A year ago, as San Francisco headed into 2013, its residential real estate market was firing on all cylinders and — sticking with the auto metaphor — there were no brakes. There were a few predictions of a crash, but those worries would not be realized. Instead, 2013 turned out to be a year in which the local market recorded new highs in housing prices and rental rates, and commercial development changed the skyline.
Time’s Christopher Matthews offered an assessment in November in which he asked whether certain U.S. housing markets were headed toward “Housing Bubble 2.0.” San Francisco appears third on his list of the “overvalued” markets, which could indicate a crash in the offing. Luckily, he threw water on his own fire by noting that the mortgage market is much more constrained than in the pre-Great Recession go-go days, and the degree of overvalue is less than in 2004.
So how did San Francisco perform in 2013? And specifically how did the City’s Northside do?
Starting with our neighborhoods, Frank Allen Realtors provides some helpful info guaranteed to deflate many hopeful homeowners. As of November 18, the median selling price for single-family homes for the previous 180 days was $2.41 million in the Marina, $3.58 million in Cow Hollow, $4.95 million in Presidio Heights, and a sinus-clearing $5.25 million in Pacific Heights.
Median selling prices for condos in the Marina for that same timeframe were $1.16 million, $1.07 million in Cow Hollow, $1.24 million in Pac Heights, and $1.78 million in Presidio Heights, according to that same Frank Allen source. Note that in this sample, 71 of the sales in the Marina over the past 12 months were condos, 33 were single family residences, 11 were tenants-in-common units, plus three each of three-unit and two-unit properties.
A few random statistics from Zephyr help fill in the details. It reports that, for example, the average days of a property on the market also varies greatly by neighborhood, with North Beach having 44 days and Presidio Heights having 56 days. Meanwhile the average price per square foot was highest (for a 90-day period in the fall) in Noe Valley at $2,678 (up 344.1 percent over the previous 90 days), but you could get a bargain in Glen Park for $343, according to Zephyr. Those numbers probably underscore the likely effects of individual sales that warp the overall averages; Noe Valley’s a great neighborhood, certainly, but it’s not that far out of whack; and this writer can attest to the many charms of his former neighborhood, Glen Park.
There have been numerous reports that prices have begun to moderate slightly in San Francisco, but that doesn’t mean they’re crashing by any means. According to Trulia, citywide average listing price as of early November was $1,534,456, which was down $87,688 (or 5.4 percent) from the week before. Yet the median sales price was $840,000, which was up $92,000 (or 12.3 percent) from a year earlier. Naturally, any such numbers can be affected by a few outsized sales, especially in a market with relatively few properties on the market, which remains the case in San Francisco.
In mid-November, Redfin reported the citywide median listing price was a lower-than-Trulia $849,000, at a median square foot price of $743, and purchasers paid 106.7 percent of the asking price. Trulia, Zillow, Redfin, and other services have different stats based upon the particular properties reported on their sites, but they are consistent in showing that the market remains strong, presenting a prime selling opportunity for owners and a challenge for buyers.
Paragon Real Estate Group reports that from May 1 to September 30, the most expensive house sales were in Pacific Heights, Presidio Heights, and Cow Hollow, with $4,775,000 as median sales price. If you’re looking to remain in Fog City but want to pick up a bargain, there’s Bayview’s $475,000 or Visitacion Valley’s $580,000 median prices. According to Pacific Union, for the entire first 10 months of 2013 (numbers weren’t in yet for the final two months), sales prices in the City were more than 100 percent of the asking price. That’s saying something, considering just last December 2012 sales prices were a reported 91 percent of asking prices.
Not surprisingly, San Francisco made the National Association of Realtors’ list of the five most expensive housing markets with an average price of $705,000, topped only by San Jose’s $805,000. You have to move all the way to San Diego, the fifth most expensive market in the entire country, to get below Bayview’s prices; San Diego’s median price was a reported $485,000.
The office Sector
Nationally, the commercial real estate sector experienced a good 2013 and expects that to continue into 2014, with office space and multifamily real estate doing quite well.
According to LoopNet, an online commercial real estate marketplace, San Francisco is a good place to be a commercial developer or landlord. Asking rents for office, industrial, and retail are all up noticeably from a year earlier, with average asking rents for office reaching $39.57 per square foot (up 1.1 percent over the past year), industrial asking rents at $15.54 (up 12.1 percent), and retail asking rents at $40.06 percent (up 8.6 percent), LoopNet reports.
Going more in-depth into the office market, we see a good snapshot of what’s happening overall to the San Francisco economy.
Matching available office inventory with the market need for commercial space can be as difficult as trying to fire an arrow accurately while running. When there is an economic downturn, demand for office space can disappear quickly; new companies are few and far between, some existing companies are driven out of business, and other businesses either cancel their expansion plans or cut costs by reducing the amount of space they lease. But in many ways, a downturn is the time to start the multi-year process needed to plan, get approvals, and build office space, because if a developer waits until the market is strong again before beginning the process, the new office space might come on the market after it has peaked and is headed back downward.
It won’t surprise anyone to report that the office market is currently strong, and neither will the reasons for that raise an eyebrow. “San Francisco County added 12,700 jobs year-over-year, while unemployment fell to 5.6 percent — well below the national average of 7.3 percent,” notes real estate services firm Jones Lang LaSalle in its 2013 third-quarter report. It’s not just Twitter and other social media companies behind the expansion; Jones says it’s also cloud computing and e-commerce companies.
In the first three quarters of 2013, total net absorption — the amount of inventory newly leased — reached 816,000 square feet of office space, and more than 200,000 sf of that was just involved in two large deals, according to Jones. Overall, the firm’s research office reports that office vacancy rates fell over the past year, as did the amount of new supply of office space. Against that background, two speculative developments broke ground, each expected to bring more than 100,000 square feet to the market, and Jones expected leasing activity to remain strong through the end of the year.