The 5+ Unit Residential Investment Market

Economic, political and even environmental volatility were powerful factors in 2018, and promise to continue in 2019: There are a lot of spinning plates right now – locally, nationally and internationally – with the potential for both positive and negative impacts on local housing markets. Generally speaking, last year was a strong one in Bay Area real estate, but varied between a hotter first half and a somewhat cooler second. Our next significant indicators of market direction will probably come with the start of the spring selling season.

Values & Trends in Values

We have a table of 2018 SF building sales with various financial data points, which can be provided upon request.

Selected Market Indicators

Many of the standard statistical indicators for the 5+ unit building market remained quite steady in 2018, though inventory levels of properties for sale have increased. In the general real estate markets around the Bay Area, the softening of the market in the second half of the year coincided with both rapidly increasing financial market volatility and rising interest rates, though simple affordability was a large issue as well.

Sales Breakdown Overviews

Rents & Rent Trends

What is being measured and who is doing the measuring varies in the following charts. Some reflect median list rents for 5+ unit buildings, while others reflect weighted average asking rents for 50+ unit buildings. There is no definitive resource for tracking what rents are actually being paid for which units, and numbers will disagree between differing measurements. What is important in these charts are the sense of general values and trends over time. How they apply to any particular unit is unknown.

This chart going back to 1994 gives more context to the ebb and flow of rental rates over time. Rents are extremely sensitive to changes in general economic conditions.

This next chart is a very approximate calculation of the impact of SF rent control on rental income over time as compared to market rents. It adds up to a substantial amount of money for both landlords and tenants – which is why rent control is such a large, continuing political issue, especially in cities like SF and Oakland, with majority tenant populations.

Selected Economic Factors

Employment growth – in many cases of very well paid jobs – has continued in San Francisco and around the Bay Area. This, of course, is a huge factor in housing markets.

There are over 70,000 new housing units in the San Francisco pipeline, and Oakland’s pipeline has been swelling rapidly as well. However, anecdotally, the word is that developers are quickly pulling back in SF due to increasing land, labor and affordable-housing costs, as well, perhaps, to increasing economic uncertainty. Which may mean that many projects currently in the pipeline may not be built in the near future. For existing landlords, that would mean less new supply coming on market and less competition for tenants from new apartment projects.

After climbing significantly through November, interest rates have been dropping since then, through the first week of January. However, rates are still much higher than the lows seen in the last few years, and predicting what will happen in the near future is very difficult indeed.

Migration: On a domestic basis, more people are leaving the Bay Area to go to other metro areas in the country than are arriving from other metro areas, and housing affordability and tax issues are widely cited as big reasons. However, foreign immigration tips the scale, for the time being, to continued, if slowing, population growth. The latest census data does not yet reflect changes that may have occurred since the anti-immigration position of the Trump administration has come into play. (About 35% of Bay Area residents were born in a foreign country.)

Broker Performance

With the mergers this past year of Paragon Commercial and Pacific Union Commercial into Compass, Compass has become, far and away, the dominant brokerage in the multi-unit residential investment market.

255 14th Street | Inner Mission

 

  • 3 bedrooms
  • 2 bathrooms
  • Newly renovated kitchen and baths
  • New floors, windows, lighting, appliances, paint inside + out
  • 1,365 square feet (main level) per graphic artist
  • 275 square feet (bonus lower level) per graphic artist
  • HOA dues: $266.20 per month
  • Walk Score: 97
  • Transit Score: 100
  • Bike Score: 98

 

Classic San Francisco design is elevated to embrace a twenty-first century lifestyle in this turnkey full-floor condominium located on one of the best blocks of the Inner Mission, rich with its own urban amenities while crisscrossed with transit corridors connecting Hayes Valley, Mission Dolores, Mid-Market and SoMa.

Alongside a dramatic gallery-like central hall featuring original wainscoting, three full-size bedrooms sit opposite two crisp designer baths. At the rear of the home, southern light filters into the open-concept living area and remodeled entertainer’s kitchen anchored with dining island. An adjacent hobby room / home office overlooks the newly landscaped shared yard which includes direct access to an exclusive-use bonus room. In-unit laundry.

New floors and paint, new windows, new stainless appliances, and new cabinetry and lighting throughout seamlessly blend with the home’s original coved ceilings, built-in shelving and period craftsmanship. Recently completed HOA improvements include new exterior paint, new front doors and entryway lights.

