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Brexit & SF Housing Market

A lot of clients have been asking will Brexit cause a slowdown in the local housing market…

So here is Pacific Union’s response, courtesy of Selma Hepp our Chief Economist.

• The United Kingdom’s unexpected vote to leave the European Union, otherwise known as “Brexit,” was not accounted for in global financial markets prior to the vote. Thus, stock market volatility is sorting out the anticipated effects going forward.
• While the financial market volatility will persist, the direct impact on the U.S. is minimal.
• U.S. economic fundamentals remain strong, as they are based on domestic activity.
• Indirect impacts may actually bode well for U.S. housing markets, as investors seek
safe, stable investments.
• However, more volatility may be in store in the weeks to come.

To say that global financial markets were not pricing in Brexit prior to the vote is an understatement. Financial markets went haywire overnight, with many recalling the sell-off following the Lehman Brothers collapse in 2008. While volatility will stay with us for some time, the current situation is nothing like the 2008 financial crisis. And though no market was spared again, Europe’s fragile markets suffered from a severe lashing and will likely to continue on the roller coaster ride.

Nevertheless, the Brexit vote still does not mean that U.K. will leave soon; the referendum is not legally binding, and only Parliament can pass the legislation to leave the EU. Even if this happens, it would take at least two years for the EU and the U.K. to renegotiate their bilateral agreements. However, since no one yet really understands the full implications of Brexit, a period of volatility and much uncertainty is likely to persist.

WHO WINS AND WHO LOSES?
Unfortunately, it is easier to surmise Brexit’s direct effects than its indirect effects. In principle, the exit decision should have little direct impact on the U.S. or global economies.

The U.K. economy accounts for only 4 percent of global gross domestic product. Also, U.S. exports to the U.K. comprise only 0.4 percent of our GDP, while the U.S. receives just 3 percent of its imports from the U.K. Additionally, our country’s bank exposure to U.K assets represents only 3 percent — thus a potential U.K. recession would have a limited impact on U.S. financial systems.

Among all parties impacted, the outlook for the U.K. is the haziest, followed by the uncertainty that will shadow over the EU. And while the direct impact on the remaining 27 EU countries is somewhat limited, the indirect effects cannot be fully foreseen at this
point. The volatility and debate over what the next steps should be will not bode well for confidence or economic growth, and it may lead to further loosening of monetary policy.

INDIRECT EFFECTS ON THE U.S. COULD HELP OUR HOUSING MARKETS
Brexit’s indirect effects on the U.S., however, may not be so gloomy. First, the Federal Reserve’s decision to raise interest rates will most likely be further delayed due to this development. Also, with global financial uncertainty seemingly everlasting, U.S. Treasuries are continuing to look very attractive and will probably woo many investors. Both factors are going to keep interest rates low — particularly mortgage interest rates.

Will a Tech Boom Create A Real Estate Bubble?

Are we about to see a replay of the first dotcom bubble?  Buyers and sellers ask us this question a lot.

So here’s our take on what is going on today:

Yes, the constant hype around mobile apps reminds San Franciscans of the market’s enthusiasm during the late 1990s.  As NASDAQ reaches levels above the dotcom bubble’s peak, buyers and sellers should wonder how long the residential real estate market can sustain a tech boom?

If you are going to live in San Francisco for the long term, you should not worry.  The startups that do make it to market come with large user bases and revenues.  WhatsApp was acquired for $19Billion for its mobile messaging services.  But that came with 450 Million users and a billion messages a day.  The SF startup scene seems to be filled with entrepreneurs with sound business models and we don’t believe the likes of Facebook, Google, Apple, SalesForce and Genetech leaving the Bay Area anytime soon.  They have spent too much time and money arguing with the City about their employee shuttle buses!

Past vs Present.  The dotcom bubble was marked by an incredibly steep—and unsustainable—growth trajectory: Between January ’96 and January ’99, the NASDAQ doubled in value. Over the next 13 months, the index doubled again before the bubble burst and sent prices falling just as quickly.  Aside from the value of the NASDAQ, today’s tech industry doesn’t have much in common with that of the ’90s.

While the late 90’s bubble was based on growth in employment trends for internet publishing, broadcasting, web portal services—workforce were over expanded by 70% in 2000.  Today, analysts believe Tech is on more solid ground.  Over the past five years since the recession, NASDAQ has doubled but at a slower pace compared to the splurge in the late 1990s.  This time employment is for internet services and mobile development, expanding at about 20% annually since 2010.  This is much different that the rapid expansion of the dotcom bubble.

