Pacific Union and John Burns Real Estate Consulting Team Up to Deliver Exclusive 2017 Outlook

We are asked almost daily to predict the future of real estate and to answer the question “When is the best time to invest in the market?”


While Pacific Union’s regional and local market knowledge is significant and our decision-support tools are comprehensive and informative, we are not qualified as economists to provide substantive, forward-looking advice beyond a season or a few quarters.

That’s why we are pleased to announce that Pacific Union has formed an exclusive partnership with John Burns Real Estate Consulting (JBREC) to publish the first San Francisco Bay Area Real Estate Outlook 2017.

JBREC is the leading national source of independent housing research, advice, and consulting, with the goal of helping investors make informed housing-industry decisions. JBREC backs its research with detailed data, proprietary tools, and experienced professionals who hold doctorate degrees.

John Burns, CEO of his namesake consulting firm, will leverage his 20-plus years of national real estate consulting experience – as well as his MBA from UCLA and bachelor’s degree in economics from Stanford University – to provide a lens into San Francisco Bay Area real estate through 2017.

On Wednesday, Nov. 5 at 5 p.m., John and I will proudly introduce the exclusive report at the SFJAZZ Center in San Francisco. We will deliver a content-rich hour of key macro- and microeconomic attributes, risks, and variables that drive our residential real estate markets, including population growth; job growth and quality; mortgage rates; and new supply of housing units.

The presentation will include a thorough overview of the Bay Area, plus a detailed examination of the nine regions Pacific Union serves: Contra Costa County, the East Bay, Marin County, Napa County, San Francisco, Silicon Valley, Sonoma County, Sonoma Valley, and Tahoe/Truckee.

While our industry has multiple indexes that reflect the previous quarter’s results – what we call “trailing perspective”– this exclusive presentation and report will offer our real estate professionals and their clients a look into the future of Bay Area real estate.

Look for details from your Pacific Union real estate professional regarding the November event, which will be open to 350 attendees on a first-come, first-served basis. We will also stream the presentation via a live simulcast in both English and Mandarin.
Once again, Pacific Union strives to innovate and provide thoughtful market intelligence to our clients, and our partnership with JBREC is the next step in fulfilling that goal.

Sincerely,
- Mark A. McLaughlin, CEO, Pacific Union

Survey: Investors Losing Interest in Bay Area, Opening the Door for First-Time Buyers

Good news for Bay Area buyers: A recent survey found that investors today are far less active in the region’s real estate markets than in years past, helping to ease some of the fierce competition for homes.

The news is especially welcome for first-time buyers, who have struggled to compete against well-heeled investors paying all cash for starter homes and then turning them into rental properties or waiting a few months and flipping them at even higher price points.
The California Association of Realtors’ 2014 Investor Survey, conducted in May and released to the public on Wednesday, found that  investors are changing their strategies and moving away from buying homes in more popular, urban areas in favor of rural locations of the state where better deals can be found.
In 2014, nearly half (45 percent) of California investors said they purchased properties in rural counties such as Kern, Fresno, Merced, San Joaquin, and Tulare, up from 27 percent in 2013, according to the survey.
Meanwhile, 15 percent of investors purchased properties in Northern California in 2014, down significantly from 27 percent in 2013.
The organization gave an early look at some of the survey data two weeks ago, and Pacific Union reported at the time that rising home prices have curtailed investment activity in high-dollar Bay Area markets like Silicon Valley.
The survey also found that 67 percent of investors paid cash, and one-third were residents of foreign countries, with China, Mexico, Taiwan, and India being the top countries of origin. Investors owned an average of 8.3 properties in 2014, up from 6.5 properties last year.
Reflecting the recovering housing market, the majority of investment properties purchased in the last year (70 percent) were equity sales, while 18 percent were short sales and 12 percent were foreclosures.
Most investors said they made minor or no repairs to the properties, and 55 percent said they intend to sell them within six years.


(Image: Flickr/Woodleywonderworks)

Billionaire says Real Estate is Best Investment Possible

Billionaire money manager John Paulson was interviewed last week at the Delivering Alpha Conference presented by CNBC and Institutional Investor. He boldly stated:

"I still think, from an individual perspective, the best deal investment you can make is to buy a primary residence that you're the owner-occupier of.”

Who is John Paulson?

Paulson is the person who, back in 2005 & 2006, made a fortune betting that the subprime mortgage mess would cause the real estate market to collapse. He understands how the housing market works and knows when to buy and when to sell. What do others think of Paulson?

According to Forbes, John Paulson is:

“A multibillionaire hedge fund operator and the investment genius.”

According to the Wall Street Journal, Paulson is:

“A hedge fund tycoon who made his name, and a fortune, betting against subprime mortgages when no one else even knew what they were.”

