An Uneven Frenzy

The Spring selling season traditionally begins in mid February, after buyers have recovered from the holidays, the weather starts to improve and taxes and bonuses are resolved. So January's numbers are really no indication of the direction of the market, but they certainly do not indicate a slowdown and anecdotal evidence so far in February points to a frenzied market, or at least parts of it. Overall, the residential market was up 7.7% this January over last. Countering the trend we have been experiencing, much of that was in condos/TICs/coops which were up 9.5%, versus "only" 6.5% for single family homes. This pairs with this agent's perception that certain properties, particularly lower-priced ones, are selling quickly and at a premium as the large number of buyers at those lower levels compete to get into the market before anticipated interest rate increases. Of course this is not across the board. Well-presented properties and, crucially, those that meet the demands of the largest pools of buyers are selling fast and high, but the market is uneven so that some properties are taking some time to find their match.

Of course, extremely low inventory (the number of properties on the market) continues to drive prices up. In January, inventory was 25% lower than last year - it appears to be the new norm of ever scarcer supply. Other indicators are not relevant for January because of the low number of sales, but keep an eye on the per square foot price. The median is slightly lower than the record peak in October ($1022) but it is amazing that even in January that number stands at $969, almost double what it was five years ago. Keep in mind that these are median numbers for all properties all over the city, so not really useful as a gauge for individual neighborhoods and types of properties. We will wait for the overall picture to appear later in the Spring. Will this year's tax changes drive the market up or down? Will the continuing robust economy carry real estate with it, or drive inflationary interest rates that stall the market? Or will San Francisco's continuing supply/demand imbalance swamp all these considerations and push the market up higher?

2-4 unit building sales in January were remarkable. A 20% increase in median price to $1,909,000 this January combined with a nearly halving in the time to sell (34 days versus 59) both indicate a robust market. Are some investors moving more toward long term assets like apartment buildings as the condominium projects start to dry up? Are people moving toward these buildings as hedge against inflation? Again, we will see if this is a long term trend through the Spring. (As always, small numbers of 2-4 unit sales skew these figures, as well as the fact that many sales of apartment buildings (and other commercial properties) are not reported through the MLS.)

This January, the different districts of the city diverged markedly in performance. Two of them actually lost value over last year; District 1 (Richmond) was down 5.4% to a median price of $1,499,000 and District 3 (Stonestown, Ingleside, Merced) was down 3.8% to $1,155,000. Both those areas are largely single family homes, but other home-rich areas were way up. District 4 (West of Twin Peaks) was the winner this month with appreciation year over year of 21.4% to a median price of $1,525,000. The second place finisher could not be more unlike District 4; District 8 which is mostly apartments, and at the other end of the city (downtown, Russian/Nob Hills) rose 20.7 % to $1,167,500, just slightly below the record numbers it hit in November and December last year (unusual, because January sale prices usually dip substantially).

District 7 (PacHts, Marina) continued its position at the top of the heap, up 19.1% to $2,025,000 followed by apartment heavy District 9 which is recovering from a slowdown at the beginning of last year, but now up to $1,175,000, an increase of 17.1%. The other two area that traditionally offered modest priced single family homes are still moving up. District 2 (Sunset) was at $1,330,000 and District 10 (Bayview, Excelsior, Portola) was at $927,944 - both 12% over last year. Finally, District 5 (Castro, Noe, Haight) and 6 (Hayes, NOPA) increased in the 3% range to hold their relative positions. (All district statistics are three month rolling averages, to mitigate for low numbers of sales.)

So we are off to a good start and anxiously await the Spring numbers. If you are interested in the value of your property or the one you want, give me a call so I can analyze your specific situation and use my experience and skills for you. More statistics, updated constantly, are at

What's a TIC?

I continue to get questions about TICs, so I thought a summary of what they are and the issues to consider when purchasing or selling one would be helpful. This is, of course, a summary only and cannot be considered legal advice applicable to particular situations, for which an attorney should be consulted.

TIC stands for tenancy-in-common. It is a form of legal ownership that is peculiar to San Francisco and results from the City's efforts to prevent removal of units from the rental market by slowing or prohibiting their conversion to condominiums. Where owners cannot condo-convert, they may choose to sell fractional interests in a building as a TIC. A TIC owner has a percentage interest in the entire building. His legal ownership is to that percentage of all parts of the building so, unlike a condo owner, he does not have a property interest in his unit (the "walls in" ownership of a condo). Instead, the TIC owner enters into a TIC agreement giving him or her exclusive use of the unit and usually other areas, like parking spots and decks (and making other agreements that largely mirror the CCRs that govern condominium associations.  

