December 2015 – Are We Getting Tired?


I’ve started to see a number of price reductions: more than in previous months, and the chatter among my fellow agents is that the market is weakening. A recent article about Square’s IPO and the valuation of other unicorns got me thinking.

Is the Market Getting Tired?

Pulse 147 - Tired

We have been in an up-cycle since 2011. This is the fourth year of robust appreciation (better than 10% a year). The up-cycle from 1994 to 2000 lasted seven years and ended with the dotcom bust. The next up leg was 2004 to 2008, which ended with the Great Recession (down three+ years). We are probably closer to the end of this up-cycle than the beginning, but no one knows how close.

While the current up-leg may be getting a bit long in the tooth, my crystal ball says that it is not headed south; probably slower growth in the year ahead rather than a continuation of the double digit growth that we have seen for these last four years.

Blessed with Multiple, Diverse Buyers

San Francisco is blessed with multiple buyer groups that sustain a long-term upward trend, which is the important consideration in my real estate book.

Primary residence buyers who want to live and work in San Francisco,
Pied a terre buyers who want to partake of the City’s dining, shopping, and entertainment and are not yet ready to give up the old homestead, but do want a place in the City where they can spend weekends, etc.,
Empty-nesters who live within 100+ miles of the City, and want to enjoy the City’s vibrancy on a full time basis now that the kids are out of the house,
Investors who understand the long-term economics of San Francisco residential real estate and want to benefit financially,
Home collectors who want a place in San Francisco, Chicago, New York, etc.

We are indeed blessed.


Even though our residential real estate benefits from multiple buyer groups (read five legs to the stool) and sustains a vibrant market over the long-term, changing market psychology also plays a role, and contributes to mini cycles within the long term upward trend.

Square had its IPO on November 19 at an offer price of $9.00 a share, which was 50% less than its most recent private financing a year ago. I’ve read that major mutual funds, ones who have been investors in start-ups over the past decade, have started to mark down valuations of some of their private company holdings.

Question – is the bloom off high tech stocks? Is this issue contributing to changing (short-term) real estate psychology? My monthly numbers don’t indicate any drop-off in appreciation (we are up some 13.5% over last year through the end of November). Given where we are in the cycle, it would seem that an easing of the heady 10%+/year appreciation rate is coming to an end, though I know not when.

But, as I have said many times, it doesn’t matter, since it’s about the long game that makes San Francisco residential real estate attractive.

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November 2015 – What’s the Square Footage?


Why do Buyers and Sellers ask this question? What difference does it make? Are they concerned about paying too much on a per square basis if they are buying or too low if selling? I thought I would discourse a bit on one of my favorite non-subjects. I’ll focus on condominiums since I become even more agitated when people use dollars/square foot when discussing the value of single-family homes.

What Matters

Does it matter that the average price per square foot in San Francisco has risen from $625/sq. ft. to $1,000/sq. ft. or that the average price of a condominium during the same period rose from $750,000 to $1,250,000? When you go to a bank and ask for a loan, the bank will look at loan to value (say 80% of $1,250,000), right? The bank is not focused on $/sq. ft. nor is its loan appraiser when he/she does comps, although it may be a consideration.

Pulse 146 - Matters

Would you rather pay $1,300,000 for a 900 sq. ft. unit with the layout/outlooks/amenities you like in a building in a good location that serves your needs or $950,000 for a 1,000 sq. ft. unit that has less of all of the above? You get my drift.

Why the Question?

This is a bit cynical, but I think many people ask the question about $/sq. ft. because they want to look knowledgeable about real estate, and/or it is a question that can fill a void when they may have asked all their other questions.

Pulse 146 - question

Developers (justifiably) use the $/sq. ft. metric to help them understand their construction costs, financing, marketing, and other soft costs, as well as their projected revenues. It makes for a very tidy model.

I recently listed a property, and in filling out the MLS information query, I was asked to enter the approximate square footage. At about the same time, a fellow agent pointed out that the sq. ft. numbers for recent sales in the building were suspect. Knowing that there has been quite a bit of litigation in recent years over sq. ft. measurements, I opted to exclude any reference to square footage in the MLS altogether. Let the buyers figure it out for themselves.

If you ask a contractor, architect, and appraiser to measure a particular unit, I submit that they will come up with three different numbers. One might measure from interior-to-interior wall, exterior-to-exterior wall, inside closets, decks, etc. Each will have his/her way of measuring, and they might vary by 10% or more.


I am comfortable using $/sq. ft. to see whether the property is in the “ballpark of reason.” I prefer paying $1,500/sq. ft. for a condominium that fits my needs rather than $900/sq. ft. for one that doesn’t. It’s as simple as that.

