Pacific Union International

San Francisco Apartment Buildings – Market Update Q4 2014

SF Apartment Buildings 2014 Overview

As we close up the first whole month of 2015, we wanted to take the data that we’ve gathered from the past year and give you a complete market overview for San Francisco Apartment Buildings.

As we forge through 2015, barring any unforeseen catastrophic events or any major economic changes, we believe the apartment market will continue advancing with positive momentum. The lending market is contributing to this positive trend by boasting much liquidity in the marketplace and providing borrowers with historic low interest rates.

The average price per square foot for all 5+ unit apartment buildings in SF is well over $400 and is expected to continue to rise. The rise is largely due to low-paying tenants moving out and market rental prices hitting all time highs.


*Because of the huge variety in buildings sold, average dollar per square foot is a very general statistic when applied to investment property sales. This data is from sales reported to MLS.

In San Francisco, capitalization rates for 5+ unit apartment buildings have continued to drop, in some areas below 4%. While we don’t know how much lower they can go, we do foresee cap rates staying steady until there is a rise in interest rates.

The higher the cap rate the greater the return on investment as measured by net income over purchase price.


* This data is from sales reported to MLS, but may contain errors and is subject to revision.

San Francisco has continued to have steady transaction volume in apartment building sales and with Proposition G being shot down late last year, buildings continue to close at record numbers.

If you are a San Francisco Apartment owner thinking about selling sometime in 2015, contact Red Bridge Group, your top multi-unit sales specialists.

unemployment in the bay

Unemployment Rates Dropping in The Bay

With summer officially coming to a close (even though we still have some of the best weather of the year ahead of us) – unemployment rates are down from last month in every Bay county! – California Economic Development Department

The 9 Bay Area counties were the only ones in the state of California to show unemployment rates of less than 5 percent – indicating that our market has reached “full employment”.

Marin County still has the lowest % unemployed workers – 4.2%, 2nd is San Mateo at 4.3%, 3rd SF at 4.6%, and Napa at 4.8%. The others range from 5.4% in Sonoma to 6.8% in Solano.

The EDD briefing states that California has gained back the 1.3 Million jobs lost during the Recession in June, 2014. July was the 53rd month in a row of continuous statewide job growth.

Of course, The Bay Area provides for many of these jobs and is largely responsible for helping our job economy normalize – often exceeding expectations. The tech sphere continues to further shape San Francisco’s job market – and for good reason.

Besides “nonfarm” jobs – between ’10 and 2014 – the EDD stats show this to be the largest 4 year job increase compared to all other California regions – showing an unbelievable growth rate of 8.9%!

Even with all that San Francisco has to offer in terms of tech jobs, the EDD estimates that in the next 10 years, the largest growth will actually occur in the hospitality and tourism sphere – which makes sense considering San Francisco is becoming one of the most desirable cities in the United States. The more opportunities we can provide – the stronger our local real estate market will be. An estimated 186,000 positions in hospitality and tourism will open. Info/tech sphere will generate an estimated 160,000 new positions; Retail expected to provide 137,000 new jobs by 2020.

Needless to say, all the new construction currently underway in San Francisco is truly needed. Yet – we know how challenging traffic and congestion can be in San Francisco already. We can certainly expect infrastructure changes from the city to accommodate all the people who will be moving here. Luckily, the tech sphere employs a larger degree of employees who can work remotely.

San Francisco Most Expensive City for Millennials

For those interested in the most recent news about younger techies in SF, read up!

While tons of young techies and millennials are flocking to SF for jobs and to take advantage of the tech sphere – they are finding it very difficult to pivot from the rental market to purchase a first home. For those who are ready – the best SF real estate team is ready for your business.

RealtyTrac just put out a study that states San Francisco is the least affordable city in the United States for the younger generation hoping to buy a new home. The data suggests that SF saw a 68% population increase between 07 and 2013 for millennials between 18 and 25. As per the statistics, the average techie would have to be wiling to spend 78% of their annual income to purchase a home. Yeah – over 3/4s of their take home would need to be devoted to buying a home. And with properties starting at 1 Million (if you want to be in SF proper and not have to commute hours for work everyday) – this creates a terrible cycle of renting for our youth who are no longer able to go through the incredible steps of buying their first home.

That being said – all hope is not lost. For those who want to commute and like more space to spread out – in Alameda, they can purchase a home by only dedicating half of their annual salary to a purchase.

Pacific Union CEO Mark A. McLaughlin gave the Mercury News his take on rising prices in the Bay Area, pointing to the region’s economy, population growth, and desirability as three key drivers.