Why does he believe homeownership is such a great investment?

Paulson breaks down the math of homeownership as an investment:

"Today financing costs are extraordinarily low. You can get a 30-year mortgage somewhere around 4.5 percent. And if you put down, let's say, 10 percent and the house is up 5 percent, which is the latest data, then you would be up 50 percent on your investment."

How many are seeing a 50% return on a cash investment right now?

Paulson goes on to compare the long term financial benefits of owning verses renting:

“And you’ve locked in the cost over the next 30 years. And today the cost of owning is somewhat less than the cost of renting. And if you rent, the rent goes up every year. But if you buy a 30-year mortgage, the cost is fixed.”

Bottom Line

Whenever a billionaire gives investment advice, people usually clamor to hear it. This billionaire gave simple advice – if you don’t yet live in your own home, go buy one.

How S.F.'s Mid-Mission district is transforming

Construction workers connect rebar at a 126-unit apartment development at 1415 Mission St. at 10th Street.
Photo: Michael Macor, The Chronicle

by J.K. Dineen








Mid-Mission is giving Mid-Market a run for its money.

While the tech-fueled renaissance of central Market Street has generated headlines around the world, a block away the parallel stretch of Mission Street is undergoing its own, much quieter transformation.

Over the past five years, 1,400 new housing units have opened on Mission Street between Fifth Street and South Van Ness Avenue, including 800 studio apartments that landlord Angelo Sangiacomo built between Seventh and Eighth streets.

And there are a lot more coming.

On Mission between Eighth Street and around 10th Street, contractors are pouring floors on three mid-rise residential towers, construction that will bring an additional 500 units to the corridor by the end of 2015.

At 1400 Mission St., Tenderloin Neighborhood Development Corp. is building 190 affordable family units. Across the street, at 1415 Mission St., Martin Building Co. is working on 126 apartments, while a block to the east at 1321 Mission St., Berkeley developer Patrick Kennedy is well under way on 160 micro-studios and "micro-suites," half of which will provide housing for students from the California College of the Arts.

Plans for 750 more units

In the past two weeks alone, developers have submitted plans that would add an additional 750 units of housing to Mid-Mission. AGI Avant has proposed 200 units at 1270 Mission St., now home to a pizza place and parking lot. On the current site of Goodwill, there are plans for 550 apartments and a 460,000-square-foot city office building.

"We are hoping that part of Mission Street establishes its own identity, on a smaller scale than Market Street," Kennedy said. "Having a few thousand new residents should help generate fine-grain retail. ... There is nothing now on our block but pot clubs."

Those bullish on central Mission Street say it has the potential to be a more intimate alternative to Market Street. While Market has a few big housing projects in the pipeline, the street is dominated by block-long buildings home to big tech companies like Dolby, Twitter, Uber and Square.

In contrast, central Mission will be mostly residential. The street has split zoning: The north side is zoned for 140-foot mid-rise buildings and the south side for buildings 65 feet or less. Eric Tao of AGI Avant said the zoning will help protect the row of former garment sweatshops that line the south side of Mission.


Unique character

"Even as the high-rises get developed on the north side, the south side is always going to retain that unique Mission Street character with smaller, interesting buildings," Tao said.

Tao was an early believer in Mid-Mission. A decade ago the block of Mission between Seventh and Eighth streets was an abandoned Greyhound station and surface parking lots. There was a methadone clinic in the alley and homeless encampments.

"It was pretty God-awful," Tao said.

But when the federal government built its office building on the corner of Seventh Street - an attention-getting structure designed by well-known architect Thom Mayne of Los Angeles firm Morphosis - Tao saw potential. His group joined forces with TMG Partners to build the 260-unit SoMa Grand condominium project.

"We made the probably foolish decision to roll everything we had into that site," he said. "In retrospect, we were a little early."

While that stretch of Mission Street still has its share of boarded-up storefronts, low costs have caught the attention of restaurateurs and their investors.

Workers snap grid lines in chalk to help guide construction of the next level of the Panoramic building in Mid-Mission. Photo: Michael Macor, The Chronicle

Places to eat, drink

In 2011, Matt Semmelhack opened AQ Restaurant & Bar at 1085 Mission St. and last year followed up with TBD at 1077 Mission St. The cocktail bar OddJob has opened at 1337 Mission St. Focaccia, part of the San Francisco group of downtown lunch spots, is opening at 1198 Mission St., according to Sangiacomo, the 89-year-old developer and landlord who has been trying to develop the neighborhood since the 1970s.

"They are spending a fortune," Sangiacomo said. "I wanted something really good in there, with sandwiches and salads. This is going to be the best one they've got."

