SF Housing Markets: Comments Around The Web

The San Francisco metro area has seen its home values drop by a quarter, and the city still has some pain to work through. The citys future predictions are still a mixed bag and hard to decipher as market signals tend to move in both directions. 

Fiserv predicts a 14.3% gain between June 2010 and June 2011. Averaged out, that means a 4.8% gain over the next two years. One reason for the sharp comeback is that much of the area's excess inventory will have been sold. It's already dropped by nearly in half over the past year.

The recovery will be delayed, though, as the area. particularly Oakland and the East Bay, due to its foreclosure problems. During the first six months of 2009, one of every 52 homes had at least one foreclosure filing.

The good news, according to Mark Fleming, chief economist for First American CoreLogic, is that core city neighborhoods don't have nearly as many foreclosures as those out on the fringe. Popular neighborhoods in San Francisco include Pacific Heights, Noe Valley, Bayview, South Beach, Bernal Heights, and Castro. The steady demand in those communities will serve as a base as other neighborhoods rebuild.
The thing is, demand is accumulating. At some point the market will kick back into gear. It's possible that prices have bottomed out, and it seems likely that today's interest rates won't be around a year from now. There will be catch-up activity, but the big question is timing. We'll have to see what happens with employment, the economy, and with today's tight credit

Via SFGate
San Francisco is one of the top ten cities in America to invest in. 

Well, the points that resonated the most with me were:
1. 9.7% unemployment, but job growth in the high income/skill sectors required to buy a home there

2. Job growth: High-tech computer jobs in SF have doubled from 8,000 to more than 16,000 (SF Center for Economic Development) 

Number of life sciences jobs in SF has grown 5X to 2,750, up from 500 in 2004.

3. Venture capital dollars invested into SF during the recession: over $6.3 B has been invested in software/computer and bio-tech just in 2010

Multi Housing New
Vacancy rates is the broadest indicator of a healthy market. Marcus & Millichap’s third-quarter vacancy rankings identify New York as the leader at 2.9% vacancy rate and San Francisco coming in at 4.7%, compared to a national average of 7.8%.

Median home price: $675,000
Value lost since 2006: 25.7%
Forecast gain by 2011*: 4.8%

From the Trulia web site
Average price per square foot for San Francisco was $556, an increase of 7.5% compared to the same period last year. The median sales price for homes in San Francisco for Sep 10 to Nov 10 was $635,000 based on 1,233 home sales. 

Compared to the same period one year ago, the median home sales price decreased 0.8%, or $5,000, and the number of home sales decreased 13.3%. The average listing price for homes for sale in San Francisco CA was $1,073,580 for the week ending Dec 15, which represents a decrease of 0.8%, or $8,237, compared to the prior week.

Since the price of housing ultimately rests on the ability to job growth. Preliminary October labor force data counts for San Francisco,county pegs the unemployment rate at 9.3%, down 0.3% in San Francisco.

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Freddie Mac Weekly Update:Mortgage Rates Ease Back a Little

30-year fixed-rate mortgage: Averaged 4.81 percent with an average 0.7 point for the week ending December 23, 2010, down from last week when it averaged 4.83 percent. Last year at this time, the 30-year FRM averaged 5.05 percent.

The 15-year fixed-rate mortgage: Averaged 4.15 percent with an average 0.7 point, down from last week when it averaged 4.17 percent. A year ago at this time, the 15-year FRM averaged 4.45 percent.

Five-year indexed hybrid adjustable-rate mortgages ARMs: Averaged 3.75 percent this week, with an average 0.6 point , down from last week when it averaged 3.77 percent. A year ago, the 5-year ARM averaged 4.40 percent.

One-year Treasury-indexed ARMs: A veraged 3.40 percent this week with an average 0.7 point, up from last week when it averaged 3.35 percent. At this time last year, the 1-year ARM averaged 4.38 percent.

Freddie Sayz
Attributed to Frank Nothaft, vice president and chief economist, Freddie Mac.
Mortgage rates were little changed this week following significant increases over the prior several weeks. Economic reports in December have suggested the economy began regaining momentum towards the end of the year, with consumer spending, industrial production and exports all posting solid gains. Treasury yields backed up as this stronger growth outlook caused an improvement in risk appetites and the likelihood of deflation to recede further.

