What Costs How Much Where in San Francisco

Below are 3 charts from our updated 9-chart report that breaks down which neighborhoods one is most likely to find a home within a specific price range, whether house or condo. The report covers homes from under $1 million to over $5 million.

If you want to buy a house under a million dollars, one is now mostly limited to the neighborhoods that run across the southern border of San Francisco.

The full report is here: San Francisco Neighborhood Affordability

What Can I Buy for $1,200,000 or $2,000,000?
Below are illustrations of the wide range of homes (and, to some degree, lifestyles) one might buy at two different price points in the city. The higher a home is located on the vertical axis of the charts, the greater its square footage. (Note that the bathroom specifications can be a little screwy, for example 1.3 or 1.7 baths, because these are averages of homes sold at these approximate price points.)

$1,200,000 is approximately the median home price in San Francisco if one combines both houses and condos. For that price, one could buy a 4-bedroom, 2135 square foot house in Ingleside or Oceanview, or a 3-bedroom, 1566 square foot house in Outer Parkside, or a 2-bedroom, 1070 square foot condo in Pacific Heights.

For $2 million, one could purchase a gracious 4-bedroom, 2650 square foot, detached house on a large lot in Forest Hill, or a classic 2-level, 3-bedroom, 1900 square foot condo with a garden in the Marina, or a 2-bedroom, 1350 square foot, luxury high-rise condo with spectacular views in South Beach.

Quick Market Update
December through February constitute the slowest sales months of the year and are subject to significant seasonal issues, so coming to definitive conclusions about where the market is heading based on their data is difficult. However, for what it is worth, comparing the 3-month period to the same period a year ago, the median house sales price at $1,290,000 is up 4.5% and the median condo sales price at $1,050,000 is down 4.1%. As mentioned in earlier reports, the big dynamic affecting the condo market has been the surge of new-construction inventory hitting the market in the past year, just as demand started to soften. The inventory of new condos for sale is now at its highest level in 7 years, and, not surprisingly, this is impacting the supply and demand dynamic for condos, especially in those districts where new construction is concentrated. On the other hand, the inventory of house listings continues to remain at record lows, keeping that market, especially its more affordable segments, quite competitive.

This chart below reflects the latest Case-Shiller Home Price Index for the 5-county metro area house market, going through the end of 2016. It illustrates how in 2016, more affordably-priced houses continued to appreciate significantly, while the most expensive segment basically plateaued. Generally speaking, this is a common dynamic around the Bay Area.

San Francisco Median Home Price Trends since 1994
For a longer-term perspective

New Listings Begin Pouring onto the Market Again

The period of March through May is usually the most active selling season of the year, and we will soon have more conclusive indications of where the 2017 market is headed. This next chart illustrates the typical, dramatic surge of new inventory that fuels sales during this season.

San Francisco Home Sales with Views
SF is a city known for its wide variety of gorgeous views, which can add substantially to the value of a home so graced. Of all the house sales in 2016, only 88 reported having a Golden Gate Bridge view, and some of those were peek-a-boo views (i.e. if you lean out the bathroom window on the top floor) or roof deck views. A full-on, panoramic view of the GG Bridge from Pacific Heights adds over $1 million to the median house price there. Unsurprisingly, condos have the most, and most spectacular, views due to high-rise condo projects.

San Francisco Home Sales by Bedroom Count

Renting vs. Buying in San Francisco

Comparing the purchase, with 20% down, of a 2-bedroom/2-bath condo with the rental of a comparable apartment in San Francisco.

Every year or so, we like to update this analysis using current median sales prices and average rents for comparable 2-bedroom condos and apartments. Rent vs. buy calculations can be performed a wide variety of ways, and results will depend on your own financial circumstances and economic projections, which you should review with your accountant. There is a versatile calculator published by The New York Times, where one can play with all the financial factors involved: NYT Rent vs. Buy Calculator. Our analysis represents simply one scenario, which is meant to be more of an invitation to perform your own calculations than a definitive conclusion on the subject.

