San Francisco Real Estate Properties

One’s perception of the San Francisco market is a bit deceiving without looking “behind the numbers” today.  No one has had to really look “behind the numbers” when there is high demand and low inventory.   One can gauge the market by how quickly properties sell (looking at the DOM - days on market). 

 

As in any market, if two comparable properties come on the market in a particular neighborhood at the same time and one sells and the other one doesn’t….it is pretty easy to determine that either the marketing, the price, the terms, and/or the condition attracted the buyer(s) to one property vs. the other. 

Without looking beyond the graphs, the averages, and the medians, one is unaware the number of properties that are selling quickly from those that are taking their sweet old time.

To understand which market a seller is in and/or buyer is looking in, one needs to separate the days on the market, not by price range but by speed. 

As we begin January 2008, the numbers of homes on the market in San Francisco are far greater than there were this time last year.  Now don’t read too much into this statistic just yet. 

  

During the last half of the 4^th Quarter, San Francisco Sellers are notorious for taking their properties off the market just before Thanksgiving if their property had not sold.  Many of these Sellers would rather wait until the New Year to put their property back on the market than to become stale on the market during the holidays.  Between November 1^st and December 31^st in 2006 152 homes and 284 condos/co-ops/lofts/TICs were withdrawn from the market and during this same time in 2007, 175 homes and 353 condos/co-ops/lofts/TICs were withdrawn from the market in hopes of re-surfacing in 2008 as fresh new listings.

During this same time, every year there is another group of San Francisco Sellers that dare to put their property on the market in November and December to find their properties snatched up by “holiday” Buyers eager to own a property before the end of the year.  In 2006, 69 single family homes and 79 condos/co-ops/lofts/TICs come on the market and closed between Halloween and New Year’s Eve.  This past year in 2007, 39 single family homes and 55 condos/co-ops/lofts/TICs came on the market and closed in less than 60 days. 

Both years, the Buyers that stayed in the market may have had less competition than those Buyers that took some time off during the holidays, yet  not surprisingly the single family dwellings and the condos/co-ops/lofts/TICs  sold 103% and 102% respectively above their asking prices (with three having undisclosed selling prices).

With all that said, generally speaking, the 4th Quarter 2007 was a bit different than in 2006 as more Sellers were unwilling to play that game of withdrawing their property from the market during the holiday season and losing their property’s exposure. 

The “New Year” Buyer will come back from the holidays (after getting in some snow-time on the slopes) to see some familiar homes still on the market and I suspect, a few more will slowly be coming back on the market as well.

To start at the beginning, the asterisk became a term of the sale either as apart of the accepted offer or sometime during the transaction.  Both the Buyer and the Seller agreed that the sales price would not be disclosed to the MLS and would be hidden on the public records at the close of escrow. 

Perhaps the real question is from whom would both parties want to hide the sales price? 

The answer might be to protect one’s privacy from someone  - i.e. nosy family, friends, and/or neighbors, disgruntled ex-spouses or creditors, employers’/employees’ chit chat, the media, etc. etc. (?)

In the real estate world, the reason may have been that the Seller sold the property so high over the asking price that it was a bizarre one time event, or the Buyer bought the property so low under the asking price that it was embarrassing to the Seller and/or so awkward to disclose the real sales price to the unsuccessful bidders (?) 

In any case, without disclosing the real sales price the MLS, Zillow.com and Trulia.com and other’s sales comparable data bases become eschewed and it makes for juicy cocktail “real estate” talk.  After all so far in 2007, there have been 51 MLS sales with undisclosed sales prices.

To hide from curious eyes, one’s sales price from the San Francisco MLS and the public records is actually quite easy to do prior to the close of escrow.

Both the San Francisco MLS and the escrow holder will need mutual instructions from both the Buyer and the Seller:

(1).   The San Francisco MLS needs a letter from the listing agent signed by the Buyer and the Seller stating the sales price is not to be disclosed by the MLS at the close of escrow and naming the sales date and the Buyer’s agent.  The MLS will then enter into their San Francisco MLS database the asterisk to the current asking price as the sale price on the closing date.

