive-bidding situation is similar to what occurred first in spring 2012 and then, to an even higher degree, in spring 2013. After the market seemed to stabilize in the second half of last year, we didn’t expect to see it turn this fierce in early 2014, but right now it appears to be every bit as ferocious as last spring’s.

Of major metro areas, the new Gallup-Healthways survey ranked SF-Oakland second in the nation (behind San Jose-Santa Clara) on their index for “well-being.” Though already the second most densely populated city in the country (after NYC), San Francisco simply has many more people wanting to live here than there are homes available to rent or buy.

Sales over Asking Price
The heated competition for new listings coming on market has resulted in an astounding percentage of sales occurring above, and often far above, list price.

1
This chart below breaks down, by neighborhood, the average sales price to list price percentage for the 90% of homes selling without price reductions. Of the areas assessed, Bernal Heights came out on top with sales prices averaging an incredible 21% over list prices over the past 2 months. 
2
Median Sales Price Spikes
Typically, the first quarter of the year does not show a dramatic increase in median sales prices over the previous quarter – in fact, a decline in not unusual due to holiday market dynamics. But the first quarter of 2014 saw large spikes in median prices for both houses and, especially, condos in San Francisco.

This next chart is a look at quarterly median price appreciation over the past 3 years.

3
Longer-term trends: While virtually the whole country has been experiencing a large market rebound, San Francisco, because of our particular economic circumstances, is generally outperforming almost every other market area. The big exception is Silicon Valley, whose high home appreciation rate is being driven by many of the same employment and demographic causes as here in the city.
4
Far Too Little Inventory

When the market recovery began in earnest in early 2012, there were complaints of a shortage in inventory. In 2013, the market grew even more heated and supply declined further to what felt like desperately low levels. Now in 2014, amid no lessening of demand that we perceive, the supply of SF homes available to purchase has dropped again.
There are increasing numbers of new-construction housing units coming on market – and many more being planned and built – but so far they’re being snapped up, at very high prices, without noticeably altering the supply and demand dynamic.

5
Listings Selling Faster than Ever
6
San Francisco Neighborhood Snapshots
We updated analyses for a number of city neighborhoods with enough sales for quarterly data to be meaningful. In every district we looked at, there were significant spikes in median sales prices and/or average dollar per square foot values in the quarter just ended.

Below are two samples, but our full collection of long-term neighborhood analyses can be found here (some updated through the first quarter, others through the end of 2013):
San Francisco Neighborhood Values

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Affordability by Neighborhood
We broke the city down by neighborhood according to the number of house and condo sales in each price segment. Below are 3 analyses from our 11-chart report, which can be found in its entirety here:
Where Can I Afford to Buy in San Francisco

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Paragon Featured in New Ranking Report
The new RealTrends 500 report ranking the sales statistics of the 500 largest residential brokerages in the country for 2013 sales was just published. After 10 years in business, Paragon came in #3 in average sales per agent and #4 in average sales price in the national ranking.

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Neighborhood Affordability in San Francisco

Where You Can Buy for the Money You Want to Spend

San Francisco Home Sales by Neighborhood

You want to buy a house in San Francisco for under a million dollars, or for over $2 million, or you have $1,800,000 to spend on a luxury condo with a spectacular view. If you’re buying a house in San Francisco, your price range effectively determines the possible neighborhoods to consider. That does not apply quite as much to condos and TICs, except for sales in the luxury segment: generally speaking, in neighborhoods with high numbers of condo and TIC sales, there are buying options at a wide range of price points, though, obviously, size and quality will vary. Also, all the new condo projects being built in many different areas of the city is changing the neighborhood pricing dynamic for condos.

For your convenience, a neighborhood map can be found at the bottom of this report.

The charts below are based upon sales reported to MLS in the 12 months between March 1, 2013 and February 28, 2014. We’ve broken out the neighborhoods with the most sales within given price points. There are exceptions to neighborhood norms scattered throughout the city and in an appreciating market these price ranges having been moving upward.

