San Francisco’s "Painted Ladies" and city skyline. Flickr image courtesy of jondoeforty1.
Tech is back — and tiptoeing along behind it, at least by some measures, is the San Francisco-area real estate market.
Local media and numerous agents contacted by Inman News report that a revival in hiring within the broadly defined technology sector is giving new life — or is expected to give it — to housing in numerous parts of the Bay Area.
"While San Francisco isn’t Silicon Valley, it’s not that far (of) a commute, and we have our fair share of new and exciting startup companies here as well," said Luba Muzichenko, a San Francisco agent.
"Tech jobs are on the rise, and with the increase in high-paying jobs, we are seeing more and more younger, first-time homebuyers."
Indeed, technology-based industry — which drove Bay Area home prices to fabled levels during the headiest days of the housing boom — seems to have found its legs. At the end of 2010, San Francisco had an estimated 30,700 tech jobs, compared with the 32,800 at the peak of its tech boom in 2001, according to an analysis by real estate firm Jones Lang LaSalle.
In Silicon Valley itself, there were more than 106,000 tech jobs in late 2010, compared to its 112,000-job peak, according to a May report in the San Francisco Chronicle.
Indeed, San Francisco is landing on some bloggers’ and analysts’ "best markets" lists lately, based largely on month-to-month momentum and other benchmarks.
Realtor.com, for example, in June calculated where homes are moving fastest around the country, based on the median number of days on market, and two San Francisco Bay Area markets made the top 10: Oakland was No. 2 (median age of inventory 46 days) and San Francisco was No. 4 (57 days).
The California Association of Realtors in May said the median time on market throughout the Bay Area was 51.9 days, which is slightly better than the month prior, but nonetheless about a week longer than it was in May 2010, when the homebuyer tax incentive was influencing the market.
The Clear Capital Home Data Index, while forecasting further price declines nationwide for the second half of the year, included the San Francisco market as one of a handful where it expects a home-price gain in 2011; although so far this year it calculates that metro home prices there have declined by 3.9 percent, the analytical firm expects the region to see a 0.2 percent price gain by the new year.
Such are the measures of optimism as housing works its way through an epoch where even a slight improvement is something noteworthy. Still, much of the hard data would hardly seem to generate exuberance, rational or otherwise.
Distinctly sober numbers emerged from the California Association of Realtors, which reported that although Bay Area single-family home sales increased 3.1 percent from April to May, they still were down 12.1 percent year over year.
And although median prices in May trended up somewhat from April, compared to May 2010 they were still down on an annual basis, slipping 8.1 percent to $512,000.
DataQuick, a San Diego-based housing analytics firm, also found modest month-to-month improvement in May sales. Although nearly 7,000 new and resale houses and condos sold in the nine-county area that month (a 2.9 percent rise over April sales), the year-over-year sales numbers were down 15.4 percent, it said.
In mid-July, the San Jose Mercury News partnered with DataQuick to crunch Bay Area data and concluded that a recovery, of sorts, was indeed under way, though it noted that some individual cities were faring far better than others.
In general, it reported, areas that would generally be described as "affluent" are about 20 percent off their highs reached around 2007; middle- and lower-income areas homes are 50 percent — or more — below their high points.
It said some cities, such as Palo Alto, are returning to bubble-era price levels. Nine cities, though, are still at their post-bubble low points, the newspaper said.
The paper and DataQuick found San Francisco and San Jose in the middle of the ongoing recovery. It found a second-quarter median price of $680,000 in San Francisco, about 22 percent below its 2007 median. San Jose’s median is 36 percent below its $700,000 peak, reached at the beginning of 2007.
The much-watched Standard & Poor’s/Case-Shiller Home Price Indices for April sales (the most recent available) did show Bay Area month-to-month prices up 1.7 percent, but down 5.5 percent year over year. Prices have cascaded down by 39.5 percent since the market peak in May 2006, according to that report.
Other slices of the local market, by the numbers:
–Trulia.com in early July reported the average price per square foot for all types of properties in the city of San Francisco was $538, down about 10 percent year over year. The number of city sales, it said, had declined 23.3 percent from one year earlier. However, it said the median price, $670,000, represented a year-over-year increase of 0.8 percent;
–Zillow.com’s analysis of April data pegged the San Francisco area to be the fourth most expensive in the nation by a single measure: a median price of $283 per square foot. Honolulu was No. 1, at $411 per square foot.