When TICs first appeared in San Francisco decades ago, one of the biggest problems with them was that they could only be financed with a single loan. That is, each of the TIC owners of a building was a lender on a master loan, and therefore each of them was liable for the entire mortgage. If one owner stopped paying his share the bank could seek payment from the others. Now, however, fractional financing - loans securitized only by the fractional interest of each owner - are readily available, solving the lending problem. These fractional loans are not available at all banks, however, and may carry slightly higher interest rates and more strict lending requirements.

Also in the past, because of the risks of the master loans, limited availability of financing and uncertainty regarding how the courts would treat TIC disputes, TICs were generally valued lower than condos. That may still be true, but the gap appears to be narrowing as those issues have been resolved. In 2014 TICs traded at a discount of about 20% but in 2017 that discount had narrowed to 11%. There is some speculation that even these numbers are deceiving because condo buildings may be nicer generally - virtually all new buildings are condos, and to convert an older one the city requires certain repairs and upgrades. So the real discount, if one were comparing identical TICs and condos, may be lower than 11%.

Of course, any evaluation of the value of a particular property and the risks and rewards of TICs versus other forms of property should be customized to your situation. Give me a call to discuss if you are interested. More TIC information here.


Dogpatch is an interesting slice of San Francisco that allows us to see the big changes of the past decade writ small. A relatively small area bounded by the 101 Freeway, the bay and Mariposa St. and Cesar Chavez streets (or some say slightly north of that), the area was developed in the latter part of the nineteenth century as a very industrialized waterfront. Relatively inexpensive housing (as well as warehouses and industrial facilities) was built back from the waterfront until it hit the steep side of Potrero Hill. None of this burned in the fires after the 1906 earthquake because of the marshlands to the north, so much of the pre-1906 architecture remains. 

But not all of it. Starting in the 1940s and continuing into the 1970s, the area declined as industry left San Francisco as the economy moved away from manufacturing, large ports in Oakland and LA too the maritime business and the area succumbed to blight. It was also cut off from the rest of the city, geographically dependent on the bridge to Mission Bay, with no train service to bring workers from the booming professional services in the Financial District. Slowly, some of the historic buildings were torn down to make way for more modern warehouses and some businesses seeking cheap land. 

That transformation took off in the 1990s with the first tech boom. Developers put up loft housing projects on the flat sunny land, sometimes at the expense of older buildings. Approval and eventual construction of AT&T Park, Mission Bay redevelopment and the Third Street rail line accelerated this process. But thankfully, the neighborhood noticed these changes and established the Dogpatch Historic District to save at least some of the area's character. The area is now on the "hipster" radar as a desirable place to live, sunny, relatively close to the central city, and with San Francisco charm, transportation and modern amenities including a lively restaurant and bar culture. Residential property values average about $1000 per square foot, about the same as the Inner Mission, but still a 10% discount from more-established Potrero Hill on the other side of 101 (and with many downtown-view properties).

And it is not stopping there. The city has approved plans to radically alter the Pier 70 area with lots of housing and parkland to open up the waterfront. The massive Potrero Power Plant site, where the smokestack and a concrete control room building (converted to a hotel) are to be retained amid 2700 housing units in a series of buildings rising up to a 300 foot tower and 6.7 acres of open land. The modern juxtaposed with the old - in true San Francisco fashion. 

More details here, here, and here

Happy New Year - Again!

 San Francisco is blessed with a vibrant Chinese community and every year (this year on Feburary 24) the entire city comes together to celebrate "Chinese New Year" with a big parade featuring those fantastic dragons. How is the date of the celebration set? It is often called the lunar new year, but is actually based on a lunisolar calendar which many cultures use, not just the Chinese. A lunisolar calendar sets dates to indicate both the moon phase and the time of the solar year. The solar year is calculated based on the time it takes the earth to go around the sun, whereas the lunar portion is based on the time it takes the moon to go around the earth. Because the celestial bodies are not in sync, lunar and solar dates do not correspond and "leap months" have to be added to keep the years together. Further, because the date is calculated based on a specific location on earth, different calendars (such as in Korea, Japan and Vietnam) may set the starting and ending dates differently.

The Chinese New Year begins at the new moon that occurs after January 21 and traditionally goes on for 15 days. In addition to parades the holiday is marked by family gatherings, gift-giving, decorating doors and windows and cleaning house. In China, travel to see family is so prevalent that special additional trains and flights are added and business is partially disrupted - similar to the Christmas and New Year's holidays in Western countries. San Francisco has had a Chinese New Year parade since the 1860s which serves as a way for the Chinese community to share its culture with the rest of the city. Gung Hay Fat Choy! More details here.