San Francisco – After analyzing the sales data from the MLS for April 2009 as compared with April of 2008 and 2007, I believe the market is starting to level off. In general terms, values across the City dropped an average of 17% from April ˜08 to April ˜09.

Some neighborhoods such as the Sunset, Midtown (Forest Hills, St. Francis Woods, Mt Davidson, Sunnyside) and Noe Valley/Upper Market beat the averages with only an 8% decline in 2008. Since 2007, the Sunset has only shown a decline of 12% to the median value and 17% in price per square foot. The Sunset is the easiest area to track valuations due to the similarity in the housing stock.

Even the Bayview-Excelsior and Ingleside are showing signs of recovery with only a 15% decline. Bayview-Excelsior and Ingleside had the most foreclosure and short sale activity. Those neighborhoods dropped first and hard. Now they are the most affordable areas in the City and are drawing increased sales activity.

Overall, open house activity is very strong. Financing is available but guidelines are strict. Jumbo financing, which was supposed to roll out the end of April, has not made an appearance. Thus the most difficult price range to finance is the $1 million-$2 million tier. Above that range buyers have more access to cash and are less affected by financing. Mill Valley Currently there are 131 homes on the market in the Mill Valley zip code. Of the 24 homes in various stages of escrow the median price is $1,038,000; $550 is the median price per square foot. Only 3 of those homes are priced above $2,000,000 but their price per square foot is $642-$929. There were 13 closings last month: median price $1,055,000 and $554 per square foot. There was only one sale for more than $2 million, which was a brand new house at 324 Melrose – a 3,492 square foot home on a 1/2 acre in Homestead Valley for $3,400,000 ($973 per s.f.).

Here is a review of the Mill Valley Market, which compares April sales from the last 3 years:

Median price, April ™07 – $1,312,000

Median price, April ™08 – $1,512,000

Median price, April ™09 – $1,271,000

Median price per square foot, April ™07 – $709

Median price per square foot, April ™08 – $718

Median price per square foot, April ™09 – $554

Since April 2007 the median price has only dropped 20% and price per square foot declined 21%. Since April 2008 the median price has dropped 30% and price per square foot has declined 22%.

In general, Open House activity is mild for this time of the year. Buyers are taking their time making decisions and are very price sensitive. Sycamore Park and the downtown areas remain the most popular areas with the buyers. Scott Valley is strong but has had very little product for sale.

In the words of a famous baseball player, œyou see something new every time you go to the ballpark. I have been in Real Estate full time for close to 37 years in San Francisco and last week I saw something new. I witnessed an auction for a home at 32nd Ave. and Lincoln in the Sunset District 3 blocks from where I grew up. It was a sign of the times both good and bad.

The homeowner was in default and owed about $715,000 between 2 loans. She hired an auctioneer that listed the home on a Friday night for $349,000 as the initial opening bid price. The auction was held Monday at 3pm. Having seen the house, my guess of the market value was about $650-675,000, which would have made it a short sale. The sad news is that was a typical situation that was created by the mortgage crisis across the nation.

The good news is that the market is still alive and breathing. Between 150-200 people showed up for the Auction and bid the price up to $775,000, with 5 families still bidding once the price got over $700,000. The fortunate homeowner paid off her lenders, brokers, and walked away with a few dollars. She was very lucky. Granted the majority of bidders that showed up at the auction were hoping to steal the house, but several real homeowners were willing to get into a bidding war even in this market.

As a Buyer’s Agent, I was surprised by the final bid. I knew of a few homes for sale within blocks that were larger and/or in better condition in the $700 -800,000 price range. I suspect a bit of auction mania was at work here. I don™t believe that auctions will become a trend “ but in this case, it was a lucky gamble that paid off for the Seller.

The market in general this February was off from a year ago in both the total number of sales and price. In San Francisco, prices declined on a yearly basis between 12-20% depending on the neighborhood. The Sunset-Richmond-Midtown Areas, where homes are generally price under $1 million dollars, showed the least decline. With prices in these area averaging $650-850,000 conforming fixed rate mortgages ($625,000) are well within the reach of buyers.

