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Condo sales picking up in Bay Area

Sun, 20 Jan 2013 14:14:10 +0000

Beth Hood, 32, decided this year to buy her first home, wanting to take advantage of super-low interest rates and to get in before a rising market priced her out. But single-family homes within commuting distance of her job at a San Francisco environmental nonprofit were too expensive.

Instead, she opted for a condo. Like many buyers this year, she was outbid several times before finally settling on a new unit at Oakland’s Uptown Place near the 19th Street BART Station.

“The rental market has changed so much that it’s cheaper to own (in Oakland) than rent even a studio in San Francisco,” she said. “A condo was the right fit for me. I couldn’t afford a single-family home unless I lived way far away.”

Many other Bay Area home buyers, especially first-time buyers, investors and empty nesters, are making similar calculations. As the real estate market heated up in 2012, condo sales surged, particularly at existing complexes. (Supply of new units remains low as home building has been stalled for the past several years.)

Most since 2006

A total of 15,853 resale condos changed hands in the Bay Area in the first 10 months of 2012 , the highest level for that time period since the bubble days of 2006, when 16,720 sold, according to San Diego DataQuick, a real estate information service.

“It’s a traditional first foothold in the housing market for a lot of people,” said Andrew Le-Page, a DataQuick analyst. “In a year where mortgage rates were unbelievably low and prices started to ratchet higher in many Bay Area communities, condos looked better to a lot of people. Both first-time buyers and investors were getting pushed out of single-family markets because of price or lack of inventory.”

It’s a big turnaround from the downturn days.

“Two or three years ago you couldn’t give condos away,” said Davey Cetina, an agent with Better Homes Gardens Real Estate in Berkeley who specializes in condos. In 2008, for instance, fewer than 10,000 condos changed hands in the first 10 months of the year.

One big reason sales fell was because tight financing guidelines often meant that condo purchases had to be all cash. Too many delinquencies on homeowner dues and too many condos that weren’t occupied by owners scotched the ability to get a mortgage at many complexes.

Additional problems

Condos can come with other problems, too. Older complexes may have deferred maintenance projects that can result in higher homeowner assessments down the road. Homeowner association dues, usually a few hundred dollars a month, add to the costs. But still, their affordability outshines that of single-family homes.

“The purchase prices are significantly less than single-family homes because there is no land involved, so we are still able to find condos under $500,000, even under $300,000,” said Zanna Knight, an agent with Coldwell Banker in Berkeley. “For first-time buyers, a condo is a nice transition to homeownership. They don’t have to worry so much about upkeep and can graduate into a single-family house when their circumstances permit.”

“It tends to be a fall-back category for people who either can’t afford a single-family home in a decent neighborhood or have gotten beaten up with rejected offers too many times,” said Jeff Weissman, an agent with Highland Partners/BHG. “I also see condo buyers who are coming back into the real estate market after family issues or having lost a house to foreclosure, as well as a few empty nesters.”

Condo prices are still far off their peaks. The median price in the Bay Area is $295,000, or $256 per square foot. That’s only a tad higher than the trough reached in 2011 of $257,000, or $229 per square foot. At the peak in 2007, the median was $505,000, or $432 a square foot.

“Condos are the last to go up in price (in a rising market) and the first to drop off when things change,” said Rick Turley, president of Coldwell Banker Residential Brokerage.

Attractive investment

Investors are an increasingly potent force in the Bay Area condo market, with absentee buyers accounting for about a third of resale condo purchases in 2012, DataQuick said. That’s almost double their share in 2008, when they were 18.5 percent of the market. But in the cheapest county, Solano, where the 2012 median condo price was just $82,000, investors account for 62 percent of sales, DataQuick said.

“Condos are an appealing investment because rents relative to prices are pretty good and they are a manageable size,” said Andrew Jeffery, principal of Cirrios Real Estate, an investment firm in San Francisco. As a sideline to his company’s business of buying apartment buildings with outside money, he and four partners are investing in a few Oakland condos.

“To buy a $60,000 or $80,000 condo is a bite-sized chunk for us,” he said. “If we see one we like, we all pony up small amounts of cash.”

In late 2011, the group bought two one-bedroom condos in the Adams Point neighborhood near Oakland’s Lake Merritt, a neighborhood that they deemed “up and coming ” – one for $60,000 plus $25,000 in renovation costs, the other for $50,000. Both bring in enough rent to cover 15-year fixed-rate mortgages, homeowner dues and other expenses. The partners just made an offer on a third one for $92,000.

“None of us are going to retire off of them, but they’ll fund my golf habit or whatever I want to do with the (rental income) in 15 years when they’re paid off,” Jeffery said.

Carolyn Said is a San Francisco Chronicle staff writer. E-mail: csaid@sfchronicle.com

Article source: http://www.sfgate.com/realestate/article/Condo-sales-picking-up-in-Bay-Area-4207185.php

High-tech boom brings sense of deja vu in San Francisco

Fri, 19 Aug 2011 19:52:50 +0000

When Twitter inventor Jack Dorsey decided to start a new company last year, he bypassed Silicon Valley and set up shop in San Francisco.

The 34-year-old, who said he was drawn to the “variety and vibrancy” of city life, is one of a growing number of entrepreneurs resisting the gravitational pull of high-tech’s epicenter 30 miles to the south.

The result is a dramatic surge in economic activity not seen in San Francisco since the height of the dot-com boom more than a decade ago. It’s a rare bright spot in the nation’s troubled economy.

