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Home Prices in San Francisco Increased by 51% in the Last Decade

Recovery led by affluent neighborhoods, but high supply is cooling the market

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A four bedroom, three-and-a-half bathroom home in San Francisco currently on the market for $7.75 million.

SOTHEBY'S INTERNATIONAL REALTY
A four bedroom, three-and-a-half bathroom home in San Francisco currently on the market for $7.75 million.
SOTHEBY'S INTERNATIONAL REALTY

While all residential markets in California’s Bay Area have made dramatic recoveries since the financial crisis of the late 2000s, none tops San Francisco’s rise, according to a new study released Tuesday.

The median house price in San Francisco—where the recovery was boosted strongly by the high-tech boom—stands today at $1.35 million, up 93% from its bottom in 2011 ($699,000), according to a new study by Paragon Real Estate Group. That value is 51% higher than its 2007 peak ($895,000), and it represents the biggest increase over the 10-year period of all markets measured in the survey.

MORE:For San Francisco Luxury Homebuyers, a Reason for Hope?

By way of comparison, the median sales price of a co-op or condo apartment in Manhattan increased 21.7% in the decade through 2015, from $830,000 to $1.010 million, according to a separate report prepared by real estate appraisal and consultancy firm Miller Samuel Inc. for Douglas Elliman. In the second quarter of 2016, the median sales price of an apartment in Manhattan was $1.108 million, 13.1% higher than in the same period in 2015.

Among neighborhoods in San Francisco, Pacific Heights/Marina recorded the highest values in the first half of 2016, with a median sales price of $3.15 million, or an average price per square foot of $1,338, according to Paragon. In that period, a total of 23 homes that featured at least three bedrooms and included parking were reported sold in the neighborhood.

Market Area Median House Price Appreciation2011-2016 YTD
San Francisco 93%
San Mateo County 83%
Santa Clara County 82%
Marin County 59%
Lamorinda & Diablo County 54%

Source: Paragon Real Estate Group

Still, while the most affluent areas of the Bay Area led the housing recovery, the high-end tier has started to cool in the last year, said Patrick Carlisle, chief market analyst at Paragon and author of the report.

MORE:Higher Values, Fewer Sales for Los Angeles Prime Market

He attributed the softening to a desire for more affordable options among buyers and a significant increase in new home construction in San Francisco.

“The luxury condo inventory increased quite dramatically,” following a similar pattern in New York and Miami, where developers rushed “to create a luxury and ultra-luxury supply that outpaces natural demand,” Mr. Carlisle told Mansion Global.

New federal oversight unlikely to impact San Francisco market

According to Paragon, 212 homes worth $2 million and above were sold in San Francisco in the second quarter of this year. Another 265 transactions in the same price range took place in San Mateo and 488 in Santa Clara.

Last week, the Treasury Department announced an extension of its Geographic Targeting Orders, meant to fight money laundering in the real estate industry, to five counties in California. The measure, which initially covered only Manhattan and Miami-Dade County in Florida, requires title insurance companies to disclose the identities of the individuals behind shell companies paying cash for properties worth over $2 million in San Diego, Los Angeles, San Francisco, San Mateo and Santa Clara counties.

MORE:Government Expands Investigation of Money Laundering in High-End Real Estate Deals

Nevertheless, Mr. Carlisle said he doesn’t foresee a significant impact from the increased federal oversight.

“San Francisco has never been a destination like New York and Miami and London and Zurich for oligarch-scale money,” he said.

California: a main destination for foreign buyers

Mr. Carlisle noted in his report that San Francisco is a relatively small market because more than 60% of its housing is in rental units. A total of 5,700 sales were reported in San Francisco in the 12 months through June 2016, versus 6,103 in San Mateo and 16,200 in Santa Clara.

In San Francisco, “we only have 865,000 people, one-tenth of New York,” Mr. Carlisle said.

California is a major destination for foreign homebuyers, accounting for 15% of all international sales in the year ending in March 2016, according to a report by the National Association of Realtors (NAR) released in July.

Over the same period, 32% of buyers from China—the No. 1 source of international activity in the U.S. residential market—chose to buy in California, compared with 10% who preferred New York, according to the NAR.

MORE:Chinese Are Top International Homebuyers in the U.S. — Again

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