Hello Friends & Neighbors:
Looking back, 2016 was a bit of a transitional year for the San Francisco real estate market. Citywide, there was more equilibrium with supply and demand than there was in the previous eighteen months. Buyers are still out in force, but their appetite to acquire a new home “at any cost” has dwindled. Buyers looking to get into premium neighborhoods still need to be prepared to compete with their checkbook, as is the case for our northwest corner of the City.
Every quarter I get questions about the neighborhood, small number of overall transactions and demand. I thought I’d address it but we need to look at the neighborhood as it relates to other neighborhoods in the City and the availability of 4+ bedroom homes.
First, the geography of Sea Cliff and the Lake Street corridor is small and it is not as dense from a housing perspective as it relates to other neighborhoods with sizable homes (so our transaction activity will always be less). The chart below should put better perspective on our sales activity as it relates to other neighborhoods.
As far as the neighborhood and value, I think we are undervalued and still have tremendous upside. We are on the north side of town, next to the Presidio, close to the water, easy commuter access and have diverse architecture. Compare this to other North Side neighborhoods and their entry cost, we look undervalued.
Now, if we can get Whole Foods to take the old Fresh & Easy site we are set!
Let’s look at the ‘Q4 neighborhood report.
As predicted in the ‘Q3 report, we experienced a surge in inventory in ‘Q4, with a lot of it coming in the premium category. Time on the market (DOM) for homes dropped in ‘Q4. And, in a year over year comparison, Sea Cliff had a dramatic rebound (in the second half of 2016) after a non-existent second half of 2015 (two sales). Here are the numbers:
For reference, here are the numbers on an annual basis:
Looking at inventory, Sea Cliff is up and the Lake Street Corridor was fairly flat. There are a few ultra-premium Sea Cliff homes that have been on the market for 90+ days in the $15M+ category. Homes in that price category generally take longer to sell as the pool of buyers is fairly select.
Here are the top neighborhood sales of the fourth quarter:
What can we expect from the market as we kickoff 2017?
From a Citywide perspective we’ll see a lot of inventory early on. A lot of this inventory will be properties that were withdrawn from the MLS over the holidays (and return as “new”). This should put the January/February new listings totals at approximately ~40% more than we had at the same time in 2016.
Borrowing money is now more expensive. The increase in interest rates will not be a major buy/no buy criteria for most, but it will have (a) an impact on the lower end of the market and (b) generate flight out of investment real estate (for diversification and / or returns elsewhere).
I see 2017 happily settling into a “quality vs. quantity” scenario for sellers in Sea Cliff and the Lake Street Corridor. Sellers will have less competition, yet it will take a little longer to find the right buyer at the right price.
I think the markets in Southern Marin and East Bay will slow; creating more flight out of SF in the mid market.
One final parting note; overall, San Francisco is still a great place to live and invest in real estate. It’s a world-class city, has incredible geography, history and culture. From an investment perspective, we all have a lot of choices where to put our money. But, often times we don’t look at our homes as typical investments. Our home is where we raise kids, entertain and decompress. The chart below should put San Francisco real estate into perspective when comparing your home to other investment options.
That is it until next quarter.