Sunday, March 9, 2014

Striking it Rich near Gold(en) Gate Park

Prices of sold properties with performance data chart (click on charts to enlarge):

The annualized rate of growth extending back twenty years is an exceptional range of annualized compounded growth between 15% and 28%. Obviously, that was not the case every year, and is generally the challenge with projecting outcomes in less-than-one-year time frames. Some of the important differences between properties with different room counts are:

·        That 2 room properties have been the slowest to recover throughout the recent market cycle.
·        Since the mid 2000s, the rates of change between property sizes have begun to differ—where larger units (not surprisingly) began commanding more of a premium.
·        There appears to be stronger correlation and often very similar prices between 3 and 4 bedroom properties. This suggests better relative value with four bedroom properties.
·        The Inner Richmond region maintains a consistent price premium of 10% to 30% over Central Richmond, this is regardless of a specific time period.

But it’s equally important to pay attention to the technicals within the marketplace…

Looking only at the Inner Richmond district, below are the numbers for days on the market & premium selling price compared to listing:

What the above data indicates is:

·        Regardless of bedroom count, properties are selling within their long-term 40 day turnover rate.
·        Premium prices, too, are persisting once again: indicating that sellers have been able to command and obtain prices that they are seeking.
·        Three-bedroom properties (red line) in particular show the most stable, gradual movements over time: this is primarily due to these homes persistently making up the majority of sales. Therefore, the data seen on the 3-room options are one of the best proxies to use when studying the Richmond, at large.

Again, everything above is a technical understanding of who are the buyers and sellers within the San Francisco real estate marketplace. Fundamentally, as we have discussed in the past, there are very real economic and demographic justifications behind these numbers. Until next time.

Monday, February 24, 2014

The Cost of Living is High?... So, who cares!

San Francisco is known for a lot of things: the Golden Gate Bridge, the cool summers, the Castro, the tech industry, the foodie culture the cable cars... and the high cost of living.  With property costs in the neighborhood of $1,000+ per square foot, it might seem like living in the city is an unimaginable expense.  But the people who live in SF and love it know they're getting a bargain – because they're not looking at cost, they're looking at value.

San Francisco is a world-class city.  It's a cosmopolitan metropolis with everything from baseball to hackerspaces to wine bars at your fingertips – and in a city that's under 50 square miles and highly walkable, "at your fingertips" is no exaggeration.  Our City by the Bay is a cultural hub and an international destination, as well-renowned as London, Paris, NYC, Tokyo, or Zurich.  And you know what: the cost of living here is cheaper than any of those places.  It may be more costly to live in San Francisco than in many places of the US, but if you compare the costs here to the costs of the other great US cities – New York City, for example – SF still comes out ahead.  So, yes, you can find cheaper real estate in plenty of places, but the price you pay is that you'll forfeit the city experience.

I’d encourage you to keep a high-level perspective when shopping for a home in San Francisco, and keep in mind the broad Buyer pool this market is exposed to (i.e. multinational / international interest).  One of the main reasons our market is so resilient and strong is because of the global visibility and demand we get from foreign players given the ‘affordability’ here compared to their home country (i.e. England, France, Japan).  In the end, if it's the city itself that you love, the price can't compare to the value of living in the heart of it all.

Sunday, February 9, 2014

Happy Wife, Happy Life

Dave Eggers of San Francisco's own 826 Valencia points out that happy families are the building blocks of happy neighborhoods, happy communities, happy cities and eventually a happy world.  While your next real estate purchase might not lead to world peace, it can have a huge impact on your domestic bliss (don't judge the pic - our parents think we're adorable, lol).

