First Half 2015 & Looking Ahead

Frustrated buyers, overjoyed sellers – that sums up this year so far. The market for residential real estate in San Francisco remains characterized by fierce overbidding and escalating prices with no end in sight.

To give you a sense of the citywide market in the first half of this year:

120 single family homes over $2.5MM sold citywide; 63.3% closed over the asking price.

• District 7 (Marina, Cow Hollow, Pacific Heights, Presidio Heights) had the highest average price per square foot ($1443/sf) of all the districts.

• The highest price of a single family house sold so far this year was 2701 Broadway in Pacific Heights at $31MM ($1890/sf).

136 condos & co-ops over $2MM sold, with 51.5% going over asking.

• District 9 (South Beach, Yerba Buena, Mission Bay, SoMa) had the highest average price per square foot ($1329/sf), followed closely behind by Russian Hill.

• The highest price of a condo/co-op sold so far this year was 2500 Steiner #5 at $9.25MM ($2643/sf). This Pacific Heights co-op needed upgrades and enjoyed spectacular views.

In the last 30 years we have experienced a wide range of economic conditions. Broad, long lasting upturns were typically followed by generally brief, subtle downturns or simply plateaus. Most downturns – from the stock market’s “Black Friday” in 1987, the Loma Prieta earthquake in 1989, and the bust in 2001 – barely made a dent in City property values in the established north-side neighborhoods. Only the financial collapse in 2008 and recession that followed had any appreciable effect there; values declined approximately 15% on the north-side. In every prior instance, the “emerging” southern neighborhoods declined noticeably more than the north-side. When the current cycle eventually comes to a close, prices may simply stabilize and some of the southern neighborhoods will prove to have been good investments.

Trends we see for the remainder of 2015:

• Expect a robust autumn real estate market to follow a relatively stable summer.

• The insatiable demand for housing will continue. The move-up market will continue to be frozen due to lack of inventory.

• An increasing number of San Franciscans who are able to move up are keeping their former residences as a rental property.

• There will be gradual increases in home loan rates by the end of the year; buying power will then decline.

• As of October 1 cash will talk a lot louder. New banking rules will increase the time it takes borrowers to close.

• The availability of public transit, especially rail, serving our emerging southern neighborhoods will continue to fuel their growth, especially with Millennials who closed 28% of all transactions in 2014.

• Watch for consolidation by tech investors in a smaller number of IPO winners.

Exciting news: The townhouses, 10 of the 76 luxury units at The Pacific (Webster & Sacramento) will be released for sale this autumn. This project will become the premier north-side address. 2016 will mark the release of the units in the main building. Expect record prices/sf for their best view residences. As a member of their Broker Advisory Board, our clients will be among the privileged few who will have first dibs on many of the residences there.

Once again, this is a time when market savvy and experience make all the difference in the world. Experience and knowledge can pay dividends to sellers and lack thereof can put buyers out in the cold. Having the personal advice and dedication of a well-informed Realtor® will make all the difference.

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