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October 2015 – Transformation

Pulse 145 - transformation

There seems to be a clamor among the natives that all the construction in the City is creating monumental traffic gridlock, displacing people, and changing the face of our fair City (read – transformation).

Been There

Moscone Center, named for the murdered (in 1978) Mayor Moscone and built in 1981, was initially opposed by Moscone when he served on the Board of Supervisors in the 1960s. He felt it would “displace elderly and poor residents of the area.” It has since transformed the surrounding neighborhoods.

In 1997, UC Regents approved Mission Bay as the site for UCSF’s new campus, and with Mayor Willie Brown’s help, Catellus Development Corporation was “encouraged” to donate 43 acres of property to UCSF Mission Bay. It transformed Mission Bay into a home to many of the most advanced research facilities in the world, not to mention new housing.

Then ATT Park opened in March 2000, and besides bringing three World Series championships to the City (read – economic benefits), it transformed all of King Street and multiple blocks to the north with new housing, retail and commercial buildings.

Population growth

The City is going through a growth spurt, which it does now and then. The City’s population stood at 803,000+ in 2010, having grown an average of 2,800 people a year from 2000.

Since 2000, the growth has been an average 4,000 people a year, but lately it has been growing at the rate of 10,000 people per year! San Francisco is the Bay Area’s densest city and one of the densest in the country.

What’s On Tap?

At least eight major developments are in the works, and each of them will have a dramatic, transformative impact on their respective neighborhoods and probably the City as a whole.

1. Transbay Terminal – Downtown
2. Warriors Arena – Mission Bay
3. Pier 70 – Dogpatch
4. 5 M – 5th and Mission Streets
5. CPMC – Van Ness/Russian Hill/Lower Pacific Heights
6. Sea Wall Lot 337 – Mission Bay
7. Treasure Island – You pick it
8. Shipyard – Bayview/Hunters Point


Yes, the City is changing, and the old refrain about displacing the elderly and poor is once again front and center. I share these concerns, and I wish I could contribute to the solution. Mayor Lee spoke at the recent Structures event hosted by the Business Times. I sense that he is not only empathetic to displacement, but has the vision, will, and political support to lessen the impact of these major developments.

Urbanization is happening all over the world. Cities are becoming denser, and San Francisco is no exception. In 2000, we may have been a quaint city of 775,000 souls. By 2030, we will likely be a robust 1,000,000.

Please feel free to email or give me a ring (415-730-7772).

September 2015 – Wait and See


“Wait and See” is not a plan, not even a strategy. I am talking about waiting to buy into our hot condominium market. Potential buyers are easily discouraged after being beaten by competition time after time. The competition is intense, and prices are through the roof: “I’ll wait and see” is equivalent to throwing in the towel.

A Personal Story

Back in the dark ages, that would be 2004, I decided that I wanted to buy a condominium and forget renting. I set my sights on a condominium in Cow Hollow. It needed work, like a new kitchen, bath, wiring, not to mentioned painting and other cosmetic work. It was listed for $699,000, and there were 10 offers. I won the property with an offer of $801,000, 14.5% over the list price. Crazy?

My economics/financial education made me question the rationality of bidding so high. I looked at the average price apperception of San Francisco condominiums for the previous 20 years. It was about 7 %/year. So I said to myself, “Self, let’s say the property is really “worth” $699,000, at what point in the future could I be made “whole’ (i.e. I could sell it for the $801,000 I paid for it) if the market appreciated only 5% per year?” The answer – it would take three years, and since I was planning to remain in San Francisco for at least five+ years, it was a no-brainer.

The Market

The average price of condominiums, citywide, during the three-year period 2001 – 2003 was down 6.7%. Average prices were up about 16% /year in both 2004 and 2005. Then the economy tanked in 2008 and prices dived 16% in the three years 2009 – 2011. Prices have rebounded more than 10% a year in 2012, 2013, and 2014 and are up 14% so far in 2015.

Average prices will continually go up, until they don’t. Dud! Long-term the trend is up and there will be periodical downturns because life and real estate are cyclical!

Inventory & Supply

My rough estimates of San Francisco inventory:

        • Apartment units          300,000 – 66%
        • Single-family homes  110,000
        • Condominiums             45,000
        • Total housing stock    455,000

In other words, two thirds of the housing stock is rentals. Condominium re-sales (not new construction) will be about 2,400 units in 2015, or about 5% of the condominium inventory (which implies that owners move, on average, every 20 years).