NATIONAL HOMEOWNERSHIP RATE LOWEST IN ALMOST TWO DECADES

With younger generations not buying homes, this is leading to the lowest home-ownership rate in nearly 20 years. With student debt rates and joblessness at an all time high – it is no surprise that the younger generation has found renting to be more suitable and practical.

Even in The Bay with employers paying more than the national average – the high cost of living (not just housing) still levels things out enough that it doesn’t make a difference. They pay you more, but you pay more to live. On the other hand, for investors – this has created an incredible rental market. There has never been a better time to contact the best SF real estate team about a multi-unit purchase!

1 million over asking

Noe Valley – Property Sells for 1 Million Over Asking

Noe Valley is becoming more and more popular every day. With such an easy commute to the Peninsula – it is quickly becoming the tech industry’s favorite neighborhood! And with tons of great shopping and restaurants on Noe’s 24th Street – it is easy to see why this neighborhood is getting so much attention lately.

Often billed as the family friendly neighborhood – or the more Southern Pacific Heights (see article) – Noe Valley’s Real Estate market is getting a lot of attention in recent years – and the price of homes has skyrocketed, with the first property to ever sell for 1 Million over asking closing last week.

“There’s been a lot of activity in Noe Valley, and some record prices per square foot…More and more, the south side of the city is becoming a magnet for a new wave of buyers, whether it be Noe Valley or the Mission District, primarily because so many people commute down to the Peninsula.” – Patrick Barber, Pacific Union’s SF President.

Between the 24 Divisadero that closes the gap between The Castro and Noe Valley, the 48 Quintara – and the J Church MUNI – there are tons of options here for commuters. Of course – the tech shuttle buses have made a home here as well.

Tons of shopping exists on the 24th Street corridor – which extends from Castro Street all the way to The Mission neighborhood – with plenty of stops and shopping to check out along the way. Included is Whole Foods, Firefly Restaurant, the Noe Valley Bakery, and Toast Eatery – as well as a Starbucks, naturally.

Liberty Hill – on the north end of Noe Valley offers some of the most spectacular views of Mission Dolores Park – and these homes certainly sell at a higher price point. A famous Christmas display on 21st Street provides an attraction for San Francisco’s tourists every December. While Noe Valley may share the same warm climate as neighboring Inner Mission and Mission Dolores, the more Southern portion of Noe – which climbs up to Diamond Heights and Twin Peaks, experiences significant fog during some parts of the year.

The median sale price increased to $1.5 million in July in Noe for Single Family Homes – an increase of 37 percent from $1.1 million last year – and, condominium prices have been raised 55% in the same time period.

As with most SF neighborhoods – supply is shrinking and demand for housing is rising. The tale of multiple competing offers has become the norm – with List Price to Sale Price ratios reaching national and all-time highs. In July homes for sale decreased 17% from last year’s July – yet the number of homes sold has increased over 30%.

15 Fountain Street – a 24th Street property, was listed by David Bellings, Coldwell Banker for 3.98M. The property just sold last week for a whopping 5.15 Million. To clarify – this is NOT a typo. The house very literally sold for 1 Million+ OVER ASKING. This is statistically significant – and the fact is, that young tech money wants young tech houses. These new remodels will have no trouble selling and this particular property really paints the best picture of Noe Valley in Fall 2014.

ity and a very diverse housing stock with everything from old Victorians to modern homes to condominiums to apartment houses,” Barber said. “It’s really become one of the top neighborhoods.” – Patrick Barber, PU President, San Francisco Area.

Alive and still Kicking – Brokers in SF

OK. Everyone needs to hold their horses because clearly, RedFin and Zillow haven’t completely annihilated our Real Estate Market – and yes, there is still a need for agents and brokers. Why? This post should clarify why and how our duty as Realtors won’t be compromised by Online portals – or brokerages like Redfin.

So yes – although the gossip drama queen/king of your office may have a different side to this story, we as Realtors haven’t been totally annihilated or kicked to the curb by our clients due to the success of Redfin, Trulia, or Zillow. They still want and need our services. But at Pacific Union – we don’t view this as some mystery yet to be solved – but rather a logical response to these services entering our marketplace. Real Estate professionals are not dinosaurs – see blog post about this – and will not be as easily kicked out of the career positions they for so long and hard.

