Realtor Patrick Belhon Maintains Positive View of the 2014 San Francisco Real Estate Market

The 2014 San Francisco real estate market is projected to be the top performer among the top 20 real estate markets in the United States.

By Patrick Belhon
Men in San Francisco thinking of buying a house -funny photo
Tight inventory and strong demand, especially for commercial properties, will help drive prices higher in the strong and flourishing local economy.

In 2013, sellers of residential real estate in San Francisco and the Bay Area of California did very well. Low inventory levels and high demand for homes in all price ranges led to the most desirable homes being snapped up as soon as they hit the market. Competition led to many homes being sold for more than their asking price.

The high price of San Francisco real estate did not dissuade buyers from entering the market. The luxury market did particularly well with more than 350 homes and 120 condos selling in excess of $2,000,000. Foreign investors helped to contribute to the demand for both moderately priced and luxury residences.

Commercial real estate also performed well in San Francisco and the entire Bay Area. Thanks to the strong economy in the region, demand for office space outstripped supply, leading to higher prices. According to a 2013 report by CBRE, a Fortune 500 commercial real estate company based in Los Angeles, the San Francisco business district (greater downtown area) had 5.7 million square feet of vacant office space and there was a demand for 6.3 million square feet of downtown office space.

What will 2014 look like?

Forecasts for 2014 residential real estate in most of the Bay Area neighborhoods are positive. While sale prices can vary significantly by neighborhood and type of home, on average, home prices are expected to increase by 6-8 percent in 2014. Inventory levels are still tight and are only expected to reach more normal levels by the end of the year or early in 2015. Foreclosures are down and continuing to go down. Mortgage rates show very little change and are expected to stay under 5 percent for the year.

San Francisco is experiencing a net influx into its population ranks. More people are moving in to the city than are migrating out of the city. The opportunity for work in high-paying fields such as technology, banking and insurance, is likely to result in an overall job growth rate of 2 percent for 2014.

San Francisco earns number 1 ranking in real estate

A highly-regarded report entitled Emerging Trends in Real Estate – 2014, was published in 2013 by PwC (PricewaterhouseCoopers) and ULI (Urban Land Institute) that gave valuable insight into the top 20 real estate markets in the United States. San Francisco finished number 1 in the overall rankings.

The study interviewed and surveyed more than 1,000 industry professionals. Included among the respondents were investors, mutual & pension fund managers, developers, property companies, lenders, brokers, advisers and consultants.

Consensus opinion was that San Francisco will continue to be a very good place to invest in both residential and commercial real estate. Private home ownership is expensive, but the prospects are good that prices will continue to rise throughout the year. According to the experts, commercial real estate has the potential to outperform residential real estate (more demand & price appreciation) in 2014.

Respondents were asked to give their opinion on the performance of the different segments of the San Francisco commercial real estate market. The question asked was whether you would buy, hold or sell a particular type of commercial property.

Hotels: 55.6% would buy – 24.4% would hold – 20.0% would sell
Industrial: 54.2% would buy – 37.29% would hold – 8.47% would sell
Retail: 50.8% would buy – 32.5% would hold – 16.7% would sell
Apartments: 49.0% would buy – 20.4% would hold – 30.6% would sell
Office Buildings: 45.0% would buy – 30.9% would hold – 24.2% would sell

If you define a positive outlook on commercial real estate as either buying property or holding on to property you already own, these statistics are clearly bullish for investors.

• Hotel segment: 80% positive outlook
• Industrial segment: 91.31% positive outlook
• Retail segment: 83.3% positive outlook
• Apartment segment: 69.4% positive outlook
• Office building segment: 75.9% positive outlook

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San Francisco Real Estate Market in 2014

The real estate market in San Francisco is trending towards recovery. The inventory is dwindling, and the home prices are increasing, but pundits warn potential investors that the housing market, in general, will not recover until 2014. According to a survey conducted, Americans believe that the recovery of the overall housing market is two and half years away. Here is what potential investors should know prior to making an investment.

