The Pacific Heights Bet
1997 - Sold for $1,825,000
2003 - Sold for $2,750,000
2014 - Sold for $6,995,000
2016 - Sold for $7,450,000
1998 - Sold for $1,000,000
2009 - Sold for $2,400,000
2011 - Sold for $2,720,000
2014 - Sold for $3,900,000
2016 - Sold for $4,200,000
By Joseph Lucier
Pacific Heights known the world over as San Francisco’s premier neighborhood is home to architecturally significant residences, quaint boutiques, and, of course, iconic views of the Golden Gate Bridge. Since 1996, the median price for a Pacific Heights single family home has increased 367% from $1,200,000 to $5,600,000. The condominium market followed showing a 286% gain to $1,450,000. There have been downturns during this time - most notably the precipitous value drop in 2009-2011; but a long term real estate hold in this blue chip neighborhood remains a wise investment. Even so, buyers (and sellers) often hedge and play the market timing game.
“In 30 years in this business, I do not know anybody who has done it (market timing) successfully and consistently, nor anybody who knows anybody who has done it successfully and consistently.” So were the words of John Bogle, founder of the Vanguard Group of Investment Companies. Cycle after cycle, we continue to note a strange phenomenon with well heeled individuals in the high end market. With a balancing market ahead, sellers need to be careful of their psychological penchant for "rear view mirror" pricing and avoid following the market down to capture reduced gains. During the inevitable market correction, buyers tend to resist the opportunity to buy real estate on sale. This is when the truly savvy take advantage of discount pricing and ride the market when it turns. Again and again in a hot market, we hear, “I am going to wait until the market cools off to buy.” And yes, they do wait…and wait…and wait! Most agree that timing the bottom (or top) is luck. Without the confidence of seasoned professional advice, we always see many “smart” buyers fervently chase each other back to the multiple offer market place after the market turns upwards. Makes sense right? Uh?
"These numbers show one thing for certain. Time is your friend when owning a home in San Francisco. Blue chip properties protect value in a downturn and take the most advantage of a market cycle in full swing."
The reality of purchasing a home often relies on factors outside of market economics. A job transfer, an equity event, a marriage, and downsizing are some of the life events that call for a new home. My advice to San Francisco clients today looking at a mature market cycle is to protect themselves by specifically buying blue chip real estate. Practice time honored fundamentals. Location, location, location. Buy the least expensive house on the best block. Get into the 2000+ sqft condominium market. Of the 2,694 condominiums in Pacific Heights only 427 are 2000 sqft or more. This is a relatively safe sector since buyers are increasingly getting priced out of this neighborhood's single family home market and alternatively choosing to stay by purchasing a large condo. Playing defense in a balancing market is an astute way to build confidence and be prepared to strike when the right property comes along.
In the last twenty years the Pacific Heights market has topped twice. The 2001 high water mark of $3,684,000 toppled with the dot-com bust, then another peak achieved in 2007 with a median price of $4,037,000. The market took approximately five years each time to climb back to peak values. Currently, the Pacific Heights single family home median price is up 38% from the 2007 top to $5,600,000. How about that!
What to make of these market cycles when coupled with the lives we lead in our homes? Well - time is your friend when owning a home in San Francisco. Take note that blue chip property protects value in a downturn and is the most advantageous when the market moves again. I encourage a bet on Pacific Heights real estate as a prime asset to any financial portfolio and a place to enjoy life amidst the San Francisco real estate merry-go-round.