Rarely does a week go by at City Hall these days without the announcement of another local tech company’s expansion — a development that always makes Mayor Ed Lee visibly gleeful.

When Lee took office in January 2011, The City’s unemployment rate was a staggering 9.5 percent. By this March, it had dropped to 8.1 percent, and much of the improvement is attributable to the tech industry.

Lee constructed his 2011 campaign around such job creation, the lack of which had been the bane of The City’s existence since the housing market crash of 2008. In a city often seen as ambivalent or even hostile toward businesses, Lee has cloaked his support for San Francisco’s business community inside the edgy cachet of The City’s resurgent technology industry.

But while it’s difficult to argue against new jobs, San Franciscans who remember the dot-com bubble of the late 1990s are now seeing other shadows of that era.

The first tech boom boosted and ultimately redefined The City’s economy, but many incoming tech workers had an easier time landing jobs than scoring affordable apartments. Meanwhile, as the business models of some tech companies began attracting critical scrutiny, more traditional businesses began leaving town for cheaper digs. In the end, the bubble burst, leaving the local economy decimated by 2002.

Now, traditional industries that survived the first tech wave are warily eyeing the mayor’s attempts to reform The City’s business tax system. While leaders in the labor-intensive tech industry would like to eliminate San Francisco’s payroll tax, talk of replacing it with a gross receipts tax scares other business executives. And the types of business  The City’s tax system favors will determine what kinds of workers San Francisco attracts.

The rapid growth of tech in the late 1990s also drove up the cost of housing, prompting many residents to move elsewhere. That gave rise to new eviction controls and, in some ways, tenants are better off today than in the 1990s.

But while the law still favors tenants, landlords have found new ways around the regulations. Rent control laws, which apply to units built before 1978, provide protection from unmitigated rent hikes, but only when current tenants stay put. As a result, some landlords have resorted to “buying out” tenants with one-time payments that clear the way for them to charge newcomers higher rents. Ted Gullicksen, the executive director of the San Francisco Tenants Union, expects more such buyouts in the future.

“Some people could be in a worse situation now, because the rents are just so much higher,” Gullicksen said. “If you do get evicted or bought out, the odds of you staying in San Francisco are pretty minuscule. Unless you are in that high-tech field, it’s hard to find a job, plus it’s hard to find an apartment.”

According to data released last week by the real estate site Trulia, San Francisco’s average rent has increased 13.2 percent since last year, the second-largest increase nationwide.

The mayor has an answer for that type of concern. After all, Lee rose through the City Hall ranks under Mayor Willie Brown — who symbolized unabashed support for business during the salad days of the first dot-com era — and he seems to have learned a few things from the travails of his old boss.

Lee’s discussions about The City’s new prosperity invariably mention the working class. He has urged today’s tech leaders to serve as a new generation of local philanthropists. He has endorsed so-called “unhackathons” for tech programmers to come up with solutions for social ills faced by The City. And he has demanded community benefit agreements from companies that take advantage of the mid-Market area payroll tax break.

Zendesk, the first company to do so, inked an with The City under which it will dedicate volunteers to local social services and open an online help center.

“What we wanted to make sure of was that there was not pressure to negotiate with every single company that decided to move in,” Lee said, “but have a master agreement that addresses how these companies can participate in issues that are impacting the neighborhood because of their presence, both positively and negatively.”

Well-connected tech investor Ron Conway — who led a well-financed committee to help Lee’s 2011 campaign — cites one other major difference between San Francisco’s twin tech booms. This one will be lasting, he believes, as social media companies look for the urban setting that best complements their products. At a February business event, Conway cited a survey of more than 100 companies that planned to fill 8,000 new jobs in 2012 alone.

Whereas five years ago 75 percent of Conway’s investment portfolio was centered in Silicon Valley, it is now evenly split between the South Bay and The City, he said. By the end of this year, he expects that San Francisco-based companies will become the majority of his investment interests. And this time it’s no bubble.

“This uptick is personified by the fact that these companies have real business models, which are completely validated and thriving,” Conway said. “If you can reduce unemployment in San Francisco by exploding the growth of tech jobs, a lot of other problems get solved as a byproduct.”

Read more at the San Francisco Examiner: http://www.sfexaminer.com/local/2012/05/tech-boom-carries-dot-com-echoes-san-francisco#ixzz1uE599ZJp

The media has it all wrong – securing mortgage approval and satisfying credit underwriting guidelines are not the difficulties plaguing mortgage consumers. It’s in meeting the rigorous documentation requirements that most people fall flat. The good news is, the fix is simple. Just scan, photocopy, fax, and deliver every aspect of your financial life. Then, shortly before closing, check everything again.