“Technology has firmly established a foothold in the city,” said Jeremy Stoppelman, founder and chief executive of Yelp, the online reviews site based in San Francisco.

The number of tech jobs in San Francisco will soon surpass the record of 34,000 set in 2000, accounting for 1 in 5 office jobs, according to an analysis by commercial real estate brokerage Jones Lang LaSalle. And tech companies are pulling out all the stops to entice new employees: soaring salaries and lucrative stock options, even signing bonuses as high as $50,000.

The flood of new tech workers has set off a mad scramble for pricey apartments in such desirable areas as Pacific Heights, where vacancy rates have dipped to 1 percent, according to real estate firm Marcus Millichap. T-shirt-clad employees from Twitter, Google and other companies mob open houses with credit reports and offers to pay hundreds of dollars above the asking rate.

Tech companies are hunting for 2.5 million square feet of office space to set up shop or expand, about 40 percent of all current demand, said Colin Yasukochi of Jones Lang LaSalle. In the first half of 2011, tech firms leased 1.6 million square feet of office space in the city, or about a third of all office space leased.

That demand has driven up office rents as much as 30 percent in the hip South of Market area, a magnet for startup companies with its renovated warehouses and industrial buildings. As vacancy rates there plunge, commercial landlords elsewhere in San Francisco are ripping out dropped ceilings, tearing down walls and exposing concrete floors and steel joists to appeal to tech companies.

Economists say the latest high-tech gold rush to hit San Francisco – the reason the city at 9 percent has the lowest unemployment rate in the Bay Area, lower even than Silicon Valley – may have more staying power than the last. City officials are banking on the tech industry to breathe new life into the economy and clean up stubbornly blighted stretches the same way it helped transform South of Market.

“We’re not saying this is a tech boom. We’re saying this is the new direction of the San Francisco economy,” San Francisco Mayor Edwin M. Lee said.

San Francisco once reigned as the West Coast’s financial center. But banks and other institutions have slashed jobs and vacated more than 1 million square feet of office space in the last year alone. Cheaper office rents and urban amenities have helped the city reinvent itself and rival Silicon Valley for startups.

Now, propelled by a more business-friendly Board of Supervisors receptive to doling out tax breaks and other incentives, San Francisco envisions turning a bedroom community for Silicon Valley into a beachhead for technology companies.

Among the new arrivals is Zynga Inc., which is on the verge of an initial public offering that is expected to value the social gaming company at $20 billion or more. It plans to move next year into a splashy 270,000-square-foot facility in the South of Market neighborhood that will house thousands of employees.

Next year, Internet software company Salesforce will break ground on its new headquarters, a 14-acre campus in Mission Bay, a former industrial area that has become a biotech hub; its bright, modern buildings will offer as much as 2 million square feet of office space for 8,000 employees.

Elected officials are encouraging the trend, seeing it as a way to gain much-needed jobs. In a bid to keep Twitter in San Francisco, the city in April adopted a payroll tax break for companies that put down roots in the troubled Central Market and Tenderloin areas.

Next year, Twitter will take advantage of the tax break by moving into a vacant furniture showroom on a neglected block of Market Street. Getting Twitter to stay put was considered a coup for San Francisco. Twitter has plans to increase its workforce to as many as 3,000 by 2013 from 600 today – with the expectation that most of these workers would be in San Francisco.

San Francisco Supervisor John Avalos has opposed the tax breaks, arguing that it benefits companies that don’t need public support.

But Twitter’s move has fueled hope that other tech companies will follow the company into the gritty neighborhood. A city analysis concluded that a Central Market technology cluster would generate an average of $2.7 million in additional payroll taxes annually over 20 years.

“We want Twitter, Zynga, Salesforce to all feel they can be here for the long term,” Lee said.

Not everyone agrees. Many of these tech startups aren’t yet generating revenue, let alone profit; instead relying on the deeply lined pockets of private investors. If that funding were to vanish, many of the startups would too.

Even so, city officials and community activists say the tech industry could help revitalize areas such as Central Market and the Tenderloin, which missed out on the last tech boom.

“This is far bigger than one company. This is about small businesses, community organizations, arts groups, the city and companies like Twitter coming together to make a positive difference,” Twitter spokeswoman Carolyn Penner said.

Twitter will anchor the western edge of Central Market, the terminus of five long blocks of boarded-up storefronts and payday loan companies, adult theaters and head shops. The Tenderloin connects on the north.

Gail Gilman, executive director of Community Housing Partnership, which offers affordable housing to formerly homeless families and individuals, hopes a wave of technology investment will bring a grocery store and retail outlets that cater to working-class people or those on a fixed income.

Unlike during the last boom, there is little fear of gentrification. City officials note that a high percentage of the housing in the area is run by nonprofit organizations or protected by city ordinances. In fact, said Amy B. Cohen, the city’s director of neighborhood and business development, “a few Twitter folks would be OK.”

Dorsey said the high-tech industry can change the fortunes of San Francisco. His two companies, Twitter and Square, have already created more than 700 jobs here, and he is a longtime enthusiast of urban living.

As a teenager, Dorsey papered his bedroom in city maps and wrote software for dispatch systems. He lives in an apartment just steps from his office at Square on the edge of the Tenderloin. Investors have valued Square, whose technology lets people accept credit and debit-card payments with a smartphone, at more than $1 billion.

“I’ve always lived in the most troubled part of a city,” Dorsey said, “and I believe confronting the issues of a community on a daily basis helps one to better understand how to fix them.”

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Article source: http://www.physorg.com/news/2011-08-high-tech-boom-deja-vu-san.html