Noe Valley Voice September 2006

Noe Valley May Hold Its Own, Housing Experts Say

By John Trinkl

For most of the summer, the talk in real estate and economic circles was about a slowdown in housing sales, both nationally and in the Bay Area.

According to DataQuick, a real estate information company, sales of homes and condominiums in the Bay Area fell nearly 31 percent in July. And though the median price of a home in San Francisco rose to $832,000, its appreciation was only 4 percent over the same month a year before.

A panel of local experts put this slowdown into historical perspective and discussed the present and future outlook for housing in Noe Valley at a July 19 forum cosponsored by Friends of Noe Valley and the Noe Valley Democratic Club.

San Francisco Chronicle reporter Kelly Zito, who has covered the Bay Area real estate market for four years, joked that "talking about real estate is a big sport in the Bay Area." Still, she tried to make sense of current trends. She agreed that the San Francisco real estate market was slowing, but slowing compared to the abnormally hot months of 2004 and 2005, when appreciation peaked at 25 percent. The moderate rise the city has been experiencing over the past 18 months is much closer to "normal" for this area, she said.

B.J. Droubi, whose real estate company has been in Noe Valley since 1972, looked further back in history and described three downturns: 1979­81, when interest rates were at an historical high: 1992­97, when there was a recession and the market was flat; and now, when the market is reaching the end of another business cycle.

But she ticked off a host of reasons why Noe Valley might be relatively immune to strong fluctuations: "Noe Valley is in the center of the city; it has the most attractive route to the Peninsula and Silicon Valley; it has some of the best housing stock; there's an incredible diversity of homes and diversity of incomes; it has a great quality of life. Noe Valley holds its value quite well," she concluded.

There are larger reasons for stability as well. "The economic base here is very stable," argued Randall Kostick, manager of Zephyr Real Estate. The Bay Area is a gateway to the growing economies of the Pacific Rim and Far East, and there are diverse and relatively strong industries: tourism, finance, high-tech, and biotech, he pointed out.

Kostick said the market cycles had not been all that dramatic here. In the downturn of the early 1990s, when there was as much as a 50 percent decline in housing prices in parts of California, the decline in Noe Valley was only 11 percent, he said. Even in the dot-com bust, when 300,000 jobs were lost in the Bay Area, he added, the housing market didn't suffer significantly.

How does it look for people who are trying to buy houses or rent apartments? In a word, pricey.

Joel Panzer of RMC, a local rental management company, said the absolute lowest price you could rent an apartment for in Noe Valley was $1,300 to $1,400 per month, for a studio. And according to RentSlicer, a rentals listing service, the average rent this summer for all types of apartments in Noe Valley was $2,690. (For the latest average rents, see the "Noe Valley Rents" chart at left.) Panzer noted that a quarter of renters paid more than 50 percent of their income on rent.

As for buying a home, Kostick reported that new home buyers in Noe Valley were paying $6,000 to $7,000 mortgage payments a month and $11,000 a year in taxes. According to the California Association of Realtors, only 14 percent of families in California can afford a median-priced home.

So who can buy a home in Noe Valley? The panelists described wealthy young software developers, stem cell researchers, and foreign businesspeople as among those who came through their doors and had no problem slapping down $1 to $3 million for a house. But for others of more modest means, "The first purchase is what is so difficult," Droubi said.

"Family assistance is a big factor in enabling people to get their first house," said Kostick. They use "the National Bank of Mom and Dad," as Money magazine put it. Last year, 37 percent of first-time homebuyers' down payments were at least in part from a family member or friend, according to the National Association of Realtors.

A case study of a Noe Valley housing seeker joined the panel a little late.

Supervisor Bevan Dufty regaled the audience with advice on how to maneuver through the Planning Department's red tape, should Noe Valley residents decide to remodel their homes instead of buy or sell.

However, what the audience really wanted to hear were some juicy vignettes from his local housing search. (As reported in the Voice last May, Dufty and longtime friend Rebecca Goldfader are looking for a home in Noe Valley to accommodate both them and their baby-to-be.)

Dufty has been around too long to be shocked or discouraged by the steep prices and lack of vacancies in one of San Francisco's most popular neighborhoods. He said only that he was postponing his house hunt until after the November election.