Mill Valley, which is generally quiet in February, had the same number of closings this month compared with February ˜08. The median price was down 14%. But then we did have a $4 million closing this month for a home in Scott Valley. Also last week we saw 2 homes priced between $1.7- $2 million go into escrow. This is an encouraging sign because the last few months the only activity was in the $1 million and under range. I believe March-June will bring brisker sales volume. If the buyers see value in the home in terms of price per square foot, floor plan, views, and of course location, they will purchase. With our close commute to the city, excellent schools, and world class beauty Mill Valley remains a great place to live and a good long term investment.

- George Green

The dynamics of the market have changed significantly in the last year. The overall San Francisco and Marin markets have not suffered quite as dramatically as the outer lying areas have. Buyers want to live close to where the jobs are located, which is holding up values in Southern Marin and San Francisco.

What has changed drastically is the price point of the average buyer. With credit tightening, conforming loan limits at $625,000 and a lack of affordable jumbo financing, the sweet spot of the market has become the $500,000 – $1,000,000 range.

In San Francisco the neighborhoods that have shown the most closed sales activity are the Sunset, Midtown and Ocean Ave areas. The Sunset is probably the strongest with a median price of $717,500, and an average price per square foot of $517. This is down from last year™s median price of $830,000 (off 13%) but the price per square foot is off just 5% from $540. The Pacific Heights-Marina Area which had 9 closed escrows in January ˜08 had just 2 closed escrows in January ˜09. However the Median price and price per foot held fairly steady with just a 2% drop in each category.

Mill Valley had 11 closed escrows in January ˜09 compared with 13 in January ˜08. Price per foot dropped from $700 in January ˜08 to $524 in January ˜09 (a 25% decrease) and the median price fell from $1,250,000 to $860,000 (a 32% drop). Ross, Tiburon, Kentfield and Belvedere had 9 closings in January ˜08 compared to 6 closings in January ˜09. Median price fell from $2,300,000 to $1,882,500 but price per foot rose from $786 to $845.

What this means in general market terms is that buyers are looking for and buying less expensive homes. Equity positions in these homes will be higher than the average purchases in the last 3 years. Cash down payments will rise to 20-30%. With the stock market values crushed by an approximate 40% drop in value, available cash for down payments for the move up markets will be severely constrained. Thus the market for homes above $1,500,000 will be slowed until Jumbo financing becomes affordable. The Fed Chairman has indicated that they will attempt to set up a mechanism for the lenders to sell Jumbo loans or have the Fed guarantee Jumbos. We have not seen a huge increase in homes for sale in the $1,500,000 plus market as of yet. Those that don™t have to sell won™t sell. As long as these homeowners have jobs this market will hold steady. For those buyers with cash there may be good buys available from homeowners who have to sell because of job transfers or divorces.

The good news is that there are still buyers looking actively in the $500-$1 million range and conventional fixed rate financing is 5% or under. In most markets buyers are not facing multiple offers with the exception of some foreclosure markets in Novato and Sonoma where prices have dropped so dramatically that multiple offers are drawn to a property. In these area the bottom has been set.

- George Green

The U.S. House of Representative passed H.R. 1, the Economic Recovery Package, by a 244 to 188 vote. The bill contains a number of issues critical to the Real Estate industry, including the elimination of the existing payback requirement on the first-time homebuyer tax credit of $7,500 for qualified buyers who purchase a principal residence between Dec. 31, 2008 and July 1 this year.

Bob Walker
Realtor/Appraiser

Although it seems painfully obvious now that when the real estate market was gaining strength and the consensus was everyone could and should own a home “ the truth is lending standards should have been tightened so that only those that should own a home did. While it is little comfort to those that bought homes during the boom and are now underwater, it is important to understand real estate cycles and the value of your assets. Unlike stocks where your asset values can go to zero quickly, home values move much more slowly and are more durable over extended periods. Buy a home, use it and hold it for the long term and you will see growth in its value even if a rough patch of devaluation occurs.

As I was working on how to rationalize the irony of the current market, I came across this excerpt below from Gary Keller in his new book Shift: How Top Real Estate Agents Tackle Tough Times, Copyright 2009. The McGraw-Hill Companies Inc.

