Two Homes in the San Francisco Market

Back in late October, I saw two fabulous new listings–both listed for $2,875,000.  In the morning, I saw a great condo at 1440 Kearny Street in Telegraph Hill.  The views from this 3 bedroom, 2.5 bathroom condo are amazing, with immediate views of the financial district and the Transamerica Tower.  This unit is in the rear of a 2 unit building, with easy access to the peaceful, terraced garden, just steps below Coit Tower.  This home has great finishes, a nice layout, great storage, a ton of privacy, and great conveniences like an elevator, a laundry room, etc.  After 2 and 1/2 weeks, this home had a $175,000 price reduction.  It was withdrawn from the multiple listing service in December for the holidays.

The other amazing property that I saw that Tuesday, is the house at 313 Duncan Street.  This home is just extraordinary.  This property was my listing a few years ago.  It was a flat front Victorian home that had been remodelled many times over the years (without the benefit of an architect) and the resulting floorplan was awkward.  It had a great south facing rear yard, and had an old cottage (without much of a foundation) that needed repair (water had seeped under the linoleum in the bathroom, the kitchen was old).  The developer who purchased the property did an amazing job.  The facade of the main house was the only thing that remains of the old property (and this was slightly modified with different windows).  The result? A gorgeous, contemporary home that has amazing light, deluxe finishes and amazing interaction between indoors and out.  The living space has an open floorplan, the layout is terrific, the finishes are fabulous.  In a word, this house is terrific.  It is still available.

So what is happening in the San Francisco real estate market?  Why are these two fabulous homes still available?   First, there are several factors that reduce the number of Buyers in the market in San Francisco.  Sure, San Francisco is still a fabulous city with incredible beauty, world class museums, arts organizations and cultural diversity, great local food, amazing chefs, and great proximity to mountains, the ocean, etc.  Since August 07 when the mortgage crisis really reared its head, banks have been tightening their lending standards for buyers.  This eliminated some buyers from our market–those without large enough down-payments, those with less than perfect credit, etc.  Not necessarily a bad thing. 

Next, this past summer, I started noticing Buyers and Sellers losing their jobs (some of them my clients).  One recently had an excellent performance evaluation.  His role as leader of a new project that would help his company develop an innovative new service put him in a risky position.  His company decided not to pursue this project (were they not able to raise or borrow money, or were they conserving cash).  Layoffs are now fairly widespread in the Bay Area, affecting many. 

The third factor here is the stock market slide in late summer/early fall.  Many Buyers lost a significant portion of their down payment because their money was invested in the market, and are not currently buyers (with their down-payments cut almost in half, their buying power often is reduced significantly–while their tastes likely remain the same).  Others are frightened by the volatility or afraid that they may lose their jobs.  They are also not buyers.

What does this all mean?  We have fewer buyers for our increasing inventory.  In many cases, qualified buyers are writing offers that are low.  Sellers who are already realizing huge gains, and those that need to sell are willing to sell at prices well below last quarters prices.  This in turn is pulling the market down further.

What will it take for the condo on Telegraph Hill and the house at 313 Duncan to sell?  A Buyer and a Seller reaching a deal, of course.  And at this point, I suspect that most Buyers will not be paying full price on either of these two homes.