Anna Marie Erwert
Monday, September 7th
San Francisco has already earned the dubious honor of most expensive city in the USA for renters, taking the crown away from Manhattan earlier this year. And according to the latest data from Zumper’s National Rent Report for September, 2015, S.F. has no intention of giving that crown back anytime soon. The report, which charts the top 10 most expensive American cities in which to lease a one-bedroom apartment, shows San Francisco’s median rent at $3,530. This is a jump of .9% quarter-over-quarter and 13.9% year-over-year. What can we get for that price? The gallery above enlightens us with three examples.
Other Bay Area rents still on the rise
Unfortunately for renters, there’s not much relief to be found: both the South Bay and the East Bay show up among top 10 most expensive cities on Zumper’s report. San Jose comes in at #4, with a one-bedroom median of $2,220. This is up 4.7% quarter-over-quarter and 13.8% year-over-year. Oakland, which made news earlier this summer as home to the hottest rental market in the country, now stands at $2,000 for a one bedroom, a 6.8% gain quarterly– and a staggering 23% gain by year.
Though white hot rental markets burn most acutely in Bay Area cities, renters across the nation are feeling the heat. Changing market factors have pushed a record number of people into competition for an inadequate supply, leading to surprising gains in most major metropolises. Factors in this trend, says Zumper, include:
- millennials migrating to urban areas
- a lack of new affordable housing construction
- a fundamental shift in public attitude toward the sharing economy
- people are also getting married later in life, leading to a displacement of the start of the traditional home buying cycle
We would argue as well that rising home prices and lack of inventory for homebuyers also keeps more people in tenant mode. There are of course many factors at work here, and readers can add them to the comments below. Whatever the cause, the effect is a distinct push upwards: 14 of the top 50 cities Zumper tracks experienced increases of 10% or more year-over-year.
Sunday, August 30th
Politicians, particularly those on the centre-left, and some policy wonks favour forms of rent regulation, such as rent control (which is the placing of a cap on the rent that can be charged) or rent stabilisation (which sets limits on how much rent can be raised over time). Supporters argue that introducing controls helps ensure that the non-rich are not squeezed out of cities in which housing costs are soaring. In many booming cities, growth pressures have pushed up housing rents, and over time the composition of many neighbourhoods has changed in favour of those who can afford the higher prices. Speaking to the Guardian, Carl Weisbrod, the chairman of the New York City planning permission, argued that regulating rent “is essential for the future of the city”. Supporters of rent control often point to Germany, where the charging of rent 20% higher than that on similar properties is often illegal. Around 50% of people rent in Germany; almost 90% of all Berliners do, many in pleasingly spacious, well looked-after apartments. Soaring rents around the rich world have driven interest in rent-control policies. In the ten years to 2014 the proportion of British households headed by someone aged between 25-34 which rented privately rose from 22% to 44%. In Seattle, rents for one-bedroom apartments increased by nearly 11% between 2010 and 2013. A case could be made that rent controls provide long-term security for renters, and also tilt the balance of power away from landlords towards tenants. That, some reckon, makes for a more just urban housing market, in which households with lower incomes cannot easily be pushed aside by landlords keen to “gentrify” the neighbourhood.
But economists, on both the left and the right, tend to disagree. As Paul Krugman wrote in the New York Times in 2000, rent control is “among the best-understood issues in all of economics, and—among economists, anyway—one of the least controversial”. Economists reckon a restrictive price ceiling reduces the supply of properties on the market. When prices are capped, people have less incentive to fix up and rent out their basement flat, or to build rental property. Slower supply growth actually exacerbates the price crunch. Those landlords who do rent out their properties might not bother to maintain it, since both supply and turnover in the market are limited by rent caps; landlords have little incentive to compete to attract willing tenants. Landlords may also become choosier, and tenants may stay in properties longer than makes sense. Interestingly some evidence shows that those living in rent-controlled flats in New York also tend to have higher median incomes than those who rent market-rate apartments. That may be partly down to the fact that controlling rent does not mean that those with more resources are not better positioned to find good housing; households of means may in some cases find it easier to track down and secure rent-stabilised properties. The example of Germany is also an imperfect one: many cities there have seen declining populations and low (or falling) house prices over the past two decades, although the latter is now changing in several cities.