So our advice is to find a property you like, tie it up with a solid offer, get really low mortgage financing and live in the property for a long amount of time.  You will never be able to time the marker and there are a lot more fun things you can do with your life.  Like a kitchen remodel, or adding additional square footage to your property’s footprint.

Let’s start your property search by going to jasonfayollat.com today!

San Francisco Tenant Buyout- a new ordinance

A San Francico Tenant Buyout just got a little more complicated for San Francisco landlords. It seems that the city is trying to control free speech between two parties getting together to discuss financial compensation in an effort to terminate a lease. Remember, in San Francisco landlords and tenants have to navigate the complicated eviction and rent control laws.

Effective March 7, 2015 a new provision has been added to Rent Ordinance Section 37.9E regulating “buyout agreements” between landlords and tenants. Buyouts are known as an agreement between landlord and tenant where a landlord pays tenants money or other consideration to vacate their rent-controlled rental units. Please note that an agreement to settle a pending unlawful detainer action does not constitute a “buyout agreement” for purposes of Section 37.9E.

This new amendment just makes it harder for two parties to talk openly about the ill-fated rent control laws in San Francisco. Here’s a primer for what Landlords must prepare for in order to navigate San Francisco tenant buyout:

1. Require notice prior to any negotiation: Landlords must provide tenants with written notice of the tenants’ rights and file a form with the Rent Board, indicating which rental unit may be the subject of the buyout negotiations prior to commencing buyout negotiations for a rental unit. The Rent Board would make this information publicly available, except for information regarding the identity of the tenants.

2. Require written agreements: All buyout agreements to be in writing and to include certain provisions regarding the tenants’ rights.

3. Provide a 45 day rescission period for tenants: Tenants would have the ability to rescind a buyout agreement for up to 45 days after its execution by all parties.

4. Requite buyout agreements to filed with the city and made public : Landlords must file copies of buyout agreements with the Rent Board and pay a filing fee. The Rent Board would create a searchable, publicly available database regarding buyout agreements.

5. Require an annual reporting of all buyouts: The Rent Board will now provide an annual report to the Board of Supervisors regarding tenant buyouts.

6. Allow for monetary and civil penalties for failing to comply: Allow tenants to bring an action in San Francisco Superior Court seeking monetary damages and civil penalties from landlords who did not provide the pre-negotiation disclosure or include in the buyout agreement the provisions regarding the tenants’ rights. The proposed ordinance would authorize nonprofit tenants’ rights organizations to bring an action in San Francisco Superior Court against landlords who failed to file buyout agreements with the Rent Board.

7. Prohibit condominium conversions for units emptied by way of a buyout: The proposed ordinance would prohibit condominium conversions in buildings where a senior, disabled, or catastrophically ill tenant has vacated a unit under a buyout agreement after October 2014. The proposed ordinance would also prohibit condominium conversions in buildings where two or more tenants who are not senior, disabled, or catastrophically ill have vacated units under buyout agreements, if the agreements were entered after October 2014 and within the ten years prior to the condominium conversion application.

Prop. G – Voters Said NO!

In a shocking (and relieving) turn of events, Proposition G – the proposal to install an additional housing tax on real estate “speculation” – was turned down by San Francisco voters yesterday at the polls. Click here for a more in-depth read about Prop. G’s terms.

 

The vote that had everyone in the Real Estate sphere spinning is finally over. Homeowners, investors, and San Francisco property owners can take a deep breath today – knowing, they haven’t lost control of their investments to a poorly planned piece of legislation.

 

Prop. G intended to tax owners of 2-30 unit residential properties if they decided to sell within 5 years of purchase. The Board of Directors – made up of supervisors Avalos, David Campos, Jane Kim and Eric Mar – thought this measure would help reduce speculation in San Francisco’s real estate market – and in turn, help to reduce evictions that have become commonplace in The City as housing costs rise.

 

Quintin Mecke – Prop. G’s leader – spoke to the SFexaminer yesterday. He stated that real estate interests “outspent his campaign by 12-1”. Over 2 Million USD was raised to fight Prop. G. Considering the cost of property in San Francisco – this is a small price to pay to avoid 100s of Millions lost this tax (had it passed). In fact, according to City Controller estimates – had Prop G passed, this tax would have raised 24.78 Million USD every year. Sadly – this money would have ended up in the general fund, rather than going towards actually addressing the issue of evictions.

