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The old stereotype that San Francisco secretly harbors tons of empty apartments owned by wealthy out-of-towners hasn’t gotten a proper analysis in a few years. A 2014 study by the San Francisco Bay Area Planning and Urban Research Association pegged San Francisco’s vacancy rate at anywhere from a smallish 2.5 percent to a more alarming 8 percent, but admitted that this figure is “very difficult to exactly quantify.”

We do know that a lot of San Francisco’s housing stock is owned by affluent out-of-towners, some of whom are also outside the U.S. These international buyers’ proclivity for all-cash purchases above the asking price definitively affects the cost of housing and the city’s available housing supply. The question is by how much.

“There is a portion of our market that does sit empty after purchase because it’s somebody’s fourth or fifth residence,” says Mark Kelaidis, a license partner with the San Francisco office of real estate company Engel Völkers. “If you cruise through Pacific Heights or the Marina District on any given day, there’s a good portion of all those properties that start at about $5 million that no one’s hanging out in.”

The National Association of Realtors (NAR) recently released its annual report on international purchases of U.S. residential properties. They found that last year, international buyers bought up less U.S. property nationwide, but more property in California.

“Ninety percent of all the [international] investment is … on one coast or the other,” Kelaidis tells SF Weekly. “It’s more appealing, it’s a better investment, appreciation is better.”

The NAR report ranks Chinese investors as the top outside international buyers of U.S. real estate, for the sixth year in a row. Chinese buyers spent more than $30 billion on U.S. properties last year, with Canadians in a distant second place at just over $10 billion.

Their most recent data also shows that Asian buyers make up an overwhelming 71 percent of internationals scooping up California residential property, though that total lumps emerging economies like India with more affluent nations like Japan under the broader category of “Asia.”

This is only one of the shortcomings that render this data a little imprecise. California deeds do not list buyers’ ethnicity or citizenship status, so these reports are just based on surveys of realtors.

But Kelaidis notes that the Bay Area’s sizable cohort of Asian buyers does not tend to let properties sit vacant.

“My personal experience with Asian clients is that they’ll stick a tenant in something — if a family member isn’t living in it — before they leave it sit empty,” he says. “They don’t get money out of China and buy million-dollar properties in San Francisco and not be pretty savvy about the whole business of it.”

While admitting San Francisco has vacant apartments whose owners live abroad, Kelaidis adds, “I don’t think that’s predominantly Asian. I think it’s everybody else.”

That “everybody else” shows signs of expanding. Engel Völkers has more recent data than the NAR’s latest report which shows a slowdown in Chinese investment.

“There is a common assumption that the top purchaser or investor of U.S. real estate is Chinese,” says Kelaidis. “That’s been the case in 2016 and part of 2017. German investors were the top investor in the first half of 2018.”

Analysts point to China enacting tight, new restrictions on U.S. real estate investment in 2015, which the Bay Area market is now beginning to feel.

“China has made it difficult to move money out,” according to Kelaidis. “Germany doesn’t have the same problem.”

Further, the market is beginning to chill on fears of a coming recession.

“All investment and purchases slowed drastically, mid-third quarter [2018],” he says. “It felt more recessional, a lack of confidence in what’s going on in the world and the economy. It’s definitely a trend.”

Normally, a recession brings housing prices down and discourages wealthy outsiders from hoarding housing. But Chinese buyers have never been keen to let apartments sit vacantly. If they sell off their properties, whoever buys them may really pose an empty threat.

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  This Lafayette property is the 3rd biggest East Bay sale of 2018. It is 12,089sf, 7 Bed, 8 full 4 half baths. Amenities include Caretaker’s Cottage, tennis court, pool, sports complex and more. 

  This property closed at $7.800 million in November of 2018 after listing at $9.975 million in September 2018.

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  This Lafayette property is the 3rd biggest East Bay sale of 2018. It is 12,089sf, 7 Bed, 8 full 4 half baths. Amenities include Caretaker’s Cottage, tennis court, pool, sports complex and more. 

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  Photo: MLS
  

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This Lafayette property is the 3rd biggest East Bay sale of 2018. It is 12,089sf, 7 Bed, 8 full 4 half baths. Amenities include Caretaker’s Cottage, tennis court, pool, sports complex and more. 

This property closed at $7.800 million in November of 2018 after listing at $9.975 million in September 2018.

less

This Lafayette property is the 3rd biggest East Bay sale of 2018. It is 12,089sf, 7 Bed, 8 full 4 half baths. Amenities include Caretaker’s Cottage, tennis court, pool, sports complex and more. 

… more

Photo: MLS

Though the East Bay still commands some of the nation’s priciest property, the top three residential sales for 2018 all closed at millions of dollars under list. This trend is also reflected in California as a whole, with 2018 bringing a slump some analysts predict will worsen in 2019.

California took several hits in 2018, both ecologically and economically, and the real estate market offers a strong example of the latter.

The California Association of Realtors (C.A.R.) reported in September of 2018 that California’s housing market posted its largest annual sales decline since March of 2014.

Third quarter reports showed home sales falling below the 400,000-level benchmark for the second consecutive month.

Data on the state’s median home price showed mixed results:  values dropped to $578,850, down 2.9 percent from August of 2018, but up 4.2 percent from September, 2017. Overall though, said C.A.R., the rate of appreciation slowed.

“Tax reform, which increases the cost of homeownership, also is contributing to the decline [in price appreciation and sales volume] especially in high-cost areas such as the San Francisco Bay Area and Orange County,” C.A.R. president Steve White told the East Bay Times.

Local effect

The East Bay’s real estate year reflects White’s comments. All three of the top residential sales for the area were multi-million dollar transactions, but all sold at deep discounts.

According to Patrick Carlisle of Compass Realty, the most expensive residential sale for 2018 in the East Bay closed in Orinda, where a home that listed in 2016 for $22.5 million and failed to sell came back on the market in 2017 priced at $16.5 million. It finally sold in July, 2018 for $12.250 million.

This sale was followed by a transaction in Fremont, where a home that listed in May of 2018 for $16 million closed at $12 million in June of 2018.

In third place, a Lafayette property closed at $7.800 million in November of 2018 after listing at $9.975 million in September 2018.

The gallery above allows us to tour each property, and opine on why they might have sold for so much less than they asked for.

What might allow us to know if we can expect more of these kinds of discounts in the coming year? Readers: make your predictions now.

Anna Marie Erwert writes from both the renter and new buyer perspective, having (finally) achieved both statuses. She focuses on national real estate trends, specializing in the San Francisco Bay Area and Pacific Northwest. Follow Anna on Twitter: @AnnaMarieErwert

Article source: https://www.sfgate.com/realestate/article/2018-s-top-3-sales-in-the-East-Bay-all-closed-at-13498709.php