In places where demand to live in the city is rising (as in London, New York and Seattle) a more effective policy would be to build more housing. The number of houses being built each year in Britain peaked in 1968 (at 352,540 dwellings). Since 2008 there has been a particularly bad slump, while a constrictive “green belt” around the edges of the city restricts growth. Meanwhile many developers sit on the land, watching its value grow. According to McKinsey, some 45% of land which is due to be developed in London remains idle. House-building rates are even lower in Germany, says Kath Scanlon of the London School of Economics. Restrictive zoning laws, in places such as San Francisco (which also has rent control) could also be loosened, while others in Seattle have called for the council to build more low-cost housing. In order to keep a city liveable politicians will have to take on the NIMBYs, not just the landlords.
When it comes to the volatility of the stock market, you may lose your shirt, but you probably won’t lose your home. That’s because real estate tends to be a life raft for investors seeking safety amid volatility when equity markets are expected to turn south.
“Real estate is Americans’ preferred investment for money that they won’t need for at least 10 years and that hasn’t changed,” said Greg McBride, chief financial analyst with New York-based Bankrate.com. “Nervous investors always look to real estate rather than shy away from it in times of volatility.”
But a repeat of the 2009 real estate crash that followed the 2008 rout of the equities market is more unlikely this time. Here’s why you shouldn’t be panicking if you’re looking to buy or sell a home:
Interest rates should stay low
With the latest bout of equities volatility, the likelihood of a Federal Reserve rate increase fades, according to Kevin Finkel, senior vice president of Resource America Inc. REXI, +1.84% , a real-estate investment trust in Philadelphia. “Clearly the risk of higher rates is diminishing right now, and that could bode well for real estate,” he said.
While the refinancing boom has slowed, that’s only because the majority of Americans who could refinance to a fixed rate have already done so, so the impact of “rate-shock” when short-term ARMs readjust will be minor compared with what happened in 2008-2009, when many Americans could no longer afford their new housing payments and defaulted.
Currently, despite an increase in bank repossessions rising to the highest levels in more than two years, the percentage of loans in foreclosure nationally are just 2.1%, the lowest level since 2007, according to the Mortgage Bankers Association. They reached a peak of 4.6% in 2011 at the height of the real estate bust.
“The recent rise in bank repossessions represents banks flushing out old distress rather than new distress being pushed into the pipeline,” said Daren Blomquist, vice president of Irvine, Calif.- based RealtyTrac, a real-estate research company.
There’s less risk of a new mortgage bubble
Unlike the 2009 mortgage meltdown, when so-called liar loans and exploding ARMs flooded the market, the subsequent pullback in credit may have been overly tight, but it does mean in 2015 there are fewer real estate bubbles waiting to pop. While it’s true there are markets that have seen incredibly inflated real-estate values such as San Francisco and New York, it’s not fueled by unsustainably loose credit standards.
“The changes that have taken place over the past five to seven years have built a more stable foundation” in the mortgage industry, said Michael McPartland, a managing director and head of investment finance for North America at Citigroup’s C, +2.56% private bank. “There just aren’t a lot of the exotic products like interest-only [loans] and super-high loan-to-value [mortgages],” he said. “If things slow down, there will be a contraction, but not a pop.”
McPartland says it may be harder for borrowers to afford a 20% down payment and monthly interest payments that are principal and interest, instead of just interest-only, but the flip side is increased home equity (the national average is 30% equity), so home buyers are less likely to leave the keys on the counter and walk away if things go bad. Foreclosure starts in July of just over 45,000 were the lowest level since November 2005, nearly a 10-year low, according to RealtyTrac.
Help for first-time home buyers
Earlier this year, the Federal Housing Administration began reducing insurance premiums on loans by an average of $900 a year, in an effort to nudge first-time home buyers and millennial borrowers who might not have much cash for a down payment to finally enter the housing market. The effort appears to have worked, with FHA loans jumping to 23% of all financed purchases in the second quarter of 2015, up from 19% a year earlier, according to RealtyTrac data. The FHA move may just help push home sales for 2015 to as much as 5.6 million, the most since 2006.
Another move late last year by Fannie Mae and Freddie Mac to begin buying loans with just a 3% down payment, or 97% loan-to-value ratio, may also help boost the housing market later this year, by making lower down payment loan options available to more borrowers. Fannie Mae on Tuesday also announced that it would allow income from a non-borrower household member to be considered as part of a loan applicant’s debt-to-income ratio. That could help some borrowers, who might have family members on Social Security or disability living with them, or a renter in a basement apartment, to boost their income levels and help them qualify for a loan.
Lower oil prices
At the end of 2008, gasoline prices, which had risen to a record $4 a gallon nationwide that summer, had crashed to under $2 a gallon. In that case, the cheap gas (and diesel) wasn’t a good thing, as the worldwide economy was shuddering to a halt.