œA buyers™ market should be just that”a buyers™ market. It™s not a fence-sitting, waiting, loitering, delaying, dawdling, postponing, vacillating, hesitating, wavering, faltering, pausing, foot-shuffling market. It™s a buyers™ market. By its very name it means buyers should be doing one thing and one thing only”buying. So where are the buyers, and why aren™t they buying?
The great irony of a buyers™ market is that even though the opportunity to buy is high, buyer urgency tends to hit an all-time low. The media becomes the excited purveyor of negative news and uninformed advice, and buyers buy it all. Actually, it feels like the only thing they™re buying.
Their reluctance is ironic since not so long ago buyers were incredibly excited about buying”and it was a sellers™ market. Prices were escalating and it was perhaps one of the most difficult times to buy value and yet people were buying like there was no tomorrow. Buyers were afraid of losing out by not buying, even though the advantage was all to the seller.
Now a shift has occurred. Fear is still in the driver™s seat but the tables are turned”the fear of paying too much seems to stop most in their tracks and immobilizes them. When they should have been afraid of paying too much they weren™t, and now that they shouldn™t be afraid of paying too much they are.
It™s one of the great paradoxical moments of any market and the herd instinct at its most pure. Reluctance in the face of great opportunity becomes an agonizingly defining characteristic of a shift.

The Myth That Fuels Reluctance -
There are two types of buyers”those who believe they can time the market and those who are always in the market and believe timing will find them. History supports the latter”it says that if you™re always actively paying attention, although you may never sell at the peak or buy at the bottom, you can buy right and always do well over time.
Logic says that you can™t predictably time the market to be able to buy at the absolute bottom and sell at the absolute top.
This should be a moment of truth for them. Buyers cannot perfectly time a market”no one can. The smartest people know this. They play in the safe zone. The safe zone is where smart people plan to buy and sell. Anyone who buys at the top of a market is just unlucky and anyone who buys at the bottom of a market is just lucky.
People who buy in a buyers™ market are the smart ones. They aren™t looking for a killing because they know that™s a matter of luck, not planning. They™re looking for a sound decision with a predictable result and, therefore, ask the question: œHas the market dropped enough now to make a sensible purchase? More often than not, when they™re asking this question, they™re already in the safe zone and the answer is yes.

As we enter 2009 we should be comforted in the fact that common sense that has returned to the real estate market will provide a solid foundation to build on going forward.

Bob Walker
Realtor / Appraiser

December 2008, San Francisco – Single Family Dwellings:
The number of closed sales this month was off 40-50% compared to December ™07, with the exception of District 3 (Ocean Ave) and District 4 (Midtown) where they remained constant.

Residential real estate values are measured by median price and price per square foot. I strongly feel that price per square foot is a more accurate measurement of value than the median price.

With Jumbo financing(loans of $625,000+)difficult to obtain and costing around 2% more than conventional fixed rate mortgages, and the Equity Markets dropping 40-50% since September ™08, median Prices have dropped 10-20% compared to December ˜07 depending on the neighborhood. District 5 (Castro/Noe/Glen Park/Upper Haight) actually experienced a rise in median price and the price per square foot paid held constant. The rest of the City experienced an average decrease of 15% in the price paid per square foot.

The market for more expensive homes (in the œmove up market) should return starting in spring if Obama™s Stimulus Package works, the Bay Area job market stabilizes, Jumbo financing returns (Bernanke has the Fed buying Jumbos from Fannie and Freddie Mac starting next year), and the Equity Markets rebound to about the 1,100 market (DJIA). Although this is a wish list, it is doable.

DISTRICT 1 – Richmond

Number of Sales, Dec. ’07 – 25

Number of Sales, Dec. ’08 – 13

Median Price, Dec. ’07 – $1,250,000

Median Price, Dec. ’08 – $1,200,000

Change – -4%

Price per Sq. Ft., Dec. ’07 – $670

Price per Sq. Ft., Dec. ’08 – $535

Change – -20%

DISTRICT 2 – Sunset

Number of Sales, Dec. ’07 – 39

Number of Sales, Dec. ’08 – 25

Median Price, Dec. ’07 – $810,000

Median Price, Dec. ’08 – $749,000

Change – -10%

Price per Sq. Ft., Dec. ’07 – $572

Price per Sq. Ft., Dec. ’08 – $550

Change – -3.8%

DISTRICT 3 – Ocean Ave.

