News & Research Archive

Pulse Of The Market - Welcome 2014

Jan 06, 2014

 

Most of us know that our residential real estate market was on fire in 2013: the second year in a row. Average home prices were up 17%, while condominiums were up 16%. This was on top of 2012 increases of 16% and 11% respectively.

Bay Area real estate is on fire

Is it Any Wonder?

San Francisco's 5.2% unemployment rate is one of the lowest in California (8.5%), and is quite a bit lower than the 8.1% in Chicago, 8.5% in Los Angeles, and 8.5% in New York City.

San Francisco residents are getting back to work across every major job sector—from hospitality and tourism to construction to technology to manufacturing to our neighborhood small businesses, so said Mayor Ed Lee recently.

At the risk of repeating what you already know, San Francisco is the recognized “innovation hub” of the world. This plays no small part in our increasing residential prices. Every young person and virtually every company in the world wants a presence in the City. It's a very big world and a very small city.

Every time one of the tech companies goes public, whether it is Google, LinkedIn, Facebook, or Twitter, more than 1,000 millionaires are newly minted. In 2013, about 2,600 single family homes and 2,900 condominiums traded hands. Do the math.

 

 Millionaires

What's a Buyer to Do?

Compete! However, come with a 7 to 10-year time horizon and make sure not to overpay; details upon request. Yes, I know it is easier to rent, but at the end of the day, a renter is paying the property owner's mortgage, which in my book is not a very good long-term strategy.

What's A Seller to Do?

Figure out where you are going to live before you put your home on the market and the buyer hordes descend. The key for sellers in this wild market is to maximize gains and leave no money on the table. I counsel my sellers: don't ask - what is my property worth? Rather, ask - what can I get for my property? If you have five different listing agents, you will get five different results. Results depend on selling strategy, marketing, presentation, initial pricing, and about 10 other factors all determined by the agent.

What to expect in 2014

No single-family homes are being built, and while we may be seeing many new (small) condominium projects springing up throughout the city from Hayes Valley, to Potrero, Inner Mission, Noe, the Van Ness corridor, and Russian Hill, they don't make a dent in supply. Nor will the new Lumina with 650 units in SOMA make a dent. No one seems to have a long-term answer for increasing supply; average prices keep escalating.

The pace of the current up-cycle will eventually exhaust itself. It always does. I think average prices will continue to increase again in 2014 and likely more than 10%. This happened in the 1998-2000 era when there were three back-to-back years of increases of more than 15%. Check in with me next January to see how we did. In the meantime, Contact me if you should need some help.

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Written by: Malcolm E.A. Kaufman

E-mail: mkaufman@pulsefactors.com


Starboard TCN is posting this article on its website and blog with Malcolm E.A. Kaufman's approval.

Malcolm E.A. Kaufman is Founder of PulseFactors™ LLC. He refers you to his website, pulsefactors.com, where you can see recent issues of Pulse of the Market© and learn more about him. He invites your comments, suggestions, and questions.

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