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Real Estate

House hunting sticker shock

Talk about sticker shock. Have you watched as someone from middle America sees San Francisco home prices for the first time? They about pass out. The people who already live here, and those from New York, are more accustomed to these prices. It’s the same with today’s foreign investors. Yes, San Francisco is a very expensive city in which to live and buy real estate, but there are many other cities that are just as expensive, if not more so.

Chinese investors generally think San Francisco is a good value and a great place to buy real estate. Londoners are used to much higher prices than here. New Yorkers experience prices as high and higher. But those coming from most of the rest of the United States are often taken aback.

Many times I have received calls from people planning to move here from elsewhere in America. They will describe their beautiful large home on several acres with a swimming pool and other amenities. I’ll ask what they expect to sell their home for, and they proudly reply, for example, $800,000 (large sums where they live). Then I will ask what they are looking for here. Often they want a large home, but understand they can’t have the acreage in the City. They want to spend what their house is worth in their home state, and when I tell them what they can get for that sum in San Francisco, they experience —you guessed it — sticker shock.

You may ask, why put such large amounts of money into a single home or asset? Well, history would suggest that it’s worth it. We just came through a terrible real estate downturn, experienced throughout the United States and abroad. When I say “we,” I mean San Franciscans, because we have come through it, while other areas and regions are still in recovery. Our home values are already at or above the height we experienced in 2006 and 2007. How can that be? We have very little land in San Francisco (remember, only seven miles wide by seven miles long), high demand (ours is a world-class city), and a number of strong industries that support our local economy (high tech, genetics, financial, tourism, and so forth). These combined factors generally make us “last in and first out” of any real estate downturns. I have personally seen this about a half dozen times.

Here are some encouraging facts: In 1993, the average single-family home price in San Francisco was $323,112. In 2003 it was $810,000. At the height of the market in 2007 it was $1,204,167. As of mid-2013, the average single-family home price is already up to $1,222,028.

This means if you purchased a home in 1993 for $323,112, that home is now likely worth $1,222,028, and that’s a profit of $899,916. I think any investor would consider that an excellent return on an investment and in the meantime you have had a home to live in — you can’t do that with stocks. So I think we can see that historically real estate has been a great investment in San Francisco, and all indications are that it will continue to be so.

Don’t let sticker shock be a deterrent to buying a home or investment property here. Examine the facts and decide for yourself.

Happy house hunting!

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Stephanie Saunders Ahlberg has been a real estate agent for over 30 years and joined Hill & Co. in 1983, where she has consistently been among the top 10 salespeople. She can be reached at www.realtyinsanfrancisco.com.

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