Mortgage consumers who enter the mortgage approval process ready to battle their chosen mortgage lender will come out with a nightmare story to tell. As the process, requirements, and guidelines are the same for everybody, your mindset is the game-changer. Accepting the redundant documentation necessary for lender approval will make everyone’s life easier.

When I was a kid, my father occasionally issued directives that I naturally thought were superfluous, and when asked why I needed to do whatever it was he wanted me to do, his answer was often: “Because I said so.” This never seemed to address my query but always left me without a retort, and I would usually comply. This is exactly what consumers should do during the mortgage approval process. When your lender requests what seems to be over-documentation and you wonder why you need it, accept the simple edict – “because I said so.” You will find the mortgage approval process much less frustrating.

So, what’s the perfect loan? Well, it’s one that (a) pays back the lender and (b) pays back the lender on time. Underwriting the perfect loan is not the goal that mortgage lenders aspire to today.

The real goal is the perfect loan file.

Mortgage lenders have suffered staggering losses and gone out of business because of the dreaded loan repurchase. As mortgage delinquencies increased, FannieMae and FreddieMac began to audit mortgage loans they had purchased and discovered substandard and fraudulent underwriting practices that violated representations and warranties made, stating these were high quality loans. Fannie and Freddie began forcing the originating lenders of these “bad” loans to buy them back. So a small correspondent mortgage lender is forced to buy back a single mortgage loan in the amount of $250,000. This becomes a $250,000 loss to a small mortgage business for a single loan, because it will never be repaid.

It doesn’t take many of these bad loan buybacks to close the doors on many small mortgage operations. The lending houses suffered billions of dollars of losses repurchasing loans from Fannie and Freddie, and began to do the same thing for loans they had purchased from smaller originators.

The small and medium sized mortgage originators that survived created underwriting guidelines and procedures to eliminate the threat of future loan repurchase losses. The answer? The perfect loan file.

It’s no longer necessary to have excellent credit, a big down payment and stable employment with income sufficient to support your debt service to guarantee your loan approval. However, you must have a borrower profile that meets the credit underwriting guidelines for the loan you are requesting. And, more importantly, you have to be able to hard-copy-guideline-document your profile.

Every nook and cranny of your financial life has to be corroborated, double- and triple-checked, and reviewed again before closing. This way, if the originating lender has created a loan file that is exactly consistent with published underwriting guidelines and has documented while adhering to those guidelines, the chances are that your loan will not be subject to repurchase.

Borrowers also need to prepare for processing and underwriting. Processors and underwriters are the people trained and charged with gathering (processors), all of your required-for-approval financial documents, and then approving (underwriters), your loan. You can assume these people are well trained and very experienced, as they are tasked with assembling and approving a high-quality-these-people-will-pay-us-back loan file. But just how do they go about that?

The process begins with the filter – the loan originator (a.k.a loan officer, mortgage consultant, mortgage adviser, etc.) – tasked to match the qualifications of a particular mortgage deal to the appropriate underwriting guidelines. It is the filter’s job to determine if a loan scenario is approvable and to gather the documentation to support that determination. It is here, at the beginning of the approval process, where the deal is made or broken. The rest of the approval process is just papering the file.

The filter determines whether the information provided by the borrower can be validated and documented. This is simple, since most mortgages are approved by automated underwriting engines such as Desktop Underwriter, and the automated approval generates a list of the documents needed to paper the loan file. An underwriter can, at this stage, request additional supporting documentation evidence at their discretion, as not all circumstances neatly fit into the prescribed underwriting box. If the filter creates a loan file with accurate information, then secures the documentation resulting from the automated underwriting findings, the loan will close uneventfully.

So, let’s begin with the pre-approval call. Mortgage pre-approval is typically accomplished with a telephone interview. A prospective borrower calls a mortgage rep (filter), and the questions begin. There will be lots of questions as this critical phase of the process is akin to the discovery period in a trial – you’ll need to disclose everything. Expect to answer queries on what you do for a living, how long you’ve been employed in your current field, and what your salary is. If there is a co-borrower, they will have to answer the same questions.

Every dollar in checking, savings, investments and retirement accounts, also known as assets to close, as well as gifts from relatives and non-profit grants, has to be accounted for. Essentially everything appearing on a borrower’s asset-radar-screen has to be documented and explained.