In the meantime, we see all sorts of cranes throughout the city. Some are for office buildings, some for hospitals, and some for apartment or condominium buildings. While there are multiple condominium buildings under construction, most are less than 100 units, and less than 900 units will be delivered in 2015*. This hardly makes a dent in inventory or average prices.

pulse 144Bottom line – we can’t build fast enough. There are many reasons (call me and I will enumerate). What really matters is “wait and see” does not get you into a property. I suggest you hold your nose and jump in, so long as you plan to own for 5+ years. One caveat – you best have a (really) good agent when you buy to assure yourself of a successful exit when you sell.

Check out the archive at for previous Pulses. Please feel free to email or give me a ring (415-730-7772).

*Note: 401 Harrison (a 298-unit completed rental property) reportedly went into contract in July with the buyer intending to offer the units as for-sale condominiums. More at TheRegistrySF.

August 2015 – Go West Young Man/Woman


Two articles caught my eye this month: one about Obama administration alums beating a path to San Francisco start-ups, the other about relocating Wall Street executives. Both are affecting the upper end of the San Francisco residential market; rental and for sale.


Technology was a central component of Obama’s presidential campaign and administration, so tech companies are a logical next step for many. “If you’re writing for a CEO out here, they’re more likely to be your peer than your grandfather,” says Tommy Vietor, a former National Security Council spokesman who has a speechwriting consulting firm in San Francisco. “They’re young, they’re cool, and they get it.”

The San Francisco Business Journal reports that recent arrivals at Uber include David Plouffe who ran President Obama’s 2008 campaign, Jessica Santillo, a former White House assistant press secretary, Jordan Burke, the former White House director of strategic and message initiatives, Kellyn Blossom, associate director of intergovernmental affairs and Sarah Fenn, an assistant to the deputy White House chief of staff.

Salesforce recruited Jim Green, Obama’s campaign staff director for technology, and Obama’s former CIO, Vivek Kundra. Twitter snagged Katie Jacobs Stanton, the administration’s director of citizen participation, while Airbnb hired Obama administration alums Nick Papas, John Baldo, Courtney O’Donnell and Clark Stevens. Square hired Michelle Obama’s former deputy communications director, Semonti Stephens, and Nest brought in Obama’s former speechwriter Kyle O’Connor.

From Wall Street, recent additions include Ruth Porat from Morgan Stanley to become Google’s CFO, Sarah Friar, a Goldman alum, now CFO of Square, and ex–Goldman banker Anthony Noto, now Twitter’s CFO.


These are not your computer science geeks pulling down low six figures; they are highly paid, non-techie executives willing and able to pay $10,000+ per month rentals and $5 million+ purchases. They are competing with the non-tech world of relocating executives, empty nesters, newly minted millionaires with IPO cash, foreign buyers looking for a safe haven, investors, and others with a lot of money.

The current 2015 year is the fourth straight year with 10%+ of average annual appreciation. These new arrivals are another addition to the buyer mix that supports this heady market and raise the average price.

Check out the archive at for previous Pulses. Please feel free to email or give me a ring (415-730-7772).

July 2015 – Motivations

The Set-up

While we know that the San Francisco residential market is on fire, and the Bay Area economy is the driving engine, we sometimes forget about the many different reasons that buyers buy.

My recent Presidio Heights listing (a condominium with 3 BR/2 BA/2-car parking at $2,495,000) gave me a chance to talk directly with a number of serious buyers. Below is a sampling of their motivations. I found their reasons for not buying interesting as well.

BTW, when this property came to market, there were only three or four 3 BR/2 BA condominiums available between $2 and $3 million in all of the Northside and SOMA neighborhoods, excluding what may have been available as new construction. This speaks to our limited inventory.

Downsizing and No Stairs

Her motivation came from two recent total knee replacements. Living in a three-story single-family home was becoming an issue. While our bedroom/bath count filled the bill, the main attraction was the lack of stairs coupled with good elevator access. It was perfect, until it wasn’t. Where would she put all her possessions from a single-family home? Downsizing is one thing: parting with possessions is another. As the population ages (read – knee and hip replacements), stairs become more difficult.

Call it an Investment

A young couple with a home in Palo Alto were looking to invest some money in San Francisco real estate well aware of its upside potential. Though some might characterize the purchase as a second home, their primary motivation was appreciation. They decided elsewhere would be better, and I am not sure why or where.


Another couple, both in finance, relocated from New York about a year ago. They had been renting in Pacific Heights. I inferred that the job transfer was working, they planned to stay, and it was time to buy. They ultimately decided to buy a property in Sausalito, rather than the city. I can’t imagine why, but I understand that there might be some good reasons for Sausalito (just ask my daughter).