Number of Sales, Dec. ’07 – 16

Number of Sales, Dec. ’08 – 14

Median Price, Dec. ’07 – $648,000

Median Price, Dec. ’08 – $652,000

Change – > 1%

Price per Sq. Ft., Dec. ’07 – $519

Price per Sq. Ft., Dec. ’08 – $444

Change – -14.5%

DISTRICT 4 – Midtown

Number of Sales, Dec. ’07 – 19

Number of Sales, Dec. ’08 – 17

Median Price, Dec. ’07 – $920,000

Median Price, Dec. ’08 – $960,000

Change – 4.2%

Price per Sq. Ft., Dec. ’07 – $642

Price per Sq. Ft., Dec. ’08 – $546

Change – -15%

DISTRICT 5 – Castro/Noe Valley

Number of Sales, Dec. ’07 – 25

Number of Sales, Dec. ’08 – 11

Median Price, Dec. ’07 – $1,399,000

Median Price, Dec. ’08 – $1,450,000

Change – 3.5%

Price per Sq. Ft., Dec. ’07 – $738

Price per Sq. Ft., Dec. ’08 – $736

Change – > 1%

DISTRICT 9 – Bernal/Potrero

Number of Sales, Dec. ’07 – 18

Number of Sales, Dec. ’08 – 9

Median Price, Dec. ’07 – $762,000

Median Price, Dec. ’08 – $625,000

Change – -18%

Price per Sq. Ft., Dec. ’07 – $595

Price per Sq. Ft., Dec. ’08 – $586

Change – -2%

Condominium/TICs in San Francisco

In the most active Districts of the City for Condos and TIC™s (5,6,7,8,9) median prices fell 6-16% and the price per square foot fell 9-19%. District 5 is again the exception – the price per square foot rose 5%.

DISTRICT 5 – Castro/Noe Valley

Number of Sales, Dec. ’07 – 40

Number of Sales, Dec. ’08 – 49

Median Price, Dec. ’07 – $780,000

Median Price, Dec. ’08 – $741,000

Change – -6%

Price per Sq. Ft., Dec. ’07 – $657

Price per Sq. Ft., Dec. ’08 – $688

Change – 5%

DISTRICT 6 – NOPA/Western Addition

Number of Sales, Dec. ’07 – 20

Number of Sales, Dec. ’08 – 19

Median Price, Dec. ’07 – $745,000

Median Price, Dec. ’08 – $675,000

Change – -9.4%

Price per Sq. Ft., Dec. ’07 – $649

Price per Sq. Ft., Dec. ’08 – $586

Change – -9.7%

DISTRICT 7 – Marina/Pacific Heights

Number of Sales, Dec. ’07 – 31

Number of Sales, Dec. ’08 – 15

Median Price, Dec. ’07 – $999,000

Median Price, Dec. ’08 – $1,200,000

Change – 16.7%

Price per Sq. Ft., Dec. ’07 – $875

Price per Sq. Ft., Dec. ’08 – $709

Change – -19%

DISTRICT 8 – Nob,Russian,Telegraph Hills

Number of Sales, Dec. ’07 – 47

Number of Sales, Dec. ’08 – 30

Median Price, Dec. ’07 – $660,000

Median Price, Dec. ’08 – $587,000

Change – -11%

Price per Sq. Ft., Dec. ’07 – $831

Price per Sq. Ft., Dec. ’08 – $714

Change – -14%

DISTRICT 9 – Bernal/Potrero/Soma

Number of Sales, Dec. ’07 – 65

Number of Sales, Dec. ’08 – 23

Median Price, Dec. ’07 – $670,000

Median Price, Dec. ’08 – $585,000

Change – -12.7%

Price per Sq. Ft., Dec. ’07 – $758

Price per Sq. Ft., Dec. ’08 – $633

Change – -16.5%

Apartment Houses

The apartment house investment market has ground to a halt as financing is difficult to obtain. The one exception is the 6-12 unit market under $3 million. End of the year exchanges and some stock market funds are being invested in the City. Sellers have to be willing to price their building to show at least a 5% capitalization rate. Rents topped out about two months ago and vacancies have risen slightly. Although part could be seasonal, the last round of Financial Services and Attorney layoffs have accounted for the increased vacancies. This should stabilize as the job market stabilizes by the 2nd quarter of 09.