–Prices within the luxury sector dipped to 2004 levels in the first quarter, according to a study by San Francisco’s First Republic Bank. Its Prestige Home Index, which defines luxury homes as those valued at more than $1 million, concluded that the Bay Area homes it tracks lost 4.3 of their value from the fourth quarter and were 1.9 percent lower in price than one year before.
The average luxury home in San Francisco was worth $2.49 million at the end of the first quarter, according to the study.
Still, agents contacted by Inman News said they found oases of encouragement. In addition to the technology hiring binge, they said they have been seeing noticeable activity from a wave of cash-paying investors, first-time buyers enabled by low interest rates, and some steadiness in the distressed marketplace.
San Francisco Bay Area market data
|San Francisco-Oakland-Fremont population (2010)||4.3 million (U.S. Census Bureau)|
|Population growth (2000-10)||+5.3% (Census)|
|Total closed sales (2010)||78,011 (DataQuick)|
|Pct. change closed sales (June 2010-June 2011)||-4.5% (DataQuick)|
|Median sales price (June 2011)||$377,750 (DataQuick)|
|Median sales price (May 2011)||$512,420 (California Association of Realtors)|
|% change in median sales price (June 2010-June 2011)||-7.9% (DataQuick)|
|% change in median sales price (May 2010-May 2011)||8% (CAR)|
|Foreclosure filings rate (Q2 2011)||1 in 124 units (RealtyTrac)|
|% of sales distressed (Q1 2011)||40% (RealtyTrac)|
|Sales per population (based on 2010 population)
||1 sale per 55.1 people|
|% homes affordable to median-income households (Q1 2011)||33.2% (NAHB/Wells Fargo)|
|Unemployment rate (May 2011)||9.3% (U.S. Bureau of Labor Statistics)|
|Rent vs. buy ratio (Q2 2011)
Sources: U.S. Bureau of Labor Statistics; Trulia; RealtyTrac; Walk Score; National Association of Home Builders/Wells Fargo; U.S. Census Bureau; California Association of Realtors; DataQuick. Note that data providers may define San Francisco market area differently and use different data sources.
Q: What types of properties are selling fastest/slowest in your market area, and why?
Climb Real Estate Group
The first-timer segment is selling fast in our area — one-bedrooms (are) in the $400,000 to $600,000 range and two-bedrooms in the $600,000 to $900,000 range. The reasons: Interest rates are still historically attractive; rents are rising dramatically — as much as 20 to 30 percent in the past six months; and home prices have stabilized and been increasing since the market plunge in 2009.
Better Homes & Gardens Real Estate Mason-McDuffie
Properties that sell the fastest have the cleanest bones in the most favorable areas. In this inventory-saturated market, buyers are hesitant to buy properties where sellers have maximized square footage at the expense of practical spaces, like garages.
McGuire Real Estate
In Marin County, there’s a serious short supply of "family-friendly" homes — updated homes with an open great room/kitchen that leads to a flat, grassy yard. Because Marin County is generally hilly, "flat" homes come at a premium.
Inspired Real Estate
I specialize in the East Bay, but have agents working throughout the Bay Area. Cash-buyer flippers are hungry to find anything under $200,000 and will bid almost sight-unseen. Investors are dominating the market and cash is king.
Q: Is anything changing about the profile of buyers/sellers in your market area?
Pacific Union International
I’m seeing younger buyers in our second-home market. Until recently, these buyers were predominantly 55 and up. But I’ve been working with quite a few 30-something buyers who say the stress of their jobs in the Bay Area has driven them out into the country to find peace and quiet.
Better Homes & Gardens Mason-McDuffie Real Estate
Buyers are waiting for one of two things: a great deal, or that ever-elusive "perfect" property. Many other buyers are waiting on the sidelines, as they think the market will decline or at least stay flat. Sellers are only selling if they need to.
DOSS: Buyers are more aware of lender scrutiny and are providing larger down payments. Conversely, sellers are becoming more in tune with the current market and are less apt to overprice their properties.
Prudential California Realty
People who are buying have money in the bank for a down payment; (have) regular, documented income; and excellent credit. That wasn’t the case a few years ago.
Zephyr Real Estate
We’re seeing a lot of cash buyers. Most of the multiple-offer situations have at least one cash offer. Considering that San Francisco’s average single-family home prices run in the $900,000 range — that there is this much cash being spent on real estate, in spite of such low interest rates, is a noticeable change.
Q: Are you seeing change in the market share of short-sale properties or REO properties?