Shanghai/San Francisco

A young Chinese executive, with business in Shanghai and San Francisco, was looking to purchase a place for himself and his family. I would call it a dual (primary) residence rather than a second home. With the recent birth of twin girls, the three bedrooms and two baths all on one floor, not to mention the good location and parking, made it perfect! Until, of course, he asked me which way the building faced (to the north), and I never heard from him again: bad Feng Shui.

Close to the Kids

The ultimate buyers were a couple from New Jersey. Their daughter had just given birth to their first grandchild at CPMC California. Since daughter, hubby and grandchild are probably not moving back east any time soon, it was incumbent on mom and dad to find a place for when they visit, one large enough to accommodate an expanding family. We wish them well.

More grandparents want to be closer to their kids and grandchildren. For more on this subject (reason to buy and reason to sell), I suggest you read this recent New York Times article.

Check out the archive at for previous Pulses. Please feel free to email or give me a ring (415-730-7772).

June 2015 – Owning Something


A recent op-ed piece by Thomas Friedman in the New          York Times caught my eye……………

o Uber, the world’s largest taxi company, owns no vehicles.

o Facebook, the world’s most popular media owner, creates no content.

o Alibaba, the most valuable retailer, has no inventory

o Airbnb, the world’s largest accommodation provider, owns no real estate
(Wow, I never thought about it in that context!)

Friedman goes on to say “We’re at the start of a major shift on the question of what’s worth owning………..”

I think that is a very interesting, conceptual, financial and existential question; way above my pay grade.

For some two-thirds of the San Francisco population, they desire to join with the 21st century crowd and lease rather than own, either because they can’t afford to own, or because they don’t plan to reside here for an extended period of time, or they just prefer to leave the ownership headaches to someone else.

For the other one-third, owning one’s home is conceptually, financially, and existentially a very good thing. I am no expert regarding the conceptual or existential issues. Nor am I an expert financially, but one need not be an expert to appreciate what is happening in San Francisco.

Average prices continue to escalate in 2015 (up more than 17% over last year YTD) and this is after increasing more than 12% in each of the three years, 2012 through 2014).

And, it will continue.

If you are not in the game, you need to get in the game: whatever it takes. If you are sitting on a large capital gain and a change-of-life-event calls for a sale, perhaps you need to bite the bullet, pay the capital gain tax, and move on. Maybe for such folks, it’s time to own nothing.

Please feel free to email or give me a ring (415-730-7772).

May 2015 – So Much


So much is happening construction-wise in our little hamlet of San Francisco that I don’t know where to start, or for that matter, end.

There are dozens of “small” condominium and apartment developments that we drive by every day. There are 20-unit, 200-unit, and even Lumina’s 650-unit development downtown. But, the sheer size and neighborhood impact of developments that we may not normally drive by are breath-taking. For example…





On the north side, the new CPMC campus takes up an entire city block between Van Ness/Franklin and Geary/Post. It’s a five-year build with completion slated for 2019. It will include a 12-story acute care facility, a 274-bed patient hospital, and a nine-story medical office building. It is already influencing two condominium developments under construction close by: 69 units at 1450 Franklin and the 260-unit Rockwell on Pine between Van Ness and Franklin.


Warriors Stadium



This 12-acre development between Mission Bay and Dogpatch will have an 18,000-seat arena and a million square feet of commercial/industrial space including restaurants and retail. Just as ATT Park was a major catalyst for residential development in South Beach and SOMA, this Warriors complex is likely to influence residential in Dogpatch, Potrero, Mission Bay, and Central Waterfront.


5 M



This is four acres (not square feet, but acres) smack in the middle of downtown. It’s hub is the Chronicle Building (5th & Mission). As you can see from the graphic, it involves office, retail, arts, residential buildings, and open space.


Treasure Island



This Lennar/Wilson Meany development in the middle of San Francisco Bay will take some 10+ years to complete and will include 8,000 homes, 3 hotels, 250,000+ square feet of commercial space, its own ferry terminal, and some 300 acres of parks/open space. The graphic is an imagined nighttime view seen from the Embarcadero. Those folks who purchased units in Tower Two at the Infinity will be blessed with a spectacular nighttime vista.


Pier 70



Just south of Mission Bay, Pier 70 was a shipbuilding center, “turning out everything from ocean schooners, ferry boats, to warships from the Spanish-American War to Vietnam.” Forest City is proposing shops, restaurants, small manufacturers, residential, office space, and a bayfront park on a 28-acre site.





The price per square foot of downtown condominiums already exceeds that of other San Francisco neighborhoods, and the construction of the Transbay Terminal (aka Grand Central Terminal of the West) is one of the reasons. It is breathtaking in its size, grandeur, and impact on the city as a whole. Who says I can’t exaggerate?