Depending on your circumstances, plans and predictions for the future, renting may well be the best choice for you. However, low interest rates, high rents, loan principal pay-down over time, inflation and appreciation rates, and the large tax benefits that accrue to homeownership typically give a large long-term financial advantage to buying, if you have the funds for the cash down-payment. (Of course, as with any investment, financial results will ultimately depend on your purchase and sale dates.) This next chart compares net monthly housing costs between renting and buying after tax deductions and principal repayment are accounted for. Our full report goes into much greater detail, such as the accumulation of wealth, in the form of home equity, over time. Please contact me if you would like a copy.

Other recent Paragon reports you might find interesting:

A Comprehensive Survey of the 2016 Market in San Francisco
San Francisco Luxury Homes Market Report
A Survey of Real Estate Markets around the Bay Area
Bay Area & San Francisco Home Price Maps

It is impossible to know how median and average value statistics apply to any particular home without a specific comparative market analysis, which we are happy to provide upon request.

These analyses were made in good faith with data from sources deemed reliable, but may contain errors and are subject to revision. It is not our intent to convince you of a particular position, but to attempt to provide straightforward data and analysis, so you can make your own informed decisions. Median and average statistics are enormous generalities: There are hundreds of different markets in San Francisco and the Bay Area, each with its own unique dynamics. Median prices and average dollar per square foot values can be and often are affected by other factors besides changes in fair market value. Longer term trends are much more meaningful than short-term.

© 2017 Paragon Real Estate Group

San Francisco Rent vs. Buy Comparison

Comparing the PURCHASE of a 2-bedroom, 2-bath, 1080 square foot condo at the 2016 median San Francisco sales price of $1,150,000, to the RENTAL of a comparable apartment at a San Francisco market rate of approx. $4,400 to $4,600/month rent Median sales price per 2016 MLS sales; monthly rent based on averaging Zillow, RealFacts & Rent Jungle asking rent data in late 2016/early 2017 Rent vs. buy calculations depend on a wide variety of financial data and projections –prevailing and future interest, property tax, inflation, home-appreciation and investment-return rates – as well as data pertinent to you and your specific purchase, such as your marginal income tax rate and how long you plan to stay in the home you purchase. Altering any of these factors can change the calculation significantly. And, of course, one could not consider buying under the scenario below if one did not have the cash for the initial down-payment and closing costs.

We have tried to be conservative in our projections, for example, putting in an annual home appreciation rate of 3%, when for the last 30 years, San Francisco has seen an average, compounding appreciation rate of 5 to 6%. (Since 2011, the SF median house price has appreciated about 90%.) However, appreciation rates vary enormously in shorter time periods, and can go negative in downturns, such as occurred in 2008, and the ability to ride out down markets can make a big difference in financial returns. We believe we have used similarly conservative inflation and investment-return rates, and used the prevailing average, conforming mortgage interest rate in February 2017.

How long you plan to stay in the home you purchase is an important factor, because the longer you stay, the more of your monthly mortgage payment goes to principal pay-down, and the longer the period of amortization of closing costs.

The below calculations were created using a calculator Paragon licenses from a third party. We strongly recommend that you consult your accountant or financial planner to discuss your financial situation, potential tax advantages and other specific pros and cons of purchase as they relate to your situation. What follows is only one scenario and should not be relied upon to make important decisions.The New York Times also has a very flexible rent vs. buy calculator, which allows you to put in your own data, rate projections, and purchase scenarios: NYT Rent vs. Buy Calculator.

The Purchase Scenario and Financial Parameters

Estimated Loan Information

Your total monthly housing payment was estimated at $6,239.38. Your down payment was estimated at $230,000 purchasing a home priced at $1,150,000. This is for a 30 year mortgage at 4.2% in the amount of $920,000. Your total purchase closing costs are estimated at $16,800.00 (about 1.5% of the purchase price).

In the analysis, the current monthly market rent is set at $4,400. The expected inflation rate of 2% annually was used to estimate future rent ($4,488 in the second year) and property taxes (though in California, increases in property taxes are strictly limited due to Prop 13 regulations). The rate of return used for the investment of down-payment monies by renters was 3% per year after taxes – obviously, this will vary widely by type of investment and time period. (If one had their money in CDs, one could only dream of an after-tax return of 3% in recent years. On the other hand, stocks have had a terrific run.)

After adjusting for your initial tax saving based on interest and property tax deductibility, and for the principal pay-down portion of your monthly housing cost, your net housing cost payment is reduced from $6,286 to $3,867, well below the market rate rent for a similar apartment of $4,400 to $4,600.

