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Second Half, 2012

What a difference a year makes! After the steady decline in values that began as a result of the financial crisis and Lehman collapse, San Francisco’s residential property values rose steadily throughout all of 2012, gaining nearly 10% year over year. Values now approach mid-2008 levels, down only slightly from the 2007 peak. Demand remains strong and inventory is scarce.

Appraisers are stretched to keep up, as limited comparable market data exists in such a rapidly rising market. This adds to the exceptional leverage of all-cash buyers. Cash buyers, both local and global, dominated not just the luxury property market, but in all price ranges and across neighborhoods.

IPOs by Bay Area companies raised a record $17.5 billion in public equities markets, more than double that raised in the height of the dot.com boom of 1999. 2012 Bay Area IPOs generated $9.4 billion in cash for selling shareholders, and when combined with cash raised in pre-IPO secondary share sales, this influx of cash lifted San Francisco’s residential property market.

The strong tech sector benefited the City across neighborhoods. Its strongest impact was felt in highly convenient commute areas. Noe Valley’s single family homes and South Beach/SOMA’s luxury high rises did especially well.

The private sale market – those properties sold outside the Multiple Listing Service (MLS) – accounted for over 25% of the luxury market over $2 million. These off-market (“pocket”) transactions were facilitated by agent membership in the Top Agent Network. We have found our participation in this organization to be extremely valuable to our clients.

December in particular was marked by sellers attempting to close prior to anticipated 2013 capital gains tax increases. Buyers and Sellers who could move quickly did well during the last month of 2012. Going forward, capital gains rates will remain at 15% for those earning less than $400,000 (individual) and $450,000 (joint). Gains above those income levels will now be taxed at 20%. Note: Gains on the sale of principal residences will remain unchanged and continues to exclude the first $250,000 for single taxpayers and $500,000 for taxpayers filing jointly.

What’s in store for the first half of 2013? Sharply rising rents, low interest rates and the lack of suitable alternative investments will continue to drive demand upward for San Francisco property. Buyers are aware that prices are expected to continue to rise; this is a Seller’s market. Multiple offers are increasingly the norm.

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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