 

Unhappy with yesterday’s result, Quintin suggests that until evictions and housing costs drop, he will continue to propose such legislation every November. We will check in with his stamina next year.

 

Today – we should all be grateful that Prop. G was voted down. This is truly great news.

San Francisco Ellis Act Payments: Campos relocation payment law invalidated

On October 21, 2014, the U.S. District Court found Subsections 37.9A(e)(3)(E)–(I) unconstitutional. This was the new law invoked by David Campos that altered the San Francisco Ellis Act Payments for landlords looking to Ellis Act a property. The law required landlords to follow an archaic minimum “Rental Payment Differential” for San Francisco Ellis Act payments.

If you look at the SF Rent Board’s website it reads a Federal Judge has enjoined the City from enforcing the new relocation payment requirements. We wrote about these new relocation payments back in August 2014 and even provided a payment example.

While the City is appealing the District Court’s ruling to the Ninth Circuit Court of Appeals, all questions concerning the legal effect of the District Court’s ruling pending a final decision in the case should be directed to private counsel.

We refer our clients to the following San Francisco attorney’s when it comes to tenant-landlord issues. If you have any questions please do not hesitate to contact us.

1- Steve Adair MacDonald
2- Bornstein and Bornstein
3- Andy Sirkin

bargain

Compared to the Worlds most Expensive Cities, is SF a Bargain?

With real estate prices reaching an all time high in San Francisco and the greater Bay Area, this post may come as a shock to some. However – in reality, compared to most of the world’s most expensive cities (think Dubai, Paris, London, etc.), San Francisco is actually quite the bargain. Which is why we are seeing so much money coming in from all over the globe.

Prices for 1 bedroom condos and lofts being over 1 Million is now the norm. If you want to buy a decent condo for yourself in SF, you will spend a pretty penny. And after just moving here from Orlando, Florida last year (working for RE/MAX – yeah, yeah, I know!) if I told you what 1 Million buys you there – you wouldn’t be so thrilled with your 700 square foot loft with no parking! All that being said, there is a price to be paid for living in one of the most desirable cities on planet earth.

Forbes magazine took everyone in SF by surprise when it published it’s list of the world’s most expensive cities – and San Francisco wasn’t even on the list! So when you are ready to buy in SF – consider the top Noe Valley real estate team!

Believe it or not but Luanda, Angola is the most expensive city in the world! 2nd = N’Djamena, Chad, 3rd = Hong Kong, 4th = Singapore. So while you think paying 4-5k for your nice 2 bedroom apartment is a lot – in Hong Kong, you would be paying 7-8k USD. So take a breath and thank your lucky stars that you indeed live in SF.

Even NYC isn’t in the top 10 – it comes in at #16 – but only after London, Beijing, Seoul, and Copenhagen.

Mercer – an employment consulting firm – created this list to help companies determine proper and compensate allowances for their employees abroad. Mercer measured the cost of living in 211 cities across the world to come up with their list.

So where DOES SF rank on the list? It comes in all the way down at #74 – and #3 among cities in the United States (after LA and NYC of course!).

Mercer stated that due to the relative stability of US fiat (money) – San Francisco jumped up 18 spots on the list compared to last year while NYC only jumped 6. So in terms of fast paced growth – you can expect SF to keep climbing. For those thinking about buying – this is good news. For once, you can tell your friends and family that SF isn’t that expensive – compared to worldly cities like London and Paris! Contact the best Noe Valley real estate team today to discuss a purchase in our neighborhood.

proposition g

Why you must Vote No on Prop G | Red Bridge Group at Pacific Union

Stop the Housing Tax: Vote NO ON G

A punitive new tax on housing is certainly not the answer to San Francisco’s housing challenges. We need thoughtful solutions that create more housing of all types, not a poorly crafted measure that levies a new tax on housing and yet, provides no guarantees that any of the revenue raised will go to new affordable housing or any housing at all.