Note that with condo ownership, the greatest portion of home insurance cost is covered in the monthly HOA association dues & maintenance. For a 2BR/2BA condo, these dues typically run $350 to $550; we added a little bit to the calculation to cover the personal property portion of the insurance not covered by the HOA policy.

According to the above calculation, using the specified rates of appreciation, inflation and investment returns, your home purchase breaks even in approximately 2.7 years.

This is based on your home’s estimated equity minus 6% closing costs when you sell your home. It also assumes your home will appreciate at 3% per year and you have an income tax rate of 25%. If you cannot remain in your home for at least 3 years you should strongly consider continuing to rent.

The breakeven point was calculated by examining how long it would take to create enough equity in your home to exceed the value of investing your cash on hand (at 3% after-tax return). We also accounted for differences in your monthly rent and house payments.

Building Equity

Typically, by far the most important financial advantage of buying is the increase in home equity (and your net worth) over time, as is calculated in the last column below. Firstly, there is the monthly reduction of your loan amount, which increases your home equity. Secondly, there is the effect of inflation/home appreciation on the value of your home over time. Since the purchase was made using a 20% cash down-payment, there is also the significant financial advantage of leverage: When home values go up 10%, the increase in your cash down-payment is approximately 50% (though there is an adjustment for closing costs).

It’s worth noting that with a fixed rate mortgage rate (and Prop 13 limitations on property tax rate increases), one’s housing costs stay relatively stable over time, while rents typically continue to increase much more quickly. As the years pass, this can add substantially to the benefit of buying.

As mentioned earlier, the New York Times also has an excellent rent vs. buy calculator: NYT Rent vs. Buy Calculator. We could not use screenshots due to copyright law, however when we ran a very similar scenario through its calculator, based on living in the condo purchased for 5 years, it came to the conclusion that if you could rent a similar home to one you were buying (for $1,150,000), at a rent of $3,700 per month or less, then you should probably rent. That is, it came to a very similar conclusion to the calculator we used above, that with a market rent in the $4,400 to $4,600 range, buying was an option worth serious consideration.

The NYT also published this excellent editorial on the financial implications of homeownership: NYT Homeownership & Wealth Creation

Typically, the purchase of a new home is one of the largest financial transactions and investments of one’s life. Whatever home you purchase should work for you now—fulfilling your basic housing requirements at an affordable monthly cost. We also suggest retaining enough monies after purchase for a sufficient reserve fund.

Historically, San Francisco real estate has generally proven to be an excellent investment over the longer term (and sometimes, over the shorter term, such as if you had purchased in 2011 and sold today). This is due to the advantages of leverage (the ability to finance much of the purchase); the significant tax benefits of home ownership; economic, demographic and geographic conditions in the city; and long-term appreciation trends. Among other things, real estate is usually considered one of the best hedges against inflation.

If one doesn’t “refinance out” increasing home equity, home ownership (as you pay down the principal balance on your mortgage month by month) typically acts as a “forced” savings account to build household wealth, as mentioned in the NYT editorial referenced above. In addition, the $250,000/$500,000 tax exemption on capital gains on the sale of your principal residence can supercharge the financial return when you do sell. (We cannot think of another investment with this advantage.)

Here are some questions to consider:

  • How long do you plan to own the home you wish to purchase? Buying and selling in the short term always entails more risk and makes it more difficult to recoup closing costs on purchase and sale.
  • Are current interest rates advantageous for buyers? Lower interest rates make an enormous difference in the ongoing costs of homeownership (and your return on investment). A long-term fixed rate at a low interest rate is hugely advantageous to buyers.
  • Apropos of this rent vs. buy analysis: How does the cost of home ownership, with existing tax benefits, compare to renting? How does it compare in the calculation of building your financial assets over time?
  • How important is it to you to own the home you live in, with all that implies—security, control, pride of ownership, the ability to make changes and improvements according to your own tastes and needs?

Any investment has both potential risks and rewards—which only you can weigh according to your financial circumstances, your tolerance for risk, your timeline, and your projection of future economic trends. If you have to sell during a down market, the financial ramifications can be negative. Please consult your accountant for a more detailed analysis of the above factors.