Rates remain low, however, despite the recent rise, and are still well below where they began the year. Low mortgage rates are an important factor in housing affordability, which in October was the highest on record, according to the National Association of Realtors . These conditions are conducive to improving housing market conditions, and indeed, sales of existing single-family homes rose 6.7 percent in November to the strongest pace since June, according to the Realtors. In addition, the median sales price rose 1.2 percent over November 2009, which represented the first 12-month increase since August and largest gain since April. Finally, new construction on one-family homes in November rose to the strongest rate since April, based on figures released by the Census Bureau

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Rent Vs Buy Today

NAR Existing Home Sales
Existing home sales which are completed transactions that include single-family, townhomes, condominiums and co-ops, rose 5.6% to a seasonally adjusted annual rate of 4.68 million in November, but are 27.9% below the cyclical peak of 6.49 million in November 2009, which was the initial deadline for the first-time buyer tax credit. Median existing single-family home prices rose year-over-year in 77 of 155 metropolitan areas and fell in 76 metro areas.
NAR Pending Sales
A forward-looking indicator, rose 10.4%  based on contracts signed in October from in September. The index remains 20.5% below a surge to a cyclical peak in October 2009, which was the highest level since May 2006.
Rent Vs Buy

The argument for affordability has a few key components. Price, cost of money and a comparison to a similar property rental.

Home prices are running about 22% less than five years ago. Its hard to know when price has reached a point where willing buyers step up, but pending sales clearly point to a slowing trend.  The Commerce Dept. report showed that new home sales rose 5.5 percent to an annual rate of 290,000 in November from the revised October rate of  275,000.

Price will continue to decline and increase affordability. There are some that think a double dip is in progress and we will see continuede price declines through 2011 or 2012.

Cost of Money
Lower tax rates just extended for another two years may boost growth. Mortgage rates responded by increasing to a six  month high with rates up more than half a point in just the past month. NAR President Vicki Golder, points out: A decade ago, mortgage rates were almost double what they are today, and they’re about 1.5% lower than the peak of the housing boom....So still historically low.

Rates remain low and are still well below where they began the year. Low mortgage rates are an important factor affordability, which in October was the highest on record

Rent Comps
Rents increased for the second quarter in a row. Asking and effective rents increased by 0.5% and 0.6% respectively in the third quarter and vacancy rates dropped from 7.8% to 7.1% nationally.To summarize, price is dropping but cost of money is rising and so are rents. Most areas havent reached a balance between the cost of renting and the cost of buyi ng, probably the main arguement for home prices continuing to descend to meet a willing buyer.

Rule of thumb: Homes are probably fairly valued at about 15 times a year's rent. So, for example, if you're paying $15,000 a year to rent a place, think twice about buying a home that costs more than $225,000. Fifteen times is the historic average.

Your home is not a growth stock. You should look to justify multiples higher than 15 to 20 by considering personal needs, proximity to schools and transportation, your own cash flow situation and job security.

It would also be advisable to get a sense of what the property would likely rent for and see how far that rent would go towards paying the mortgage should you have to move. Home sales are slowing and if you find yourself a reluctant landlord, be sure you can carry the mortgage.
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Park Merced: Cutting Edge Plans - Organic Farms, Share Bikes and More

Parkmerced is in for a long term redevelopment that is designed to change our definition of neighborhood living. Its nothing short of a game changing attitude adjustment. Its a long-term project (20-30 years) involving new buildings, community living and public transportation improvements.

Mending The Earth
One Development At a Time

Renew the Watershed Area
Parlmerced Parkmerced is a watershed area draining into Lake Merced, that was developed without consideration of its of its ecological importance. The new development vision is to regenerate the watershed and create a socially sustainable neighborhood. The stream corridor will draw native wildlife back to the lake area. Landscaping will use only native/wildlife friendly plants  to minimize water consumption and to provide food and shelter for wildlife. Rainwater flows will recharge Lake Merced and underground aquifers, including a new stream corridor, ponds and wetlands which will filter rainwater before discharging into Lake Merced.

New Wetlands
The landscape will create a variety of green zones including wetlands, coastal woodlands, and meadows. Parkmerced will become an ecologically sustainable neighborhood where urban and natural systems  are mutually supportive.

Ecologically Smart
The new Parkmerced will include both rental and for-sale housing that will be woven in and about parks, trails, and public spaces to encourage walking and other outdoor activities. Parks and recreation spaces will be set in public open spaces, and neighborhood Commons all Linked into an ecologically connected network.

Organic Farms
Parkmerceds southern edge will house a Community Center offering residents fitness and wellness programs. West of the Community Center, an organic farm, 2- to 3- acres large,  will provide a local food source.  Fruits and vegetables grown will be for sale at the local grocery store and farmer’s markets.

