Accelerating San Francisco's Housing Development: First City To Miss New Legislation

San Francisco has recently marked a significant milestone, albeit a dubious one, as the first city in California to fall short of its state-mandated housing goals. This failure has triggered the activation of Senate Bill 423 (SB423), a robust piece of legislation aimed at streamlining housing approvals in the city. Authored by State Senator Scott Wiener, SB423 represents a transformative shift in San Francisco’s housing development landscape, potentially reshaping the future of its urban core.

Streamlining Approvals: A Necessity for Growth

The California Department of Housing and Community Development's recent ruling underscored San Francisco's shortfall in meeting its housing targets. The city was mandated to plan for 82,000 new units from 2023 to 2031 but has managed to authorize a mere 3,870 units in the last 18 months. This stark discrepancy has not only spotlighted the inefficiencies in the city’s permitting processes but also catalyzed the need for legislative intervention.

SB423 simplifies the previously complex and protracted approval procedures by allowing most housing projects to bypass the Planning Commission. This means that projects can avoid lengthy appeals to the Board of Supervisors and circumvent extensive environmental reviews unless they involve large developments or properties with historic resources. Such streamlining is critical in a city where the permitting process could stretch up to two years.

The Implications of SB423

This new law is a game-changer for San Francisco, promising to reduce the average approval time from 26 months to a mere six months for most projects. This expedited process is a welcome development for both market-rate and affordable housing developers who have been hamstrung by bureaucratic delays and high construction costs. By reducing the timeframe for approvals, SB423 effectively lowers the cost of development, making it financially feasible to kickstart projects that were previously on hold.

Developers like Chris Foley are already gearing up to take advantage of this new regulatory environment. Foley plans to submit an application for a 200-unit, 23-story tower on the edge of the Castro neighborhood, highlighting the readiness of developers to jumpstart their projects under the new law.

Economic and Social Benefits

The faster approval process introduced by SB423 is not just a bureaucratic relief but a significant economic booster. It allows developers to respond more agilely to market demands, facilitating a quicker turnaround on housing supply. This is particularly pertinent in San Francisco, where the demand for housing significantly outstrips supply, contributing to some of the highest real estate prices in the nation.

Moreover, by enabling more housing projects to come online faster, SB423 supports the city's economic diversity, allowing workers across different income brackets to afford living in the city. This diversity is essential for the sustainable growth of San Francisco, ensuring it remains a vibrant, multi-faceted metropolis.

Addressing the Critics

Critics of SB423 argue that the law could lead to uncontrolled development, potentially undermining the architectural integrity and historical character of neighborhoods. However, these concerns must be balanced against the acute need for more housing. San Francisco's charm and character can indeed be preserved even as we embrace more streamlined development processes that address the urgent demand for housing.

Conclusion: Embracing a Future of Possibilities

As SB423 rolls out, it is a watershed moment for San Francisco. The law stands as a bold step towards addressing the housing crisis head-on, promoting a more dynamic and inclusive approach to urban development. For a city that is a beacon of innovation and progress, embracing such legislative changes is crucial to ensuring it remains at the forefront of sustainable and equitable urban development.

For more insights into how these changes could impact your property investments or development plans, feel free to text me with questions.

Bay Area Housing Market 2024: Challenges and Market Trends

The Bay Area housing market remains a hot property, characterized by strong buyer interest and consistent price increases. The region's economic strength and desirable lifestyle make it a top destination for homebuyers, with property values in the San Francisco Bay Area showing no signs of cooling down.

Current Market Overview

Data from March 2024 reveals a significant year-over-year jump in median sold prices, solidifying the upward trend. This sustained growth highlights the Bay Area housing market's resilience and reflects the ongoing demand for homes in the region. While short-term fluctuations are possible, the overall outlook points toward continued price appreciation.

A key indicator of a market's health is the median sold price of existing single-family homes. According to the California Association of Realtors (C.A.R.), the San Francisco Bay Area saw a notable surge in this metric in March 2024, with a median sold price of $1,386,500. This represents a significant increase from both the previous month's figure of $1,256,500 and the same period last year, translating to a 10.3% rise month-over-month and a substantial 15.5% jump year-over-year.