Bayview – Hunters Point



This massive 20-year development by Lennar will have more than 10,000 residential units, 2 million+ square feet of office/retail space, a new stadium, 300+ acres of parkland, and some of the best weather in San Francisco, not to mention waterfront views. It is just 3.5 miles north to ATT Park at the southern edge of SOMA, a stone’s throw from SFO, and an easy commute for those who work at Silicon Valley companies.

Is it any wonder that there is not enough residential properties to satisfy demand with so much happening? These seven developments are massive in scale, not to mention their long-term impact on adjacent neighborhoods and the city as a whole. It is wise to think long-term when making residential decisions.


Check out the archive at for previous Pulses. Please feel free to email or give me a ring (415-730-7772).





April 2015 – Who’s Afraid


Gee whiz, the constant drumbeat these days is “there’s no inventory.” Yeah, but I think the real story is Who’s afraid – this time?

The following scenario is pretty much the same for condominiums as it is for single-family homes, but let’s keep it simple. I choose to discuss only single-family homes. The numbers are essentially the same for condominiums.


Back Then

The top of the market for the average price of single-family home sales was 2007. In 2007, the average price was $1,204,167 for all of San Francisco. There were 2,323 homes sold in 2007, down from more than 3,000 (250 per month) sales in each of the years 2002 – 2005. The low point for unit sales was 2008, when the city had only 2,161 single-family home sales. The drop from 3,000+ a year to less than 2,200 a year is a drop of more than 25%! Why did this happen? My opinion – many (not all) buyers were afraid to buy.


And Now

So far, in 2015 we are perking along at an annual rate of only 1,800 sales (150 per month). Mind you, this is even less than the sales rate of the low in 2008. Why is this happening? My opinion – many sellers (not all) are afraid to sell.


The Downturn & the Bounce

From peak to trough, the average single-family home lost 22% in value in the 2008-2011 recession. Buyers were afraid to buy. Those who did have benefited greatly from the recession bounce. So far, in 2015 we are up some 64% in average price from the lows set in 2011 (that’s 15%+ per year).


The Reasons

There are many reasons for the strength of the current San Francisco residential market, including a vibrant economy/low unemployment, limited (developable) land, etc.

In my opinion, the bounce has been especially strong because the downturn was so severe. In addition, the vibrant IPO market, dominated by Bay Area tech companies, has minted thousands of young millionaires in the years since the deep recession. At the same time, the robust Chinese economy has minted tens of thousands of millionaires many of whom want to find a safe haven for part of their fortune. Some of it ends up here.



I am finding, and I assume others are as well, that many owners are sitting on very substantial appreciation and the unwelcome realization that the taxman will take a very hefty bite out of any capital gains.

In historical terms, there is adequate inventory. It’s just not enough to satisfy the appetite of the large numbers of well-heeled buyers.


Check out the archive at for previous Pulses. Please feel free to email or give me a ring (415-730-7772).

March 2015 – Planning Ahead


This Pulse is the fourth in a four-part series focused on key issues for pied-a- terre and empty nester buyers, particularly those who reside within 125 miles of San Francisco. The archive at has the complete series.

Rent versus Buy

Part 4 - Rent v. buy

Periodically, the media presents a financial analysis of the economics of renting versus buying. I usually read the article and come away with the same opinion I had going in: it is better to buy than to rent, but I recognize and admit, I am biased toward buying.

Do you watch CNBC’s stock market morning program? A friend of mine likens it to “financial pornography.” I think she is right. It is all about short-term trading; nary a word about investing.

As a financial friend notes, renting is about spending money. Buying a condominium is about investing. Renting is about short-term. Buying is about long-term.

Past and Future

San Francisco’s real estate benefits from its strategic location, unparalleled employment opportunities, multiplicity of buyers, and limited land.

Yes, real estate is cyclical, but the trend has been and will continue upward (I guarantee it). So long as you don’t buy a property and try to flip quickly, you will do well on the investment.

Finding What You Want

Part 4 - searching

There are many condominium opportunities in San Francisco. Finding what you want is often a problem. I submit that the problem comes from not understanding the options and understanding the economics. That’s ok. It is a learning and educational process, one that takes time, and one that takes a talented, financially sophisticated, and savvy agent that can guide the way (shameless self-promotion here).


“Investing” in a pied-a- terre is a good way to plan ahead. It can and should be a test bed for a possible move to the city prior to the empty nester stage. While our historically low interest rates won’t last forever (and a good reason to act now), the inherent investment qualities of San Francisco residential real estate will persist. (I guarantee it).
Please feel free to email or give me a ring (415-730-7772).