Green Transportation
Share Bicycles
A number of bike share centers will be available throughout Parkmerced. Residents will be able to borrow bicycles to get to work or just for a leisurely ride through the parks and trails.

The M line
Each Parkmerced resident makes about 6 vehicle trips per day.  Parkmerced developers in a city partnership  will reroute the M-Ocean View Muni to make three  stops within the complex. People will be able to walk along fresh streams and trails or use share bicycles to Muni reducing auto use.

Green Buildings Too
Parkmerced will utilize green building envelopes, including  solar, wind and cogeneration facilities , producing some of Parkmerced’s energy.

Collecting rainwater runoff  will help restore the natural water shed that Park Merced is built on.. Even rainwater flowing from rooftops will be collected and returned to the natural water systems that flow to Lake Merced. The annual volume of water for irrigation is expected to decrease from roughly 55 million gallons of potable water per year to just over 30 million gallons of recycled and/or grey water.

Use of low flow toilets, sinks, shower heads, and laundry machines in both new and existing units and the use of recycled and/or grey water, is expected to bring down the individual resident to 38 gallons  per day. Estimates vary, but average usage falls between 575 and 120 gallons per capita. Part of San Franciscos dream to be a leader in how to better live in harmony with everything.  Gotta love this city!

Thanks for Reading

San Francisco Apartment Rent Recovery

San Francisco investment properties are bottoming. According to Jay Greenberg, in an SFAA magazine article, San Francisco has seen positive sales numbers this year. Rent rates have also been getting stronger in the city. Im a firm believer that well paying jobs and the reverse commute busses provided by the tech sector, are a big part of why rentals are up and property is on the rebound.

Greenberg points out that interest rates are low, rent rates are increasing and cash flows are improving. Following is a synopsis of Greenbergs review of apartment sales:
Chart Source National Real estate Investor

5-9 units

The slide in this sector seems to have stabilized. Price per sqft is $271 this year vs. $376 in 2008. Deal flow for the first three quarters of 2010 is 61 compared to 57 in 2008.

10 Plus
Average price per sqft in 2010 is $256 donw from $347 in 2008. The good news here is that the deal flow has increased to 65 for the first three quarters up from 32 last year.

The San Francisco apartment sector is benefiting from pent-up demand, declining homeownership, and a limited supply of new development. Nationally, 70 million potential renters, the echo boomers, are expected to enter the renter pool for apartments. Something like 3.2 million renters, aged 20-34, will be looking for a place to rent between now and 2012.

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Multi Famiily Rentals Improve

The demographics
Rent AbsortionRate
Renter demographics
Who Are They

People Needing Flexibility
Renting can provide more flexibility, greater convenience and lower costs than buying a home. As a result, certain households are more likely to rent than own, including young singles starting out, families relocating to a new metropolitan area, recent immigrants to the United States, and low-income household

In Transition
such as a change in job or marital status. For example, over 60 percent of households that moved in 2003 because of divorce or separation chose to live in a rented unit.

For owners who are relocating, rental housing can be a good option if they expect to move again within a few years.

When birth rates among the native born population fell sharply after the baby boom, many feared that rental demand would drop off precipitously. But thanks to the strength of immigration, the number of renter households remained steady through the 1990s and early 2000s as foreign-born households supplemented the rental demand of native-born households. The arrival of young foreign-born households thus tempered the decline in renters aged 25–34 from 20 percent to 12 percent, and in renters aged 35–44 from 18 percent to 7 percent over the 1994–2004 period. Indeed, without these immigrants, the total number of renters would have fallen by more than 2 million (5 percent), rather than rising modestly by 100,000.

Retirees Moving Back
 As the baby boom population ages and their children leave home, some will opt for moving out of their homes and into apartments that require less upkeep and allow them the freedom to do what they want.They fit into he category of lifestyle renters.  Not wanting or needing the cost and obligations of home ownership and choosing the mobility that comes with the lesser commitment of renting, expect a lot of retirees coming back into citys for ease of access to theater, larger communities of like interests and excitement not available in suburbs.

Echo Boomers
National Association of Housing Builders chief economist believes that 83 million echo boomers will enter residential renter market and lead the demand for apartment units over the next few years, approximately 3.2 million between 2010 and 2012. This demographic trend coupled with a strong immigration trends will drive apartment fundamentals. This housing crash happens in the formative years of this population. Will the bias towards home ownership still hold or will echo boomers, raised during this crises, hold a bias towards renting over ownership.

Its clear that rental property will have a brighter future and likely to recover first. The caveat here is that jobs will be a determining factor. If job growth is meager then echo boomers may stay home longer or double up as roommates.

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