If you were previously a homeowner and sold your home in a short sale, or if you own a home now and plan to keep it as an investment or rental property, there are new and specific underwriting guidelines created just for you. In these cases, full disclosure of your credit and homeownership past can potentially eliminate unforeseen mortgage approval woes. For instance, FannieMae has a new underwriting guideline called “Buy-and-Bail,” for current homeowners’ planning on keeping their existing home as an investment/rental property. Properties not meeting the 30% equity test for “Buy-and-Bail” result in additional asset requirements to purchase a new home. Buyers with a short sale history may have to wait two to three years before they are eligible for mortgage financing again. Full vetting of your previous mortgage life will save you the dreaded we-have-a-problem call from your mortgage lender.

It all comes down to your proof. If the lender asks for a specific document, give them exactly what they are asking for, not what “should be OK,” – because it won’t be.  This is where the approval process tends to go off the rails, when the lender asks for specific documentation and the borrower supplies something else. Here, too, is where both sides get frustrated. So if the lender asks for a bank statement and there are 5 pages for that bank statement, send them all 5 pages, and not just the summary. If you send them the summary page and they ask again, don’t complain that the lender keeps asking for the same thing when you never sent it in the first place. This may sound elementary, but the vast majority of mortgage approval process woes stem from scenarios just like this.

The reason the mortgage approval process is now so rigorous is simple. Avoiding defaults and loan buybacks has become the primary goal of mortgage lenders.   Higher standards are reducing loan defaults,  which should mean fewer foreclosures in the future. Government data shows that  less than 2% of loans originated in 2009, that were resold to Freddie Mac and Fannie Maewent into default after 18 months, down from more than 22% default rates for 2007 loans.

So when your lender requests specific documents from you, give it them just “because they said so.”

You can thank my dad for that.

Real Property Tax Prorations

Every state bases its property tax calendar year differently. In California, for example, the calendar year is from July 1 to June 30^th. Some states collect property taxes in advance, some collect in arrears, and some collections depend on the time of year.  Taxes are most often paid in two installments.

The first thing is to figure out if the period during which you are closing involves prepaid taxes. If the taxes are prepaid, and you are the seller, you will receive a credit. If the taxes are prepaid, and you are the buyer, you will be charged. The opposite is true if taxes are not yet due and payable: sellers will receive a debit proration and buyers a credit proration. In some situations, even if the taxes are not yet due and payable, if your closing date is near the date taxes will be due, your closer will pay the taxes from the seller’s proceeds, credit the unused portion to the seller and charge the buyer accordingly.

Some calculating buyers will ask for no tax prorations in the purchase contract if it is apparent that the buyer will be expected to reimburse the seller for a portion of prepaid taxes. If you are a seller in this situation, and you do not understand the significance of “no prorations,” you will pay taxes for a period that you did not occupy the property.

Mortgage Interest Prorations

Unlike rent, which is paid in advance, mortgage interest is paid in arrears. When you pay a mortgage payment on Jan. 1, for example, it pays the interest for December. On a new mortgage loan, lenders want to collect interest up to 30 days before the first mortgage payment is due. This means if you close on, Nov. 15, your first mortgage payment will be due Jan. 1. The Jan. 1 mortgage payment will pay interest for December. As the borrower you will be charged 15 days of interest on your closing statement, from Nov. 15 to Dec. 1. To figure out your interest proration in this scenario, here is the formula:

• Loan Amount x Interest Rate = Annual Interest
• Annual Interest divided by 12 Months = Monthly Interest
• Monthly Interest divided by 30 Days = Daily Interest
• Daily Interest x 15 Days (to pay the interest to Dec. 1) = Interest Debit Proration

The same principal applies to sellers who must pay interest in conjunction with a loan payoff, pursuant to the lender’s beneficiary demand.

The city has risen to newfound prominence amid the Bay Area’s current tech boom and become the nation’s startup capital. To an unprecedented degree, companies developing a wide variety of technology-powered products and services, ranging from business applications to games, are choosing to cluster and grow in the city.This is San Francisco’s time.

This trend has pushed office leasing to historic levels, sent real estate prices soaring and driven apartment rents to new highs. It is refilling restaurants and bars, reshaping the area south of Market Street and even remaking the city’s politics, with politicians paying closer attention than ever before to what the tech sector wants. But it’s also raising fears among skeptics that it’s a bubble that is inflating, only to burst.

“It’s a very special renaissance, and it’s an unparalleled time in San Francisco,” said Kevin Hartz, a longtime tech entrepreneur who is now CEO of Eventbrite, a fast-growing digital ticketing service with nearly 200 employees in tech-trendy SoMa.

“The city is transforming truly into this digital city that is the epicenter of innovation throughout the world,” said Hartz, who was an early investor in PayPal.