NO on G | WE NEED MORE HOUSING, NOT LESS
We need to bring more housing onto the market. But this measure creates an immediate incentive for homeowners to take secondary units, commonly known as in-law units, off the market or face a tax that could be $240,000 (or more) when they sell their properties.
NO on G | A MASSIVE NEW CHARGE WILL NOT LOWER HOUSING COSTS
San Francisco is facing a major housing crisis, but imposing an additional tax that makes housing more expensive makes no sense. While current owners will absorb some of these costs, much of it will be passed on to new renters and new owners. In the end, middle-class renters and homebuyers will pay for the 24% housing tax.
NO on G | POORLY CRAFTED OR OVERTLY POLITICAL
We need to bring all parties to the table to protect tenants from eviction. However, because of political backroom deals or simple ignorance, this measure leaves out over 40,000 residents in buildings with 30 or more units. If it is a good idea for some, why not all? We need smart policies, not backroom deals or last minute slip ups.
NO on G | READ THE HISTORY
Proponents say Supervisor Harvey Milk first proposed this idea. That is misleading. The measure Milk proposed only levied a fee on profits gained by owners, not on the sales price. Milk’s measure exempted the up to 50,000 single-family homes with a secondary (in-law) unit. He also exempted any owner over 63, understanding that many seniors use their homes as retirement nest eggs.
NO on G | TENS OF THOUSANDS WILL BE AFFECTED This tax is levied if you sell your home or property within 5 years of purchase. Since the average home turns over every 7 years, this tax will affect tens of thousands of San Franciscans.
NO on G | NO PROTECTIONS FOR EMERGENCIES Prop. G will devastate everyday homeowners who face real-life emergencies and unexpected difficulties. The tax makes no exemptions for circumstances such as job loss, job transfer, death in the family, sale to a family member or financial hardship. In the event of a person who loses their job and is forced to sell their home, this measure will force you to pay up to 2496 in housing taxes.

The Details of Proposition G

San Francisco currently collects a “transfer tax” on sales of most real property in the city. The tax rate is based on the amount for which the property is sold. The lowest to rate is 0.5% of property sold for $270,000 or less. The highest tax rate is 2.5% for property sold for $10,000000 or more.

Prop. G imposes an additional 14-24% tax on residential properties with 2-30 units and single-family homes with in-law units, if they are sold within 5 years of ownership. The tax applies to the entire sale price of the property and is in addition to the existing transfer tax that is applied to residential property.

Prop G. would not apply in the following circumstances: single-family homes with no in-law uni; the property contains more than 30 residential units; the owner of the property has used it as a primary residence for 12 consecutive months immediately before the sale; sale at a loss; sale within one year of property owner’s death; property is deed-restricted affordable housing; property is new construction; property contains no more than two dwelling units and the seller applied on or before July 1st, 2014 for a building permit for a project with a total construction cost of $500,000 or more, and last permit was issued no more than a year before the sale of the property.

luxury

The Luxury Market Report

All signs point to a robust market for luxury homes in 2013, according to a new report from Christie’s International Real Estate that analyzed sales trends in San Francisco and nine other cities worldwide.
Global economic and political trends have a minor impact on luxury sales, the report concluded. Pacific Union is a partner with Christie’s, and we’re proud to have contributed to the report.
Analysis of luxury sales worldwide also found:
Among the 10 cities that were part of the survey, residential sales continue to set records – with out-of-town buyers accounting for many of the top sales.
Prestige property values are more likely to follow growth trends of luxury goods, such as fine art, rather than growth trends in the general housing market.
Recent tax law changes in many markets are expected to impact 2013 market activity.
High-net-worth individuals see real estate as an essential part of their investment strategy.
Read the full report for more details on the luxury real estate market, including a comparison of what $5 million buys in San Francisco and other top destinations.

affiliate of the year

Christie’s International Real Estate Affiliate of 2013

Christie’s International Real Estate has officially named Pacific Union International as it’s “Affiliate of the Year” for 2013.” While this may come as no surprise – keep in mind that Pacific Union is just 1 of 139 Christie’s global network of affiliates. This award is a great honor.

With Pacific Union’s effective and creative marketing, branding, and innovation – the top honor of “Affiliate of the Year” is remarkable and meaningful for everyone with an interest in PU here in the Bay Area. The award was presented to PU CEO Mark McLaughlin – who called the award a great honor -in Barcelona, Spain earlier this year. “A true industry leader, Pacific Union has long been known for its innovative programs and quality services, and we are proud to award the company with this prestigious distinction,” said Bonnie Stone Sellers – Christie’s CEO.Bonnie Stone Sellers, CEO of Christie’s International Real Estate said in a statement.

“We are deeply honored to receive this award and look forward to continuing our fantastic collaboration with Christie’s for many years to come…our exclusivity with this prestigious brand undoubtedly helps us deliver the very best in Northern California luxury real estate to clients from around the globe.” – CEO Mark A. McLaughlin