Semmelhack said he was drawn to Mission Street because it offered a combination of low overhead and high potential. "Permits were pulled and there were cranes in the air, but the rent was still cheap," he said.

While AQ started as a destination restaurant, it's now drawing residents from buildings like Nema at 8 10th St. and Ava at 55 Ninth St. "There has been an obvious shift in terms of people being more local," Semmelhack said.

As Mission Street becomes denser, some question whether the city is paying enough attention to its public realm. The street is clogged with buses - the 14, 14L and SamTrans lines - with little space for cyclists. And the intersection of Mission and South Van Ness can be harrowing to cross on foot or bike.

Semmelhack recently joined the board of the Mid-Market Central Business District and has to remind other board members that Mission Street exists.

"Market Street is the No. 1 point of conversation in all the meetings, but I'm always outspoken about Mission Street," he said. "It's an important part of the Mid-Market district and at times it tends to get overlooked."

"Mission Street has been ignored forever," said John Elberling, executive director of Todco, which owns and manages about 1,000 units of affordable housing South of Market.


Gentrification concerns

His group owns residential hotels along Mission Street and is concerned about gentrification, particularly on the blocks on either side of Sixth Street, which has one of the city's biggest concentrations of residential hotels in San Francisco. He said the city needs to look at a Mid-Market development fee that would be invested back into neighborhood improvements.

Neil Hrushowy, general manager of the San Francisco Planning Department's City Design Group, which works to "balance all the functions of a street," agreed that Mission Street has played second fiddle to Market Street.

"After two rounds of community outreach," he said, "we heard strong feedback that we needed a more coherent plan for Mission Street."


Original Article and Photos Sourced from:  http://www.sfgate.com/bayarea/article/How-S-F-s-Mid-Mission-district-is-transforming-5626785.php#page-1

Bay Area seed investing on record track

San Francisco Bay Area seed-stage investment is on track to hit a record levels this year, continuing a three year streak of increasing investment, according to a new report by CB Insights, a New York firm that tracks private company fundings.

During the first half of the year, $192 million went into 242 seed-stage deals in the region that includes San Francisco and Silicon Valley. That is almost equal to 2011 activity and more than all of 2010 in funding and deal levels.

While the trend has been generally up, the sectors getting the money have shifted, with the funding of Internet companies actually on track to dip from last year after rising 54 percent and 74 percent in 2010 and 2011, respectively.

Early funding for mobile ventures, meanwhile, have already doubled 2010 levels and hit 75 percent of 2012.
The top three early stage investors the report identified, in order, are SV Angel, Andreessen Horowitz and Google Ventures. CB Insight's list excluded individual investors and incubator/accelerator programs like Y Combinator and 500 Startups.

A separate report issued July 8 by PitchBook, a Seattle research firm, showed 500 Startups as the most active VC entity in terms of number of deals, with $111 million going into 63 deals. Others put far more money out, including New Enterprise Associates with $898.7 million in 30 deals, Andreessen Horowitz with $722 million in 45 deals, and Kleiner Perkins Caufield & Byers with $777 million in 25 deals.

Article Written By:  Patrick Hoge w/ San Francisco Business Times
http://www.bizjournals.com/sanfrancisco/blog/2013/07/bay-area-seed-investing-on-record-track.html

San Francisco, Santa Rosa Metro Areas Ranked Among Top 25 Spots for Home Flipping

Did home flipping make a big comeback in the Bay Area last year? A recent report suggests that’s the case.
The San Francisco and Santa Rosa metropolitan areas landed on a list of the top 25 markets in which to flip a property.

RealtyTrac, which compiled the report with 2012 data on homes that sold twice within six months, ranked metropolitan areas with at least 500 such transactions by the percentage of gross profit “flippers” raked in. Flippers buy homes, fix them up, and aim to resell them quickly at a profit.

A whopping 11 California metro areas made the RealtyTrac list, including San Jose-Sunnyvale-Santa Clara, with 1,166 flips and 24 percent gross profit margins; San Francisco-Oakland-Fremont, which saw 2,815 flips and 23 percent gross profit; and Santa Rosa-Petaluma, with 527 flipped single-family homes and 19 percent margins.

Napa also recorded hefty gross profits of 24 percent on flipped properties but didn’t earn a spot among the top 25 metro areas. That’s because its total number of transactions came to just 125.

In a recent Press Democrat article, Sonoma County flippers agreed that 2012 had been a particularly good year but noted that profits are much lower in the North Bay than the RealtyTrac numbers suggest.

“The houses in Sonoma County take a lot more to fix up,” Chris Peterson, a managing director of Santa Rosa’s Praxis Capital, told the newspaper. “The net margins are very small in Sonoma County.”
And opportunities for home flipping may already be dissipating – at least at the lower end of the market, said Rick Laws, branch executive of Pacific Union’s Sonoma County offices.

