San Francisco Leads the Region as Top City for Rental Real Estate Investment

It is undeniable that San Francisco is a great place to live. Vibrant neighborhoods, an exceptional art and cultural scene, fantastic restaurants, world-class shopping and a stunning natural landscape have all helped San Francisco secure a place among the top cities in the country. With the release of the All Property Management Q2 2014 Rental Ranking Report, the City by the Bay can also add being the No. 1 city in the region – and No. 3 in the country – for rental real estate investment to its list of accolades.

Saving money

The Q2 2014 Rental Ranking Report looks at metrics including vacancy rates, capitalization rates, home value appreciation, annual job growth, rental rate variance, and average days a property sits on market for 75 Metropolitan Statistical Areas to determine the top U.S. cities that are poised to give investors the highest return on their rental real estate investment. San Francisco took the top spot regionally, beating out cities such as San Jose, Seattle, Denver, and Los Angeles, while coming in 3rd only to Grand Rapids, MI (No. 1) and Poughkeepsie, NY (No. 2) in the country.

San Francisco Boasts High Rental Rate Variance to Secure Top Ranking 

With rising San Francisco rental rates a main topic of conversation in the community, it will come as no surprise to locals that the city does quite well in the rental variance metric. In fact, with an 8.44 percent increase in year-over-year rental rates, San Francisco takes the No. 1 spot for rental variance among the 75 cities studied, according to the report. While performing generally well in most categories, this rental rate variance certainly helped San Francisco clinch the top regional spot.

San Francisco also boasts one of the lowest vacancy rates in the report at 4.9 percent (giving it a 10th place ranking in the country) and a good home value appreciation rate of 4.95 percent year-over-year. What might surprise you, however, is the city’s relatively low capitalization rate. The “cap rate,” which compares average property value to average rental rates to determine how profitable a rental may be, is 4.07 percent in San Francisco. This is the second-smallest cap rate in the report. By comparison, Grand Rapids, the No. 1 ranked city in the U.S., offers a cap rate of 9.64 percent. The low cap rate is partially fueled by San Francisco’s high property values.

If you’ve been sitting on the fence toying with the idea of buying San Francisco rental real estate, the All Property Management Q2 2014 Rental Ranking Report suggests you should make a move. Opportunity is waiting – will you take advantage?

This is a guest post from All Property Management.

Founded in 2004, All Property Management helps property owners maximize their rental income potential by connecting them with the largest network of property management services on the Internet. As part of that work we track a number of different metrics, from rental vacancy rates and home values to regional job growth, for 75 different metro areas in 5 regions of the country. We use that data, along with input from our nationwide network of over 5,000 property managers, to produce our quarterly Rental Ranking report, which measures a city’s attractiveness for real estate investment.

Fewer All Cash Sales for Single Family Homes

Are cash sales in SF on the rise, on the decrease, or holding steady?

While we were out on tour last week, this discussion item popped up based on some observations at a recent sales meeting:

Which led us to do some digging in the MLS (but not that kind of digging) to see what the stats would say about cash sales over the past several months here in San Francisco. Last week over at SF Modern Condos, we wrote about how cash is holding steady in the SF condo market.

SF single family homes - All Cash sales in late 2013 and early 2014
SF single family homes – All Cash sales in late 2013 and early 2014

As you can see below, after spiking at close to 30% of the market earlier this year, the number of all cash deals does seem to be down more for single family homes when compared to condo sales.

Percentage of all cash sales - Single family homes
What percentage of sales for single family homes in SF are being bought in all cash purchases?

While there could be (and probably are) a variety of explanations for this phenomena, one of the things I’m curious about is if overseas buyers actually have a preference for condo buildings? While this flies in the face of the “conventional thinking” that says single family homes are a more valuable property type than condos, it makes sense if you think about it: If you aren’t going to be living in the residence on a daily basis, it is preferable to have a home in a building where there are people around to keep an eye on it for you.