This report was created in good faith using data and analytical tools deemed reliable, but it may contain errors and is subject to revision. It is not meant to convince anyone to do anything, but to simply provide additional decision-making tools and information. Ultimately, the end result of any investment will depend on the exact purchase and sell dates.

Information and interactive calculators are made available to you as self-help tools for your independent use and are not intended to provide investment advice. We cannot and do not guarantee their applicability or accuracy in regards to your individual circumstances. All examples are hypothetical and are for illustrative purposes. Tax law can change at any time, which could impact the calculations provided above. We encourage you to seek personalized advice from qualified professionals – accountants, financial planners, and loan agents – regarding all personal finance, tax and loan issues.

© 2017 Paragon Real Estate Group

Where to Buy a Home in San Francisco for the Money You Want to Spend

The charts below are based upon San Francisco home sales reported to MLS during the 12 months from 2/16/16 – 2/15/17, breaking out the neighborhoods with, generally speaking, the most sales within given price points. Other neighborhoods not listed did have smaller numbers of sales within given price segments.

Where to Buy a HOUSE for under $1 million

The overall median HOUSE price in the city in 2016 was $1,325,000, so the under-million-dollar house is becoming increasingly rare. For context, in 2011, 75% of San Francisco’s house sales were below $1,000,000; that percentage has dropped to 24% to 26% (depending on how one is measuring). The vast majority of house sales in this price segment now occur in a large swath of neighborhoods running across the southern border of the city, which are by far its most affordable house markets: from Bayview through Portola, Excelsior, Visitacion Valley and Crocker Amazon, to Oceanview and Ingleside.

The chart’s horizontal columns reflect the number of sales of houses with at least 2 bedrooms, with parking, for under $1 million, while the median sales prices noted are for all 2BR house sales during the period. Median price provides a good idea of overall neighborhood house prices.

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Where to Buy a CONDO, CO-OP OR TIC for under $1 million

The overall SF median condo price in 2016 was $1,095,000, and sales under $1m still occur in almost every area of the city that features these property types – but a studio unit in Russian Hill may cost as much as a 2-bedroom condo in Diamond Heights. Note that these charts only reflect sales reported to MLS, and many new-project condo sales do not.

Of these property types, condos make up about 90% of sales, stock co-op apartments 1 to 2%, with TICs making up the balance. TICs typically sell at a significant discount (10% – 20%) to similar condos.

The horizontal columns reflect the number of sales under $1m broken out by 1-bedroom and 2-bedroom units. You can see that if you want to buy a condo in the South Beach/Mission Bay district, you are pretty much limited to 1BR units (or studio units). The box of median sales prices is just for 1BR units, again simply to give an idea of relative values between neighborhoods. Median price is that price at which half the sales occurred for more and half for less.

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Spending $1 Million to $1.5 Million in San Francisco

In this price point for houses, one starts moving into another layer of neighborhoods in the west and the central-south areas of the city: The Sunset and Parkside neighborhoods, Golden Gate Heights, Miraloma Park, Sunnyside, Mission Terrace, Bernal Heights and others as shown. There has been a lot of upward pressure on these areas in the past 2 years in particular.

The horizontal columns reflect the number of sales, with the average dollar per square foot values for the homes in this price range noted alongside.

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Condo and co-op sales in this price range are mostly concentrated in those areas where newer condo developments have surged onto market over the past 10 – 15 years, and continue to arrive in increasing numbers – South Beach, Mission Bay, Inner Mission, Hayes Valley, Dogpatch, SoMa – as well as in high-end neighborhoods such as Pacific Heights, Russian Hill and the greater Noe-Eureka Valleys area.

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Condos & Co-ops for $1.5 million to $1.85 million

Houses for $1.5 million to $2 million

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Buying a HOUSE for $2 million to $2.999 million

When you get to the $2 million to $2.999 million range, the house market becomes dominated by the greater Noe-Eureka-Cole Valleys district, the St. Francis Wood-Forest Hill district, the Potrero Hill-Inner Mission area, the Inner-Central Richmond and Lake Street area, and Inner Sunset/ Golden Gate Heights. One no longer can find much in this price range in the Pacific Heights-Marina district.