“There has been a tremendous amount of flipping,” Laws said. “But a lot of that is going to have to be water under the bridge, primarily because what drove it was distressed property. In April only 11 percent of the new listings that came onto the market (in Sonoma County) were distressed properties, meaning short sales or bank-owned properties.”

Couple that with rising prices, low inventory, and a competitive market – and it’s no wonder that opportunities in the under-$500,000 range are few and far between these days, Laws said.
“The margins that were here are not here now,” he said, adding, “Some of the more aggressive or insightful (flippers) are moving up-market, and they’re finding good buys and they’re restoring the luster to some properties that may have been a little beaten up and neglected. I think there’s a little more longevity north of $500,000.”

Patrick Barber, president of our San Francisco region, said he wasn’t surprised by the city’s high ranking on the RealtyTrac list.
“When you spend a little bit of money, on average you get a lot back,” Barber said of flipping in San Francisco. “There’re quite a few developers who do one, two, three projects every year here.”
Barber pointed to a number of high-end homes in the city’s Pacific Heights and Presidio Heights neighborhoods that sold last year — and then went for millions more in the past several months after undergoing renovations.

“Until the market starts to decline, you’ll see a steady flow of it,” he said. “As long as there’s money to be made, it’s good for a developer.”


(Photo by Luckygirllefty, via Flickr.)

In Real Estate: Today’s Golden Opportunity we compared the current housing market to the market for gold about a decade ago. Some commented on the fact that you can’t compare gold to real estate as an investment as gold is a very liquid asset and it would take more time and effort to sell a house. We were not trying to make the case for real estate vs. gold as an investment in our blog. We were just showing that all investments go through cycles and that the best time to buy any investment may be when everyone is saying not to.

Homeownership as an Investment

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However, since the subject of comparing real estate to other investments has come up, let’s take a closer look. There are two major advantages to investing in a home of your own rather than another option:

You Can’t Live in Your IRA

When you buy your own home you are not taking available dollars away from another investment. You are replacing one housing expense (rent) which has no potential for a return on investment with another (mortgage payment) that does give you an opportunity for a return. We realize that there has been research showing that over the last 30 years renting has been less expensive than owning. That research also says that if you invested the entire difference between the rent payment and mortgage payment you may have done better financially. There are two challenges with this conclusion:

1. Today, in the vast majority of the country, renting is actually more expensive than owning a home.
2. History has proven that tenants DO NOT invest the difference in their rent and mortgage payments.

Today, studies show that owning a home is no more expensive than renting a home. However, even if this wasn’t the case, history shows that owning a home creates greater wealth.
Paying a mortgage creates what financial experts call ‘forced savings’. The Joint Center for Housing Studies at Harvard University released a study last year titled America’s Rental Housing: Meeting Challenges, Building on Opportunities. In the study, they actually quantified the difference in family wealth between renters and homeowners:

“[R]enters have only a fraction of the net wealth of owners. Near the peak of the housing bubble in 2007, the median net wealth of homeowners was $234,600—about 46 times the $5,100 median for renters. Even if homeowner wealth fell back to 1995 levels, it would still be 27.5 times the median for renters.”

There Are Tremendous Tax Advantages to Investing in a Home

There is no doubt that selling an investment such as gold is easier than selling your home. However, this liquidity comes at a price. The price is called capital gains. That is the tax you pay on any financial gain you receive from the investment. This tax doesn’t apply the same way when you sell your primary residence:
Theresa Palagonia, a CPA and the Accounting Manager for the firm G.S. Garritano & Associates, was good enough to explain the Home Sale Exclusion Rules:

“You may qualify to exclude from your income all or part of any gain from the sale of your main home. 
Maximum Exclusion
You can exclude up to $250,000 of the gain on the sale of your main home if all of the following are true:

• You meet the ownership test.
• You meet the use test.
• During the 2 year period ending on the date of the sale, you did not exclude gain from the sale of another home.

If you and another person owned the home jointly but file separate returns, each of you can exclude up to $250,000 of gain from the sale of your interest in the home if each of you meets the three conditions listed above.
You may be able to exclude up to $500,000 of the gain on the sale of your main home if you are married and file a joint return and meet the requirements. (Special rules apply for joint returns.)
Ownership and Use Tests
During the 5 year period ending on the date of the sale, you must have:

• Owned the home for at least 2 years, and
• Lived in the home as your main home for at least 2 years

Certain exceptions exist in which you may qualify for the exclusion without satisfying the tests listed.”

Bottom Line

Every investment has pros and cons. That is why there is such an assortment of great opportunities. Real Estate has been, is and always will be one of those opportunities.


Article Sourced From:   thekcmblog.com