While China’s economy is still contracting, the U.S. economy isn’t, so the lowest gas prices since 2009 are likely to help the housing market. “The continuing drop in gas prices is freeing up valuable disposable income,” says Finkel, which can help Americans absorb higher rent payments, or move up to a more expensive property.
While jobs typically are a lagging indicator of an economic downturn, the U.S. has had a slow but steady rate of job creation for the past five years.
“The economy continues to create jobs, and the quality of jobs being created has improved as the economic recovery has progressed, with professional and business services leading the way. This is indicative of an economic recovery that is sustainable,” said Bankrate’s McBride. And while in this economy, wages have been slow to recover, and it’s been a challenge to get long-term unemployed Americans who no longer count in the official jobless statistics to return to the job market, the job growth has been good enough to boost the housing sector and lure millennial borrowers off the fence.
“If wage growth materializes in a broader way, this will be the catalyst for many existing homeowners to put their homes on the market and finally look for the move-up buy, boosting housing and alleviating the inventory shortage,” McBride said.
April 15, 2015
For home buyers in northern California, speed is the name of the game.
Of the top 10 fastest-moving housing markets, 8 are located in California, with San Francisco, San Jose and Oakland taking the top three spots, according to a report from Trulia. At least 70% of homes in these three areas sold in two months or less.
“California has seen very strong job growth, especially in coastal markets,” said Ralph McLaughlin, housing economist at Trulia. Lack of supply in these markets also plays a factor. “The amount of new housing that gets built is relatively small compared to other parts of the country.”
San Francisco, which had a median asking price of $1,099,000 in April, topped the list and has particularly low new construction levels thanks to its topography and building regulations, according to McLaughlin. “The process of adding new supply is more difficult here … for natural and legal reasons.”
The report tracked home sales listed on Trulia in the 100 biggest metro areas in the U.S. on Feb. 5 and were still available on April 5. In addition to the 8 cities in California, Seattle and Salt Lake City, Utah, also made the top 10 list.
Farther south in the Golden State, homes in San Diego are also selling at a rapid pace with 33% of homes listed in February still available 60 days later, down from 44% the year prior.
On a national level, 40% of homes moved off the market in the two-month period, a slight increase from 38% during the same time period in 2014, the report showed. On average, lower-priced homes in the fast-moving markets sold the quickest, with half still on the market after two months.
This means buyers, especially first-timers, need to go into their house hunt prepared, advised McLaughlin.
“Not only is it more difficult to buy where homes are moving fastest, the homes first-timers would buy are moving faster compared to middle and higher-priced homes. It’s a double whammy.”
Overall, housing markets that have experienced strong price gains in the last year have also moved the fastest, McLaughlin added.
Sellers remain in control in many Florida markets as well, with 47% of homes in the Cape Coral-Fort Myers area still for sale after 60 days. Last year, 64% of homes were still on the market in this area during the same time period. West Palm Beach, Fort Lauderdale and Orlando also saw homes selling faster than in 2014.
However, in Miami, buyers might have more of an upper hand with 65% of homes still sitting on the market after two months, compared to 56% last year. “Miami has had a huge condo boom … the end of last year and the start of this year was about the time the condos came to the market,” McLaughlin said. “Compounding that, over the last year-and-a-half, affordability in Miami has dropped.”
Home buyers in Long Island and Albany, New York, can also breathe a little easier in their search, as 69% and 71% of homes, respectively, were still on the market after two months.
10 fastest-moving housing markets
|Rank||Metro||Homes still for sale after 2 months April 2015||Homes still for sale after 2 months April 2014|
|1||San Francisco, CA||26%||28%|
|2||San Jose, CA||30%||31%|
|4||San Diego, CA||33%||44%|
|5||Orange County, CA||41%||45%|
|8||Los Angeles, CA||43%||45%|
|9||Ventura County, CA||43%||50%|
|10||Salt Lake City, UT||45%||51%|
Michelle Jamrisko & Nina Glinski
March 21, 2015
Todd Mitchell adjusts a “For Sale” sign in front of a home in Alpine, California, a San Diego suburb, on Wednesday, March 22, 2006. Sales of existing homes unexpectedly rose in the U.S. last month for the first time since August, after mild temperatures brought buyers out early. Photographer: Jack Smith/ Bloomberg News
The vast majority of American homeowners have little to fear: A new gauge from Nationwide Insurance in Columbus, Ohio, suggests the national market is in its best shape since 2001 and there’s no reason to fear a national downturn, no less a bursting bubble.
