The 2-4 World
by Robert Link
Two Units
In step with historical trends, sales volume starts slowly in the first two months of the year. This can be interpreted by the annual market recalibration of both prices and value-increases at the beginning of the New Year. Duplex sales started off slightly slower this year compared to the fourth quarter of 2004. A total of 119 duplexes sold from January 1 to March 31. Comparing the first quarter of 2005 to the fourth quarter of 2004, sales volume decreased 29%; however average sales prices increased 4.4% to $1,234,459. The average price per square foot was $454.
Districts 5 and 9 had the highest concentration of duplex sales, with 31 and 29 respectively. District 5 is comprised of the following neighborhoods: Castro, Noe, Mission Dolores and the Haight. District 9 is made up of Soma, Mission and Bernal. This correlates with the data recently listed in this magazine regarding TIC formation made available by the DPW 2004 list of condo-conversion lottery winners and losers. Interesting fact: nine duplex buildings were selected in the condominium lottery this year, accounting for 9% of the total units.
Three Units
Sales of triplexes were a slightly different story than that of duplexes in the first quarter of the year. A total of 47 buildings changed hands during the first quarter, representing a 15% rise in volume from the last quarter of 2004. Average list prices increased to $1,371,438, up from $1,307,000 in the fourth quarter. Representing a 4.7% increase, this increase was the largest quarter-to-quarter increase in any of the three property groups profiled in this column.
The average sales price of a triplex in this period increased 4% to $1,428,253. The average price per square foot paid also increased to $388 from $372, a 4.1% increase. The largest sale in dollar amount in the first quarter occurred at 2091 Hyde Street, which sold at $3,075,000 for a large Edwardian sitting atop Russian Hill. The 4,300 sq. ft. building sold for $703 per sq. ft., indicating to me that the views must be stunning. This February's condo-conversion lottery selected a total of 38 triplexes, which accounts for 114 units or 57% of the total available conversion bids. This number establishes the triplex, at least in this year, as the building type most often converted to condominium through the lottery process.
This is clearly attributable to the sheer number of triplexes in the city and the relative popularity of TIC formations in this group. Triplexes were built with a larger average per unit size than four-unit buildings. A flat in a triplex allows a homebuyer more usable space and therefore a longer residency. In my experience, most people sell their two bedroom 1,200 sq. ft. flat because eventually the space becomes too confining.
Four Units
The sales volume for four-unit buildings remained steady over the last two quarters with a relatively equal number of transactions; with 25 in the first quarter of 2005 and 24 in the fourth quarter of 2004. The average listing price increased to $1,366,438, representing a 3.7% trend upward. The average sales price also increased to $1,396,000, a 2.7% increase over the previous quarter. Comparing the average list and sale prices, one sees the variance of the two numbers. The variance is an indication of the overbid percentage, not an exact representation of it. The variance here is 2.2%, the lowest variance in the two-to-four-unit category. Why is this? Are they just priced closer to true value or are there fewer buyers for this type of building keeping the values more conservative? Of the 25 sales in the past quarter, nine buildings were sold under asking, or 36% of the transactions. This should dispel the notion that every listing will be sold at a percentage over asking.
In my opinion, the variance is attributable to the more sophisticated buyer. At the current valuations, no one is buying four-unit buildings to hold; rather they are buying to create TICs. The four-unit buyer is more than likely a TIC developer who has a pro-forma assessment of the project before he/she drafts the offer. There is a limited range of variance that one allows for any line item, most importantly, the purchase price.
February's condo lottery resulted in 13 buildings selected from the four-unit sector, representing 52 converted units or 26% of the total lottery winners (San Francisco's condominium lottery permits conversion of 200 total units per year after certain requirements are met).
The opinions expressed in this article are those of the author and do not necessarily reflect the viewpoint of SFAA or the San Francisco Apartment Magazine. Robert Link is a real-estate agent with S & L Realty, a family-run property management and real-estate brokerage firm based in San Francisco's Richmond district. He can be reached at 415-386-3111 or robert@slrealty-sf.com. Copyright © 2005 by the San Francisco Apartment Magazine. All rights reserved.