Pacific Union blogger discusses where Brad Stone, author of Businessweek.com post about Redfin and Trulia killing the role of the agent, falls short. In the end of the day, these websites are just websites – and unless they provide some additional benefit to the consumer – they will remain, regardless of their impressive web traffic, just websites. Consumers are intelligent and motivated – they can move around a keyboard with the same skill as any of us – and we cannot fail to recognize this. So – if they can do something on their own – and save money while doing so – you can bet your bottom dollar, they sure will. “That’s why Expedia.com has supplanted travel agents, online banking and ATMs have reduced banks’ physical footprints, and Amazon.com has become a behemoth in the book industry. Consumers saw the benefits and jumped aboard in droves.”

That being said, RedFin has yet to take over the Real Estate industry – despite it’s recent expansion and move to places like Orlando, Florida. With all the marketing and branding of RedFin – at this point, it is clear that RedFin simply isn’t a good value proposition to the consumer. The Real Estate industry remains to be the last true vestige of commission based sales for one reason – because not all homes are created equal. Real Estate is not a security – or a future rate that can be bought and sold – like the stock market, or a hotel room rate. Real Estate is emotional – and not every house makes a “home” for different people. That is why our job is so much fun! We see the reactions of our clients – and adjust on the fly – to ensure we are showing them property best suited to their given needs and wants. A travel agent doesn’t have the same responsibility – because selecting a hotel room, or plane seat – doesn’t require the same due diligence as buying or selling a home. Generally speaking – an isle seat costs more because out of the 3 options – most people would prefer the extra leg room – simple as that. But when discussing a home – especially in a market like San Francisco – a home (for example) up in Twin Peaks with a view of Treasure Island through Market Street might be worth a whole lot more to someone who grew up on Treasure Island than someone who did not. They might be willing to offer more – while someone else who doesn’t care about that small detail – might not. No computer algorithm can ever take away the Realtors ability to price accordingly.

Simply put – consumers want information – and they will get it, with you – or without you. In the end of the day, complete transparency is where the Real Estate market is heading – but not in a direction that will eliminate the role of Realtors. Rather, it will change the role of Realtors – from gatekeepers to an encyclopedia. It will only make for better, more educated Reatlors. Customers are smart – and they think Realtors are trying to get “one-up” on them.

For agents – we simply need to plant our foot and show the value we bring to our clients. In the end of the day – we want to close as many deals as possible – and from those deals, generate the greatest possible referral network. With bidding wars and a hyper-competative market here in SF, why would any agent worth their grain in salt ever purposely steer a client in any direction. We want to help them find exactly what they want. “In 2011, 88 percent of home buyers used the Internet as a source of information in their home searches. Good luck trying to keep a client from stumbling on a home you want to hide!” And as much poor sentiment we as Realtors feel from the public at large – we are still only as good as our next referral – and the information sources we can give to our clients.

There is a reason why For Sale By Owners aren’t the norm – and that is because the time and energy it takes to list a property is hard enough – but try doing so without the backing of a top-tier Real Estate firm. To do a FSBO without hiring an attorney is simply foolish. And the costs associated with this could wind up costing more than just paying a commission. In a city like San Francisco – which is experiencing an all time high LP/SP ratio, you want to ensure that your listing gets all the attention it deserves.

“Let’s take a look at the real world instead. According to the National Association of Realtors, homes for sale by owner netted an average sales price of $150,000 in 2012. For home sales assisted by a real estate professional, the price spiked to $215,000. That’s a whopping 43 percent difference.
We’re betting that most consumers are savvy enough to use the Internet and to understand the real FSBO numbers. So, sorry, we don’t buy the argument that hapless consumers are just being misled and misinformed and THAT is why they aren’t flocking to Internet brokers.”

top growing

Pacific Union – Named to List of Top Growing Bay Area Companies

Honored again with more awards (see we were named to Inc’s 5000 list) – Pacific Union is eager to share with our readers that we have been named as 1 of the Bay Area’s 100 fastest growing companies for 2013 by the San Francisco Business Times. This growth award is calculated using the revenue growth between 2010 and 2012.

Placing 96th on the list, with a 70.7% growth from 2010-2012 – Pacific Union is pleased to say that we are 1 of only 2 Real Estate firms to make the cut for this prestigious list.

Mark A. McLaughlin – now CEO of Pacific Union is largely responsible for helping us make the cut – by growing PU’s revenue to 92.4 Million by the end of 2012 alone.