Market Dynamics and Buyer Behavior

This spike in median sold price reflects the robust demand for housing in the Bay Area. This demand is fueled by a number of factors, including a booming job market, appealing amenities, and the region's reputation as a tech hub.

Bay Area Sales Activity: A Mixed Bag

The rising median sold price paints a rosy picture, but for a well-rounded view of the market, it's crucial to delve into sales figures. March 2024 saw a sharp 31.7% month-over-month increase in Bay Area sales, indicating a surge in buying activity. However, compared to the same period last year, there's a contrasting trend with a 5.4% year-over-year decline in sales. This fluctuation in sales figures highlights the Bay Area's nuanced market. Consumer confidence and external factors significantly impact buying behavior. Despite the slight year-over-year dip, the month-over-month sales surge suggests underlying resilience in the Bay Area housing market.

Regional Housing Data: March 2024

Examining the regional data helps to get a clearer picture of the Bay Area housing market in March 2024. By dissecting the median sold price of existing single-family homes alongside sales figures, we can uncover specific trends in each county:

  • Alameda County: Alameda saw a steep 7.7% increase in median sold price from February, reaching $1,400,000. This is on top of a significant 16.2% surge compared to March 2023. Sales activity also remained robust, with a 31.2% month-over-month jump, despite a slight 3.7% year-over-year dip.
  • Contra Costa County: The median sold price climbed to $890,000, reflecting a 4.7% month-over-month rise and a solid 9.5% year-over-year increase. However, sales activity showed a steeper decline of 21.0% compared to March 2023, hinting at potential shifts in buyer behavior.
  • Marin County: Marin witnessed a remarkable surge in both median sold price and sales activity. The median price reached a staggering $1,957,500, representing a 21.6% month-over-month increase and a substantial 22.3% rise year-over-year. This confirms Marin County's status as a highly desirable market for both buyers and sellers.
  • Napa County: Despite a slight dip in median sold price compared to February, Napa held steady at $880,000. However, sales activity experienced a notable decline of 18.1% year-over-year, suggesting potential challenges in the local market.
  • San Francisco County: San Francisco saw a significant increase in median sold price, reaching $1,745,000, with a 9.7% month-over-month rise and a more modest 2.6% year-over-year increase. Sales activity remained robust, indicating continued demand in the city's real estate market.
  • San Mateo County: San Mateo experienced a substantial increase in both median sold price and sales activity. The median price hit $2,170,000, reflecting a 12.9% month-over-month jump and a significant 16.7% rise year-over-year. This further solidifies the county's position as a highly sought-after destination for homebuyers.
  • Santa Clara County: The median sold price climbed to $1,910,000, with a 5.6% month-over-month increase and a notable 12.4% rise year-over-year. Sales activity surged by an impressive 49.2% compared to March 2023, highlighting the county's strong market dynamics.
  • Solano County: The median sold price remained stable, with a slight month-over-month increase to $584,950. However, sales activity experienced a 5.9% decrease compared to March 2023, highlighting potential challenges in the county's real estate market.
  • Sonoma County: Sonoma witnessed a steady increase in both median sold price and sales activity. The median price reached $865,000, reflecting a 4.7% month-over-month rise and a 4.3% year-over-year increase. This suggests Sonoma remains an attractive option for homebuyers.

Bay Area Housing Forecast: 2024 and Beyond

The Bay Area, consistently topping lists of priciest U.S. real estate and boasting dense populations, remains a housing market powerhouse. Encompassing nine counties (Alameda, Contra Costa, Marin, Napa, San Francisco, San Mateo, Santa Clara, Solano, and Sonoma) and over 100 municipalities, the region centers around San Francisco, Oakland, and the largest, San Jose. Let's delve into predictions for the Bay Area housing market in 2024 and 2025.