The data points are striking:

Tech companies have signed 14 leases of more than 100,000 square feet in San Francisco since Jan. 1, 2011, the busiest such 15 months ever. More than 1 million square feet was signed by tech tenants this year alone, the fastest quarterly take-up of space in more than a decade. Seventy-five percent of first-quarter leasing was to tech companies, and the frenzy is unlikely to slow down soon. At least a half-dozen companies like Yelp, Salesforce and Square are known to be still shopping for big chunks of space.

The 415 area code, which includes San Francisco and Marin County, was the destination for $3 billion in venture capital investment last year. That exceeded the amount invested in the South Bay, though it trailed the Peninsula, according to National Venture Capital Association data.

San Francisco in February had the third-lowest unemployment rate in the state and Bay Area at 8 percent, trailing only Marin and San Mateo counties. For the last three years, the city has had the highest number of job listings at “high growth” startup companies in the region, according to jobs site StartUpHire. That’s nearly 40 percent of the Bay Area’s 2011 total, which has led the state that has led the country.

Apartment rents have shot up 14 percent in the last year, prompting developers to dust off plans for 3,000 new units now under construction. The average cost of a one-bedroom was $2,330 in 2011, up from $2,010 in 2009, according to RealFacts.

Shift from the Peninsula to S.F.

San Francisco’s central geographic location and its cultural diversity have placed it at a crossroads of design and technology, a sweet spot that is fueling the growth of technology enterprises from video gaming and mobile entertainment to business applications and big data management software.

Longtime early-stage tech investor Ron Conway, who’s funded 500 companies over his career, said that five years ago 75 percent of those he invested in were down the Peninsula, with the remainder in San Francisco. That ratio is now even, with San Francisco headed toward 60 percent this year, he said recently.

Many others see the same dynamic.

“There has been a shift in the center of the universe for technology. It was always down on the Peninsula and the South Bay, and it feels like it’s shifting up here,” said entrepreneur Niklas Lindstrom, a 12-year Silicon Valley veteran. Lindstrom’s San Francisco mobile location-based people-meeting application, called Skout, got $22 million in venture funding this week.

The city’s complexion has changed significantly as a result, Lindstrom said, particularly South of Market Street.

“Twelve years ago I would never have imagined it like it is today,” he said. “You are in a coffee shop and there’s people pitching VCs (venture capitalists) — you can hear it.”

Shayan Zadeh, co-founder of the dating site Zoosk and a SoMa resident, said he sees flyers on the street in SoMa advertising engineering jobs.

“That’s totally new, and it didn’t exist five, six years ago,” said Zadeh, whose company is approaching $100 million in annual revenue.

Service businesses like The Creamery at Fourth and Townsend Streets say they are being lifted by the rising tide. Opened in December of 2007, the cafe was slow during the first half of 2008 and then things picked up considerably. The owners opened a taqueria next door, and a catering business that counts numerous area tech companies as regular customers.

“The tech community is a key element of our customer base,” said manager Ivor Bradley.

“A couple of years ago, there was a lot of empty office space, empty car parking spaces. Now there’s none of that,” he said. “I can feel that there’s a busier presence in the neighborhood.”

Ghost of the bubble

However, with tech firms gobbling up space at ever-higher rents, companies hiring at a breakneck pace, investors pouring billions of dollars into a panoply of untested ventures, and techies once more packing San Francisco’s bars and restaurants, others feel the presence of something else: the ghost of the dot-com bubble.

That, after all, was San Francisco’s last tech explosion. The years ending in 1999-2000 saw a seemingly similar burst of growth among pioneers of the then-nascent Internet that also rippled rapidly through the city’ real estate, finance, housing and entertainment sectors — before it collapsed nearly as quickly.

But despite surface similarities, those inside and outside the tech industry who have been through both eras say the differences are more striking.

The Internet, for one thing, is much larger, with more than 2 billion people now online, and the mass use of mobile computing devices did not exist a decade ago. Access to international markets is greatly improved, emerging economies offer enormous opportunities, and technology itself has greatly lowered the cost of starting a tech company. Software is also disrupting an ever-widening range of industries.

But the biggest difference can be summed up in one word: revenue.

The new breed of large San Francisco technology companies have real customers and real revenue, sometimes in staggering amounts, and defensible balance sheets. The gaming company Zynga, for instance, recently paid $228 million for its Showplace Square headquarters building — cash.

“The biggest difference between this cycle and the dot-com boom and bust of the late 1990s is that the companies driving job growth now are actually making money,” said Michael Cohen, now of the real estate investment firm Strada Investment Group and former director of San Francisco’s Office of Economic and Workforce Development.

“The companies that are taking big blocks of space are generally more mature companies than in the late 1990s — it’s companies like Salesforce and Riverbed and Macy’s.com that have real track records and real balance sheets,” Cohen said. “Even the relative startups like Zynga are making boatloads of money.”