Coming as no surprise after the March award by the San Francisco Business Times calling for Pacific Union as the 3rd largest residential real estate firm in Northern California – we can expect that this will be one of many awards Pacific Union can expect under it’s new and improved management. This Spring, PU also made REAL Trends and RISMedia’s PowerBroker list for ranking 3rd in the nation for average home sales price!

pacific union

Pacific Union ranked in Inc. 5000 2 years Running

For the 2nd year running, Pacific Union is at the top again – and happy to share with our friends and family that our firm has secured it’s place in the Inc. 5000 list – a prestigious list that ranks the 5,000 fastest-growing companies in the United States based on revenue growth between 2010 and 2013. Moving up in the rankings substantially – Pacific Union is pleased to share this growth and success with our cohorts.

For the fiscal year 2013, Pacific Union closed a whopping 5.5 Billion Dollars in sales – proving a 3 year growth rate of 141%. And not to brag – but for the 2nd year running – Pacific Union is the only Bay Area real estate brokerage to make this rank. Moving 800+ spots in # rank all the way to the 2,663 spot, Pacific Union also focused on growing our Real Estate family – bringing in 179 of Northern California’s best top-producing agents. Leading to a grand total of 646 real estate professionals – Pacific Union officially has more successful Realtors than any competing California based real estate firm on the list of 5,000 – and this is just 1 of many awards and accolades that PU can claim so far for 2014.

Both The Wall Street Journal and REAL Trends ranked 7 of our Realtors in the top 250 in the entire United States for closed sales volume in 2013. The numbers really do speak for themselves – this past Spring quarter, REAL Trends 500 Report showed PU as the top #3 firm in the entire country for average home sales price.

For many reasons – Pacific Union is having another great year. It goes without saying, PU is “on a roll” and growing more quickly than anyone imagined. With new office opening – (see new PU office in Noe Valley – location in San Francisco’s equally expanding Noe Valley neighborhood) – and top producing agents being brought on, 2014 will be another incredible year for PU and our extended real estate family.

J.D. Power

Pacific Union’s Response to J.D. Power Survey – Proud to be PU!

According to a recent survey by respected research firm J.D. Power and Associates, first time homebuyers and sellers are more influenced by a real estate firms reputation and financial standing than by referrals and recommendations by family and friends. Among repeat customers – a higher level of satisfaction was also shown. Specifically, satisfaction levels among repeat homebuyers and sellers were measured at 817 and 803 – in that order – on a scale to 1,000 points. The average satisfaction-level number for both first-time buyers and sellers is 797.

35+ percent of first-time homebuyers and 27+ percent of first-time sellers disclosed that their choice in selecting a real estate firm was based primarily on the goodwill and reputation of the company. Meanwhile, 28 percent of first-time homebuyers and 27 percent of first-time sellers made their choice because of recommendations. Not a huge difference – but certainly statistically significant and worth reporting. For new agents or top producers in San Francisco looking to hang their license – this information is valuable – especially as discount brokerages like Redfin saturate the Bay Area marketplace. It is good to know that PU’s goodwill is still stronger than ever.

The most interesting aspect of the survey is this: “Customer loyalty is first to the company and second to the agent,” said J.D. Power spokeswoman Christina Cooley. “Interestingly, less than 20 percent of customers say they ‘definitely will’ switch real estate companies if the sales agent moves to another company…In the end, it is the combination of the company’s standards, processes, and approach to addressing customer needs, combined with outstanding execution by the sales agent, that will truly differentiate the customer experience.”

This survey served to confirm our belief at PU that it is our agent’s neighborhood knowledge, local expertise, and talented agents that generate our brand’s respect from consumers and general goodwill. For this reason, it is important to recognize that numbers are only part of our story. What makes our brand so great is our dedicated real estate professionals and our customers unwavering brand loyalty. Which is why – in San Francisco, everyone wants to work with the top SF real estate team when selling their home in Noe Valley or in any neighborhood.

The fact that PU’s Realtors have an above average sales volume than agents at other firms is no small feat – in fact, it serves to unite our family and bolster support from our clients and their larger sphere of influence. Thus creating our tight knit family and allowing our agents to close more deals with us than they could at any other firm. PU is more than just a real estate firm – we are an institution that we are all extremely proud to represent.

PU’s Take on Zillow’s “Coming Soon” Feature

This past month, Zillow – after a buyout of Trulia – unveiled it’s “Coming Soon” feature – a way to let real estate professionals advertise and market exclusive listings up to 30 days prior to public MLS posting. This came as a shock to many industry professionals – who for the longest time – prefer to be the gatekeepers of all information real estate related. However – rather than fight a losing battle with technology and time – Pacific Union has decided to embrace and test this new Zillow feature – hoping to implement it in such a way that proves advantageous to our fellow Realtors – and ultimately, their clients.