The San Francisco-Oakland-Hayward region continues to see steady growth in home values, with the average property reaching $1,176,322 – a modest 2.8% increase over the past year. Homes are also moving quickly, going into pending status in an average of just 13 days. Here's a closer look at some key market indicators:

  • Market Forecast: Analysts at Zillow predict continued growth with a 1.3% increase expected over the next year.
  • For-Sale Inventory: The current inventory sits at 5,176 homes, offering a selection for buyers.
  • New Listings: Market activity remains healthy with 2,595 new listings added in the last month.
  • Negotiation Dynamics: The median sale-to-list ratio of 1.006 suggests a balanced market where list prices are fairly close to final sale prices.
  • Median Sales: The median sale price for existing single-family homes is currently $992,417, while the median list price sits at $974,667.
  • Competitive Landscape: Over half (52.5%) of homes sold above the asking price in February, highlighting a competitive market. However, there's still negotiation room, with 37.6% of sales closing below the list price.

Buyer's or Seller's Market?

The current Bay Area market leans slightly towards sellers. The combination of steady home value growth, low inventory, and competitive bidding situations creates an environment that favors sellers. However, the recent dip in year-over-year sales growth and the increasing number of homes selling below list price suggest a gradual shift towards a more balanced market.

Will the Bay Area Housing Market Crash in 2024?

Home prices in the Bay Area are not experiencing a significant drop. While the year-over-year growth rate might be moderating, the overall trend points towards continued appreciation, albeit at a potentially slower pace than in previous years. Experts aren't predicting a housing market crash in the Bay Area. The region's strong economic fundamentals, limited housing supply, and high demand are likely to continue supporting home values. However, a slight correction or a period of slower growth can't be entirely ruled out.

Is Now a Good Time to Buy a House in the Bay Area?

The question of whether 2024 is a good time to buy a house in the Bay Area is multifaceted and depends on various factors, including personal circumstances, financial situation, and long-term objectives. Here are some considerations to aid in this decision:

  • Market Conditions: While the market has seen a slight decline in home values over the past year, the forecast suggests a potential uptick. If the forecast aligns with your investment horizon, it might be a favorable time.
  • Competitive Nature: The high percentage of sales over the list price indicates a competitive market. Buyers should be prepared for potential bidding wars and act swiftly.
  • Interest Rates: Consider prevailing interest rates, as they influence your borrowing costs. If rates are relatively low, it could be advantageous for buyers.
  • Long-Term Goals: Evaluate if buying aligns with your long-term goals. If you plan to settle in the Bay Area for a considerable period, purchasing a home can be a prudent investment.

Ultimately, the decision to buy a house in the Bay Area in 2024 should be based on a comprehensive assessment of your unique circumstances and careful consideration of the market conditions and trends outlined by Zillow.

SF Bay Area Real Estate Investment Outlook

The San Francisco Bay Area is a magnet for real estate investors, but understanding the market landscape is critical. Here's a breakdown of key factors for informed investment decisions:

  • Enduring Demand: The Bay Area's allure for homebuyers remains strong, fueled by tech industry jobs and stunning natural beauty. This steady demand is a key factor for investors to consider.
  • Location is King: From vibrant downtowns to charming suburbs, the Bay Area boasts diverse neighborhoods. Meticulous research is essential, as each micro-market offers varying growth potential and rental yields.
  • Rental Market Strength: Evaluate the rental market performance in your chosen area. Robust rental demand can be advantageous for investors seeking income properties.
  • Picking Your Property: Will you invest in single-family homes, multi-unit buildings, or something else? Each type presents unique advantages and risks. Align your investment goals and risk tolerance with your property selection.
  • Expert Insights: Consulting with real estate professionals and economists is vital. Their market forecasts and insights can equip you to make informed investment decisions.

Why are Houses So Expensive in San Francisco?

The high cost of housing in San Francisco can be attributed to several factors:

  • Strong Economy: The Bay Area is a global tech hub, home to Silicon Valley, and numerous tech giants. The region's strong economy attracts high-income professionals, leading to increased demand for housing, and driving up prices.
  • Limited Supply: Geographical constraints and strict zoning regulations limit new construction in San Francisco. The supply of housing struggles to keep up with the growing demand, resulting in scarcity and rising costs.
  • High Land Costs: The cost of land in San Francisco is exceptionally high, which makes it expensive for developers to acquire land for new housing projects. This cost is often passed on to homebuyers and renters.
  • Foreign Investment: San Francisco's reputation as a global city attracts international investors, further driving up property values.
  • Desirability: The city's quality of life, cultural attractions, and natural beauty make it a highly desirable place to live, leading to a willingness to pay a premium for housing.
  • Limited Space for Growth: San Francisco is surrounded by water on three sides, leaving limited room for urban expansion. This geographical constraint intensifies competition for available properties.

