Market View

Same Time Same Station

by Jay Greenberg

The San Francisco apartment housing market has not changed much in the past 12 months in my opinion. The rental market continues to be weak, and the sales market continues to be steady. Financing remains at 40-year lows, and investors are seizing this unusual opportunity. As for the balance of this year, I do not anticipate much change in the market place.

Our weak rental market is no longer news to owners. Most landlords are much more realistic about rents today than they were a year ago. The result is that rent levels have remained steady during this time period, and owners are not taking as long to rent their units.Proactiveownershavegood occupancyrates,whilehold-the-line owners are still experiencingpainful vacancy problems. I have not heard the following phrase in quite a while: “I do not want to rent my unit too low, because when the rent goes back up, I’m stuck.” One year ago I was still hearing this. Most of us have gotten the message.

I am extremely pleased with the sales market. Currently, there are numerous contingent-free sales that will close escrow in the next few months. I expect year-end sales figures to be quite similar to the past few years. The 5-to-9-unit sector has been extremely healthy in recent years, mostly due to a very large buying pool making down payments of $250,000 to $750,000. This market is similar to the single-family residential market, which still has ferocious competition for low- and medium-priced San Francisco housing. The high-end market for single-family residential homes is a different story. There have been large drops in values from the peak, and activity levels are down.

Apartment Sales Transactions

The Bay Area is a wealthy community, and wary investors are still showing San Francisco apartment buildings are the product of choice. I recently listed a seven-unitapartment building, located on the corner of 19thAvenueand Rivera in theSunset District,for 13.2.GRM. Within the first week,there were 12 offers on the property.

The sales figures through June of this year in the 5-to-9-unitsector, compared with the same time frame for 2002, were 49 sales for 2002 versus 55 sales for 2003. In regard to dollar volume, sales were $56.8 million for 2002 versus $61.1 million for 2003.

The sales figures through June of this year in the 10-plus-unit sector, compared with the same time frame for 2002, were 23 sales for 2002 versus 18 sales for 2003. In regard to dollar volume, sales were $49.7 million for 2002 versus $47.3 million for 2003.

Apartment Sales - Dollar Volume

There are many excellent loan programs available today. I just refinanced an apartment building where I was paying 7.45 percent fixed with a new 5-year fixed rate of 4.6 percent. My mortgage dropped approximately 40 percent. It is no secret that the number one factor for our steady real estate market and holding values is the current level of interest rates. How long will this last?

Partial list of sales for April, May and June:

Sales Price	Units	Sq. Ft.
1449 Washington Street $2,450,000	12	10,350
1460 Sutter Street $2,125,000	15	9,510
1015 Shotwell Street $1,325,000	10	6,649
1241 Bush Street $2,1000,000	17	9,950
1539 Greenwich Street $2,320,000	12	9,950
1874 Market Street $2,320,000	32	12,600
1357 Clay Street $2.825,000	13	8,875
1830 Clay Street $4,715,000	20	26,650
644 Lyon Street $3,000,000	18	12,900
134 Duboce Avenue $2,200,000	15	10,260

The opinions expressed in this article are those of the author and do not necessarily reflect the viewpoint of the SFAA or the San Francisco Apartment Magazine. Jay Greenberg is a real estate broker with Marcus & Millichap. He can be reached at 415-391-9220 ext. 300. Source for graphics: COMPS, Inc., Win2Data, First American Title Co., and Marcus & Millichap Research Services.