the 2-4 world
Realtors LEED the Way
by Erika Burke
During the first quarter of 2009, 36 2-4-unit buildings transferred for a total dollar volume of $38,423,750. The average sales price of $1,097,821 was 95.80% of the average list price, and properties stayed on the market for an average of 87 days. Ostensibly, this is a slow-moving, low-volume market in which list prices are higher than the average buyer is willing to pay. Winter traditionally brings us a slower market. Buyers and sellers alike are relying on statistics, net sheets and numbers more than ever right now to determine when and how they will make their moves.
Notable Sales
Coldwell Banker transferred 10 properties for the highest dollar volume of $13,495,750 and 16.7% of the market share. They were followed by Pacific Union/GMAC with 8 sales for $8,731,500 and 10.80% share of the market. Vanguard Properties, Inc. and Zephyr Real Estate followed with 5 sales each. In fifth place, McGuire Real Estate brought the highest average sales price of $1,625,000.
Kudos to Michael Harrison of Vanguard Properties for the sale of 3913-3917 22nd St. in what appeared to be zero days. The listing had been on the market at $1.8 million with no takers for several months when Erik Von Muller of Paragon brought a neighbor to the property for a successful sale at $1.5 million. Harrison entered the property into the SFMLS for comp purposes.
Congratulations to Vali Bensinger of Frank Howard Allen Realtors for the sale of 83-85 6th Ave. after 309 days on the market. Joseph Zadeh of McGuire Real Estate brought the successful offer for the final sales price of $1,900,000—5% under the original asking price.
2 Units
This quarter, 25 2-unit properties transferred for a total dollar volume of $26,039,250, which is 54% less than the previous quarter and 68% less volume than the first quarter of 2008. The average sales price of $1,041,750 reflects a drop of 22% from the previous quarter and 27% from the first quarter of last year. Four units transferred in the Bayview, three transferred in Noe Valley, and there were two transfers each in the Inner Mission and the Marina.
The average price per sq. ft. in a 2-unit was $394.17. The highest sales price was for $2,003,250 in the Marina, while the lowest was $440,000 in the Excelsior.
Comparing 2-unit sales since the first quarter of 2005, the volume began with 130 2-unit transfers. The next year it fell to 114, then 77, then 58 and finally 25 in 2009, for an 80% decline in volume since 2005. The average sales price began at $1,198,513 in 2005, rose 9% in 2006, climbed another 3% in 2007, and continued 4% higher in 2008 to $1,418,138. It then dropped by 22% from the first quarter in 2008, though only 15% from the first quarter in 2005.
Many of the 2-unit properties that transferred focused their marketing on their vacancies. Keeping vacant units pristine, with no Ellis Act or other eviction, is critical and of value in this marketplace if the owner of the property intends to condo-convert the units under the current legislation. Always check with your real-estate attorney for the latest legislation changes and procedures before beginning an eviction action.
We are not seeing these buildings marketed as TICs, as we have in previous years. This is a huge change in the 2-4-unit market sector, which has resulted in a definitive stemming in the tide of speculation. The owner-user has gladly crept back into the picture, and finally income property appears to be gaining speed as a viable investment with returns.
3 Units
The average sales price for the five 3-unit properties that transferred was $1,218,600, a 31% drop from the first quarter of last year and a 7% drop from the final quarter of last year. The average number of days on the market rose to a high of 119 days, with an average list versus sales price of 90.55%. The total dollar volume of $6,093,000 represents a drop in volume of 81% since 2005, 72% since the first quarter of 2008 and 65% from the final quarter of 2008.
The number of transactions during the first quarter since 2005 has steadily declined. In 2005 it was 48, then 44, then 26, then 14, and finally 5 in the first quarter of 2009. The neighborhoods of Inner Richmond and Sunset, Noe Valley, Mission Dolores and Hayes Valley each had one sale. The average price per sq. ft. was $338.45, with a building average of 3,809 sq. ft. The cost per unit in this type of property now stands at $406,200.