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Foreclosures and the San Francisco Real Estate Market

The housing market is in jeopardy because of foreclosures primarily. This crisis has discounted houses by 46 percent in California and 35 percent all over the nation. When there are a significant number of foreclosures on the market, this forces the prices down on other properties.

In general, there is a two-year supply of bank-owned properties available. Typically, California homes require 600 days before foreclosure occurs. Since the process takes a considerable time, home buyers will begin witnessing homes in foreclosure that began the process almost two years earlier. This is why pundits speculate that the housing market will not show strong signs of recovery until 2014.

The large number of foreclosures is what keeps the prices low and also, keeps new construction at a minimum. San Francisco’s problems stem from the lack of inventory and the inability to find affordable properties. Inventory has reduced by 57 percent, and prices have increased by 25 percent. When cash buyers come into play, finding an affordable property becomes even more difficult. Short sales are also growing in popularity, but it creates a problem in the San Francisco housing market.

Future Housing Expectations and Policy Changes

Pundits are expecting to sell the rest of the distressed inventory in 2013 and into 2014. Then, there will be signs of recovery. One circumstance that may impede this process is the housing policy changes. Currently, 96 percent of all mortgages are originating from FHA, Fannie Mae, and Freddie Mac. There is also a considerable number of cash-paying investors.

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The conversations on Capitol Hill may affect the number of mortgage arising from these organizations. The Dodd-Frank bill is one to watch. Without mortgages, there will be no housing market. The United States housing market is close to hitting rock bottom. Thus, this is the best time to buy before the prices start to recover and remain steady, but pundits do not expect the entire market to recover for another 18 months.

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Lombard Street: One of San Francisco’s First Transformed Pieces of Real Estate

One of San Francisco’s first truly transformed pieces of real estate”Lombard Street” one of the city’s main attractions. People flock from all over the world to see one of the World’s crookedest streets. How this happened has become part of San Francisco legend. San Francisco is a tourist destination for travelers around the world and few feel they have seen it without taking the time to visit “Lombard Street”.

San Francisco Lombard Street Design 2013This tourist attraction began as a very steep cobblestone street. At a grade of 27 percent, cars were an impossible idea. The idea of 10 percent grade is very steep for a vehicle and 27 percent grade is frightening for anyone driving a car. To increase land value and to make the property more accessible a curved street was designed initiated. The crooked street called “Lombard” swirls down the hills of San Francisco with beautiful flower gardens and lovely homes in the backdrop.

Lombard Street in San Francisco seen from the Coit Tower.

Lombard Street in San Francisco seen from the Coit Tower

Pictures of Hydrangeas were shown beautifully on a post in the early 80s attracting droves of tourist ever since. The space of land of land was a not a prime location in the early years but as it developed it became and still is some of the most attractive piece of real estate property in the San Francisco area. The streets are cobblestone which reminds one of the days of San Francisco’s Barbary Coast days. This once not so accessible piece of real estate is now high-end real estate filled with stately homes.

Lombard Street gives the full feel of the “Hills of San Francisco. “ The scenery is beautiful with flowers in bloom that make for a gorgeous photo to send home. The curves of the street lined with beautiful flower beds strategically planted along the way add a flare to this uniquely designed street. This street was engineered for the best access for residents and has turned out to be a great advantage for visitors too.

PLACES FOR TRAVELERS AROUND SAN FRANCISCOLombard was one of San Francisco’s first truly transformed pieces of real estate, turning it into a tourist destination for people all over. The gracious homes located along the route furnished with the latest amenities of the modern world reminds visitors of the present, while the street itself with its beautiful gardens so carefully cared for takes you back to yesterday, when life was a little bit slower. Drive or walk through this stretch of road and momentarily go through a time tunnel of San Francisco history.
 – Guest blogger: Marcelin P. 1959/Architect From France 

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