(2).   Buyer and Seller will instruct their escrow holder to prepare the Grant Deed for recording at the close of escrow by adding the notation “See tax on separate sheet” to “The undersigned grantor(s) declare(s) the Documentary Transfer Tax is … “.  The City and County of San Francisco’s Recorder’s Office will accept the notation as long as the documentary transfer tax paid on the actual sales price stated on that separate sheet at the time of recording. 

By the way, it may take those curious eyes several years to be able to approximate the actual sales price at time of sale.   When the time comes that the San Francisco Tax Assessor has finally computed the Supplemental Taxes, several tax years have passed.  By that time, the current tax bill will show only the current total assessed value of the property for public to see. 

Question: Would this be a term of sale you would consider or agree to do?

This is a continuation of “Part Two-Wait and See or Get In Now?”

In any real estate market and especially in San Francisco, the best properties sell first. In fact, the best location in the best condition at the best price sell the fastest and that is why the new mantra “Price, Condition, Location” is king today.   

I may be preaching to the choir when I say in San Francisco no one can ever under-estimate our real estate market, after all some properties don’t come on the market for generations.  This especially is true in the neighborhoods of Noe Valley, Eureka Valley, Presidio Heights, Pacific Heights, Russian Hill, Nob Hill, Cow Hollow, the Marina and North Beach/Telegraph Hill.  If you are a serious buyer in these neighborhoods, some of these properties come on the market and off the market in a matter of days or hours.  When this happens condition and price become secondary.   

With that aside, in this San Francisco market two things are emerging that Buyers that have been on the fence need to know now: (1) Our inventory for sale is increasing steadily. (2) We have just moved into a Buyers market for the first time all year. 

Both San Francisco’s Sngle Family Homes and Condo, Co-ops, and Lofts for sale inventory are mounting with the summer’s left over inventory and the seasonal new fall inventory are now outpacing the number of fall sales.   For the first time in years, Buyers are able to pick and choose what they want to buy and ultimately negotiate the best possible price with more and more motivated Sellers with properties not selling.

 

The above chart illustrates how the number of Single Family Homes listed for sale have been growing (Year-to-October 20, 2007) in San Francisco.

Now see how the Condos, Co-ops, Lofts, and TICs combined have been steadily inching up throughout the year, as well.

 

The above chart illustrates how the number of Condos. Co-ops, Lofts, and T.I.Cs on the market have been increasing (Year to October 20, 2007) to give Buyers more selection of properties to buy in San Francisco. 

Now, a quick look at one way to spot “the windows of opportunities” using the Market Action Index (MAI). 

The MAI charts illustrate the balance between supply and demand using a statistical function of the current rate of sales versus current inventory (similar to absorption rate).  A MAI value greater than 30 typically indicates a “Seller’s Market” (A.K.A. as a “hot market”) because demand is high enough to quickly gobble up available supply. A “hot market in San Francisco” will typically cause prices to rise and/or cause Buyers to anticipate multi-offer scenarios and they will write their offers over asking thus giving Sellers’ their highest possible price. MAI values below 30 indicate a “Buyer’s Market” (a.k.a “Cold Market”) where the inventory of already-listed homes is sufficient to last several months at the current rate of sales. A “cold market in

San Francisco” will typically cause prices to fall and/or cause Buyers to be able to negotiate with motivated Sellers to get their best possible price at or below theSeller’s asking price.

Each of the MAI charts (below) are shown by quartile to demonstrate how different price points react to the MAI.  Each quartile is 25% of the properties on the market.  Most expensive 25% of properties are in the first quartile, the upper- middle 25% of properties are in the second quartile, the lower-middle 25% of properties are in the third quartile and the least expensive 25% of properties are in the fourth quartile.

 

Both the San Francisco Single Family Home for sale inventory (see chart above) and the Condo, Co-ops, Lofts, and TICs for sale inventory (see chart below) have been trending down into a Buyer’s Market (below 30 on the chart above) in the last several weeks that puts Buyers in the driver’s seat for the first time all year.  

San Francisco Buyers are suddenly realizing that by sitting on the fence they will be missing out on this terrific “window of opportunity” to get into the San Francisco real estate market before the end of the year while interest rates remain at near-historic lows and finally, they can be choosy and maybe even a bit more commanding (?).