Another possibility has to do with location – since single families aren’t really built in SF anymore, will people go for location preference over property type preference?

We’d love to hear your comments below, on twitter, or on our Facebook page (give us a like if you haven’t already!).

Noe Valley Condo or Noe Valley Single Family Home?

Our San Francisco Real Estate Report is a statistical extravaganza – and also really useful! But don’t just take our word for it – here’s an example of the types of questions it can answer. Noe Valley in District 5 has been one of San Francisco’s hottest neighborhoods for quite a while. It’s excellent weather and easy access to the peninsula for Silicon Valley commuters has made it a destination neighborhood

Median Sales Price for Noe Valley condos
Median Sales Price for Noe Valley condos, 2009 to 2013

The chart to the left shows the median sale price for condo homes in Noe Valley over the past five years. Data is from the SFAR MLS, and we do not include tenancy-in-common properties in the condo category.

In 2009, the median sale price for a condo in Noe Valley was $765,000. The price has gone up for each of the past five years, and in 2013 the median sale price for a condo broke the $1,000,000 mark, with the median sale price being $1,002,000.

The average Noe Valley condo has appreciated 5.55% a year for each of the past five years.

Median Sale Price for Noe Valley Single Family Home
Median Sale Price for Noe Valley Single Family Home, 2009 – 2013

 

 

The chart to the right shows the median sale price for single family homes in Noe Valley over the past five years.

As you can see, in 2009 the median sale price was $1,117,500 and in 2013 that value had dramatically appreciated to $1,700,000.

If you calculate out the annual appreciation rate, it comes out to almost 9% – 8.75% – for each of the past five years!

Single Family homes have appreciated an average of 9% per year for each of the past five years.

 

 

Noe Valley property values have been on the rise, and both condos and single family homes have done incredibly well. What are your thoughts about property values in Noe Valley, or any other part of San Francisco? We’d love to hear your thoughts in the comments below.

 

How’s the market in St. Francis Wood?

St. Francis Wood is a part of District 4, and is known for its large lots and elegant, stately homes. One local survey (not us) named it the most kid-friendly neighborhood in San Francisco. It is perhaps the most elegant example in San Francisco of the “Residential Park” neighborhood concept that gained favor in the early 20th century. All of the information in this blog post can be found in our San Francisco Residential Real Estate Report, a free download with statistics on every SF neighborhood.

Days on Market in St. Francis Wood

St. Francis Wood Days on Market
Days on Market – 2009 to 2013

As you can see, the luxury market has made a dramatic recovery since 2009. In this particular neighborhood, days on market has dropped from 72 days in 2009 to 21 days in 2013.

 

 

 

 

 

 

 

 

Sales in St. Francis Wood

Home sales in St. Francis Wood
Home sales in St. Francis Wood

What makes the decrease in days on market so remarkable is that the average time a property was on the market decreased at the same time as the number of sales increased. In other words, supply couldn’t keep up with demand. Sales were abnormally low at 13 homes selling in 2009, while 25 exchanged hands in 2013 – a number much more in line with the prior three years when 22, 19, and 23 homes were sold.

 

 

 

 

 

 

Median Sale Price and Price per Square Foot in St. Francis Wood

Median Sale Price St. Francis Wood
Median Sale Price in St. Francis Wood

Both median sale price and price per square foot tell the same story – values have been rising in St. Francis wood over the past five years. Homes in 2013 sold for – on average – $250,000 more than they did in 2009.

 

 

 

 

Median Price per Square Foot - St. Francis Wood
Median Price per Square Foot – St. Francis Wood

 

When we look at Median price per Square Foot, the low was (again) in 2009, with a noticeable jump in 2010 (most likely we had some smaller homes changing hands in the neighborhood, which skewed this number higher in 2010). While the 2013 value of $776/sq.ft. isn’t as high as the value in 2010, it has shown a strong upward trend for the last three years.