Is Real Estate Investment a Good Option in this Region?

Investing in the Bay Area's real estate market can be both lucrative and challenging. Here are some considerations:

  • Lucrative Returns: Despite high prices, rental rates in San Francisco are also substantial, making it possible to generate good rental income.
  • Appreciation Potential: The Bay Area's strong economy suggests that property values are likely to appreciate over time.
  • Diversification: San Francisco is known for its tech industry, and investing in real estate diversifies your investment portfolio, which may be tech-heavy.
  • Challenges: High property prices mean a substantial initial investment. Additionally, property management and regulations can be complex.
  • Risk Mitigation: Careful property selection, understanding market dynamics, and working with local experts can help mitigate risks.

Investor Preferences in the Bay Area

Investors in the Bay Area have various options to consider:

  • Residential Properties: Single-family homes and condos are attractive for long-term rental income.
  • Multi-Family Units: Apartments or multi-unit buildings can offer multiple rental income streams.
  • Commercial Real Estate: Office and retail properties may provide stable rental income, particularly in business districts.
  • Short-Term Rentals: With tourism being a significant part of the Bay Area's economy, short-term rentals through platforms like Airbnb can be profitable.
  • Real Estate Investment Trusts (REITs): For those seeking to invest without direct property ownership, REITs focused on the Bay Area offer an alternative.

Economy and Growth

The San Francisco Bay Area boasts a robust and diverse economy, primarily driven by the technology sector, often referred to as Silicon Valley. This economic powerhouse has led to sustained growth, high incomes, and a robust job market, making it a hotspot for professionals and businesses. As a result, the region consistently attracts individuals seeking employment opportunities, which, in turn, fuels the demand for housing.

Housing Supply Shortage vs. Demand

The Bay Area faces a persistent challenge with housing supply shortages. Geographical constraints, coupled with stringent zoning regulations, limit the construction of new housing units. This limitation in supply collides with the consistently high demand for housing, primarily from tech professionals and other high-income earners. The resultant scarcity drives up property prices, making homeownership and rentals expensive propositions in the region.

Geography & Zoning Restrictions

Geography plays a significant role in the Bay Area's real estate market dynamics. Surrounded by water on three sides, the region has limited space for urban expansion. As a result, land is at a premium, and developers often face challenges in acquiring suitable land for housing projects. Zoning regulations, aimed at preserving the unique character of different neighborhoods, can further limit the potential for new construction. These factors collectively contribute to the scarcity of housing and rising property values.

Luxury Real Estate Market

The Bay Area hosts a thriving luxury real estate market, catering to high-net-worth individuals and investors. Luxury properties in prestigious neighborhoods like Atherton, Hillsborough, and Bel Air offer premium amenities and stunning views. The region's desirability, coupled with a strong economy, has sustained the luxury real estate segment, making it an attractive option for those seeking upscale investments.

High Real Estate Appreciation Rate

Despite the high cost of entry, real estate in the San Francisco Bay Area is known for its impressive appreciation rates. The region's strong economic fundamentals and limited supply have historically driven property values upward. This means that real estate investments often offer the potential for substantial capital gains over time.

Conclusion

While San Francisco's high housing costs can be a barrier, the region's strong economy and desirability continue to attract investors. Careful consideration of factors such as property type, location, and market dynamics is crucial for making informed investment decisions in the San Francisco Bay Area. Investors should assess their goals, risk tolerance, and long-term strategies to determine whether this market aligns with their investment objectives.

Berkeley Considers Allowing Homeowners to Sell ADUs as Condos

Berkeley is on the verge of becoming California's first city to allow homeowners to sell accessory dwelling units (ADUs) as condominiums. This initiative is based on Assembly Bill 1033, enacted this year, which permits cities to let residents sell their ADUs independently from their primary homes.

