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January 5, 2011

My Ten SF Real Estate Predictions for 2011

Now that we’ve slammed the lid on 2010, it’s time to look at the year ahead. I thought I’d gaze into my Realtor’s crystal ball—the black one with the “8” on it—and let loose:

1. Inventory will remain high all year. Loans still aren’t easy to obtain with less than 20% down, so the buyer pool is still narrower than it once was. And many sellers are having a difficult time adjusting to market realities when it comes to price (as the more than 3200 expired/withdrawn single-family home, condo and TIC listings in 2010 indicated).

2. Sideline buyers will take action. Everyone who stood on the sidelines throughout 2009 and 2010 waiting for prices to fall significantly in the city will realize that opportunities are passing them by. They’ll check in with their lenders in January or February, get a realistic price range, and will be out by Spring looking at open houses.

3. Condo conversion will get slightly easier. Our Board of Supervisors gets a facelift this January, and many incoming Supervisors are a lot friendlier toward homeowners. First order of business will be baby steps toward increasing the number of units that win the right to condo convert from tenancy-in-common (TIC) ownership.

4. SoMa will get even hotter. Things cooled off for a while South of Market. The neighborhood had its share of condos and lofts in foreclosure, properties with water intrusion issues, and HOA litigation. But with a limited number of new developments on tap for San Francisco and buyers looking for deals, it’ll be natural for them to turn to SoMa. HOA dues are lower than that of pricier South Beach and Mission Bay, and new businesses and restaurants continue to proliferate. (Thank you, Bar Agricole and Zero Zero.)

5. The $400,000-$900,000 price range will rule. It certainly did last year, when 1600 of the 1692 condos sold were in this range. Expect more of the same.

6. Properties with leased parking will sell. The rise of car-sharing availability in San Francisco has finally given some city dwellers an excuse not to have a car. A total of 170 condos sold in 2010 without deeded parking, and I expect that number will increase this year.

7. Buyers and sellers will get creative. That 2,000-square foot, tenant-occupied Pacific Heights TIC that couldn’t sell in 2007? It’ll get the green light this year, maybe with buyers who can live with a few tradeoffs and sellers who can throw seller-financing into the mix (for example). With financing still a challenge to obtain, 2011 will witness the sale of many properties that won’t necessarily have all the amenities.

8. Flips will fade. There was some flip activity last year, but most people who purchased property last year didn’t do so to make a profit. Those who did so more than likely didn’t make nearly as much money as the effort was worth, or lost money in the end.

9. America’s Cup? World Series Champions in the hood? Pied-a-terre sales will pick up. Those who have been sitting on their money since the most recent stock market crash will figure out that a reasonably sized condo in a walkable neighborhood will be an excellent way to invest. Expect sales in South Beach, Yerba Buena and Mission Bay to bump up, with special thanks to the San Francisco Giants. And who wouldn’t want to use their view pied-a-terre to watch the America’s Cup in 2013?

10. The ultra-luxury market will flourish. There’s lots of international money pouring into San Francisco, and much of it goes toward real estate. A total of 230 houses and condos sold for more than $2M in 2010 (twelve of which sold for more than $5M), and I’m betting that number will double by the end of 2011.

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