The bench of companies in the city that could go public is deep, and includes Airbnb, AKQA, Dropbox, Eventbrite, Kabam, Kixeye, Splunk, Square, Trulia, Twitter and Yammer.

Cautious growth

Companies are also being more prudent about the pace and scale of hiring.

“This is not a bubble,” said Tom Silver, senior vice president of North America at Dice Holdings Inc., the online job board for technology workers.

“As a result of the crash, employers are smarter about hiring,” Silver said. Over time, he said, tech sector employment has improved to where we are now. The current job market is not the result of a quick run-up in demand.

The city’s increasing concentration of companies from startups to behemoths is creating its own gravity that is continuing to draw in companies from elsewhere in the region, or outside the area, so as to be able to better compete for talent.

Kabam, a successful social gaming company that raised $115 million in venture capital last year, said recently it will close its Redwood City headquarters and move some of those 200 employees to San Francisco, where the company already has a studio of nearly 200 workers. The biggest block of Kabam’s nearly 500 employees already lived in San Francisco, and the city is more accessible to others living in the East and North Bay areas, said Kabam CEO Kevin Chou.

“The most important reason is that engineering talent is easier to get in San Francisco,” said Chou, himself a city resident.

“You have all these very innovative companies in San Francisco. It feels a bit more like a community,” he said. “You can’t beat the culture and the restaurants and the coffee shops and the entertainment. If you are a young entrepreneur, living in the city is incredible.”

“In this economy, talent is the single-most-scarce resource, and that talent wants to live in San Francisco more than Mountain View,” said Cohen. “Being able to offer a San Francisco address is a big advantage.”

Hunt for talent

Meanwhile, the decreased cost of starting a technology business and a flood of early-stage capital is leading many people to try to be entrepreneurs, thus making it that much harder to hire talented people in a tight labor market, particularly for technical jobs.

Greg Tseng, CEO of Tagged, a social network for meeting new people, said, “These days it’s so easy, one might say even too easy, to start a company, that every engineer thinks (he) can be the next Mark Zuckerberg.”

“There are so many little companies getting started it spreads the talent pool of Silicon Valley way too thin,” said Tseng. “Companies like us and a lot of these smaller companies just can’t hire.”

Indeed, StartUpHire, a company that claims to have the largest online database for jobs at startups, recently compiled data in partnership with the National Venture Capital Association showing that San Francisco had by far the greatest concentration of jobs at “high growth” startup companies in California, said Steve Roberson, StartUpHire general manager.

Of the 42,000 total number of startup jobs listed in 2011, 36.3 percent were in California, and of those, more than 29 percent were in the Bay Area.

Of those in the Bay area, 39.9 percent were in San Francisco, up from 39.1 percent and 32.6 percent the prior two years. That compares with less than 11 percent in San Mateo in 2011, about 9 percent in San Jose and Santa Clara, and between 7 percent and 8 percent in Sunnyvale and Palo Alto.

People just out of college with degrees in computer science are getting nearly $100,000 starting salaries in the city, and poaching for talent among companies is rampant, said Zoosk’s Zadeh.

The fevered atmosphere belies a central fact, however, which is that the amounts of money it takes to launch a startup these days with the advances in technology are tiny compared with a decade ago, he said. So even if many of the startups fail, as they likely will, the capital lost will likely have little impact on the wider economy.

For now, when companies are stalling out or failing, the employees are quickly being absorbed into other enterprises.

“There’s a lot of cheap experimentation going on,” Zadeh said.

It’s a far cry from when Yammer relocated to San Francisco from Los Angeles in 2009 and moved into a shared 9,000-square-foot office in SoMa with Eventbrite, which Hartz and his wife, Julia, helped co-found in 2006.

Their building at 410 Townsend St., which sits within sight of the Caltrain station, was half empty, said Yammer CEO David Sacks, who was also in the thick of the last boom as the first COO of PayPal.

The building subsequently filled up, though a number of tenants have left for larger space. Eventbrite, which is processing $500 million a year in ticket sales, occupies more than 30,000 square feet at 651 Brannan St.

Yammer, which raised $85 million in February, has been negotiating a possible lease for 130,000 square feet on Third Street.

“A dozen years ago, there were no real tech companies up in the city. Now, I’d say it’s probably 50-50 between San Francisco and the Peninsula for consumer Internet companies,” Sacks said.

“It’s going to keep going,” Sacks predicted. “We are going to see at least two more very good years in San Francisco, at least two really exciting years.”