 

 

 

 

 

Are homes in St. Francis Wood selling over or under asking?

Are homes in St. Francis Wood selling over or under asking price?
St. Francis Wood homes – final median sales price compared to median list price

From 2009 to 2011, homes in St. Francis Wood – on average – sold for less than their asking price. 2010 was the year in which homes went the most under the asking price, at almost 6%. That trend has been reversed for the past two years, with homes selling barely above the asking price in 2012 and homes selling for about 8% over asking in 2013.

 

 

 

What are your questions about the St. Francis Wood neighborhood? We’d love to hear them in the comments below.

 

Single Family Homes in San Francisco Appreciated 20% in 2013

2013 was a good year to be a single family home in San Francisco – or, at least, the seller of a single family home in San Francisco!

The top line data is below, and in the coming days and weeks you can expect us to drill much deeper into the data. But here are some highlights:

  • Sales of single family homes were essentially unchanged, with 2,618 sales being reported through the SFAR MLS in 2013, compared to 2,633 in 2012. Inventory was essentially unchanged, but the number of buyers in the market was up dramatically, which leads to…
  • The median list price in 2013 was $829,000 and the median sales price was $915,000.
  • The average (mean) list price in 2013 was $1,211,642 and the average (mean) sales price was $1,295,601.
  • Depending on if you think the median average or the mean average does a better job of representing home sales, the typical single family home sold for between 7 and 10% over asking in 2013.
2012 and 2013 Single Family Home Sales in San Francisco
2012 and 2013 Single Family Home Sales in San Francisco

If we look at year over year trends, the high level data says that:

  • Median sales price was up from $760,000 to $915,000 – a year over year increase of 20%.
  • Average (mean) sales price was up from $1,103,974 to $1,295,601, a year over year increase of 17%.
  • The typical single family home in San Francisco appreciated in value between 17% and 20%, depending on how you like to measure things.

For those who have been following the market, none of these numbers should come as much of a surprise. 2013 was an incredibly strong year for San Francisco real estate, and all signs seem to point to more of the same (although, with interest rates slowly rising and the Fed finally tapering, the general expectation is for the market to remain strong but not unsustainably so).

As usual, all of our data is from the SFAR MLS, using data for single family homes in MLS districts 1 – 10 (San Francisco proper). What are your thoughts?

 

Bernal Heights, Call the Fire Department

Bernal Heights, call the fire department! Your neighborhood appears to be one of San Francisco’s “hottest” neighborhoods for single family homes in 2013. This post is part of a continuing series that looks at 2013 single family home sales, and includes the The Number One Overbid for a Single Family in 2013 as well as 3 out of 4 homes sold for over asking in 2013.

I took all of the sales data for single family homes in San Francisco that were reported in the San Francisco Multiple Listing Service. I then calculated the percentage over asking the house sold for based on the original list price (not the most recent list price, in case  there was a reduction along the way). The sales are all plotted below:

  • Blue dots represent homes that sold at or near the asking price
  • Orange dots represent homes that sold over the asking price by 15%
  • Red dots represent homes that sold over the asking price by 30% or more

2013 single family home sales prices

You can click on the image above to go to the source map that I created on openheatmap.com.

One Very Important Reminder:

  • This data is for single family homes only! If you are looking at the north-east corner of San Francisco and wondering where the sales are, most of the homes in that area of town are condo/co-op/or tenancies in common. This data will be shared in another heat map to follow in the next few days.

I don’t know what stands out to you, but I’d say Bernal Heights seems to be the neighborhood that most consistently went over the asking price. The blue dots in other neighborhoods don’t mean that the overbids weren’t happening there – it just means that the overbids were a lot closer to the asking price. I may post another version that is slightly more granular – say in the 0% (at), 5%, and 10% over asking ranges.

What stands out to you about the data? Are you surprised to see so many red dots at the south end of the city? Were you expecting more (or less) in any particular neighborhood or area? I’d love to hear your thoughts in the comments below!