Zillow claims that it’s website has 81 Million unique hits on a monthly basis – and also claims that their overall website traffic has increased over 50% just since January! This large database of users provides the perfect proving ground for Pacific Union to test the actual quality of Zillow’s daily viewers. With sites like Houzz providing remodeling tips and tricks for consumers – PU doesn’t yet know whether Zillow’s traffic is valuable. In other words – we have yet to conclude the motives behind the average Zillow user. Are they actively looking at homes to purchase or decide on selling their home – or are these 81 Million simply window shoppers – collecting ideas for remodeling or just day dreaming about luxury property in San Raphael? Basically – PU wants to know just how qualified the average Zillow visitor really is – and how valuable is this traffic generally?

For years – the battle between gate keeping and transparency has been fought. Old-school Realtors feel that the MLS provides a safe, secure – and most of all – fair outlet for real estate information. But new-school Realtors and their clients want more – they want information, and they want it all. Zillow’s “Coming Soon” program is a response to this age old dilemma – and they have really stepped out in front of the industry to say – this is where Real Estate is heading so get on board – or move out of the way. So while some agents share pre-market data on sites with subscribers – think Top Agent Network – the idea of sharing this information with the public at large creates some challenges for the MLS and concerns for some Realtors who are scared by the idea of this last commission based economy being changed so drastically.

So for the potential Zillow users – who could very well be qualified buyers – having this information will give the additional resources and time to consider properties for sale. And in the Bay Area where inventory is almost always low in recent days – this will change the 7 days to contract script that has become commonplace. So for agents – depending on how they view this change – many could really use this to their advantage and potentially find more buyers for their own listings than ever before.

So what does this mean for PU? Well – in order to fully vest ourselves in this new system – we will be launching an application interface in early August 2014 that will allow our Realtors to upload pre-MLS listings to Zillow’s “Coming Soon” feature. This ability will be built into the agent’s PU fees – and will not cost any additional money. It is really simple – PU will evaluate Zillow’s system based on the numbers and analytics they generate. If this system allows our agents to close more deals – and our agent’s find the system attractive and beneficial to their clients – we will install in permanently.

In the end of the day – the battle between gatekeeping and transparency will continue. But the industry is already changing – and we can see this everyday. Never will a website or mobile application replace the role of the Realtor – or the value a client represents to a Realtor. Both parties will always need each other – but technology can certainly help buyers and sellers overcome market challenges. For someone interested in purchasing a home – why should an MLS prevent that person from having every bit of information right at their fingertips so they can make an educated financial decision? Zillow even admits – no algorithm can replace human evaluation – as they point to their often hated Zestimate feature – which has terribly low accuracy and only a 2 of 5 star client accuracy rating and only comes within 10% of the final sales price about 1/2 of the time. In San Francisco proper – the rate of error is even larger. A computer can never replace the role of a Realtor. But Realtors can also never replace the role of the computer – and it’s ability to relay valuable market information more efficiently than through old-school gatekeeping methods. Real Estate professionals are inherently specialized to understand a specific market, neighborhood, or city – meaning they will always be able to predict home values with a greater degree of certainty than a computer program.

We know this is a change that many Realtors are not ready for – but as a leader in the Real Estate Industry (see blog post where PU ranks in Inc. 5000 for 2013) – we must be willing to accept the things we cannot change, have the courage to change the things we can – and possess the wisdom to know the difference.

 

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accolades

Pacific Union Accolades – 2013

At Pacific Union International – the statistics and accolades we receive truly speak for themselves.

We are happy to announce that The Wall Street Journal and REAL Trends Inc. ranked 7 of our Pacific Union agents among the most prestigious Realtors in the United States for 2013 – out of 250 agents in the US for closed 2013 sales volume.

This goes hand in hand with our previous announcement made in May – where REAL Trends Inc. ranked Pacific Union as #3 in the United States for average sales price. This is the 2nd consecutive year running we have received this honorary mention.

This Spring – Christie’s International Real Estate named Pacific Union the 2013 Affiliate of the Year – all while the Web Marketing Association awarded us for best “Forward-thinking Digital Presentation Tool.”

Not only that – but Pacific Union is really expanding. Even in a city like San Francisco, where the market is truly saturated with agents – PU knows that only the best agents in San Francisco are helpful to their clients. Look out for a brand new PU team office in Noe Valley – opening in October 2014.

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