Buying a House for Under $1 million in San Francisco

Out of the approximately 2635 house sales in the past year, about 50% sold for under $1 million. The vast majority of these sales occur in a large swath of neighborhoods forming a giant L shape, down the west side of the city, from Outer Richmond to the border with Daly City, and then sweeping east across the southern side of San Francisco to Bayview and Hunter’s Point. Generally speaking, the western and central-ish neighborhoods cost more than the southern neighborhoods in this under $1m house market.

Houses in these neighborhoods began their recovery from the market downturn a step or two behind more expensive areas in San Francisco, but now the markets here are red hot and very competitive, and home prices are under very strong upward pressure.

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Houses for $1 Million to $1.5 Million

In this price point, one moves into a big circle of neighborhoods in the middle of the city plus the Richmond District in the northwest. Within this circle, one will typically get significantly more house for one’s money in the Sunset, Central and Outer Richmond, Miraloma Park or Bernal Heights than in Glen Park or Potrero Hill, or especially, Noe or Eureka Valley.

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Houses for $1.5 million to $2 million

As the price range goes up, the number of sales begin to narrow. The neighborhoods in this house price range are similar to the previous range, but sales predominate in central Realtor District 5, which comprises the greater Noe- Eureka-Cole Valleys area. District 5 has been a white hot market for the last two years and competition for homes here is ferocious.

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Buying a Luxury Home in San Francisco

Rather arbitrarily, houses selling for $2 million and above, and condos, co-ops and TICs selling for $1.5 million and above are designated as luxury home sales in San Francisco: these homes now make up about 14% of total home sales (up from about 10-11% a few years ago). Once again, what you get in different neighborhoods for $2 million can vary widely – a large, immaculate house in one place, a fixer-upper in another.

Luxury home sales in San Francisco are dominated by the swath of established, prestige northern neighborhoods running from Sea Cliff through Pacific Heights and Russian Hill to Telegraph Hill, by the greater Noe-Eureka-Cole Valleys district, and, to a lesser extent, the smaller neighborhoods around St. Francis Wood. For luxury condos, the greater South Beach-Yerba Buena-Mission Bay area has a large and growing presence as big, expensive condo projects have sprouted there over the past 15 years.

Luxury Condo, Co-op and TIC Sales

As one can see, no area has more luxury condo, co-op and TIC sales overall than the Pacific Heights-Marina district, but the Russian Hill-Nob Hill-Financial District area has more sales of $2 million and above, and again the South Beach-Yerba Buena area is the fastest growing luxury condo market and will probably take first position in the not too distant future. The average dollar per square foot values for luxury condos in the major neighborhoods below run $918 in the Noe, Eureka and Cole Valleys district, $961 in the Pacific Heights-Marina district, $1147 in the Russian-Nob-Telegraph Hills district, and $1229 in the greater South Beach-Yerba Buena area (think newer construction, high floor units and spectacular views).

With the construction of new high-end, high-tech-amenity condo projects on Market Street and Van Ness, and in neighborhoods like the Inner Mission, Hayes Valley and Inner Richmond — often selling for more than $1000 per square foot — luxury condos are now spreading into new areas of the city.

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Luxury House Sales in San Francisco

It wasn’t so long ago that houses selling in Realtor District 5, the greater Noe/Eureka/Cole Valleys area (which includes Clarendon, Corona and Ashbury Heights), for over $2 million were an exception. But that is certainly not the case any longer. If we looked closer at the sales in the $2 million to $5 million, we’d find the higher end of the range dominated by Realtor District 7, the Pacific Heights-Marina area, the most expensive house market in the city. Though District 5 does see sales in the $3.5 to $5+ million range, most of its luxury houses sell between $2 million and $3.5 million. There are several other significant areas for these high-end houses, such as Lake Street/Sea Cliff, St. Francis Wood/Forest Hill and Lower Pacific Heights.

Most luxury houses in the city were built in the period between 1905 and 1950, reflecting the era of construction dominating these neighborhoods of San Francisco — and a gracious, elegant era it was. However, there are a small number of big, new houses built each year, as well as some beautiful fifties houses scattered here and there, and, of course, many of the older houses have been extensively renovated over the years.