The San Francisco real estate market changes every day, as in any market, with each and every property coming on and off the market, along with each and every price reduction and pending sale.  Yet one of the quickest indicators of how our market is doing is through: how many buyers came through the open house last Sunday, how many offers are expected vs. how many were written, and lastly, how much over and under did the property sell for in the end. 

Perception is everything and reality takes a distant second when it comes to the uninformed. 

Time and again our local media plays on “factual” national, state, and/or regional economic news with big moan and groan headlines.  With a leading headline and the classic one long sentence first paragraph, these articles lead one to believe the bad news is happening on their block, on their street, or in their neighborhood or in our city.   

Case in point, based on sub-prime mortgages being reset to unaffordable rates for many in the Bay Area, a recent misleading headline entitled “Bay Area Foreclosures Skyrocket”  gives one a false impression that the sky is falling in San Francisco and prices must be dipping.

Many times these media stories are not reporting on the actual and accurate happenings in our San Francisco and yet they appear that they are.  As any market, a prudent consumer, potential buyer and/or potential seller should not buy into the media’s hype of “facts” at face value and first glance.   

For San Franciscans to get the pulse of the San Francisco Market, our local media will report median prices as news “facts”.  I find that a bit amusing that they look at our own market so generally.  Typically the media will lump the median home & condos sales prices together for the city.  What good is that? 

I saved a characteristic example of local media hype from the San Francisco Chronicle in the Business Section dated April 25, 2007 entitled “State Market Cools” . The article mentioned the Bay Area as cooling.  There are nine counties in the Bay Area (i.e. Alameda, Contra Costa, Marin, Napa, San Francisco, San Mateo, Santa Clara, Solano, and Sonoma).  While the article did mention several of the nine Bay Area counties were cooling, there was no mention of our San Francisco.   What is one to think …is the San Francisco Market cooling or not? 

But wait, I saved this article for another reason, read on…

 

Don’t get me wrong, I love to look at median prices.  At the very least, median prices need to be broken down into a chart showing each quartile (i.e. Most expensive 25% homes, upper-middle 25% of homes, lower-middle 25% of homes, and least expensive 25% of homes). 

Now, look at the same information from the chart above and see how median prices are now more meaningful and no longer “a bunch of hogwash”. 

You are able to see and understand the San Francisco Market in a whole new perspective.  The “facts” are actual and accurate; the consumer’s perception is, at a minimum, a truer reality.

It takes a seasoned real estate agent to distinguish between “facts” and actual and to be able to analyze the (sometimes hidden) market trends and spot windows of opportunity in order to be able to interpret these findings to one’s clients so that these clients are able to make informed, intelligent decisions when it comes to their buying and selling in San Francisco…in any market.   

Do you have such an agent?

 

Anticipation comes to mind.

For San Franciscans, Labor Day brings the anticipation of the beginning of our hot sunny San Francisco’s summer weather (and fewer foggy days).

For the San Francisco real estate market, it is the anticipation that the perplexing effect the media has had on potential buyers’ perceptions and fears will settle down soon, as buyers with a reasonable credit and a nice (20%) down payment are getting reasonable home loans when they have been working with a multi-source mortgage broker finding well-capitalized lenders.

Over the past several weeks, there have been a few San Francisco transactions that had loan setbacks which delayed and/or cancelled an escrow or two because the financial markets reaction to the tightening of credit in the mortgage industry.   Three real estate industry groups have reported slower sales in California and the nation due to the ongoing bad news of tighter mortgage underwriting and its adverse psychological impact, yet the reality here is that the credit tightening has only affected a very, very small percentage of buyers and sellers in San Francisco. 

This week before Labor Day, there are presently 551 homes and 444 unsold condos, co-ops, and lofts for sale that have been on the market unsold for an average of 56 days and 51 days respectively.  At the same time there have been 392 homes and 411 condos, co-ops and lofts that are either now in contract or have sold so far this month.

Sellers anticipating that their properties will get lost in the shuffle of new properties coming on in the fall have been reducing their properties accordingly giving the end of the summer buyers an excellent opportunity to invest in some great real estate deals.

Now more than ever, I anticipate that your Realtor’s experience will count in you understanding today’s many opportunities that exist in buying and selling real estate in San Francisco! 

Charts presented by Ann Scherbert courtesy of San Francisco Association of Realtors MLS data (all information deemed to be reliable, but not guaranteed).