In its first data release, the national Leading Index of Healthy Housing Markets rose to 109.8 in the fourth quarter. Values greater than 100 indicate a robust industry. The index uses local data in 373 metropolitan statistical areas that are underlying drivers of the housing market, including measures on employment changes, demographics and the mortgage market.
When it comes to predicting bubbles, Nationwide’s data is worthy of your attention. It accurately showed signs of unraveling in early 2005, long before the S&P/Case Shiller index of home prices peaked at the end of 2006 .
The housing market may not improve by leaps and bounds this year, and that’s exactly why Americans should feel good, David Berson, Nationwide’s chief economist said.
“There are a lot of markets that are probably growing less rapidly than people would like, but that means they’re sustainable, and in the Goldilocks sense they’re just right,” said Berson. “It’s difficult — if you’re only growing modestly — to build up imbalances that cause the growth to end, and that’s what we’re seeing in most of the MSAs today.”
Pittsburgh, Cleveland and Philadelphia were ranked the healthiest cities. Rock-bottom was Bismarck, North Dakota.
“In Bismarck, the booming-ness is being caused mostly by good economic fundamentals,” Berson said. “Still, prices are going up there at an unsustainable rate, and that’s why it gets downgraded in our rankings.”
The surge in property values in Bismarck is a case in point for Berson’s biggest negative risk for housing this year: Home prices that far outpace income growth.
“Really the only concern I have is that home prices continue to grow too rapidly and make more parts of the country unaffordable,” he said.
Stagnant wage gains have been a thorn in the side of the U.S. economy since the expansion began, with the latest figures showing paychecks are growing at a pace that matches the average since we put the recession behind us in June 2009.
Set those pesky income data aside, though, and it’s easy to see why housing is on track for stable, if not awe-inspiring, advances this year. And that’s in no small part due to the impressive job gains of late, Berson said.
“Because the jobs numbers in almost all of the U.S. picked up strongly in the second half of last year, the index looks pretty good almost everywhere.”
March 6, 2015
The Inner Sunset has grown in prominence as a hot San Francisco real estate market, and we caught up with Ilana Minkoff, a Realtor with Vanguard Properties, to learn more. Although she helps clients buy and sell across the city, Minkoff shared insights into the unique challenges of purchasing real estate right here in the Inner Sunset.
What’s the most notable change to the Inner Sunset’s real estate market that you’ve observed in recent years?
“What used to be a fairly under-the-radar neighborhood has become a recently discovered gem. It has a laid back, unpretentious family feel. And being so transit and bike friendly, it’s become a great alternative to more pricey neighborhoods. As with the rest of San Francisco, inventory in the Inner Sunset is very low, so with such high demand, prices are on the rise.”
How many homes have been listed for sale in the Inner Sunset in the last 12 months?
“In the last 12 months, 67 properties, including single-family homes, condominiums and tenancies-in-common, have sold according to the MLS. As of March 3rd there were only three active listings on the MLS. That being said, about one-third of the properties are sold ‘off-market’ which means they are never put on the MLS. This is happening citywide. Working with a good Realtor is key to finding ‘off-market’ properties.”
In your experience, what’s the biggest surprise for first-time homebuyers in San Francisco?
“I’m constantly reminding my buyers to stay positive. Competition can be fierce. I always tell my buyers it’s normal to write 3-4 offers before one is accepted. Then if they get one accepted faster, they’re thrilled. Buyers often don’t believe that a property will sell so far over the list price until they see it with their own two eyes. So my job is to set expectations and get them prepared for the journey so they avoid getting discouraged.
“As a seasoned Realtor who’s worked with plenty of first-time buyers, I educate them on the buying process before they start shopping. They should follow the market, go to open houses and track properties for a few months before jumping in to make offers. That way it’s not shocking when we have to go 20 percent or more over the list price on an offer. I remind them interest rates are still really low, so now really is a great time to buy. Home buying in this market really is more of a marathon than a sprint.”
Is there a specific type of person or demographic that’s moving to the Inner Sunset? What do they do for a living?
“One of the really special things about the Inner Sunset is the diversity of the population. A wide variety of people are moving here. Many are young families who want an easier lifestyle, parking, a yard and to be able to take the kids to the park are drawn here. Of course there is a considerable amount of money coming in from the tech sector citywide, and that is also the case here. Proximity to UCSF is also a draw for their staff. The largest age range in the 94122 area code is the 21-34 year olds with a median income of $81,000 (according to Claritas.com).”