HOA dues: $266.20 per month

Offered at $985,000

MissionPossibleSF.com

Showing Schedule

  • Saturday, January 12: 2-4PM
  • Sunday, January 13: 2-4PM
  • Tuesday, January 15: 2-3:30PM
  • Saturday, January 19: 2-4PM
  • Sunday, January 20: 2-4PM
  • Tuesday, January 22: 2:30-4PM

 

Suzanne Gregg
415.816.9133
[email protected]

 

Michael Basham
415.794.0999
[email protected]

San Francisco Real Estate Looking Back on 2018

There were almost too many local, national and international political, economic, social and ecological factors impacting the 2018 market to count. In the first half of the year, market conditions were about as hot as they’ve ever been, and there were staggering year-over-year appreciation rates. Come summer/early autumn, real estate and financial markets began to shift distinctly cooler. Looking at 2019, there are many wild cards whose impacts are difficult to predict: extremely volatile financial markets, fluctuating interest rates, contentious national politics, international trade issues, spiraling debt levels, employment growth – and a dramatic surge of local high-tech unicorns that plan to go public, which could create a tsunami of new wealth in the Bay Area.

Year-over-Year Annual Appreciation

Comparing 2018 to 2017, the median house sales price jumped 13% or $185,000 to $1,600,000 – the largest annual dollar increase ever (not adjusted for inflation) – and the median condo price increased by $60,000 to $1,210,000.

Year-over-Year Appreciation by Quarter

When one breaks 2018 down by quarter, it is clear that the big increases in price occurred in the first half of the year, after which the median house sales price declined. By the 4th quarter of 2018, the quarterly, year-over-year median house appreciation rate had basically dropped to zero. Condo prices were basically flat Q2 to Q4. This trend of high appreciation rates in the first half plunging during the second half was relatively common around the Bay Area.

Home Prices by San Francisco Neighborhood

The city has more than 70 neighborhoods, and our tables of median house and condo prices by bedroom count run 6 pages. Below the map are 4 tables of selected neighborhoods – let us know if you would like the full reports.

SF Home Sales by Price & Property Type

SF Housing: Era of Construction

Luxury Home Sales Trends
Short-Term & Long-Term

As seen in the next 2 charts, luxury home sales have, generally speaking, held up quite well in San Francisco, though there was an increase in high-end listings withdrawn from the market without selling (3rd chart below).

The number of luxury home listings that were pulled off the market without selling climbed at the end of 2018. Many will be re-listed in 2019.

Selected Market Indicators

The dramatic decline in house listings coming on market (red line) has been a major factor in the median house price appreciation rate since 2012. Condo listing inventory has been significantly impacted by new-condo construction during this period.

Price reductions and listings pulled off the market without selling both hit new highs since the recovery began in 2012.

Hiring has continued to fuel the SF and Bay Area economy. So far, it has continued to hold up.

After a big jump in autumn, interest rates saw a drop of similar magnitude through the first week of January, which is good news for real estate markets.

Compass is a real estate broker licensed by the State of California, DRE 01527235. Equal Housing Opportunity. This report has been prepared solely for information purposes. The information herein is based on or derived from information generally available to the public and/or from sources believed to be reliable. No representation or warranty can be given with respect to the accuracy or completeness of the information. Compass disclaims any and all liability relating to this report, including without limitation any express or implied representations or warranties for statements contained in, and omissions from, the report. Nothing contained herein is intended to be or should be read as any regulatory, legal, tax, accounting or other advice and Compass does not provide such advice. All opinions are subject to change without notice. Compass makes no representation regarding the accuracy of any statements regarding any references to the laws, statutes or regulations of any state are those of the author(s). Past performance is no guarantee of future results.

Happy New Year

Happy Holidays

With the new year upon us, one of the greatest joys of this season is the opportunity to express our gratitude and to look forward to all the great things we’re working on in 2019!

Partnered with Compass, we’re launching four initiatives designed to directly elevate our clients’ experience:

  • 0% interest loans for home prep prior to sale
  • Bridge loans to offer greater flexibility
  • A vendor services marketplace for quality referrals
  • More local philanthropy efforts to give back

Wishing you a bright new year!

