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San Francisco Real Estate Market Update for 6/19 – 6/25/06

Avram Goldman, President and COO of Coldwell Banker, San Francisco Bay Area said in his latest weekly report:

“The week of June19-25th showed a bit of an upswing. Although the market is not moving anywhere near the velocity of last year, the best priced and staged homes are selling in historically short periods of time. Yes, more homes are available than we have seen since 2003, but are nowhere near the slow cycles of the early 80’s and 90’s.”We are seeing fewer multiple offers around the Bay with the exception of the SF/Peninsula where percentages run from 20-75% of listings sold being involved in multiple offers. We are still having shortages of good listings in the SF/Peninsula market under the $1-1.5 mil. price range and the upper ends of those markets still are moving where there are shortages of available listings.

“Open house activity is slowing, particularly for the listings that are being held open for the 3rd or 4th times. Well priced and prepared homes being held open for the first time are attracting large groups of buyers. There are still plenty of buyers looking; they are just taking longer to make their decisions. The volume of price reductions has increased as motivated sellers are trying to find buyer price points. I am attaching an article from the Wall Street Journal discussing the advantages of different pricing and reduction strategies.


“What we are noticing is that the flow of new listings coming on the market is beginning to slow. I think over the next several months we will see those sellers that don’t have a compelling reason to sell taking their homes off the market. This will be a positive sign for the market as it will accurately reflect the true inventory available. Now is a great time for buyers as choice is at the highest point in years and interest rates are still under 7% which is historically low. 


– Avram Goldman

* For an e-mail alert when this report is updated, send a note to info@SFResidence.com with “weekly market report” in the subject line.

Haight-Ashbury has changed in San Francisco

A reader asks: As a youngster during the 60’s, my family and I visited San Francisco. We were amazed at how the area of Haight-Ashbury was glamorized in the news, yet how run down it was. Has this neighborhood changed much?

Our reply: The Haight (as it is called today) has changed a great deal from when you visited though local shops still promote remnants of the bygone era like tie-dye tee shirts and psychedelic posters. The San Francisco Chronicle website has a nice profile of what may be found in this neighborhood today

Wikipedia has some more interesting history on the area plus many related links.More recently, as property values have risen, the Haight is slowly improving. Victorian homes and apartments are being renovated which is causing the property values to rise significantly. Haight Street still has many small businesses, restaurants, coffee shops, and bars which attracts a diverse clientelle. Unfortunately, there is still an element of drug activity and homelessness in the area of the park close to Stanyan street but the City is striving to improve this area. The Haight-Ashbury Neighborhood Council holds regular meetings to discuss topics concerning the neighborhood.

– Janis Stone and Mick Orton

How to pull money out of a property without selling it – Part 3

A reader previously asked: I want to pull some equity out of my San Francisco property and pay as little as possible in taxes or none at all. Is there a way to do this?

Our answer: In our first article, we discussed refinancing and private annuity trusts. Our second article talked about reverse exchanges. This third article discusses second loans or lines of credit. At the time of this writing, the Fed raised interest rates to a 5 year high on June 29, 2006 and are probably going to continue on fears of rising inflation. Back in July of 2005, we published a market report (written by Jay Bransfield) explaining what these rising rates affect and why.

As you probably know, this most affects the short term interest rates for credit cards and, even more importantly, second loans or equity lines of credit on your home. It also affects adjustable rate mortgages. In the short term, seconds loans and lines of credit might be good ways to pull money out of your property, but as a long term solution it can be quite expensive. This might override any advantage you might get from not being taxed on the money.

– Mick Orton, Janis Stone, Jay Bransfield

Explaining the difference between a TIC, a condo and a Co-op for San Francisco Real Estate – Part 3

A reader previously asked: In San Francisco, I hear a lot of people throw around the terms, tenancy in common, condominium and co-op and often use them to describe the same property in the same sentence. What is the difference between them?

Our answer: In part 1 we talked about Tenancy in Common. In part 2 we discussed condominiumns. The third and final installment covers Co-ops as a form of ownership. Co-op is short for a Cooperative apartment. Technically speaking the building is owned by a corporation and ownership of each of the individual units is defined by a certain number of shares of stock in the corporation with a proprietary lease to occupy a particular unit. There is usually a requirement that when a unit is sold the buyer must be approved by the Board of Directors of the Co-op. The buyer submits a financial statement and personal and financial references to the co-ops board of directors. The board reviews the information and approves or disapproves the purchaser. Because of this approval process, often the escrow period needs to be longer than for a condominium.