Anecdotally, what draws prospective buyers to the Inner Sunset?
“A lot of people are drawn to the Inner Sunset because they’re looking for a mellow, laid-back, transit-friendly, affordable area of town. They love the being close to Golden Gate Park and how easy it is to get to the beach. The housing prices are still quite a bit lower than other areas, making it more affordable than more eastern neighborhoods. And you can often get far more space for your dollar than other parts of town. The wide variety of great restaurants, the Sunday Farmer’s Market and shopping around 9th and Irving is definitely a draw as well. And because it’s relatively flat, you can leave your car at home, take a nice walk and enjoy everything the Inner Sunset has to offer.”
What advice, if any, do you have for renters who are seeking to become homeowners?
“Start planning early. Have a goal. It’s never too soon to meet with a financial planner or lender to make a plan. Whether you are starting at the very beginning with saving for your down payment or getting close to go time, get a plan.”
How large of a down payment will someone need (ballpark)?
“The general rule of thumb is 20 percent of the purchase price.”
Would you ever counsel someone against his or her first choice of property? If so, why?
“Of course. I frequently equate buying a home to dating, because it’s something everyone gets. Sometimes you go out on a first date and you are absolutely sure that person is the one you are going to spend the rest of your life with. You think they are perfect! But as we all know, you can be so blinded by lust you can’t see their faults. My job is to be that gentle friend that reminds you to really look at their qualities, good and bad before putting a ring on it.”
San Francisco Business Times
Wednesday, November 5,2014
Republicans danced to big congressional wins across the country Tuesday – and that could spell bad news for both San Francisco renters and real estate moguls.
Kenneth Rosen, the University of California-Berkeley business professor who chairs the Fisher Center for Real Estate and Urban Economics, told hundreds of real estate players Wednesday morning at a Cushman & Wakefield event that Republican gains could force the Federal Reserve to inch interest rates up more quickly than planned. If that happens, San Francisco’s job growth and the boom in new housing construction may be cut considerably.
“The election of a Republican Congress will put more pressure on the Fed to normalize sooner. The Fed is independent, but they go through these [congressional] hearings and there’s a lot of people who believe the government can’t run the kind of deficits they want with big spending programs, so the Fed is indirectly doing this by creating money,” he said. “There will be a lot of pressure on (Fed chair Janet Yellen) to normalize rates.”
“We’ve had five years of interest rates at zero. They’re going to start moving, probably in the middle of next year,” he added.
The Fed pledged this fall to keep interest rates near zero for a “considerable time” after it finished asset purchases, because of only moderate economic growth.
Rosen’s analysis typically draws big real estate crowds, and he especially plays up his close relationship with Yellen, a former Berkeley professor. He echoed the Fed’s own forecast at the event, expecting the yield on Treasury bills to rise from 0.1 percent to 1.2 percent. He put Treasury bond rates up at 3.7 percent next year, jumping at least another percentage point by 2017.
San Francisco’s economy has been riding high in part because of technology companies’ easy access to capital – gobbling up venture capital dollars and taking advantage of stock gains to buy smaller companies and hire more workers. That employment growth helps feed real estate demand in the city, putting apartment and condo building pace at a peak.
That growth is “at the mercy of overall capital markets,” Rosen said at a similar presentation Monday. “A slowdown will surely happen. We won’t see the bubble burst, but we’ll see a correction. Capital markets have allowed them to hire and lease space all in excess of their current needs.”
What does that mean for individual renters? Oz Erickson, a city developer who heads the Emerald Fund, told me last month that the most expensive city for renters in the country could see an even tighter squeeze. If builders can’t borrow money as cheaply, those costs will be passed onto renters.
“The biggest risk of all is interest rates,” he said. If interest rates rise faster than expected, “you’re talking about rents needing to go for a one-bedroom from $3,000 to $4,600 just to meet extra costs from interest. If that happens, everything stops.”
Monday, March 31, 2014
Daniel Kennedy packs up items for his move into a condominium at the Marlow development on Van Ness Avenue, one of just four new condo projects to hit the market in S.F. last year. Photo: Deborah Svoboda, The Chronicle
Earlier this month, there was an invite-only reception at Vida, a condominium project being built next to the New Mission Theater.
As Jose Roberto Hernandez‘s trio played, 250 potential buyers sipped on cans of Modelo and ate tapas provided by the Mission Language and Vocational School. Two days later, 20 units were in contract – and the building won’t even open until January.