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Buying a LUXURY HOME in San Francisco

San Francisco houses selling for $3 million and above, and condos, co-ops and TICs selling for $1.85 million and above constitute about 10% of sales and, for the purposes of this report, are designated as luxury home sales. What you get in different neighborhoods for your millions of dollars will vary widely. Views often play a significant role in SF home values, but particularly in the luxury condo market, where the most expensive units often offer staggering views from very high floors. Over the past 15 years – and accelerating in the current market recovery – there have occurred some very large shifts in the luxury home market, with districts other than the old-prestige, northern neighborhoods becoming major destinations for (very) high-end homebuyers. However the northern neighborhoods like Pacific Heights still dominate the ultra-high end in SF: houses selling for $5 million or more. The greater South Beach-Yerba Buena area, with its many new luxury condo towers now comes in second place for luxury condo sales (reported to MLS) after the Pacific Heights-Marina district.

Luxury CONDO, CO-OP & TIC Sales

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Luxury HOUSE Sales

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San Francisco Neighborhood Map

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For prevailing SF (and Bay Area) median home sales prices, our interactive maps of neighborhood and city values can be found here: Bay Area & San Francisco Home Price Maps

Other updated reports you might find interesting:

SF Home Prices by Bedroom Count, Property Type & Neighborhood

Our Most Recent Market Analyses

San Francisco Market Overview Analytics
: Interactive, auto-updating charts for all the standard real estate statistics – median sales price, average dollar per square foot, days on market, months supply of inventory, listings for sale, and so on.

San Francisco District Sales Overview: A breakdown of sales by price segment for 14 different sections of the city.

SAN FRANCISCO REALTOR DISTRICTS

District 1 (Northwest): Sea Cliff, Lake Street, Richmond (Inner, Central, Outer), Jordan Park/Laurel Heights, Lone Mountain

District 2 (West): Sunset & Parkside (Inner, Central, Outer), Golden Gate Heights

District 3 (Southwest): Lake Shore, Lakeside, Merced Manor, Merced Heights, Ingleside, Ingleside Heights, Oceanview

District 4 (Central SW): St. Francis Wood, Forest Hill, West Portal, Forest Knolls, Diamond Heights, Midtown Terrace, Miraloma Park, Sunnyside, Balboa Terrace, Ingleside Terrace, Mt. Davidson Manor, Sherwood Forest, Monterey Heights, Westwood Highlands

District 5 (Central): Noe Valley, Eureka Valley/Dolores Heights (Castro, Liberty Hill), Cole Valley, Glen Park, Corona Heights, Clarendon Heights, Ashbury Heights, Buena Vista Park, Haight Ashbury, Duboce Triangle, Twin Peaks, Mission Dolores, Parnassus Heights

District 6 (Central North): Hayes Valley, North of Panhandle (NOPA), Alamo Square, Western Addition, Anza Vista, Lower Pacific Heights

District 7 (North): Pacific Heights, Presidio Heights, Cow Hollow, Marina

District 8 (Northeast): Russian Hill, Nob Hill, Telegraph Hill, North Beach, Financial District, North Waterfront, Downtown, Van Ness/ Civic Center, Tenderloin

District 9 (East): SoMa, South Beach, Mission Bay, Potrero Hill, Dogpatch, Bernal Heights, Inner Mission, Yerba Buena

District 10 (Southeast): Bayview, Bayview Heights, Excelsior, Portola, Visitacion Valley, Silver Terrace, Mission Terrace, Crocker Amazon, Outer Mission

Some Realtor districts contain neighborhoods that are relatively homogeneous in general home values, such as districts 5 and 7, and others contain neighborhoods of wildly different values, such as district 8 which, for example, includes both Russian Hill and the Tenderloin.

As always, the quality of the specific location and the range of amenities of the property; its curb appeal, condition, size and graciousness; and the existence and quality of parking, views and outside space can all significantly impact unit values.

These analyses were made in good faith with data from sources deemed reliable, but they may contain errors and are subject to revision. Statistics are generalities and how they apply to any specific property is unknown without a tailored comparative market analysis. Sales statistics of one month generally reflect offers negotiated 4 – 6 weeks earlier. Median sales prices often change with even the smallest change in the period of time or parameters of the analysis. All numbers should be considered approximate.

© 2017 Paragon Real Estate Group