Reporting contributed by: Lindsay Riddell, J.K. Dineen, Eric Young, Blanca Torres, Mark Calvey.

Us vs. then

How current markets compare to the last tech boom:

4/3/12

Two significant legislative enactments, the Costa-Hawkins Rental Housing Act and the Ellis Act, are likely to come under attack during the current session of the State Legislature in Sacramento.

TheCosta-Hawkins Rental Housing Act (Civil Code Section 1954.50-1954.535) (AB1164, Chapter 331, Statutes of 1995) ("Costa-Hawkins") was passed by the State Legislature in 1995. It allows residential property owners to charge market rate rent upon vacancy of existing rent stabilized units (termed "vacancy decontrol"), permanently decontrolled single-family rental housing, and prohibited new construction from being subject to rent control.

The Ellis Act (Government Code § 7060-7060.7) (SB 505 Chapter, Chapter 1509, Statutes of 1986) ("Ellis Act") was passed by the State Legislature in 1986. It permits owners of rent stabilized properties to opt out of the rental housing business, thus the Ellis Act depletes the affordable housing rental stock.

This is what is being said about the acts by tenant activists:

Both Costa-Hawkins and the Ellis Act ultimately encourage landlords to promote tenant turnover, because landlords will receive higher rent from new tenants or can sell their vacant Ellis'd property for new development. In some cases, this has led to tension between tenants and landlords and in extreme cases the harassment of tenants. The two acts have also exacerbated each other, because tenants evicted through the Ellis process cannot move to another rent stabilized unit, due to the higher rents caused by Costa-Hawkins vacancy decontrol.

Costa-Hawkins has also reduced the ability of jurisdictions to provide new affordable housing units, due to the connection made in the Palmer/Sixth Street Properties v. City of Los Angeles court decision. The court found that housing policies mandating the inclusion of affordable units in new multifamily rental projects violated Costa-Hawkins if incentives were not provided to the developer. This case could impact the ability of cities to provide new affordable housing units if developers elect not to utilize a city’s development incentives.

At this time, the repeal of Costa-Hawkins and the Ellis Act would eliminate the adverse effects that both policies have had on the ability of rent control cities to maintain stable rental rates and ensure the availability of affordable housing for all segments of the population.

http://trends.truliablog.com/vis/metro-movers/

Short answer:  YES.

Although no definitive measure exists, a “Seller’s Market” is achieved when sellers generally have the upper hand in negotiations, in price and terms.  This environment is characterized by quick marketing periods, sellers receiving multiple offers, sale prices exceeding list prices, and buyers being frustrated by a lack of available inventory.  If you are in the market to purchase today, perhaps some of this sounds familiar?

Months Supply Inventory (MSI)

In an attempt to be more scientific and objective, economists will often point to supply and demand curves and more specifically, absorption rates, to better define exactly when a Seller’s Market exists.  The absorption rate is a measure of how rapidly inventory is being purchased relative to supply.  In real estate, an excellent expression of this is Months Supply Inventory (MSI), which tells us how many months it would take for the current number of homes on the market to sell if no other listings were to come to market.  Depending on where you are and who you ask, a Seller’s Market exists when there is less than 3 to 6 MSI.

San Francisco Supply & Demand

San Francisco Monthly Supply of Inventory

 Noe Valley Supply & Demand

Noe Valley Monthly Supply of Inventory

San Francisco and Noe Valley

By this measure, San Francisco has always been a Seller’s Market!

In reality, although San Francisco is certainly subject to the same broad-based fundamentals which drive the regional/national markets, SF real estate moves according to micro-markets or micro-trends that affect property differently depending on its location, condition, unique characteristics, or compromises that a buyer must make.

At the moment, Noe Valley is one micro-market that seems to be leading the metric trends we’re seeing Citywide.  It would be an understatement to say buyers are indeed eager to buy in Noe Valley, where inventory is getting snapped up at a pace twice as fast as it is elsewhere in the city.  And that’s really saying something, where San Francisco condos as a whole are taking less 60 days to sell and where there is only 1.5 Months Supply Inventory.  Condos in Noe are selling at an amazing 30 days and have 0.6 MSI (that’s 18 DAYS Supply Inventory!)

Taking those flaws into consideration, Realtor Bernard Katzmann listed it for $1.1 million at the inauspicious sales time of Thanksgiving. Then he watched in amazement as 22 offers came in - many for all cash - and it ended up selling for $1.54 million.

"Lots of tech companies were represented" among the bidders, he said. "I heard that many buyers want to get in now before Facebook goes public (and spawns scores of new millionaires), which is pushing demand."

In a still-moribund real estate market, Noe Valley stands out as a neighborhood buoyed by positive fiscal forces.

