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Ditch the suit and grab a hoodie – it’s colder than you think.

TRD is thrilled to announce that our real estate coverage is expanding to a fifth market: San Francisco. Gone are the days of hitchhiking hippies hiding their stash from the cops. Today, cable cars run alongside chartered Google buses and boutique dispensaries are scattered like Starbucks locations throughout the Financial District. But the Bay Area is so much more than just tech and counterculture.

Check out some of our most recent coverage and plug into SF real estate with us for even more.

• Scrappy startups of the 90s may have gotten their start in garages, but the Bay Area of today has real offices — and even more on the way, like this shuttered movie theater, slated for redevelopment with a $56.2 million construction loan.
• To the envy of debt-saddled millennials across the nation, Gen Z is jumpstarting the SF rental market. New York just surpassed San Francisco as the most expensive city for renters and the Zoomers have caught on, taking advantage of the city’s lowered rent and vacancies.
• Over the bridge and through the rainbow tunnel, aging rockstars are peacing out of Marin County – First Metallica’s Lars Ulrich in May and now Carlos Santana, whose Tiburon home just hit the market for $5.8 million.

Article source: https://therealdeal.com/2021/08/24/introducing-the-real-deal-san-francisco/

In expensive rental markets like the Bay Area, apartment scams light on details and heavy on pressure to hand over deposits are nothing new. But recent alerts from financial watchdogs and data on rental housing schemes point to a fast-changing landscape for California renters trying to navigate the frenzied pandemic housing market, where some tenants are struggling to dig out of debt while others take advantage of discounted rents.

A new Apartment Guide report reveals that from January 2015 to May 2021, California was home to three of the nation’s top five cities for reported rental scams per capita: No. 1 Los Angeles, No. 3 San Francisco and No. 4 San Diego. The report also found that the busy summer moving season tends to be the most costly, when median losses have topped $19,000 per victim.

This year, the timing couldn’t be worse. After a slow start to California’s unprecedented $5.2 billion pandemic rent relief program, officials are pleading with tenants to apply for assistance before the state’s Sept. 30 eviction moratorium expires. But tenant advocates warn that a widening array of scams may be hindering those efforts.

“It’s really brutal out there in terms of trying to prove that you’re not trying to just get people’s information and take advantage of them,” said Leora Tanjuatco Ross, associate director of the Housing Leadership Council of San Mateo County.

Even before the pandemic, Tanjuatco Ross said her nonprofit was hearing more skepticism from renters worn down by years of rising costs and intense competition for housing. And now, dozens of community groups around the state have been enlisted to help pump out rent relief funds through a maze of city, county and state programs funded by the federal government.

As of last week, the state’s primary rent relief program had paid $282 million to 23,760 households, according to the California Business, Consumer Services and Housing Agency — a fraction of the 807,000 households that the National Equity Atlas estimates are behind on rent. When adding in smaller Bay Area county and city rent relief programs, just 10% of nearly $900 million in funds available to the region had been paid out as of mid-July.

Now, efforts to speed up those payments are colliding with recent warnings from watchdog groups about scammers changing their tactics as pandemic rental protections start to expire.

“Con artists often take advantage of the confusion and stress surrounding major events,” the Better Business Bureau explained in an Aug. 6 alert. “As the eviction moratorium winds down, watch out for scammers offering loans, peddling credit repair services or promoting government programs.”

The Better Business Bureau’s scam tracker, which is just one snapshot based on consumer reports, identified more than 50 rental and moving scams around the Bay Area and 144 throughout California since the start of COVID-19 lockdowns in March 2020. They range from two roommates in Oakland who said they lost $4,190 after touring an apartment by sending money for a deposit through a cash app to a person in Los Angeles who paid $499 for an eviction defense service that never materialized.

One challenge is that the range of rental scams in California has already exploded in recent years, going far beyond familiar attempts to get apartment applicants to wire money to unknown recipients. Now, scammers may assure targets that they don’t need Social Security numbers, just a credit report. Or they repost photos from houses recently sold or listed for rent on more regulated websites such as Zillow, Vrbo or Airbnb, district attorneys in Santa Cruz County and elsewhere have warned.

Last year, the FBI’s cybercrime division reported more than 13,600 confirmed victims of rental and real estate scams across the U.S., making them less widespread than credit card schemes but more frequent than health-care-related ploys. All told, real estate scams cost victims more than $213 million.

Around the Greater Bay Area, rental scams have also taken root in areas reeling from fires and, more recently, in places seeing an influx of remote workers. Take a three-bedroom Santa Cruz bungalow with a white picket fence advertised for $3,600 a month last week on Craigslist and $4,600 a month on Zillow.

“I cannot give you a tour in person right now,” the Craigslist poster said, instead offering an elaborate backstory about out-of-state cancer treatment and an image of a driver’s license with the same Santa Cruz address.