The other difference is the financing of a cooperative apartment. There are only a handful of lenders in San Francisco who will loan on co-ops and of those, some will only loan on certain co-op buildings. The loan-to-value ratio is typically lower than condos and can be as low as 50% but are typically 70-75%. There are still a couple of buildings in San Francisco that do not allow any financing at all so units must be purchased with cash.Be sure to check on the financing of a building to be sure you can get the the loan you need and want.

– Janis Stone, Mick Orton

Green housing? What’s that???

A reader asks: I have heard the term green housing. Are these homes becoming more popular?

Our reply:The term green housing is a relatively new term brought about by environmentalists who promote the use of “earth friendly” and recycled materials in homes as well as ensuring they are energy efficient. It is the latest craze in building technology.

In San Francisco, even the Mayor has gotten into the act. In August of 2005, the San Francisco Chronicle he announced that all new affordable housing projects would promote “high environmental standards”. Some of the new features would include solar panels, recycled building materials and so on.

Green construction has gotten very popular lately, especially in California. The US Green Building Council has a website full of information as well as links to other sites providing resources on this topic.

– Mick Orton

San Francisco Real Estate and landfill

A reader asks: I have heard there are different areas of the city are made of landfill. What are the concerns with buying in these areas?

Our reply: Entire neighborhoods of the city such as the Marina and Hunters Point sit on man made landfill (made up of mud, sand, and rubble from past earthquakes) were created when flatland became scarce. Unfortunately, such land tends to be unstable during earthquakes. As a result, the liquefaction during earthquakes causes extensive damage to property built upon it, as was evidenced in the Marina district during the 1989 Loma Prieta Earthquake.

In an earlier article (June 19, 2006) we talked about earthquakes, and included a link to the USGS website showing the different areas of the City and the types of soil in each.

When buying a property in areas that are built on landfill it is important to consult with a structural engineer. They will be able to inspect the property and give you their opinion of the structural integrity of your home. Remember that this is usually the largest purchase you will ever make and it is important to understand protential risk in relationship to earthquakes. Your real estate agent should give you a booklet (one of the requriements when we meet with a client) which explains basic structural components of a property which may compromise it’s stability in an earthquake and what can be done to retrofit a property to help reinforce it to minimize the damage in an earthquake.

You can purchase earthquake insurance for a home but the deductible can be 15-20%. In the case of a condominium you should see if the homeowner’s association has a master policy that includes earthquake insurance. Even if they do, you should also purchase a homeowner’s policy to cover your contents.

– Janis Stone

Explaining the difference between a TIC, a condo and a Co-op for San Francisco Real Estate – Part 2

A reader previously asked: In San Francisco, I hear a lot of people throw around the terms, tenancy in common, condominium and co-op and often use them to describe the same property in the same sentence. What is the difference between them?

Our answer: Hopefully part 1 of this atricle answered the question for you about Tenancy In Common. Now we’ll discuss condominiums.  

Dictionary.com describes a condo as, “A building or complex in which units of property, such as apartments, are owned by individuals and common parts of the property, such as the grounds and building structure, are owned jointly by the unit owners.”

With condominiums you own the “airspace” that the condominium occupies. Each unit has its own lot number and map just like a plot of land. The owner owns that “lot” which is the interior space from the exterior walls and a percentage of the common areas which can include the land on which the condos are built, outdoor space, roof, exterior walls, and any common areas defined within the CC&R’s or title report. Sometimes this also included a deeded parking space.

The CC&R’s are the Covenants, Conditions and Restrictions of the condominium. These documents define the ownership rights and responsibilies of the condominium project. They are specific to each association and are recorded with the deed and are a matter of public record. Every association has its own CC&R’s, and it is important that when you are going to buy a condo, you read and review these documents so you make sure can live with the rules since they can be legally enforced. (For example some associations do not allow pets or restrict the type or size of the animal.) There may be also be other rules in addition to the CC&R’s.

Condominiums can be financed just like a single family home. However, there are some lenders who will only do loans in condominium buildings with more than 10 units. Others will not loan if too many of the units are rented. And you might have problems getting a good loan is if there is pending litigation in the complex. So check with your lender to be sure.

– Janis Stone

How will interest rates affect San Francisco Real Estate?

A reader asks: The Fed keeps raising its interest rates, and this is causing long term and short term interest rates to steadily rise. Should I buy now or wait until interest rates start to come back down?

Our answer: No one can predict what interest rates will be in the future. The San Francisco Chronicle reported June 29, 2006, that rates have passed the 4 year high, but a day later reported that “Sales of New Homes Increase Unexpectedly”. When interest rates are rising it can actually be the best time to buy.