All the money flowing into tech firms, and all the tech jobs being created in Silicon Valley and San Francisco, have been a boon for Noe Valley because of its fortuitous location for Peninsula, South Bay and downtown commutes, along with its walkable, small-town feel, family-friendly vibe (it's called "stroller valley"), and charming, albeit pricey, Victorians.

"It's like a little village within the city," said Sally Smith, co-publisher and editor of the Noe Valley Voice, the monthly neighborhood newspaper. "It has that community feeling that everybody wants."

"Noe Valley is a favorite neighborhood for techies because it's so close to 101 and 280," said Tim Gullicksen, an agent with Zephyr Real Estate. "It's a pain to live on the north side of San Francisco because they have to get all the way through town to get to the freeways."

Tech firms' buses a plus

The private bus routes sponsored by tech firms are a draw, said Zephyr agent Danielle Lazier. "We see a lot of first-time buyers from tech companies who still want to have a city lifestyle; they don't want to live in the suburbs, but they work down south. What I notice is when people from Google, Apple, Yahoo and Genentech come in for a first meeting, we literally draw a line in the city because of the commute. Noe Valley is at the top of the list, then Bernal, Mission, Dolores, Cole Valley."

The numbers tell the story. The median sales price in San Francisco has tumbled to $653,000, down 22 percent from its 2007 peak of $840,000, according to real estate information service Dataquick. That's a far less dramatic slide than most other California cities. But in ZIP code 94114, which includes Noe Valley and the Castro, the median sales price for single-family homes now stands at $1.332 million, only 5 percent below its 2007 peak of $1.406 million. The median condo price is $820,000, down 8.5 percent from its 2007 peak of $896,000.

"It's not completely bulletproof, but it's more stable than other areas," Lazier said. "Not everything sells over asking price the way it used to."

Noe isn't the only San Francisco neighborhood whose cachet has insulated it from the real estate downturn. ZIP codes 94117 (Haight-Ashbury/Cole Valley) and 94123 (Marina/Cow Hollow), for instance, have seen even less pricing impact.

Tight inventory is one factor that keeps Noe Valley prices up. Last year, 163 existing single-family homes, 143 existing condos and 10 new residences changed hands in the ZIP code, Dataquick reported.

Location, location, location

"Noe Valley has several things going for it," said Jed Kolko, chief economist at real estate site Trulia.com. "Being closer to the Silicon Valley commute than other desirable parts of the city is a big plus. It's also convenient to downtown. And it's a neighborhood where there's not a lot of new construction to relieve price pressure as more people go after pretty much the same number of homes."

Brendan Collins, owner of Collins Construction, buys "fixer" houses, remodels and expands them, and then sells them. Noe Valley, where the older Victorians and Edwardians are modest in size because they were built for working-class families, is particularly fertile ground because it is such a desirable neighborhood for families, he said.

Vaishnavi Bodanapu, who is creating a social enterprise around food, and her husband, Sundeep Peechu, a venture capitalist in Palo Alto, are hunting for a two- or three-bedroom house in Noe Valley, where they hope to start a family.

"If you're working in the South Bay, it is one of the best spots to be in the city, other than SoMa, which doesn't have the same neighborhood feel," she said.

"I certainly think it's a little more expensive than it should be," she said. "But Noe has its own charm. You get more for your money in Bernal Heights, but Noe feels like more part of the city."

A dearth of for-sale properties means they haven't made an offer yet. According to Realtor.com, ZIP code 94114 had 36 single-family homes for sale in January, half the number of listings a year earlier.

"There are lots of people in the market to buy, but there's not a whole lot of inventory," Bodanapu said.

Pete Brannigan, an agent with Brown & Co. Real Estate, said more than 100 people streamed through a recent open house. "It was a good price point for the neighborhood, just under a million dollars, meaning it was a, quote-unquote, starter home for Noe," he said.

Many longtime residents say the neighborhood has maintained its character throughout the influx of new inhabitants.

The current tech-powered surge of house hunters is nothing new, said Smith, the Noe Valley Voice editor. She's seen similar dynamics several times before.

"I moved here in the wave in the 1970s when lots of young people came here from Haight-Ashbury. Once they started meeting and having kids, they spilled into Noe Valley," she said. "About 10 years later, as the tech industry boom was just starting, people who worked in Silicon Valley wanted to live here. The (private corporate) buses definitely created another wave. Now there are new businesses that are accelerating people's desires to live here. We've been seeing higher demand, and rents and home prices going up."

