Inside San Francisco Real Estate

We’ve been busy.  Very busy.  We have been putting together our first post called “Market Check-Up”, in which we’ll delve deep into a local micro-market and give you all the stats, trends and analysis you could ever hope for.  This is like our Getting Granular series on steroids.  In this series you’ll see:

• Median Sales Price trends over the past 14 years, inflation adjusted using the Consumer Price Index!
• Sales Volume, as compared to the overall San Francisco market.  You’ll learn how this neighborhood has increased or decreased in volume over time.
• How much appreciation or depreciation you would have realized if you owned your property for X amount of years (again, inflation adjusted).
• Year over year appreciation rates comparing our micro-market of choice to San Francisco as a whole.  This will let you know if the neighborhood is a good or poor performer in relation to the entire City.
• Marketshare:  You’ll learn how much of the overall San Francisco market this neighborhood is responsible for.
• Days on market trends and sales price to list price ratios.
• Absorption rates, numbers of Expired and Withdrawn listings.
• Add to that bullet points and commentary, and you’ve got yourself a good, all around micro-market “Check-Up”.

And we're underway!

Let’s get things started, shall we?  The first neighborhood we’ve chosen is Pacific Heights and the property type is condominiums.  Even if you’re not interested in this market segment, take a peek at the article so you can see all the glorious analysis that’s in store for your neighborhood soon.

Sales Volume (click to enlarge)

• The navy blue bars represent the sales volume for ALL condos in San Francisco.  This is here so we have a trend of comparison.
• The orange bars represent the sales volume for ALL of District 7, which includes Cow Hollow, the Marina, Presidio Heights, and of course, Pacific Heights.
• The green bars represent Pacific Heights only.
• What we see here is that the volume of condo sales peaked in 2004 and 2005, the days of free-flowing easy money.
• 2001 and 2008 are both years that took big hits.  2008 is the new 14-year low for condo sales in both Pacific Heights and District 7.

Median Sales Prices (click to enlarge)

• Once again the colors for navy, orange and green correspond to the areas described above.
• You’ll notice our charts now have pink backgrounds.  Pink lets you know the sales prices have been adjusted for inflation using formulas derived from the CPI (Consumer Price Index).
• Both District 7 as a whole and Pacific Heights consistently ride above the median for San Francisco.  This is no surprise as the area is home to many high end properties.
• Pacific Heights rides lower than District 7 as a whole, demonstrating that values in Cow Hollow, Presidio Heights, and the Marina can be a bit higher.
• From 2007 to 2008, Pacific Heights condo values went down 5.61%.  District 7 as a whole went down a bit more at 5.75%, while the entire City only went down 2.46%.
• Median values took a bigger hit in 2001/2002 in Pacific Heights and all of District 7 as compared to the entire City of San Francisco.  It looks to have shaped up that way in 2008 as well.
• It’s interesting that prices peaked and remained flat for condos in all of SF around 2005, but in District 7 and Pacific Heights, they continued to rise for two more years.  Could the high-end of the condo market lag the overall market by a year or two?  It appeared to show that tendency in 2001 as well.  If so, an owner in this area could theoretically keep their eye on the navy line and get a prediction of what’s to come for their market in a year or two.

Appreciation/Depreciation (click to enlarge)

• This is my favorite chart, as you can imagine yourself as an owner in this neighborhood.  It shows you how much appreciation or depreciation you would have realized if you owned your condo for X amount of time.
• All figures are inflation adjusted, so it’s the real deal.
• What stands out in this chart is that San Francisco condos on the whole have been losing value for 3 years in a row.  However, in District 7 and in Pacific Heights, there has only been 1 year of depreciation so far.
• If you bought more than 4 years ago, you’d be doing okay in all 3 scenarios.
• And for the long-term owners out there, the picture just gets rosier and rosier.  We’ve said it before and we’ll say it again — benefiting from real estate ownership takes time and patience, but it definitely works like a charm.
• Let’s say I bought a place 5 years ago, in 2003, for the inflation-adjusted median value of $764,750 and sold in today’s down market for the median value of $957,500.  That is $192,750 in real dollar appreciation.  Coupled with my tax deductions on interest payments and my tax deductions on property taxes each year, I’m putting more money back in my pocket for something I’m going to need anyway – a place to live.  I get to keep ALL that profit tax free when I sell AND I avoided spending around $150,000 on rent during that same period.  Plus, I get to make the place mine (not be told what to do with it), and I’m not subject to rent increases.  When I sell, even after I pay closing costs and commissions, I’m still walking away with a boat-load of free cash and saved myself a ton of expense.  It just makes more sense to own, and the longer you can own, the better.  Sorry, SocketSiters, but your parents are right.  Renting is throwing money away needlessly.

Year Over Year Appreciation/Depreciation (click to enlarge)

• This chart shows the year over year appreciation and depreciation numbers for all of SF’s condos, District 7′s condos, and Pacific Heights condos.
• The appreciation rates were calculated by taking the median value and dividing it by the median value of the year before.  For example, if the median value was $957,500 in 2008 and $1,014,390 in 2007, then the appreciation rate for that year was -5.61%.
• What’s interesting here is that in 2001, San Francisco condos took a big hit.  However, it took a full year for the effect to be felt in District 7, and it was felt harder.  Once again, there’s that lag  in District 7.  Buyers and sellers may be able to leverage this info to their benefit.

Market Share Stats (click to enlarge)

• This chart shows three things.  First, the navy bars show how many condo sales take place in District 7 as compared to ALL condo sales in SF.  The number has decreased by 10% since 1995.  It’s interesting that in 1995 about a quarter of all condo sales in San Francisco took place in Cow Hollow, the Marina, Pacific and Presidio Heights.  But now it’s only 13.5%.  We attribute this to all of the new condo inventory popping up in other locales around the City, such as South Beach.
• The orange bars show what percent of all San Francisco condo sales are taking place in Pacific Heights.
• Finally, the green bar shows how much of District 7′s overall sales belong to Pacific Heights.  Clearly, the majority of District 7′s action is in Pacific Heights and has been every year.  Pacific Heights condo sales account for more than the Marina, Cow Hollow, and Presidio Heights volume combined each year.

Lastly, we’ve got a couple of other market vitals to present:

• Days on Market for Pacific Heights over the past 12 months is: 35
• Over the past 6 months is: 49
• Over the past 3 months is: 59
• This is clearly trending upwards, as money has tightened and the economy has gotten worse.

• Average sales price to list price ratios for Pacific Heights over the past 12 months is: 99%
• Over the past 6 months is: 103%
• Over the past 3 months is: 89%
• Wow, looks like the time to buy was when everything was going kaput.

• Absorption: There are currently 29 condos in Pacific Heights for sale.
• Two are in contract.
• This leaves 14.5 months of inventory, but with so few condos on the market in the neighborhood, months of inventory can (and will) change dramatically with just a couple of new escrows.
• There have been 6 listings that expired within the past 3 months.
• There have been 29 listings withdrawn during the past 3 months.

Phew… that wraps it up for our first market Check-Up!  We hope you enjoyed it and are open to your ideas and comments.