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Spring 2007 Issue
Market Update: Back in Business
By the time it's in the news, it's old news in San Francisco.
So when reports of a real estate slowdown had everyone quaking in '06 and some predicting precipitous drops in property values for '07, our market was already showing some of its old vigor. I felt something different as early as last December, and I thought, "everybody's back in." Was it a rash of New Year's resolutions to finally get into the housing market? Was it Mom and Dad's gifts to house-hunting children who needed a leg up? Or was it big year-end bonuses at work? Whatever it was or is, properties that are priced well and show well are drawing multiple offers again. A property in Noe Valley asking $1,150,000 recently drew 31 offers in one week and sold for over-asking at $1,500,000. Another home in the Inner Sunset received a whopping 52 offers. In my view, San Francisco is back in business.
As always, it's a case of supply and demand. You just can't replicate the charm and character of old houses in well-established neighborhoods. While South Beach is currently saturated with resales of one-bedroom condos in newer buildings, recently settled 30-somethings are clamoring for the less-available, more-traditional family homes to nest in. These people are willing to bid up and pay for the home of their dreams in San Francisco. And many of them have big incomes to afford it.
The good news is that most sellers will continue to hold the power in '07 while buyers, well, they'll just have to duke it out for prize homes in short supply. Pair that story with the statistical reality that empty-nesters are moving back to cities in droves (think 60s urban flight in reverse) and the fact that first-time buyers in the market today have worked more and stayed single longer than previous generations, and you can see what's happening. People are going to keep paying top dollar to live in San Francisco.
Contact me for an update on your home's value.
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Subprime Scare — Not in San Francisco
National home prices are expected to fall this year, and some believe the subprime mortgage loans that helped create record home sales in the last few years are partially to blame. The combination of lower prices and higher foreclosure rates could be a harbinger of a sustained downturn in housing prices for some regions, but most of the Bay Area real estate market should remain unscathed as long as demand continues to exceed supply.
My guess is that people who opted for subprime mortgages had lower credit scores in the 600 range and were mostly first-time buyers who couldn't afford to purchase property in San Francisco. The city is more likely to see a rise in foreclosures and short sales (with lenders accepting less than what is due) among borrowers who chose interest-only or adjustable rate mortgages between 2000 and 2004 that offered five or three-year interest rates at around 4%. If those folks didn't save up or refinance, they're going to have a hard time when their mortgage payments jump in 2007 and 2008. Needless to say, there will be buyers to make offers on those homes.
Despite the subprime or adjustable rate fallout and the recent decline in housing markets throughout California, I expect that continued overall demand will keep San Francisco out of a housing slump. The resurgence of jobs in our high tech and biomedical sectors supports that projection. With a healthy local economy fueling aggressive corporate recruitment of outside professional talent, demand for limited housing should stay strong through 2007 and going into 2008.
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Featured Listing: Beaux Arts Pacific Heights Half Flat
1740 Franklin Street, #3
This Pacific Heights building displays the ornamented masonry, balconies and balustrades of 1920s French Beaux Arts architecture. The elegantly designed 2bd/2ba flat is distinguished by expansive curved windows, built-in benches, stained glass and other flourishes that make it a luxurious home. Abundant natural light fills the open, airy rooms, illuminating inlaid paneling, crown moldings, coved ceilings and beautiful hardwood floors. The South-facing master bedroom features a marble bath with classic fixtures and fittings; the large second bathroom was once a third bedroom. A built-in bar in the hallway is excellent for entertaining. The living room with its marble fireplace opens onto the spacious formal dining room and both rooms have French doors opening onto a romantic patio. The sizable kitchen showcases ample granite counter space and cabinets, and additional storage space can be found in the flat's generous closets and in a deeded storage room. This boutique, ten-unit building has a beautiful marble lobby, impeccable common areas, an elevator and a live-in house manager.
Sold: $1,095,000
View more photos and details
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Catch Me on HGTV
HGTV, The Home and Garden Network which featured my Ashbury Heights home on its "Curb Appeal" program last year, came back to me again — this time for my real estate expertise. I'm happy to say that I was chosen out of 10 candidates to host the San Francisco version of "National Open House."
The first two shows aired in early April and will repeat in coming months. Two new episodes will air in early summer. Check the HGTV website for exact dates and times. I hope you'll tune in and then let me know what you think. I'm eager to hear your feedback!
"We chose Brendon to represent the San Francisco market because he knows the city inside and out and has an impressive track record. His enthusiasm and professionalism really come across on camera."
Julia Huffman, Producer
National Open House
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Give Yourself a Break — On Taxes
Did you pay too much tax this year? Are you wondering how you can get a break even though the right house/condo/price for you hasn't materialized in San Francisco? You don't have to sit on the sidelines. Why not get into the market elsewhere? Maybe a home in North Carolina or Idaho is just what you need to give yourself a tax break and a leg up while you continue the search for the right property in the Bay Area.
Consider this: A single family, three bedroom home in a fast growing, moderate income neighborhood in the Raleigh/Durham metropolitan area of North Carolina would cost about $200,000 With good credit, 20 percent down ($40,000) and a five-year fixed, interest-only rate of 7.25 per cent, your monthly payments would be $942.50. Rent on the property would likely bring in $1,295.00 a month. Right away, you'd be able to deduct close to $600 a month in operating expenses, depreciation and interest from your taxable income, saving you as much as $7,194 in taxes the first year. Add to that a conservative estimate of seven percent appreciation on homes in fast-growing communities in that area, and you come out way ahead; estimated before tax sale proceeds would exceed an $83,000 gain by December 2010.
A similar three bedroom, two-and-a-half bath home in an appreciating neighborhood in Boise, Idaho and neighboring Treasure Valley would run you between $215,000 and 255,000, bring in $1,100 a month in rent, and give you an initial tax break of around $13,142 a year. Believe it or not, Boise was the SECOND-HIGHEST appreciating metropolitan area in the nation in 2006 with most homes appreciating 30 per cent on average for the year. With a conservative estimate of 12 per cent appreciation in Boise for the next three-year cycle, you would be able to anticipate an equity gain in the range of $156,000 by December 2010!
Are these investment returns and tax savings really possible? Not in the Bay area, but significant net gains are achievable in targeted investment markets outside of California. Contact me today to learn how you can invest your equity from a primary home towards purchasing appreciating real estate assets in other markets.
Note: Financial Analysis and Market Data provided by Scott Moeller, Managing Broker, Realty Wealth Advisors. I am currently working with Scott on out of state investments and I'd be happy to help you explore this opportunity.
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Market Stats
The San Francisco Association of Realtors' median price statistics listed below show a slight decrease in home sales in two key San Francisco neighborhoods. But these numbers don't reflect DataQuick Information Systems' assessment of the Bay Area market as a whole (seen in this April 13th article from the S.F. Chronicle) and my personal experience so far this year. As reported in my lead article for this quarter, I've seen a recent bump in demand with homes drawing multiple offers and selling for slightly over asking in many cases. Am I right in thinking "everybody's back in?" Time will tell. Check our next newsletter to see how the stats hold up for the second quarter of 2007.
District 5 (Ashbury Heights/Cole Valley to Noe Valley)
Single Family Homes
Q1 06 $1,297,500
Q1 07 $1,237,000
District 7 (North of California including Presidio and Pacific Heights, Cow Hollow and the Marina)
Condos
Q1 06 $920,000
Q1 07 $915,000
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