Kathie and Emil Hewko
Keller Williams Realty
Over the last year, San Francisco North Bay communities have seen the combined short sale/REO (bank-owned properties market) increasing while traditional sales were decreasing.
Comparing first-half 2011 data to first-half 2010 data, in Marin County, short sales were down 1.2 percent; REO sales were up 4.2 percent; traditional sales were down 5.3 percent. In Napa County, short sales were up 2.1 percent; REO sales were down 3.6 percent; traditional sales were up 1.5 percent.
CHOEY: No. Short sales and foreclosure remain steady, at 20 to 25 percent of inventory.
Antonia and Steve Quanstrom
J. Rockcliff Realtors
We’re actually seeing more short sales close — yippee! Bank-owned homes sell very quickly because we live in such a high-demand area. We haven’t run the numbers, but it feels like the number of short sales and REOs has stabilized.
ANDERSON: We’re seeing fewer REO properties and a larger number of short sales. However, many of the short-sale transactions aren’t closing, often at the 11th hour, when a buyer’s lender presents unreasonable conditions to approve the sale.
This is especially troubling, as the transactions are falling through very close to the trustee sale dates, and short-sale lenders are increasingly not extending the deadlines to give sellers and agents time to find another buyer.
This means that agents are often working for months, ultimately making no commission. The best agents are tired of working for free.
Q: What worries you most about the current state of the market, and what represents a sign of optimism/opportunity for the real estate market?
LINDQUIST: We’re in a state of limbo where many homeowners can’t sell due to lost equity, and buyers are afraid to buy, due to insecurity about jobs, the economy overall, and property values. We can be optimistic about the fact that current market conditions are allowing many first-time buyers to purchase a home after so many years of overinflated property values.
CHOEY: A sign of optimism and opportunity is the robust technology sector, both in the social media companies and the biotech sectors, which are the foundation of wealth and jobs in the Bay Area.
CORMACK: I worry about the lack of opportunities for tenants-in-common financing. Currently there are only two local lenders offering fractional TIC financing. The products are limited to three-, five- and seven-year (adjustable-rate mortgages), and interest rates are higher than non-TIC lending vehicles.
QUANSTROMS: The biggest sign of optimism is there are many more move-up buyers than there were a year ago. One of the biggest concerns is that our upper-end market is still quite slow. But we do see sales in the upper end, so it’s a lot better than it was two years ago.
Better Homes & Gardens Mason-McDuffie Real Estate
I’m concerned about the slow economic recovery. Nevertheless, there are more short- and long-term investors helping in the market share. They’re purchasing everything they can and taking advantage of the low prices. Also, bidding wars are back, and some are bidding over the asking price.
ANDERSON: One of the most troubling aspects is a requirement by many REO sellers that buyers must be preapproved for a loan with the same REO lender before they will allow them to even submit an offer.
This delays the offer process, makes more work for the agents and buyers who have already been approved by one or more direct lenders, can potentially damage the buyer’s credit rating due to additional credit-report inquiries, and give the seller an unfair look at intimate details of the buyer’s finances before considering an offer.
CUNNINGHAM: What worries me is that all these people are hurting because they worked so hard to maintain their outstanding credit and they’ve become victims of a phenomenon that was out of their control.
I guess unless you studied global economics and finance, you would not have known about these terrible real estate cycles. I sure didn’t!
MUZICENKO: My biggest concern is that loan limits will be going down later this year, and some banks are already using the new lower loan limits as their guidelines. In a city with high home prices, like San Francisco, this will definitely decrease the pool of potential buyers.
Q: Where are sellers moving to, and where are the buyers moving from in your market area? Does this represent a change?
CUNNINGHAM: Sellers are moving to the same areas where their old homes were, just renting. There’s no reason to pull kids out of school, change jobs or communities, just because you couldn’t afford your payments any longer.
ANDERSON: Some sellers who had moved into farther-out areas like Antioch, Tracy or Stockton are using the opportunity to move closer and lessen their commute as renters.
QUANSTROMS: We’ve been seeing more relocation sellers, which might be indicative of the economy picking up.
CHOEY: I focus on San Francisco, and with the chronically underfunded public school system, sellers are leaving the city when their children get old enough to attend school. The latest reports I read were that San Francisco’s percentage of children living in the city has dropped yet again.
HEWKOS: We’re seeing sellers of short sales and foreclosures either renting, moving in with family locally, or moving to areas where the cost of living is less.