“Yeah, it’s a scam,” said Scott Joly, the Realtor trying to rent the actual house.

It’s the first time New York has been ahead of San Francisco since Zumper started tracking rental data in 2014.

The spread between the two major cities has been shrinking steadily in 2021. In early 2019, median one-bedroom rent in San Francisco was more than $800 more than New York’s. While both cities saw rents plummet amid the pandemic — median one-bedroom rent fell 23.4% in S.F. since March 2020, while New York’s fell 17.5% — both were poised to rebound when COVID-19 vaccines became more widely available. 

But since January 2021, New York rent has risen by 19.6% and is now down only 1.4% relative to March 2020. With rent nearing roughly where it was before the pandemic, NYC has rebounded, while SF rent is up only 4.5%.

When asked whether this spread was here to say, Zumper data journalist Jeff Andrews wasn’t sure. “It’s hard to say with any level of definity because the delta variant is a huge wild card, but in the near-term, you could see S.F. pass NYC again,” he said. “You could see them swapping spots a few times.”

The high concentration of tech workers is thought to be the main reason for the lack of rising rents. Many companies still have yet to return to the office, and these employees in general have adopted more permanent work-from-home policies. 

“I think the primary thing to consider is this: New York rent is now down only 1.4% relative to March 2020, meaning it’s basically regained all its losses over the pandemic. How much more growth does it have given it’s already near its pre-pandemic peaks?” Andrews posited. “San Francisco, meanwhile, is still down 20% relative to March 2020, meaning it has a lot of room for growth. Offices reopening would likely draw people back to SF and thus drive rent back up, but that’s looking more and more like it’ll be 2022 before that happens.”

As for the rest of the Bay Area, Oakland may soon drop below its spot at No. 7, with San Diego rents rising in August to match the median one-bedroom rent of the East Bay city.

San Jose stayed steady as the fourth most expensive market in the country, with almost no significant change in August. Meanwhile, rents are still skyrocketing in other parts of the country, with the median one-bedroom rent up 9.2% year-over-year, while two-bedrooms are up even more at 11%.

If items like this aren’t part of the sale, they need to be disclosed prior to the deal. When none of the lights turned on during the final inspection of a home where all the wall sconces were removed, Krock felt bad for the buyer. “Because there is no inventory the buyer decided to close anyway because they have no power,” Krock said. “There are three other people lined up behind them.”

Compass agent Nina Hatvany, who covers San Francisco, said she’s particularly noticed this with built-in furniture like wall-mounted shelving units or a wall-mounted console. She had a seller recently take a wall-mounted unit with them because they claimed they had purchased it at a fancy Italian furniture store and the only difference between this furniture and regular furniture was that this furniture didn’t have legs.

“We have seen a couple of sellers acting a little cavalierly,” Hatvany said. “I wouldn’t say that they are doing so because they can but more because they aren’t afraid that the deal will tank if they do.”

While the national housing market seems to be cooling off, according to Redfin, it hasn’t declined quite as much in the Bay Area. The number of listings going into contract in the Bay Area’s largest markets — Santa Clara, Alameda, Contra Costa and San Francisco — is slightly down from peaks hit earlier in spring, with the exception of Alameda County, which was slightly up from spring, according to data provided by Compass. Krock said there’s typically a slowdown when schools begin again, but she’s still seeing inflated prices throughout the area.

Median sales prices are up more than 15% in all nine Bay Area counties from 2019 to July 2021. In Contra Costa County, sales are up 39%. The percentage of home sales over list price are still at an all-time high at 80% as of spring 2021. 

“It’s greed like I’ve never seen it before. People are getting $300,000 over list price and they’re countering and asking for another $100,000 dollars,” Krock said. “… I think it’s just this feeling like all the power in the world is theirs and they can ask for anything and for a while they were getting it.”

With a larger volume of transactions taking place, Leo Medeiros, a real estate agent with Compass, said he thinks it’s more common to hear of these types of stories. “Sellers can feel more inclined to have odd requests for things that must go when they move out as they are more in the driver’s seat,” said Medeiros. “Conversely, I can also see buyers, who are really eager to get into a home, have more willingness to accept a seller’s odd request.”
  
Perhaps more than sellers deciding to take objects with them, it’s the items they leave behind that can complicate a move for buyers. “Because we have such a mass exodus of baby boomers getting out of the state due to politics and taxes, they don’t want to carry all their stuff with them. So they’ll leave pool tables or dining room tables or huge leather sectionals behind,” Krock, who covers both Alameda and Contra Costa counties, said. “Some of them are doing the right thing and giving advance notice and then we negotiate, but I’ve had some instances where sellers move across the country and they’ve left furniture there and the buyers don’t want it and then it becomes my job to have it removed. It’s just very sloppy.”