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And, as illustrated below, at the very top of the luxury house market, the district of Pacific & Presidio Heights, Cow Hollow and Marina completely dominates sales. Here mansions can sell for up to $20 million or $30 million. Houses in Russian Hill are also exceedingly expensive, but there are very few houses in that area: Russian & Nob Hills are dominated by high-end condos and co-ops. Two additional house sales (both listed by Paragon) in the $5 million to $7 million range closed in Noe Valley in the first half of March 2014 (after the time period of this analysis) — another indication of what’s happening there, often driven by young, high-tech wealth. It should be noted that a fair percentage of these ultra high-end home sales occur privately, outside of MLS, and are not reflected in this chart.

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San Francisco Neighborhood Map

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March Newsletter: Price Pressure Builds Once Again

March 2014 Report

Upward pressure on home prices is based on one basic dynamic: more demand than there is supply to satisfy it. Various factors can supercharge demand, such as extremely high rents and low interest rates, which make homeownership more attractive, as well as a sudden, large influx of new, affluent buyers (our high-tech boom) piling into what is basically a relatively small, inventory-constrained market. When there are 5, 10 or sometimes 20 qualified buyers chasing after every attractive, reasonably priced, new listing, prices typically go up, sometimes quite quickly.

Last year, after the spring feeding frenzy, the market generally stabilized through the end of the year: It continued to be a strong market by any measure, but prices mostly plateaued, albeit often at new peak levels. We recently speculated on tentative signs that suggested a further market normalization, but now the indicators are pointing in a different direction. The inventory of homes available to purchase on any given day is even lower than before last year’s furious market; buyer demand has emerged from its midwinter hibernation like a hungry bear; and prices are under increasing pressure once again.

The spring selling seasons of 2012 and 2013 saw huge spikes in home price appreciation. Now we enter the third spring since our market recovery began in earnest, and the desire to live in our small, beautiful, expensive city continues unabated. We shall see how it plays out in the coming months.

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Median Sales Prices: Heading Up Again
There is an aspect of seasonality to median home prices – typically up in spring, down in summer, up in autumn, down during the holidays — which explains some of the fluctuations seen on this chart, though the upward trend since 2012 began is very clear. It’s common for median prices to fall in January and February: This reflects offers accepted during the holiday season, when the higher end of the market often checks out. But not in 2014: median sales prices for houses and especially condos jumped dramatically in the past two months, which may suggest another white-hot spring market. Note that median sales prices are often affected by other factors besides changes in values, such as inventory, and longer term trends are much more meaningful than short term fluctuations.

This link below illustrates the longer-term trend in median sales prices in San Francisco for houses, condos and TICs, by year since 1993:
Longer Term Trends

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3-Bedroom House Values by Neighborhood
This is one of 8 updated tables on San Francisco home values by median and average sales price, and average dollar per square foot. The full analysis looks at houses, condos and TICs by neighborhood and number of bedrooms throughout the city and can be found via this link below. All general statistics typically disguise a huge variety of values in the underlying individual sales, but can give a good idea of comparative home values.
Full Report

 

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2-Bedroom Condo Values
2-bedroom condo values by median and average sales price, and average dollar per square foot, sorted by neighborhood. Again, the full report can be found here:
Full Report

 

 

 

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Sales Price over Asking Price: A Sudden Spike
Last month, we pointed to the decline in the percentage of sales price over list price for homes selling without price reductions in December and January as a possible indication of a cooling market. February completely reversed that trend (though one should never make too much of one month’s data).

5Home Values around the Bay Area
This map illustrates overall median sales prices for houses in cities all over the Bay Area. In San Francisco, median prices by neighborhood can vary from under $500,000 to over $4,000,000; other cities will often display a similarly wide range of home prices in different neighborhoods.

 

 

 

 

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Sales by Property Type: Condos Up, TICs Down
As shown in this first chart, condo sales now outnumber house sales, a trend that will only continue to accelerate as new condo developments are built. Very few new houses are built in San Francisco and they generally simply replace older homes.