Before we get married, my fiancĂ©e (Susie) and I have the benefit of a class to guide us through some of the big conversations: how would we balance our finances?  Do we want children, and how many?  What are our priorities going to be, as a couple?  Whether you're caught up in the excitement of a new engagement or celebrating your fiftieth anniversary with a move to a better home, you should discuss your real estate goals with your significant other. Consider the following:
  • What neighborhoods do you want to be in?  Do you like the bustle of city life, or the quiet of a property farther out?  How do you prioritize access to public transportation, shops, nightlife, parks, and other resources?  Do you want a place that's easily walkable, or a place that caters to commuters and roadtrippers?
  • How do you plan to use your home?  Are you attached at the hip, or do you need private spaces like a den, office, or separate bedrooms to enjoy some alone time now and again?  What about the facilities – do you entertain frequently and need a well-appointed kitchen and dining room, or do you enjoy crafts and want to convert a bedroom or even livingroom to a workroom?
  • What does your family look like, and do you expect it to change?  If you're planning on having children, they'll want their own rooms and you'll want to be close to schools and kid-friendly spaces.  Or maybe you've got grown children who have already moved out, but you still want a guest room set up in case they stop by.
Your home should set the stage for an enduring romance between you and your loved one.  Talk to your significant other about how you want that romance to look! 

Wednesday, January 22, 2014

It's All in the Flow

Whether you're a long-time resident of the City by the Bay or an occasional visitor looking to move in, you know how the feel of the city changes from neighborhood to neighborhood – even block to block.  With every step you take, the vibrant character of the city enfolds you and informs your experiences.

When it comes to choosing a home in San Francisco, the layout of your space can be as dramatic as the change from neighborhood to neighborhood.  Imagine walking into your home and feeling the living room opening up around you, its window facing out over the view from one of the city's great hills, with an open-plan, and eat-in kitchen so that the whole space feels luxuriously vast.  Or perhaps you'd prefer walking into a cozy reading room, set aside from the concerns of the day, and a large second bedroom appointed as a home office.  

The floor plan of your home controls how you move through the space, how you interact with it, and how you live in it. And as the old saw goes: when they are good, they are very, very good.  And when they are bad, they are awful.  Narrow entryways, rooms that aren't conveniently sized for their intended uses, or a lack of storage space that causes clutter to overflow into living areas all contribute to a cramped, restless feeling – not good, for the place you want to be able to unwind in!

These days, many developers are taking the stately old Edwardian and Victorian homes in San Francisco and renovating them into something more modern.  With the value placed on housing inside the city, there's often a call to make the most of a limited space, and a floor plan that emphasizes natural light and an easy flow from one area to another can make a modest home feel much bigger on the inside.

Visit prospective properties to get a feel for them.  Walk the routes through the living rooms and kitchens and to the bedrooms and bathrooms; imagine how furniture would look, and what space it would take up.  See if there's room to stretch out, literally and figuratively, and imagine if the daily motions of your life feel comfortable in the property's layout.  If they do, then congratulations: you might just have found your new home.

Friday, January 10, 2014

Statistical Analysis of Property: Cow Hollow

I’ve always been curious to actually get into the nitty-gritty of the SF real estate data.  We spend a lot of time regurgitating opinions, but for once I actually went to the raw data myself: I got a mathematician from The University of South Carolina involved to conduct a study on property information, covering both the Cow Hollow and Marina Districts.  This is an original piece, so I get to speak with a lot of authority here.

Below are some of the discoveries made on Cow Hollow (click on image to enlarge):

  • The proximity to the median price - the number exactly in the middle - captures over two-thirds of the values of Flats, Single-Family Homes, and Condominiums in Cow Hollow.  Paying attention to the median as a price proxy is, therefore, most important.  It’s also a little better than talking in averages because as you see in the charts above… the data skews nicely.  No surprises there.
  • A predictor model was developed and it was discovered that square feet is a leading predictor of price!  We kind of knew this all along - but now we have the evidence - that's encouraging.
  • After making sure that bedroom and other inputs do not skew the relationship of total square feet to price - we tested for normality.

And that’s exactly what we got: the data we worked with is reliable!  In English: we can trust the results.

Here comes the coolest part of all: we figured out how to model an expected price based on key inputs:
Using the above chart as an example of outcomes: what we are able to do is determine relationships between key factors of a property - number of bedrooms, bathrooms, square footage - which are dubbed “residuals” in fancy terms - and how that tentatively translates into price.