Q: How have you changed your business to mirror the market and to capitalize on market trends?
MCCARTHY: The majority of my clients move to Marin County from San Francisco. I’ve been holding seminars called "Considering a Move to Marin County?" I cover things like schools, communities, commute times, microweather patterns and average home prices. I’ve held eight over the last year and have at least five families attend each seminar.
LINDQUIST: I was specializing in the upper two-thirds of the market — move-up and luxury properties — prior to the downturn, but am now serving all market segments. It’s a lot of fun to help first-time buyers — they’re so enthusiastic about their goals.
CHOEY: We have focused more on renters and first-time buyers. We also have focused on buyers from abroad. There are also quite a few investors looking for opportunities, so we’ve ramped up our business to selling short sales and foreclosures, as well.
DOSS: In order to capitalize on the current market trends, I’ve dedicated a significant amount of time to credentialing and to understanding alternative market options and sale propositions for distressed sellers.
QUANSTROMS: We are definitely much more careful about taking high-end listings. We’re lengthening the time for our listing agreement. It used to be that a 90-day listing would sell and close within 45 days. Now we ask for a minimum four-month listing and much longer on a high-end property.
VALDERAS: Last year, most of my business was short sales and REOs. I take short-sale classes and other seminars so I am up-to-date.
MCCARTHY: I belong to a number of mothers’ groups. Many moms have turned to me when they’ve found themselves stuck in homes that they purchased in 2005, at the height of the market. I’m well-versed in helping sellers with their distressed homes and have listed and closed a number of short sales.
ANDERSON: The adage used to be that any listing was a good listing. However, there are many uncooperative short-sellers who make it difficult for agents to show their home. Those sellers pose a drain on resources and can damage an agent’s reputation.
With transactions often taking six-plus months to close, agents can’t afford to invest time in a property with a low chance of closing. So we advise our agents to carefully screen and interview sellers before agreeing to take a listing.
Q: What are some overall economic trends in your market area that will guide the real estate market?
CUNNINGHAM: Overall, the trend has been that people are looking for the "good deal" on a home purchase and waiting for prices to decline even more.
ANDERSON: While there are some glimmers on the economic front, East Bay employers are still struggling. Area residents are still worried about job loss, and many are still underemployed. Consequently, many are commuting farther than they would like.
As the economy and job market stabilize, I believe that many will take the opportunity to move closer to their employment.
VALDERAS: The Bay Area has a lot of high-tech companies and startup companies that are hiring. This will help stabilize the unemployment rate. There are probably more buyers who used to be on the sidelines who will have confidence buying in this market.
DOSS: As San Francisco has some of the most comprehensive tenant-rights laws, including rent control, I am observing a shift in investor dynamics, from property appreciation to tax benefits on multi-unit property ownership.
CHOEY: There are a lot of new jobs in the area from large technology companies such as Twitter, Salesforce.com, Google and Zynga, which all have headquarters in or near the SoMa (South of Market)/South Beach neighborhoods.
There are a lot of people moving to the area who have joined these growing companies and are renting first before they decide to buy. This is having the effect of making rents skyrocket.
LINDQUIST: I’m seeing quite a bit of downsizing and a focus on eco-friendly lifestyle choices. Sellers are downsizing and buyers are looking for smaller and more energy-efficient homes.
I think quite a few people who live in the Wine Country, a mecca for those seeking the good life, have begun to redefine what that good life really is. Lavish social gatherings have been scaled back and more people who live here seem to be spending a lot more time with their extended families.
Q: Any other big changes you’re seeing?
QUANSTROMS: Buyers are more conservative now. They buy with the idea of selling their home down the road, and know that they don’t want to be underwater or facing a difficult sale when they have to move.
ANDERSON: Short-sale lenders continue to try to cut agent commissions. At every step of the negotiation, they will attempt to reduce the agent compensation.
CUNNINGHAM: The big change I’m seeing is that more and more people are looking to rent. It’s a combination of people who lost homes or cannot qualify to buy.
HEWKOS: Unless the economy demonstrates a sustained recovery, we see a more conservative lifestyle impacting general buying patterns — more so in owning real estate.
Real estate technologists and industry professionals are coming from around the globe to San Francisco next week to participate in a series of Inman News events:
- Data Summit: July 25-26;
- Agent Reboot San Francisco: July 26; and
- Real Estate Connect SF 2011: July 27-29.
Mary Umberger is a freelance writer in Chicago.