4 Units
Six 4-unit properties transferred during the first quarter, with an average sales price of $1,221,083. The average sales price has fallen 32% from the first quarter in 2008 and 16% from the final quarter of 2008. The average 72 days on market is only 2 more than last year’s first quarter and 11 days more than the final quarter of 2008. At a list versus sales price of 96.29%, sellers of these properties are more aware of the value in today’s market. The total volume of $7,326,500 demonstrates a 40% decline in volume from the final quarter of 2008 and a 58% drop in volume from the first quarter of last year.
A unit in a 4-unit property costs an average of $305,270 and the average price per sq. ft. is $363.03. Noe Valley had three transfers, the Inner Mission had two and Haight Ashbury had one transfer during the first quarter. In the last five years, 2007 showed the highest sales volume. The average sales price has risen and declined as follows: 2005 was 9% higher than this quarter, then 2006 dropped by 2%, 2007 rose by 18% to $1,575,558, 2008 dipped
by less than 1%, and 2009 is down 22% from 2008.
The Big Picture
Since the first quarter of 2008, we have seen a steady 22% to 32% drop in average sales prices, with total volume dropping sometimes more than 50% in each building type. To say we have a sluggish market in residential multiunit sales is optimistic. With average sales prices dropping as significantly as we have seen, there is not much movement on the part of sellers unless they had substantial equity due to a lengthy holding period. This is the time to trade up. The four-unit is still the best value per unit, though not by much. We’re seeing a $56.25 difference in price per average sq. ft. between the 2- and 3-unit property, and an additional $24.58 average difference per sq. ft. between the 3- and 4-unit property.
The spring months usually bring an upturn in real-estate sales and we can expect to see more properties coming to market. Next quarter’s report should show some of the averages on the rise. It is doubtful that we will return to the average prices and volume of prior years any time soon, though any upward movement would be welcome. This is the time to add value to your properties in other ways. Your asset is no longer of tremendous value just by virtue of it being there.
When prepping property for market or rental upon vacancy, owners should retrofit with sustainable living features like energy efficient appliances, CFL light bulbs, low-E dual-pane windows, low-VOC carpet and paint, low-flow shower heads and faucets, tankless hot water heaters, energy efficiency compliance work, insulation and duct sealing, among many other choices. You will find tenants and buyers seeking these choices. In smaller properties, an energy audit can provide direction for small cost retrofitting that can be made by owners, which should save money, provide a return on investment and attract the kind of tenant to whom sustainable choices matter. In today’s market, these improvements add real value.
The San Francisco Multiple Listing Service has begun to offer Built/Remodeled Green Certifications for all residential real estate, as a means of allowing the realtor to add this to their listing features along with any ratings. Since my column in January’s issue, I have been accredited by the National Association of Realtors with the “Green” designation and I am testing soon to obtain my LEED Accredited Professional designation from the United States Green Building Council.
Realtors with the green designation can assist you in navigating the wealth of information available about green property sales and purchases, as they have been trained in green building principles and practices, valuating green improvements as part of a remodel and sale, regulatory issues, sustainable communities, land planning, green living and more. No longer merely a trend, sustainable living has become a lifestyle choice, not only with the professionals who support you in your real-estate goals but with the new buyer or tenant who is looking for the landlord and seller who is contributing to the greater good of our city and its residents. Watch how this segment of sales and the discussion of green features and conservation for multiunits grow in the next year.
The opinions expressed in this article are those of the author, and do not necessarily reflect the viewpoint of the SFAA or the SF Apartment Magazine. Erika Burke is a green realtor with Zephyr Real Estate and brings sustainable living, green building and renewable energy resources to her real-estate practice and clientele. She can be contacted through her blog, www.greenblogsf.com, or 415-279-1135. Copyright © 2009 by Black Point Press. All rights reserved.