During the period where interest rates were lower there was such a frenzy in our market that buyers were paying 10-40% over the asking price or the last comparable sale in the neighborhood. Even with low interest rates that translates into higher loan amounts. Now that rates are moving higher the market is slowing and buyers are getting the opportunity to negiotiate on the price. In some cases they are buying for less than they might have had to pay a few months ago. Keep track of monthly San Francisco real estate market trends on our website. Keep in mind there is about a 30 day lag in reporting because escrows typically take about a month to close.

There is very little down side to buying now. If interest rates fall you can always refinance to lower your payments.

– Janis Stone, Mick Orton

Parking problems when owning San Francisco Real Estate

A reader asks: The parking in San Francisco has always been a problem for me as a renter and now as a potential homeowner. Is there a way to fix the problem of buying a home or condo that does not have a garage or parking space?

Our answer: Many properties in San Francisco are older buildings constructed before cars were invented so they do not have parking. When you are considering purchasing a property you can think about adding a garage. This can be done by either raising the building or excavating, or a combination of both. Not only will this provide parking for you but will add value to your property.

In order to find out if it is either structurally or economically possible to add a garage, consult with a contractor who specializes in garage construction in San Francisco. (Add a Garage is just one of the contractors who tackle this type of project.) They can come out to the property and give you an estimate before you purchase the property. Also be aware there may be height restrictions for your particular area so check with the city and any neighborhood associations as well.

If you do not mind parking on the street, you can obtain a residential parking permit issued by the City, which allows you to park in your neighborhood without getting a ticket for parking more than the time limits imposed by the city. Of course, you still have to find a parking place near your home, but if you do not use your car everyday this could be an option.

– Janis Stone, Mick Orton

A reader wants to know why his house isn’t selling

A reader asks: The market has been so good that I tried to sell my house by myself last spring. I didn’t get much interest even though I did advertise in the San Francisco Chronicle for a couple of weeks. Do you have any suggestions?

Our reply: Please don’t take offense, but buyers and sellers think Realtors make all this money for just sticking up a sign, putting an ad in the paper and answering the phone to sell your house. There is a lot more that goes into marketing your property when a Realtor does it. I am going to answer the question as if we were not real estate agents, for the purposes of education.

First of all there is the liability issue. How were you going to protect yourself against an over zealous lawsuit? Brokers are required to carry liability insurance. In addition, Realtors carry “Errors and Omission Insurance” to protect themselves. But you, as a seller, have no such protection when selling your own home.
Real estate agents are also there to answer legal questions. Realtors are kept up to date on the most recent changes in real estate laws. Additionally, a good Realtor can offer advice for solving problem situations that invariably arise during the Escrow period! And let’s not forget the endless resources at their disposal such as mortgage brokers to help the buyer, escrow officers, and the other professionals that are helpful when selling your home.

With “for sale by owner” properties, the issue of the agent’s commission usually comes up. Sure, the commission looks like a lot of money, and it is. But did you know that, on average, a Realtor can sell the same house for 16% more than an owner can get on his or her own (figures come from www.Realtor.org)? When you look at property values in San Francisco, you’re talking about a lot of money! For this reason alone, Realtors more than pay for themselves by handling the transaction.

There are also a lot of expenses that go into properly marketing your home to ensure it is exposed properly.

  • Advertising in the Chronicle is just one part of a San Francisco Realtor’s job.
  • Once you’ve signed the listing agreement and are ready to go, your home is placed on the MLS which gives you instant exposure to every Realtor in the City as well as any outside of it who have a subscription. This act alone exposes your property to some of the best agents in the country (San Francisco has some of the top producers in the US) who would not have otherwise seen your listing.
  • Some Realtors also do featured ads in popular local magazines (i.e. Nob Hill Gazette, Homes, Real Estate times, etc.) to give your home even more exposure.
  • In addition, most agents now have their own websites to help promote their current listings. Did you know that in 2004 only 15% of buyers first learned about the home they purchased on the Internet as compared to 24% in 2005. Of those Internet buyers, 81% of them purchased their home through a Realtor.
  • Property information statements need to be printed for the open houses.
  • Just listed cards are sent out to a select list of people to ensure someone shows up at those open houses.
  • Even more important are the brokers’ tours (called caravan and other things in different areas) where agents can come (with or without their clients) and see your home in one or two showings. This is less disruptive to you. Chances are, if you were representing yourself, most agents didn’t even know your home was for sale.

So next time you decide to sell your house, please consider working with an agent. Be sure to interview a few and pick the one you think will do the best job. Good luck.

– Mick Orton

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