“It was a madhouse,” said Matt Fuller of Zephyr Real Estate.
If that sounds reminiscent of late 2007, when buyers lined up outside One Rincon Hill until the wee hours, it is. Median condo prices in San Francisco are now above $830,000, about 8.2 percent higher than the peak reached right before the economic crash in early 2008. The latest Standard & Poor’s/Case-Shilling home sales price index shows that San Francisco prices have jumped 23 percent in the past year.
Units that seemed terminally underwater are now high and dry. At One Rincon Hill, a unit sold recently for $815,000, a 15 percent profit over its early 2008 purchase price. The seller’s broker, Leslie Bauer of Sotheby’s International, said, “Even a year ago it would have sold for about $650,000.”
Another One Rincon Hill unit traded in February for $1.14 million – 31 percent over its 2011 price of $870,000.
The frothiness is being whipped up by a combination of the robust tech economy, low interest rates and a supply of new condos that is at an all-time low. San Francisco has fewer than 100 new units on the market, compared with the average of 1,000 units on the market at any given time between 1999 and 2009.
A year ago four condo projects hit the market, totaling about 300 units: Linea at 1998 Market St., Marlow at 1800 Van Ness Ave., Blanc at 1080 Sutter St. and the 300 Ivy St. development. Marlow, Blanc and 300 Ivy are sold out, while Linea has about a dozen units left.
‘The new normal’
The average price per square foot at both 300 Ivy and Marlow topped $1,000.
“The new normal for new construction is $1,000 a square foot, and it goes up from there,” said Chris Foley, a principal with Polaris Pacific, which is handling sales for Vida, Blanc, Linea and Marlow. “Vida will sell out before construction is finished.”
Daniel Kennedy, who moved into his new one-bedroom condo at Marlow this week with his partner, Alek Chainam, knew what he was getting into. After all Kennedy, who works in marketing for a tech company, had sold his previous unit near the Caltrain station about a year ago.
“I knew the market would be tight, but it was worse than I thought,” he said. “It seemed like every month it was getting tighter.”
Hesitation costs buyer
Kennedy was originally the first buyer in contract at Marlow, but he decided to wait and look around. The hesitation cost him: Marlow’s prices rose 17 percent from the start of construction to the closeout.
“Of course I ended up having to pay more because I came in later.”
And unlike in 2007, when buyers got away with 5 percent down, postcrisis banking regulations are stringent: You better have a job, strong credit and 20 percent cash to plunk down.
Many buyers, however, are putting down even more. At Marlow, where the price per square foot averaged $1,060, 28 percent of buyers paid all cash.
“The buyer profile at Marlow was the strongest I have ever seen,” said Jason Chapin, a retail sales supervisor for Wells Fargo Home Mortgage, who supervised loans on the project. “People with plenty of cash, excellent income and great credit.”
Cash buyers “set the tone for the market, even in a retail market, because they are hard to compete with,” Chapin said.
“There is a lot of cash in the Bay Area,” he added. “The IPOs in tech and biotech are back. We see a lot of young people with more liquidity than we have seen in the past.”
But it can be a frustrating time to be a buyer. Some would-be buyers end up scoffing at the going rate of $800,000 for an 800-square-foot condo, even if they can afford to buy it.
“You are starting to hear about more people getting buyer’s remorse and falling out of contract after deciding the market is overpriced,” Bauer said.
But the alternative – the rental market – is no picnic. Rents in the city’s more fashionable neighborhoods have topped $4.50 a square foot.
Trying to add housing
Builders like Sean Sullivan, president of JS Sullivan Development, are doing what they can to add housing. Sullivan just completed Blanc and has two projects under construction: 1515, a 45-unit project at 15th Street and South Van Ness Avenue, and 870 Harrison St., a 26-unit building to open in October. Sullivan said Blanc exceeded expectations and, surprisingly, attracted a fair number of families with children to a somewhat edgy location.
Sullivan said he sees the market leveling off but not falling. “It will cool off – this rate of increase in valuation is unsustainable,” he said.
“The current pipeline is all under construction – what is going to happen in 36 months when all those high-rises under construction are sold out? We are going to have inventory issues for years to come.”
The likelihood that interest rates will jump this year is creating an additional incentive for buyers and sellers alike. The current rate of 4.30 percent on a 30-year fixed loan means that monthly payment on a $500,000 loan is about $2,500 a month – compared with $3,000 a month in December 2007, when rates were at 6.10 percent.