With the January inauguration of the new administration came a number of changes that have injected uncertainty into some important aspects of business which may have a ripple effect into the San Francisco real estate market.
The first change is the executive order to ban non-U.S. citizens entering the U.S. from certain countries. This caused an immediate employee travel ban by a several prominent San Francisco and Bay Area employers for employees potentially affected by the ban. Second came the announcement that the administration plans to double the qualifying salary threshold from $65,000 to $130,000 for an H-1B visa, making it much harder for employers to fill positions with foreign talent, a not insignificant source of employees in the high tech sector. Both of these injected uncertainty and potential business disruption into the Bay Area business community and both have received broad coverage in the business and general news, with some high-profile CEO’s speaking out against them because of fears of damage to their businesses.
On a stabilizing note, mortgage rates eased off just slightly (about 1/8 percent) in January. However, most lenders expect them to rise somewhat throughout the year, to around 5%.
The charts on the following pages graphically depict the same message we’ve seen for the past few years: San Francisco remains a strong single family home sellers market, with incredibly low inventory at 1.3 months, down 10% from January 2016. Median sales prices are up 7.1% year-on-year for single family homes. The median sales price of single family homes also continues to be bid up above list price, coming in at 105.9% for January.
Pretty much every article from respected economic sources is painting a rosy picture for the results of 2016 as well as the outlook for 2017, with a few caveats.
2016 saw unemployment fall in 271 of 387 urban markets while payroll jobs expanded in 303. Real GDP was revised upwards for 2016 by the Federal Reserve Bank in December to 1.9% and is projected at 2.2% for 2017.
However, it is difficult to predict how significantly some recent changes in economic and monetary policy and actions at the federal level will impact the economy in general and real estate specifically. The first change is the rapid rise in long term interest rates, which are up 0.5% since early November. The second is the dramatic appreciation in the value of the dollar in the same time frame, up 2.5% against the Canadian Dollar, 7.2% against the Euro, and 15.7% against the Yen.
How might these affect the real estate market in San Francisco and the Bay Area? Well, rising interest rates affect a lot more than just home mortgages. They dampen business investment and feed inflation. Rising inflation can have a damaging effect on the economy because it can become part of vicious cycle of rising interest rates fueling inflation which drives higher interest rates, and so on. We have been in that paradigm before and it can take a terrible toll on both the economy and real estate values. As interest rates rise, property values fall (as I discussed in our November report).
Right now, our economy is being driven mainly by strong consumer spending. And while there has been a lot of talk about big infrastructure spending by the new administration, any positive impact on the economy from that will be felt in 2018 and beyond. So, if consumer confidence weakens from concern over rising inflation, or if purchasing power erodes because of it, the economy will suffer.
The charts on the following pages graphically depict this message: San Francisco remains a strong sellers market, with incredibly low inventory of both homes and condos. Median sales prices ended the year up 8.2% for single family homes and down 7.7% for condo/lofts. At $1,300,000 and $1,011,000, respectively, both are below their peaks earlier in the year (October $1,402,500 homes; June $1,162,500 condo/lofts). However, given the incredibly low inventory, it is likely that prices will strengthen as the Spring selling season starts.
Furthermore, 2016 research from MGIC Connects shows single women representing the second-largest home-buying group, right behind married couples. This is even more impressive when you consider wage inequality, which is still a country-wide issue. In 2015, women made only 80 cents for every dollar earned by men working a comparable job-a gender wage gap of a shocking 20 percent.
So, women are kicking butt in the housing market. But who are these ladies? According to NAR’s 2015 Profile of Buyers and Sellers report, the median age of the single female buyer is 32 years old, and their median income is $49,000. But it’s not just 30-something ladies purchasing their homes solo, but baby boomers, divorced and out on their own, or downsizing from a family home they no longer need.
What’s in store for the future of female-owned housing? When you consider the consistent rise in the educated woman (meaning higher-paying jobs and more opportunities), well, things are looking pretty peachy.
Source: By Zoe Eisenberg, RISMedia read more →
Once upon a time, the neighborhoods west of Van Ness were full of Italianate Victorians with boxy frames but classy facades.
Then 1906 came along, and most of those Gold Rush and post Gold Rush-era homes went the way of so much rubble and kindling. Another sacrifice to the gods of tectonic upheaval.
But the prize home at 467 Oak, aka the Russell Warren House, endured; in fact, it has lasted through almost everything the city can throw at it since its original construction in 1875. (Or so; dating the place more precisely is tricky business.)
That makes it legitimately one of the oldest intact homes in San Francisco. Its latest challenge: Finding a buyer for the $1.95 million it listed for today.
Actually, the historic Oak Street home is a duplex, and if you’re a bit shy of a bit shy of $2 million, each individual unit is up for $979,000. The entire building last sold in 2004 for just over $1.1 million.
Russell Warren is the name of a noted New England architect most famous for his Greek revival homes in his native Rhode Island and surrounding states.
But, according to the paperwork filed in 1983, when the Russell Warren house made it onto the National Registry of Historic Places, we’re not talking about the same Russell Warren here.
Turns out an architect with the exact same name was working on the West Coast at the exact same time, responsible for three dozen San Francisco homes, mostly in this style
In fact, this was Warren’s own home at time. The ‘83 assessment called it “one of the best examples in scale and detail” of its style, and “recalling the glory of modified Renaissance and Mannerist Italian palaces.”
A more contemporary assessment—via the upstairs unit’s Airbnb ad for $125/night—notes its trendy Hayes Valley location and the old school charm of its chandeliers, crown moldings, and marble fireplace.
(Although someone did away with the lower flat’s marble hearth in the ‘40s. But since one generation’s practicality is another’s retro charm, the brick one they built in its place doesn’t look so bad either.)
And if potential buyers are looking for one additional plum, the listing notes that city law allows unique leeway for condo conversion of two-unit buildings.
Of course, the historic status of the old place would make that job order a bit harder to fill. But where there’s a will, there’s often a plausible route to entitlements.