This link illustrates the decline in sales for TICs and 2-4 unit buildings, which is occurring due to a variety of factors, including financing issues, rental units converting to TICs, TIC units converting to condos, and complex tenants’ rights and eviction issues.
TIC & 2-4 Unit Building Sales

8Case-Shiller Price Trends by Price Segment since 2000
All numbers relate to a January 2000 value of 100: A reading of 182 signifies a home value 82% above that of January 2000. These 3 charts illustrate how different market segments in the 5-county SF metro area had bubbles, crashes and now recoveries of enormously different magnitudes, mostly depending on the impact of subprime lending. The lower the price range, the bigger the bubble and crash. The upper third of sales by price range (far right chart) was affected least by the subprime fiasco and has now basically recovered peak values of 2006-2007. In the city itself, where many of our home sales would constitute an ultra-high price segment, if Case-Shiller broke it out, many of our neighborhoods have risen to new peak values. The lowest price segment (far left chart), more prevalent in other counties, may not recover peak values for years. If one disregarded the different bubbles and crashes, home price appreciation for all three segments since January 2000 is almost exactly the same, in the range of 75% to 82%.

A more detailed report on the Case-Shiller Home Price Index can be found here:
Case-Shiller Index Report

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Tentative Signs of a Shifting Real Estate Market

February 2014 San Francisco Market Report

It is far too early in the year to reach definitive conclusions regarding substantive changes in the market, but there are indications of a number of shifts. From the hurly burly on the street, the word is that the quantity of offers coming in on new listings is declining. Where a new listing might have attracted 10 or 12 offers last spring, 3 or 4 are coming in now; where 3 or 4 offers would have arrived, the seller is getting 1. And, according to Broker Metrics, for every 2 listings that accepted offers in December and January, another listing expired or was withdrawn without selling.

The amount of competition deeply affects home price increases.

There are still a very large number of buyers looking at listings online and at open houses. But more of them appear to be first-time buyers and they are proceeding more cautiously. Some buyers are burned out on the multiple-offer bidding frenzies of last year and are reluctant to participate in them. Though the market remains hot by any reasonable standard, by some statistical measures it is cooling. This may reflect a transition or only a lull before the spring sales season begins.

Recently, the investment-property analysis firm Reis speculated that SF apartment-rent growth — which has been extraordinary by any measure, especially in a period of low inflation — will slow despite intense demand and very low vacancy rates, simply because people can’t pay any more. It’s an idea which may or may not be correct or apply to other types of housing costs. Rent rates do play a role in purchase prices as buyers often compare the net housing costs of the two options.

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Median Sales Price Appreciation by Neighborhood

In San Francisco, some of the most affluent neighborhoods — such as the Pacific Heights-Marina district and the Noe, Eureka and Cole Valleys district — started their recoveries in the second half of 2011, well before virtually every place else in the city or country. When 2012 began, prices in these districts soared, while other areas played catch up. In 2013, that dynamic flipped: Appreciation rates in comparatively less expensive neighborhoods surged, while slowing in the most affluent areas.

A big part of this is simple affordability: Priced out in one neighborhood (or city), buyers focused on others, similar in ambiance but less costly. Home prices there looked so good in comparison that buyers were willing to bid them up. The huge decline of distressed sales in areas severely affected, such as in Bayview, has had an outsized effect on median sales prices there. Continuing gentrification, as in the Mission, and increasing “luxury” condo construction in less affluent areas have also played parts in this trend. It’s not as if demand plunged in the Pacific Heights-Marina district (or Noe Valley, for that matter). Quite the contrary: its 9% appreciation rate in 2013 translated into the city’s largest median price increase in dollar terms ($300,000). However, in the previous year, this district saw year over year median price appreciation of 25%.

Note that median price appreciation does not perfectly correlate to changes in home values, as it can be affected by a variety of market factors. It does give an approximate sense of market trends.