The New Ordinance

The Berkeley City Council has directed staff to draft an ordinance that would authorize these sales, aligning with AB 1033, authored by Assemblyman Phil Ting. Ting sees this as a significant opportunity for affordable homeownership, allowing more people to achieve the California dream. The ordinance is expected to be presented to the City Council within a year.

Potential Impact

If implemented, the new law could open up the market for first-time homebuyers, including teachers, nurses, and other essential workers, to purchase 500-square-foot homes in a city where the typical home value is nearly $1.5 million. This move is part of Berkeley's broader strategy to address the housing crisis, earning it the designation of a "pro-housing city" by the state.

ADU Market Dynamics

The construction of ADUs has surged across California, with nearly one in five new homes being an ADU. Berkeley built 410 ADUs between 2019 and 2023, reflecting a statewide trend driven by laws that make it easier to build these units. San Jose is also considering adopting AB 1033, with recommendations expected in June.

Challenges and Considerations

Despite the potential benefits, the cost of building an ADU can be prohibitive for lower- and middle-income homeowners. Additionally, homeowners within existing homeowners associations (HOAs) will need to secure permission from their HOA before converting an ADU into a condo. Real estate brokers have also raised questions about whether these units will be treated as single-family homes or as part of a tenant-in-common agreement.

Conclusion

Berkeley's move to allow the sale of ADUs as condos represents a significant shift in addressing the housing shortage. This initiative could provide more affordable housing options and help residents build equity. As the city prepares to implement this ordinance, it will be crucial to navigate the challenges and ensure that the benefits reach those who need them most.

For more details, you can read the full article on The Real Deal.

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Hotwire's Karl Peterson Sells San Francisco Home for $24M

Karl Peterson, co-founder of Hotwire and prominent venture capitalist, has sold his Presidio Heights home for $24 million. This sale sets a new benchmark in San Francisco's 2024 real estate market.

The Property and Its Controversial Pickleball Court

Located at 3630 Jackson Street, this home became notable not just for its luxury but for the controversy surrounding its private pickleball court. Originally listed at $36 million a year ago, the property saw price adjustments, settling at $29 million before closing at $24 million. Noise complaints about the pickleball courts across the street impacted potential sales, with one buyer backing out due to the disturbances. Despite these challenges, the Petersons added their own private pickleball court, which further fueled public-court players' discontent.

Details of the Sale

The buyer, identified as 3630 Jackson LLC, has Texas ties, with both the real estate attorney and principal address located in the Dallas-Fort Worth area. The listing agent, Steve Mavromihalis of Compass, declined to comment due to a non-disclosure agreement. The Petersons originally purchased the home for $16.65 million in 2013 and invested an additional $10 million into renovating the 1917 Julia Morgan-designed house.

Luxurious Features and Renovations

This expansive 12,000-square-foot residence boasts eight bedrooms, 7.5 baths, and a range of luxury features, including a ground-floor speakeasy/karaoke lounge with three disco balls, multiple panic/safe rooms, and a two-car garage with a dog washing station. Many north-facing rooms offer stunning views of the Presidio, bay, and Golden Gate Bridge. The primary suite is particularly lavish, featuring two walk-in closets, each with its own bathroom.

Market Context and High-End Sales Trends

Holly Peterson mentioned that their teenagers' attendance at boarding school and the renovation of another San Francisco property prompted the sale. The Petersons also own homes in Aspen and South Bend, Indiana. The ultra-high-end market in San Francisco is showing signs of revival, with other significant sales occurring in the city. A recent Pacific Heights listing sold for just under $24 million, breaking the $20 million mark for the first time this year. In contrast, other high-end sales in northern neighborhoods have averaged closer to $10 million, with several deals currently in contract around this price point.

Conclusion

The sale of Karl Peterson's Presidio Heights home highlights the dynamic nature of San Francisco's luxury real estate market. Despite noise controversies and fluctuating prices, the successful sale at $24 million underscores the city's enduring appeal and the resilience of its high-end property sector.

For more details, you can read the full article on The Real Deal.

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