Mill Valley-Single Family Homes

Sales in all of Southern Marin have ground to a halt. The market for homes over $1,600,000 in December was non existent due to a number of factors, including the hard hit Equity Markets, lack of Jumbo Financing, and the San Francisco and Mill Valley “move up” market slowing. A sign of times was a vacant lot in the red hot Sycamore Park. The 6,000 square foot flat lot where a 2,100 square foot home can be built closed escrow for $750,000. A year ago there would have been multiple offers ranging from $850,000 – $950,000. Although the developer was still confident they could sell a new house on that site, they are being prudent because they know completed sales prices will not be what they were a year ago – $1,000-$1,100 per square foot.

Number of Sales, Dec. ’07 – 14

Number of Sales, Dec. ’08 – 6

Median Price, Dec. ’07 – $1,155,000

Median Price, Dec. ’08 – $1,200,250

Price per Sq. Ft., Dec. ’07 – $634

Price per Sq. Ft., Dec. ’08 – $598

Change – -6%

There are 12 Pending home sales.

It™s been a whirlwind of political and economic changes this month. Here™s where things stand. The Single Family home market activity is up in most neighborhoods of San Francisco. The number of closed sales in most areas is on par with this time last year; the exception is Noe Valley, which saw a decline in closed sales.

Prices in most areas have dropped approximately 7-10% over the past year, except for in Noe Valley, which saw a gain of 10%. Loans are still available and in the 6% range with 20% down required.

The Condominium and TIC market is about the same as Single Families but with a much larger backlog of listings on the market. This is definitely a Buyer™s Market.

The Apartment House market is still slow. Buyers are demanding a minimum of 5% return on net incomes. Most buyers are still sitting on the sidelines waiting to see what will happen next year.

I hope you had a happy Thanksgiving and are looking forward to a wonderful holiday season.

Next month I will have an in depth report summing up 2008 and looking ahead to 2009.

Over the last few months I have read several doom and gloom articles about real estate values in San Francisco and the surrounding areas. Though I am not an expert in the entire Bay Area market, I can say I know San Francisco and Southern Marin very well. The figures are as follows from the Greater San Francisco Association of Realtors: Median prices for Single Family Homes in San Francisco: Sept. ’08 – $782,500 Sept. ’07 – $880,000 Sept. ’06 – $833,000 Sept. ’05 – $809,000 Sept. ’04 – $736,000 Median Prices for Condominiums in San Francisco: Sept ’08 – $689,500 Sept ’07 – $720,000 Sept ’06 – $721,500 Sept ’05 – $700,000 Sept ’04 – $583,000 The market obviously peaked sometime in 2007, with single family homes in general now off 11% and condominiums/TIC™s off 6% from the peak. These are citywide numbers; performance of different areas has varied. Neighborhoods such as Bayview and Ocean Avenue have seen steeper price declines over the last year, while property in Noe Valley and the Western neighborhoods has held it value. A prime example of this is a house at 766 Duncan in Noe Valley. The same house, without any major improvements, went through the following sales. Oct. ’08 – $1,149,000 Oct. ’07 – $1,150,000 Oct. ’05 – $1,250,000 Oct. ’04 – $970,000 Although the number of sales is off 40-50% from the heights of ˜06 and ˜07, inventory is still not plentiful. Most sellers are sitting out the market and only putting their homes on the market when a job transfer, divorce, or death occurs. Most homeowners in the City have adequate reserves and equity to sit out this market. Buyers are being very cautious and many are waiting to see when the stock market will stabilize. If it does in the next few months, and I believe it will, real estate activity will increase. Most buyers in San Francisco have significant down payments and loans are still available. We are seeing a few foreclosure sales but nothing like the defaults that other areas of California have experienced. The San Francisco and Southern Marin real estate markets remain stronger than most others because of the extraordinary wealth of opportunity, jobs and lifestyles they support. I continue to believe in the long term merits of real estate investment and the real time joys of homeownership. I continue to search for smart buys for my clients. The facts are, most times, if you buy a home and live in it for 3 to 7 years, you will realize a gain. We™ve seen housing prices come down in the last year, and they may continue to drop for a bit, but they will come back up. This is a great opportunity for people who want to own a home in this area to enter the market.