Setting the bar

  • Sales Records set by InvestSF in 2018
  • Highest Price, Noe Valley, Q2 2018 Top 10 for 3 Bedroom Condos
  • Highest Price, Noe Valley, 2018 Top 5 for 2 Bedroom Condos
  • Highest Price, District 4, All-Time for All TICs
  • Highest Price, District 4, All-Time for for 3 Bedroom TICs
  • Highest Price, District 4, All-Time for for 4 Bedroom TICs
  • Highest Price, District 5, Q2 2018 Top 3 for 2 Bedroom Condos
  • Highest Price, District 5, 2018 Top 5 for 2 Bedroom Condos
  • Highest Price, District 5, 2018 for 2 Bedroom TICs
  • Highest Price, District 5, 2018 for 3 Bedroom TICs
  • Highest Price, District 5, All-Time Top 5 for 2 Bedroom TICs
  • Highest Price, District 5, All-Time Top 3 for 3 Bedroom TICs
  • Highest Price, District 5, All-Time Top 3 for 4 Bedroom TICs
  • Highest Price, San Francisco, 2018 Top 3 for 2 Bedroom TICs
  • Highest Price, San Francisco, 2018 Top 10 for 3 Bedroom TICs
  • Highest Price, San Francisco, 2018 for 4 Bedroom TICs
  • Highest $/SQFT, Noe Valley, Q2 2018 Top 3 for 3 Bedroom Condos
  • Highest $/SQFT, District 4, All-Time for 3 Bedroom TICs
  • Highest $/SQFT, District 4, All-Time for 4 Bedroom TICs
  • Highest $/SQFT, District 4, All-Time Top 3 for All TICs
  • Highest $/SQFT, District 5, All-Time for 2 Bedroom TICs
  • Highest $/SQFT, District 5, 2018 Top 3 for 2 Bedroom Condos
  • Highest $/SQFT, District 5, 2018 Top 10 for 3 Bedroom Condos
  • Highest $/SQFT, District 5, All-Time Top 3 for 2 Bedroom Condos
  • Highest $/SQFT, District 5, All-Time for 2 Bedroom Condos
  • Highest $/SQFT, District 5, Past 10 Years Top 10 for 4 Bedroom TICs
  • Highest $/SQFT, District 5, All-Time Top 10 for 3 Bedroom TICs
  • Highest $/SQFT, San Francisco, Q2 2018 Top 5 for 2 Bedroom Condos
  • Highest $/SQFT, San Francisco, Q2 2018 Top 25 for 3 Bedroom Condos
  • Highest $/SQFT, San Francisco, Q3 2018 for 3 Bedroom TICs
  • Highest $/SQFT, San Francisco, 2018 Top 10 for 2 Bedroom Condos
  • Highest $/SQFT, San Francisco, 2018 for 2 Bedroom TICs
  • Highest $/SQFT, San Francisco, 2018 Top 3 for 4 Bedroom TICs
  • Highest $/SQFT, San Francisco, All-Time Top 3 for 2 Bedroom TICs
  • Highest $/SQFT, San Francisco, All-Time Top 20 for All TICs
  • * Records per sales reported to MLS at time of close of escrow

See the Latest Sales, Overbids, Underbids + Hot New Listings

4169 24th Street | Noe Valley

Exclusively Offered by InvestSF

Noe Valley Commercial Condo

  • Constructed in 2018
  • Ideally located on 24th Street at Castro Street
  • Ground floor of six-unit mixed-use building
  • Soaring 15-foot ceiling
  • ADA bathroom
  • Separate executive office on mezzanine
  • In-unit storage space
  • 720 square feet per condominium map
  • Zoned NCD – 24th Street Noe Valley Neighborhood Commercial
  • HOA dues: $240.13 per month

This modern, open span, street level commercial condominium is a rare offering indeed. Consider this property for an investment, or use for your own small business.

Noe Valley has an exhilarating rhythmic energy. While it has a small-town feel, the neighborhood itself is quite expansive. 24th Street is one of two main commercial strips lined with upscale restaurants, boutiques, and dozens of kid- and pet-friendly storefronts and cafes.

The area is known to have more stroller traffic than vehicles, making it a popular place for young families; it has an equally large population of young professionals that fill up the neighborhood bars and restaurants late into the night. Its thriving pulse, central location, and distinctive charm is a boon to business prosperity.

Coming Soon: $399,000

Showings

Suzanne Gregg
415.816.9133
[email protected]

 

Michael Basham
415.794.0999
[email protected]

1025 18th Street | Oakland

Reflecting the grandeur and colorful history of old West Oakland, this Colonial Revival, also known as the Wansner (Wilhelm) house, is sited on an exceptional gated corner lot in the “Oak Center Historic District”. Boasting period details including cove ceilings, decorative brick fire place in the living room, built in display case and hardwood floors, the modern updated kitchen, and bathrooms provide for contemporary comforts. Externally, the expansive deck with retractable canopies provide for intimate private affairs or open air events. As well, it serves as a great viewing venue for local events. Making your way from the deck to the exquisite level side yard featuring a lovely arched arbor and water fountain, requires a simple stroll along the cobble stone paved path adjacent to the newer constructed expansive 2 car garage. Close to BART, FWY access, transportation, Uptown, Down town, Fox Theater, Defermery Park, public shared bikes and restaurants!

Roark

Roark O’Niell 

415.308.5085 [email protected]

1273 Filbert Street | Russian Hill

Prime Russian Hill Edwardian full floor condominium with incredible Golden Gate Bridge views and two car garage. This two bedroom, one and a half bath flat boasts classic details including crown molding, hardwood floors, gas fireplace and exclusive roof access. San Francisco living at its absolute best, offering walk ability to Union St., Aquatic Park, Sterling Park Tennis Courts, North Beach and just a short Cable Car ride to downtown. * Two Bedrooms * One and One Half Bathrooms * Formal Dining Room * Two Car Garage with Ample Storage * Shared Bucolic Garden * Exclusive Access Rights to View Roof * Hardwood Floors * Gas Fireplace * Laundry Room * Plantation Shutters * Pets Negotiable *Partially Furnished

Leased