Medeiros said these sellers just don’t want to deal with bulky items. “I have seen and heard of a number of things, including a lawn mower, a big art piece or mirror that does not work in the next home, a desk, etc.,” Medeiros said. “This makes it so much easier for the consumer to simply move on without the headaches of dealing with it.”

While deals can fall through with complications like this, it’s not common in a hot market like the Bay Area. 

“It’s never happened to me,” Krock said. 

“It has that community feel,” the 28-year-old, who now works for a startup, told The Chronicle. “There will be weekend barbecues. … It definitely has a feeling that in this neighborhood a lot of people know each other.”

It’s clear that Bernal Heights is a desirable neighborhood, for all these reasons and more. The Chronicle’s housing guide describes the neighborhood as a “food lover’s hub” with a “small-town feel.” Redfin named it the “hottest neighborhood in America” in 2014.

So why isn’t it growing?

Last week, the U.S. Census Bureau released its second batch of data from the 2020 decennial census, which included detailed population counts of cities down to the block level. The data shows that over the last decade, all of San Francisco’s neighborhoods in the top half in income — those neighborhoods with median incomes over $125,000 — saw at least a 5% growth of inhabitants. Except Bernal Heights. The neighborhood was one of just six S.F. neighborhoods that recorded fewer people in 2020, though it essentially stayed flat, dropping by just 12 people. (This is among the 39 neighborhoods defined by the San Francisco Planning Commission.)

There’s at least one obvious reason why Bernal Heights — which is bounded by Interstate 280, Highway 101, Cesar Chavez Street and San Jose Avenue, according to the Planning Commission — has not ballooned in size, and it will be familiar to anyone with a grasp of San Francisco’s public policy: Since 2010, the neighborhood has constructed almost no new housing.

But Bernal Heights’ situation is extreme even for San Francisco. In 2019, the planning district associated with the neighborhood created fewer net housing units than any of the city’s 14 other planning districts except for South Central and Ingleside, according to a report by the San Francisco Planning Commission. And from 2011 through 2019, the district built zero new buildings with more than four housing units, according to that report.

An illustrative recent example: A project to create four new duplexes in the neighborhood was finally approved in late 2019 — 41 years after the developer, Patrick Quinlan, had originally purchased the property.

The demographics of the neighborhood stayed relatively constant over the decade. In 2020, about 45% of residents identified as non-Hispanic white, 26% as Hispanic, 18% as Asian, and about 3.5% as non-Hispanic Black. The Hispanic and Black populations of the neighborhood declined slightly from 2010 to 2020, while the share of Asian residents and those who identify as two or more races increased. The white population stayed about the same.

Danielle Lazier, a real estate agent who has sold over 160 homes in Bernal Heights and who lived in the neighborhood for 11 years, said Bernal Heights consists of densely packed single-family homes on small lots. This layout creates a cozy, “communal village” feel, she told The Chronicle.

“The press that Bernal Heights got during shelter-in-place, little businesses popping up, community members helping each other, I think really (shows) that,” she said.

However, the neighborhood’s layout has also made it difficult to build new housing, particularly multifamily buildings — creating a shortage that’s sent home prices soaring. Home values in Bernal Heights have grown by almost 240% since 2000, according to data from Zillow, making it one of the neighborhoods with the fastest appreciating real estate values in an already expensive city.

Part of the reason it’s so hard to build new homes in Bernal Heights is that the neighborhood has its own building code. The code, which aims “to encourage development in context and scale with the established character” of the neighborhood, prohibits buildings over 30 feet tall in most circumstances — making the construction of large apartments close to impossible.

“It is fairly restrictive,” Dan Sider, director of executive programs at the San Francisco Planning Commission, told The Chronicle about Bernal’s building code. He added that the code includes restrictions on building depth and mass as well as height, and until recently required each new home to have a parking garage.

These codes have essentially locked in Bernal Heights’ status quo of tightly packed, small single-family homes with some duplexes sprinkled in. This layout makes the neighborhood feel much denser than it is; multiple sources described Bernal as “dense” or “tight,” when in fact it’s not among the city’s most dense neighborhoods.

Todd Lappin, a longtime resident of the neighborhood who used to run the neighborhood blog Bernalwood and now manages a neighborhood Facebook page, agreed that the neighborhood’s housing layout may help explain its lack of growth. But he said that’s probably not the only factor at play.

“My hypothesis about the slight population decline in Bernal is that it’s about lower density within the existing housing that we have,” he said.

Essentially, Lappin believes that over the last decade or so, older, larger families have been moving out more often. Younger adults, who tend to live alone or in smaller families — a couple with their first baby, say — have been disproportionately moving in.

The data doesn’t necessarily support this theory. While youths under 18 make up an increasingly small percentage of San Francisco, Bernal Heights actually gained youths as a share of its population since 2010. People under 18 now make up almost 17% of the neighborhood’s population, up from about 16.6% in 2010.