San Francisco – Overall the market for single family homes and condominiums in the City has weathered the storm the rest of California and the USA has experienced. Closings of single family homes in July ˜08 totaled 204 compared to 206 in July ˜07. The median price in July ˜08 was $869,000 compared with $898,500 in July ™07, down only 3.3%. That number looks good compared to the 25-50% drop in value in some areas of the state and country. Have we hit the bottom of this cycle? Maybe. The median price in June ˜08 was $835,000, thus we are up 5% over the last month. If this trend continues or holds over the next couple of months we may call June ’08 the bottom of the market. Escrows for July are up significantly. The Sunset, Richmond and Noe Valley are leading the City in price appreciation in this period. Condominiums have started to show signs of activity, despite a large supply of units for sale. High end units in high rise downtown buildings continue to lead the pack. But bargain hunters have started to buy entry level units once again. This indicates that we may have hit the bottom despite tougher financing requirements from lenders. There were 260 closings in July ™07, with a median price of $749,500. July ˜08 saw 240 closings but a median price of $787,000. June ˜08 saw 214 closings and a median price of $773,500. We are tracking in the right direction. Apartment House investment activity has plummeted since the Lembi Group quit their buying mode. They have placed a large number of their buildings on the market but have found few buyers willing to pay their asking prices. Most investors today are waiting for and will only accept Cap Rates of 4-5% compared with the sub 3™s we saw a year ago. Buyers are also insisting that the buildings have upside in rents even at these higher Caps. Financing is extremely difficult and expensive. The good news for owners is that rents have significantly jumped in the last year. vacancy rates are still low. Apartment house values that were artificially high for a few years have returned to a normal level. Mill Valley The number of sales in Mill Valley declined when comparing July ˜07 to July ˜08. In July ˜07 there were 39 closings with a median price of $1,188,000. July ˜08 saw 28 closings but a median price of $1,417,500. We saw more homes over $1,500,000 sell this year than last year. The $2,000,000 and up market saw 6 homes go into escrow July. Most of these buyers are moving from San Francisco. Many are single or are couples with no children. Newer or remodeled homes near downtown or in the hills with views have been their sweet spot. Besides being a great family town, Mill Valley has become a place to retire and enjoy the outdoors while remaining a quick commute to the culture and business activity of San Francisco.

Sales activity for June held steady as did prices. Median prices fell 3-7% in the Sunset, Richmond and Mid Town areas, while they rose slightly in the Upper Market, Noe and (surprisingly) the Southern Districts – Excelsior, Bernal, and Potrero. Buyers realized that these districts were among the most affordable neighborhoods in the City.

Condo-TIC sales held steady as well, with activity actually increasing in the South of Market neighborhood. Although the median price fell, Buyers took advantage of the sheer number of units on the market to drive bargains. Only the Western Addition and South of Market showed declines in median prices. All other areas showed slight increases along with increased sales activity.

The Apartment house market is waiting for investors to jump back in. There were 2 significant sales: 1220 Jones in Nob Hill for $37,000,000 and 990 Bay for $13,400,000. Otherwise, there are quite a few buildings on the market but it seems that sellers have not reduced prices to match the increased cost of money. As long as rents remain high and vacancy low, this market will remain tight.

Mill Valley Home sales activity held steady although it is still off 25% from June ˜07. The surprising figure was that the median price dropped from $1,600,000 in June ˜07 to $1,220,000 in June ˜08. Remodeled or newer homes in the downtown area are still selling at $1,000 per square foot or more.

San Francisco Legislative Alert: The Supervisors are at it again. There are proposals to drastically raise the Transfer Tax for the sale of property. For properties over $1-2 million this could mean an increase of 50-100% from its current rate. There is also a proposal to take away the exemption for 2 unit buildings in the Condominium Lottery. Both of these proposals are bad for the City. If you are interested in knowing more about these proposals, send me an e-mail and I will forward the information I have on file.