Everything is about comparisons, and this is precisely how we maximize the ability to compare and spit out a more reliable listing indicator.  At the end of the day, most of this is behind-the-scenes work, but for once I wanted to put it out there so you could see at least some of the methodology.  Based on the responses to this I would love to get more specific with other sub-districts.  Feel free to email me at  

Thursday, January 2, 2014

Where’s the Next Goldmine in SF?

Buyers and developers alike always ask me, “Dino, what areas of the city are undervalued – where can I expect the greatest appreciation looking ahead if I were to buy today?”  This is a very good question as most people are seeking price stability, first, with appreciation potential, in addition.  Timing is key.

My high-level, macro answer to this question is that the San Francisco real estate market is truly neighborhood-by-neighborhood, block-by-block even.  Location is vital, patience is necessary, and having the right agent will make sure that the proper execution and correct behaviors are in place to maximize value.  The value of advice translates into real dollars.

At a sub-district focused level, I believe there are two locales in SF that offer greater growth potential than others: Potrero Hill and the Richmond District.  Let me break it down for you as to why I believe this to be the case:

Potrero Hill is a deep hail mary pass away from the hot & hip Mission District, which has been experiencing new construction condo sales of $1,500 per square foot (e.g.  In comparison, the most expensive condo sale of 2013 in Potrero went for $931/sqft (and that’s an outlier).  Aside from being one of the sunniest parts of town (and without the strong winds), garnering killer views of the Bay and City skyline, here are some other reasons why Potrero is on the verge of blowing-up in value:
·         The UCSF Benioff Children's Hospital is currently under construction.  This world-class hospital will act as a boon for employment creating a potential and tangible buyer pool that will be soon reflected in the prices of property.  Unlike any other national area, SF real estate is driven by the economics of supply and demand and this is but a single contributor.
·         Proximity to the South Bay and Valley (via access to freeway and CalTrain) is easy in Potrero Hill.  More and more singles and families alike who work along the Peninsula but prefer City living are recognizing the value of this location.  There is value in getting to the office just a little more easily.
·         Although it’s known to be a little quieter in Potrero (which many prefer), you’re only a short cab ride from the hustle and bustle of the Mission restaurants and shops. Why live on top of the madness when you can still enjoy it slightly removed?

The Richmond District is my personal favorite given its proximity to Clement Street (shopping), and the Golden Gate Park.  Here are some reasons why this sub-district is a perfect value play:
·         Much of the ‘smart’ (investor) money is steadily making its way in this area.  It cannot be ignored, that every avenue in the Richmond is humming to the sound of contractors and developers either renovating for spec or end-user demands.  Bottom line: homes are affordable here, especially for those looking at single-family homes that offer separate in-law / au pair suites.
·         Price per square foot hasn’t been blown out of the water (yet).
·         Farmer’s Market just hit the scene several months back, and one cannot deny seeing the droves of young families and couples moving into the area.  The produce is fresh, too!
·         Clement Street restaurants, shops, and cafes are incredibly diverse – reflecting the people walking amongst them.

I’m happy to provide you with more insight into the quantitative side (the numbers) on both areas, along with other sub-districts that may be of interest - just let me know!  And remember, in real estate: 'you make money when you buy, not when you sell'.

Friday, December 13, 2013

The Yield Curve Movements as it Relates to Home Buying

Mortgages don’t look quite as cheap as they used to.  As of December 9th, the national mortgage averages look as thus:

The Federal Reserve has observed that the economy is doing better than anticipated, and now there are discussions about allowing the Quantitative Easing (QE) program to phase out.  Reactions to this have resulted in more sell offs in the bond market, which have further resulted in the rising yield curve.  If you are like me, and don’t necessarily believe that the Fed is driving the car, just look at the money flows over the past 12 months:

Since mid-year people have been ditching bond-investments, directly and indirectly putting all the more pressure on yields.  So buying a home has become marginally more expensive.  However, before we become too reactive to this evidence, let’s appreciate the counter-factual: the values of homes, too, have been rising!  This is the inverse, the opposite, of what we saw coming out of the S&L crisis of the early 90’s—instead of more expensive prices with lower affordability, back then it was lower prices with stronger affordability trends!

Here is a neat way to frame it, my way of framing it, using a matrix: