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Is the Rise in SF Bay Area Home Prices a Sign of a Healthy Real Estate Market? – Virtual

Wed, 19 Mar 2014 03:10:02 +0000

San Francisco has seen a record increase in home prices in recent times. ACL Real Estate and Property Management analyze whether this growth is a sign of a healthy real estate market by reviewing the recently released report by The Demand Institute.

San Francisco, CA (PRWEB) March 18, 2014

Analyzing the recent report published by The Demand Institute, leading real estate and property management firm ACL Real Estate and Property Management says that San Francisco is unlikely to continue to witness the double digit housing price growth it experienced in 2013.

According to their report, A Tale of 2000 Cities, published by The Demand Institute in February 2014, home prices are likely to increase by an average of 2.1% per year during 2015-2018. However, this figure does not fully reflect the huge pricing differences the nation is likely to see across region. Here is how the report sees prices across states by 2018.

The report also demonstrates the disparity between home prices and the median income, with rents in San Francisco as high as thrice the national average. The Case-Schiller House Price Index for June 2013 had put the price rise in San Francisco at 47%, the highest among all the metropolitan areas studied. This increase, The Demand Institute’s report says was “largely driven by investors buying up swaths of distressed homes to meet growing rental demand.” At the same time, the report forecasts an annual growth rate of 2.1% for single-family homes during 2015-2018, given the expectations of better equilibrium between demand and supply.

“Rising housing prices is not always an indicator of a healthy market because health is more a function of whether people can afford homes at those prices in the long term,” says a spokesperson from ACL Real Estate and Property Management. According to the report published by The Demand Institute, 41% of households faced a moderate-to-severe housing cost burden in 2013 (with 25% carrying moderate burden and another 16% carrying severe burden). The Harvard Joint Center for Housing Studies defines a moderate cost burden as “the need to allocate 30 to 50 percent of pretax household income to essential housing expenses: mortgage principal and interest payment, rent, insurance, taxes, and utilities,” while a severe burden occurs when this figure rises to 50 percent.

The situation is scarcely better for renters. Following the 2007-2008 recession, more and more homeowners have turned into renters, leading to rising demand for rental accommodation. According to The Demand Institute’s study, 31% of tenants in the United States are today spending about 30%-40% of their pre-tax income on housing, with one in every four spending more than 50%. So, is the San Francisco residential market really healthy?

About ACL Real Estate and Property Management: With wide experience and a proven track record in quality service and reliability, ACL Real Estate and Property Management has carved a niche for itself for its real estate and property management services in the East Bay and Peninsula areas. The company has a successful track record of assisting home owners in both selling and buying any type of property. The company also offers comprehensive property management services that ease the process of selecting tenants, maintaining the home and ensuring timely rent collection for homeowners.

For the original version on PRWeb visit: http://www.prweb.com/releases/2014/03/prweb11678686.htm

Article source: http://www.virtual-strategy.com/2014/03/18/rise-sf-bay-area-home-prices-sign-healthy-real-estate-market

Apartments reap rewards of rising rates

Sun, 14 Jul 2013 15:03:30 +0000

“I am scared, in part due to the fact that my father and mother had a lot of problems with their mortgage and due to the job market,” said Charles Desanpedro Jr., a renter in Northern New Jersey.

(Read More: Map: Tracking the US Real Estate Recovery)

Fear and financing have kept the apartment rental market strong for the past several years, with rising rents and falling vacancies. Rents rose yet again in the second quarter of this year, according to a new report from Reis, up more than 2 percent from a year ago. But rents and vacancies have been stabilizing of late, as buyers return to the market.

Mark Sadaka and his wife are looking to buy a home in New Jersey.

“It’s hard to get a mortgage, but now things have apparently lightened up. I don’t know, we’re exploring that now,” said Mark.

Mortgage credit is easing up slightly, according to a new index from the Mortgage Bankers Association. The increase was driven by a small uptick in the number of jumbo, investor and cash-out products as well as those with higher loan-to-value ratios. All those are riskier loans.

But while credit is easing slightly, mortgage rates are rising. The 30-year fixed hit 4.41 percent on the Zillow Mortgage Marketplace, up 24 basis points from a week ago.That’s the highest in two years. Rates could move higher after Wednesday’s release of the Federal Open Market Committee meeting minutes and more clues to the easing of federal stimulus in the mortgage market.

(Read More: Rising Rates Sour Housing Market Plans)

Rising rates have already taken away considerable purchasing power for potential buyers. Fewer consumers now think it’s a good time to buy compared with just a month ago, according to a survey from Fannie Mae.

Article source: http://www.cnbc.com/id/100874193

Even as Housing Revives, Apartment Growth to Boom

Fri, 17 May 2013 16:11:02 +0000

“Despite overtures of the headwinds from new supply, our April survey results showed positive gains in both occupancy and rents ahead of expected seasonal trends,” she wrote in a report to clients.

(Read More: Apartment Building Bubbles as Single-Family Homes Struggles)

Zelman noted an intentional slowing by home builders, who are strapped by labor and supply shortages and who are looking to gain pricing power as the market recovers, as a key driver of apartment demand.

Rising rents are pushing some tenants to move, but not as many as expected. 11.5 percent of departing residents in April left due to rent increases, according to the report, up from 10.9 percent in 2012 but way down from 17 percent in 2011. In addition, more than half of those moving out remained in the apartment rental market. Thirty percent bought a home, and ten percent rented a single family home; the remaining moved in with family or friends.

The concern for investors in the apartment sector, especially in multi-family REITs (real estate investment trusts), is that there is too much new supply coming on line, just as demand is about to turn. The government numbers for housing starts in April added confusion to that argument, but some say the monthly numbers, especially for new construction, which have a wide margin of error, are just “noise.”

(Read More: Rising Rates Rattle Mortgage Market)

“Multi-family starts plunged 38.9 percent to 23,000 units, but the more important average of March and April was still a solid 321,000 units,” noted Michael Montgomery, an economist at IHS Global Insight.

Article source: http://www.cnbc.com/id/100746253

Apartment mania: Sleek live-work lofts in East Bay vs. SF

Thu, 02 May 2013 13:36:51 +0000

Apartment hunting in San Francisco is not for the faint of heart. The latest news on spiraling rents and brutal competition for rentals in San Francisco — as well as Oakland and San Jose — is covered here.

Many folks find that they can get more for their money by trekking across the Bay.

Here’s a look at two state-of-the-art lofts in converted industrial buildings — one East Bay (Emeryville), one West Bay (San Francisco) that underscore the price differentials. Both are from the same dynamic duo team — architect David Baker and developer Rick Holliday. Admittedly they aren’t direct comparisons, as the San Francisco penthouse is bigger and in a more chi-chi location, but they give an idea of the price differences.

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First up, here is a “gorgeous light-filled” one-bedroom, one-bathroom in an historic Emeryville warehouse. At $2,450 a month for 1,300 square feet, it was snapped up within a week, said leasing agent Jeanne Zimmerman of McGuire Real Estate/Urban Bay Properties in San Francisco. “It would be about $3,800 if it were in San Francisco,” she said, pointing to the Hueblein Building as an equivalent SF comp.

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Next, take a look at this penthouse unit in San Francisco’s landmark ClockTower building with one bedroom plus an office space and two bathrooms. It also found a tenant quickly. At 1,925 feet it went for $6,500.

Believe it or not, in the early 1990s when Holliday converted the 1907 ClockTower building, originally the home of a lithography company that printed California fruit-crate labels, to 127 open-floor-plan live/work units, people “thought I was out of my mind,” he said. The South of Market/South Beach area seemed like a wasteland at the time. “Then the building sold out,” he said. “It blew everyone away; it was written up in Esquire magazine.”

The condos that sold for $250,000 “back in the day” now hover around $1 million with some of the better ones going for $2 million, Holliday said.

A side note on live-work lofts. Zimmerman said they have an unusual competitive situation where potential residents have to vie with corporate renters.

“I see a lot of small businesses and startups competing with residential customers for them,” she said. “The companies are looking to lease them for office space, and use the bed upstairs in the loft area for executives who travel or employees who work late.”

Carolyn Said is a San Francisco Chronicle staff writer. For insights and news on Bay Area real estate, follow her on Twitter: @csaid

Article source: http://blog.sfgate.com/ontheblock/2013/05/01/apartment-mania-sleek-live-work-lofts-in-east-bay-vs-sf/

Is Multi-Family Home Construction Overheating?

Wed, 17 Apr 2013 10:14:14 +0000

“With most data surpassing trailing 10-year averages, supply is clearly on the way. … The big unknown, in our view, is how desensitized (or not) investors are to the idea,” wrote David Toti and Gaurav Mehta, analysts at Cantor Fitzgerald. “Already the No. 1 concern for apartment investors, recent permit/starts data have suggested sharp increases in the delivery of new apartment product in 2013 and beyond. Although we do not yet view this as a danger at the operating level for some time, the perception of a supply spike could cause the stocks to underperform as cash flow growth trajectories are lowered.”

Toti and Mehta noted that unlike previous recoveries in which supply initially increases in low-barrier markets, developers today are targeting the highest-tier, coastal, so-called A markets. That is because lenders are more willing to fund projects in these less risky areas, such as downtown Bethesda, Md., where cranes rise above the busy streets. Once considered a suburb of Washington, D.C., Bethesda is now a prime urban market, and developers and REITs such as ederal Realty Investment Trust are reaping big rewards, despite what some call an overheating market.

“We’re not concerned about any of that,” said John Tschiderer, vice president of development for Federal Realty. “I think a lot of it is location-driven and place, quality of place-driven, and in our investments our locations are strong, based on transit and the quality of what we build.”

Apartment vacancies fell to just 4.2 percent nationally in the first quarter, down from 5 percent a year earlier, according to Reis Inc. That pushed rents higher by more than 3 percent year-over-year.

“Analysts have wondered how rents could keep climbing when jobs are being created at a sluggish rate and wage growth has been relatively stagnant,” Reis economist Victor Calanog wrote in a recent report. “One answer is that the moribund housing market left households with little choice but to absorb rent hikes, but with the housing market now recovering, does that mean the tide is turning against landlords?”

(Read More: Boomers a Boon to Urban Home Builders)

Article source: http://www.cnbc.com/id/100646124

Beyond the Numbers, Confidence Returns to Housing

Wed, 27 Mar 2013 06:59:07 +0000

While first-timers are getting more interested, current homeowners are getting less interested, according to the Campbell survey. Meanwhile investor interest in housing rose to a four-month high, accompanied by a rise in sales of distressed properties. Investors, who largely buy all in cash, have been the main competition for regular home buyers, and as big hedge funds and private equity purchase lower end, distressed homes in bulk, that pushes prices drastically higher. Witness a 23 percent jump in Phoenix home prices in January, according to the latest reading from SP/Case-Shiller.

While the number of distressed homes is falling, the remnants of the housing crash are still weighing on the recovery. There are still 5.1 million properties where the owner is either delinquent on the mortgage or the home is already in the foreclosure process, according to a new report from Lender Processing Services. As banks ramp up the foreclosure process, following delays due to processing fraud over the past few years, more distressed properties will come to the market. That may ease some of the price gains, although investors, still reaping rental rewards, seem ready for all of it.

(Read More: No Money? No Worries. Home Lenders Ease Rules)

What remains to be seen is for how long those rents will stay strong? With more Americans looking to buy and souring on renting, rent rates could start to come down. In addition, new supply of rental apartment buildings will be hitting the market in force over the next two years, as developers have been increasing multi-family housing construction.

(Read More: Defying Gravity: Miami Condos Soar Again)

—By CNBC’s Diana Olick; Follow her on Twitter @Diana_Olick or on Facebook at facebook.com/DianaOlickCNBC

Questions? Comments? RealtyCheck@cnbc.com

Article source: http://www.cnbc.com/id/100592690

The Housing Bubble Is Back

Mon, 25 Mar 2013 18:39:38 +0000

Cullen Roche is worried that the trajectory of housing prices might deviate from what practical assumptions would predict

Real estate returns are not rocket science. Because they’re such a huge portion of the consumer balance sheet they tend to be tied very closely to wage growth. Wage growth, by definition, is very closely tied to the rate of inflation. That explains why the long-term historical return of real estate is roughly in-line with the rate of inflation. But this survey from Zillow shows that real estate “investors” are probably still too optimistic.

I can see why these assumptions are attractive, but they are not quite what drops out of macroeconomic analysis.

Fundamental Upward Pressure of Prices

Wage growth, per se, shouldn’t drive housing prices. What we might expect is that wage growth drives rents and rents drive housing prices.

The wage-rent relationship, however, is not an iron law.

Matt Yglesias and Ryan Avent are famous for pointing out that rents – and hence housing prices – could be much lower in coastal cities if residents would abandon restrictive zoning laws. For example, Dallas and Philadelphia have roughly the same median household income, but home prices in Philly are much higher than in Dallas.

In general, if a fundamental driver – regulation, technology, preference – causes rents to eat up a higher portion of folks pay checks then rents and home prices will be higher.

To some extent the national rise in home prices is due to both technology and preferences driving more people to want to live in high rent areas like the Northeast Corridor.

Those same forces are leading some people to want to live in Houston, Austin and Raleigh-Durham, but because of looser regulation that simply translates into booming housing supply and a booming population rather than higher prices.

In addition, the relationship between rent and housing prices depends on interest rates – both the real portion and expected inflation. A house is like a utility company. Instead of providing power services, it provides shelter services and keeps you from having to pay rent.

Many finance folks are familiar with the rule-of-thumb that utilities tend to trade like bonds. Higher interest rates lead to lower bond and utility stock prices. Lower interest rates lead to higher bond and utility stock prices.

This is because – like a house – you are receiving a fixed stream of services over a long period of time.

Though this framing is kinda technical, most of these factors can be summed up in a really straightforward comparison: monthly rent vs. monthly mortgage payment for similar homes.

When the market is balanced the monthly mortgage payment should be slightly higher than the rental payment because 1) Mortgages get a tax break and 2) Traditional rate mortgages offer you the stability of a fixed payment.

Adjustable rate mortgages (ARM) need to produce a payment close to or even below rent to be a good buy. That’s because you lose the security of a fixed payment and depending on the terms of the ARM you may actually be facing more payment volatility than with renting.

Trulia crunches the numbers and it looks like under their baseline assumptions its cheaper to buy than to rent in every one of the top 100 metropolitan areas in the United States.

In traditional hotspots like the San Francisco Bay area, New York City and Orange County, CA, the discount is low. Still this is a recipe for fundamentals house price appreciation.

Bubble Territory

If housing prices merely stabilized into a sustainable equilibrium with rents then the future probably wouldn’t be too dramatic. We would see a rapid shoot-up in home prices now, followed by a long period of little to no price growth as the Fed raised interest rates.

Rents would still be going up and monthly mortgage payments would rise with them to maintain equilbrium. However, mortgages payments would be rising because interest rates were rising, not because home prices were rising.

Eventually, the Fed would stop raising rates and home prices would start to drift higher and eventually home price growth would converge to rent growth.

Article source: http://www.forbes.com/sites/modeledbehavior/2013/03/25/the-housing-bubble-is-back/

San Francisco’s real estate boom puts a damper on nonprofits

Wed, 27 Feb 2013 07:05:07 +0000

Renée Frojo
Reporter- San Francisco Business Times

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While I’d rather not put a negative spin on San Francisco’s gangbusters economy, it’s hard to ignore the fact that it’s putting pressure on nonprofits to either pay up, get creative or get out.

As I wrote in this week’s paper, rising rents are pushing nonprofits out of the city and into the East Bay in search of affordable space. But what about local nonprofits that need a San Francisco address? How are they facing skyrocketing rents and landlords that refuse to renew their lease in hopes of attracting higher-paying tenants?

Well, “it’s really nuanced,” said Leiasa Beckham, a real estate consultant with the Northern California Community Loan Fund, in trying to explain the kinds of solutions that nonprofits in the city are coming up with to find more stable, affordable rent.

According to Beckham, some nonprofits with enough funds are looking into buying their own space. But because these projects are currently undergoing complex lease negotiations, she wouldn’t specify who is doing what.

Other scrappy nonprofits, she said, are looking for shared space concepts, co-locating to buildings with reasonable rents or renting spaces from other nonprofits in shared-space buildings — a model that has been used by nonprofits for some time.

But as rents continue to rise and real estate throughout the city — including the historically affordable areas of town — becomes increasingly desirable, even shared office spaces have become harder to find and develop.

“The real estate market is really prohibitive to centers expanding or replicating here,” Katie Edwards of Tide’s Nonprofit Centers Network, a peer learning community for nonprofits that share space, told me.

Renée Frojo covers hospitality, restaurants, retail and nonprofits for the San Francisco Business Times.

Article source: http://www.bizjournals.com/sanfrancisco/blog/2013/02/san-franciscos-prosperity-puts-a.html

What Tops Home Buyers’ Wish List Now

Mon, 25 Feb 2013 18:58:54 +0000

Perhaps the most surprising finding of the NAHB survey is not what we want in our homes, but where we want our homes to be. Just 8 percent of those surveyed want to live in a city center, 36 percent prefer the outer suburbs, 30 percent the close-in suburbs and 27 percent still want the old-fashioned, rural American living. This counters recent assertions by those in the apartment sector that Americans are increasingly seeking a more urban lifestyle.

Rising rents and increased demand for rental apartments has fueled the theory that from young Millenials to downsizing Baby Boomers, the recent housing crash has changed the way Americans want to live, shifted attitudes toward home ownership and created a strong new desire for big-city living. Rising gas prices have also pushed more home buyers closer to city centers.

(Read More: Why Women are Driving the Demand for Rental Apartments)

While 23 percent of survey respondents categorically reject the idea of living in a city center, others could be swayed if, again, offered the right amenities. These include walking/jogging trails, nearby parks and an outdoor swimming pool. That bodes well for planned, gated communities.

The age of the McMansion may be over, as money spent on space is reallocated to energy efficiency and home technology. Builders today will look to do more with less space, and buyers who can now afford to be picky about amenities, certainly will be.

Article source: http://www.cnbc.com/id/100491599

Trulia Classifies Housing Markets in San Francisco Bay Area, Seattle, Denver …

Wed, 06 Feb 2013 04:10:29 +0000

January 2013 Trulia Price Monitor Summary

% change in
asking prices

# of 100 largest
metros with asking-
price increases

% change in asking
prices, excluding
foreclosures

Month-over-month,
seasonally adjusted

0.9%

Not reported

1.2%

Quarter-over-quarter,
seasonally adjusted

2.2%

2.9%

Year-over-year

5.9%

6.5%

Booming Housing Markets Have Both Price Gains and Healthy Fundamentals

Healthy housing markets are defined by strong job growth, low vacancy rates, and low foreclosure inventory. In “booming” markets such as San Francisco and Seattle, rising asking prices are supported by strong job growth and are unthreatened by future foreclosures. However, investor-fueled price increases in “rebounding” markets like Phoenix and Las Vegas are at risk from slow job growth, high vacancies, or future foreclosures. At the other end of the spectrum, healthy markets without dramatic price gains, such as Houston, will continue to hum along after avoiding the worst of the housing bubble and bust. Meanwhile, markets like Chicago continue to struggle without strong market fundamentals or big price gains.

BOOMING

Big price increases and healthier
market
fundamentals.

HUMMING

Stronger market fundamentals
without dramatic price
gains.

REBOUNDING

Big price increases, but weaker
market fundamentals.

STRUGGLING

Neither strong market
fundamentals nor big price
gains.

New Construction Eases Rent Gains Nationally

With more newly-constructed multi-unit buildings coming to completion, rent gains fell behind asking price increases at the national level for the first time since the price recovery began last spring. In January, rents rose 4.1 percent Y-o-Y nationally, slowing down from 4.7 percent in July 2012. Regionally, rent gains cooled the most in San Francisco, where rents rose only 2.4 percent versus 11.5 percent in July 2012. According to the Census, construction activity in San Francisco has been well above normal for the last year, and it’s nearly all in multi-unit buildings.

Where Rent Gains Slowed Down Most

U.S. Metro

% Change in
Rents, Y-o-Y,
Jan 2013

% Change in
Rents, Y-o-Y,
July 2012

Percentage
Point
Difference

San
Francisco, CA

2.4%

11.5%

-9.1%

Portland,
OR-WA

4.7%

9.2%

-4.4%

Seattle,
WA

6.4%

10.8%

-4.4%

Denver,
CO

7.4%

10.3%

-2.9%

San
Diego, CA

2.0%

4.4%

-2.4%

PRE-APPROVED QUOTES

“In many local markets today, dramatic price gains can mask serious
red flags,” says Jed Kolko, Trulia’s Chief Economist. “Strong job
growth, low vacancy rate, and low foreclosure inventory–not huge price
gains–are signs of a healthy housing market. Without strong underlying
market fundamentals, price rebounds might be here today, but gone
tomorrow.”
“Rent gains are slowing down because of more supply, not less demand,”
explains Jed Kolko, Trulia’s Chief Economist. “Many of the multi-unit
buildings that have been under construction over the past two years
are now coming onto the market. Renters in San Francisco, Seattle, and
Denver are starting to get a touch of relief, even though rising
prices might put homeownership out of their reach.”

MULTIMEDIA

To read the full report, see here.
To download the full list of price and rent changes for the largest
metro areas, see here.
To download a graph of price changes from January 2011 to January
2013, see here.
To download a scatter plot graph contrasting price trends with the
market’s health for the 100 largest metros, see here.

METHODOLOGY

To view the full methodology and 2013 release schedule, see here. The next release of the Trulia Price Monitor and the Trulia Rent Monitor will be Tuesday, March 5, at 10 AM ET.

ABOUT TRULIA, INC.

Trulia (NYSE: TRLA) gives home buyers, sellers, owners, and renters the inside scoop on properties, places, and real estate professionals. Trulia has unique info on the areas people want to live that can’t be found anywhere else: users can learn about agents, neighborhoods, schools, crime, commute times, and even ask the local community questions. Real estate professionals use Trulia to connect with millions of transaction-ready buyers and sellers each month via our hyper local advertising services, social recommendations, and top-rated mobile real estate apps. Trulia is headquartered in downtown San Francisco. Trulia is a registered trademark of Trulia, Inc.

Article source: http://www.fortmilltimes.com/2013/02/05/2478046/trulia-classifies-housing-markets.html