A sense of community

"There has always been a really big sense of community here, and there still is," said Carol Yenne, owner of Small Frys, a children's store on 24th Street - "downtown Noe Valley." She and her husband have lived in Noe Valley for 36 years. Their two grown daughters now live in the neighborhood with their own families.

"There aren't fancy cars or huge McMansions here the way there are in places like Menlo Park, where people tear down houses and build ones three times bigger," Yenne said. "Here they might gut the interior and build an addition on the back, but there isn't the kind of ostentatiousness that you see in other areas (touched by) the technology boom. When I meet people on the street here, I don't know if they're a fireman or a Facebook millionaire; they all look the same."

While prices continue to climb, it helps to remember that affordability is always relative, she said.

"When we bought our (Noe Valley) house in 1975, it cost nothing compared to nowadays," Yenne said. "But my mother back in Montana cried because we could have bought 10 acres and a ranch house there for the same price, and here we got a 25-foot-by-100-foot lot with an old, crummy house."

Carolyn Said is a San Francisco Chronicle staff writer. csaid@sfchronicle.com

This article appeared on page A - 1 of the San Francisco Chronicle

Source: http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2012/02/20/MNIS1N7MM8.DTL

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"Signs of an improving economy are beginning to appear, and we are excited about the outlook and our brand position for the coming year," commented Randall Kostick, Chief Operating Officer of Zephyr Real Estate. "Zephyr's elite team keeps our brand in this coveted position."

About Zephyr Real Estate Founded in 1978, Zephyr Real Estate is San Francisco's largest independent real estate firm with over $1 billion in gross annual sales and a current roster of more than 200 full-time agents. In 2010, Zephyr launched its new website, which has earned three web design awards, including the prestigious WebAward for Outstanding Website from the Web Marketing Association. Zephyr Real Estate is a member of the international relocation network, Leading Real Estate Companies of the World; the luxury real estate network, Who's Who in Luxury Real Estate; and the local luxury marketing association, the Luxury Marketing Council of San Francisco. Zephyr has six strategically located offices in San Francisco, a business center in Marin County, and serves a large customer base throughout the San Francisco Bay Area. For more information, visit www.zephyrsf.com .

        Contact:
        Melody Brown
        Zephyr Real Estate
        San Francisco, CA
        415.729.3555
        Email Contact

SOURCE: Zephyr Real Estate

That's the fifth consecutive annual loss and the biggest decline since 2008, when markets were in free fall and prices plummeted more than 18%.

Prices have been falling since they topped out in 2006, and are down 33.8% from their peak, according to the S&P/Case-Shiller national home price index.

"The housing market ended 2011 on a very disappointing note," said David Blitzer, spokesman for S&P. "While we thought we saw some signs of stabilization in the middle of 2011, it appears that neither the economy nor consumer confidence was strong enough to move the market in a positive direction as the year ended."

After prices fell sharply in 2007 and 2008, declines over the past three years have been more modest. Many analysts thought markets were bottoming out and would soon stabilize, and even pick up. The last quarter of 2011, when national index prices fell a steep 3.8% from the third quarter, may have dashed those hopes.

"While we thought we saw some signs of stabilization in the middle of 2011, it appears that neither the economy nor consumer confidence was strong enough to move the market in a positive direction as the year ended," said Blitzer.

Robert Shiller, the Yale economist and co-creator of the Case-Shiller indexes, is more optimistic. Last year, he thought home prices were in danger of falling by up to another 25% before they bottomed out.

On Tuesday, he cited several economic reports as signs that housing could start stabilizing. He also focused on surveys that indicated that Americans are very confident of the long-term prospects for housing as an investment.

During the boom, about 90% of the people he surveyed thought it was a good time to buy. Recently, 92% of people agreed with that statement. Still, Shiller is far from bullish on the housing market.

"We may be on the verge of recovery but we may not," he said.

The S&P/Case-Shiller 20- and 10-city indexes recorded similar sharp declines during the quarter. Among individual cities, Atlanta recorded a 12.8% year-over-year fall, the worst of any city.

Other big losers were Las Vegas, down 8.8%, Chicago which fell 6.5% and Seattle, which declined 5.6%. Detroit, where prices crept up 0.5% for the year, was the only city in the 20-city index to register a gain.

Multi-million dollar foreclosures

In the past five months prices have declined at an annualized rate of more than 6%, according to Dean Baker, director with the Center for Economic and Policy Research, a trend he said is especially troubling. He cites some reasons for hope, however.

"Case-Shiller is a lagging indicator and most of the contracts reflected in this report were signed in August and September," he said. "The latest economic data shows a much brighter picture."

Industrial production has been up and unemployment has dropped.

"The economy is stronger now than in the first half of 2011 and that will filter down to home prices," said Baker.