2Percentage of Sales Price above Asking Price
As the market turnaround began in earnest in early 2012, two trends emerged: 1) increasing percentages of sales without any previous reductions in list price, hitting a whopping 90% of sales in May 2013, and 2) sales prices exceeding asking prices by escalating percentages, hitting an incredible average of 9% over list price in June of last year. Both of these highs reflect the ferocious spring 2013 market frenzy. Since then, these statistics dropped, stabilized and have now dropped some more. One shouldn’t make too much of a month or two of data, and it must be noted that the January numbers — 81% of sales occurred before any price reductions, at an average of about 4% over list price — would signify a red hot market at any other place or time, but they are significant drops from those predominating last year. We won’t know whether it’s a seasonal blip or the beginning of a major shift until the spring selling season gets underway.

3Case-Shiller Home Price Index: 2012-2013 Appreciation
This chart is updated through November 2013, reflecting the last Index report published by Case-Shiller: It illustrates approximate Bay Area home price appreciation for higher priced homes, which San Francisco’s generally are, over the past 2 years. Spring 2012 and especially spring 2013 saw very large upswings in values, but prices then stabilized and basically plateaued since last summer began. Will this spring bring another increase in prices or has the market exhausted its appreciation momentum for now? We shall soon know. Note that chart numbers refer to January 2000 values designated as 100: 181 signifies home values 81% above that of January 2000.

This link goes to a chart looking at the past 18 years of home price appreciation, illustrating longer term cycles in real estate:
Case-Shiller Index since 1996

4Inventory of Homes for Sale
One thing that has not changed in the market is the very low level of homes available to purchase. Historically, inventory usually surges in spring, declines somewhat during the summer, jumps again in autumn (September is typically the single month with the greatest number of new listings) and then plunges dramatically for the holidays and mid-winter. Agents and buyers are desperately hoping for a major surge of new inventory in the next couple months. Generally speaking, low inventory puts upward pressure on prices when buyer demand is healthy.This link looks at Months Supply of Inventory. While still very low — anything under 3 months is typically considered a Sellers’ market — it is climbing. The lower the MSI, the stronger buyer demand is as compared to the supply of homes available to buy, and the more likely prices are to rise.
Months Supply of Inventory

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Updated Neighborhood Price Charts
We’ve updated long-term market value charts for several dozen San Francisco neighborhoods. This one is for Bernal Heights, a neighborhood which experienced feverish appreciation in 2013. This link below goes to the webpage containing all these neighborhood charts. Let us know if you can’t easily find one for the neighborhood or property type you’re most interested in.
SF Neighborhood Home Values

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Mortgage Interest Rates
Confounding “expert” predictions once again, interest rates in the first week of February fell to their lowest point in almost 3 months, though they were still about 1 percentage point above the historic lows of one year ago. Interest rates play an enormous role in homeownership affordability, and the incredibly low rates of recent years have been a significant factor in the market recovery. They are expected to rise, but then they were expected to jump to 6% or more in 2010 and fell dramatically instead. Where they will go this year is one of the wild cards of the real estate market.

Unusual Spike in Condo Median Sales Price

January is not a high-sales quantity month as its sales mostly reflect accepted-offer activity in December, the slowest month of the year, and monthly median price data is not that reliable as it can fluctuate without great meaningfulness. However, an odd data point came up for median sales prices in January: The median price for SF houses dropped an insignificant amount, from $938,000 in the 4th quarter of 2013 to $928,000 in January (down from a brief spike to $976,000 in the 2nd quarter). However, the median sales price for SF condos made a very big leap from $835,000 in the 4th quarter to $927,500 in January, the highest monthly condo median price ever. Of the 144 January condo sales reported to MLS as of 2/8/14, 45 sold for $1,200,000 or more. This is an unusually high percentage of high-end condo sales, especially for a January — January 2013 had 19 such transactions — and is probably just one of the anomalies we sometimes see in monthly sales data. (We much prefer longer-term data.) We’ll have to watch what happens in future months.

One can never take for granted exactly what is going to happen next in the San Francisco real estate market.

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