Noe Valley Voice March 2009

State of the Housing Market: Slow

By Corrie M. Anders

When Marc and Anne Feder put their 26th Street home on the market, the couple hoped it would sell quickly, though probably not at the warp speed with which they bought it five years ago.

The "For Sale" sign went up in late January. Since then, a steady parade of prospects has toured the Marina-style home, with its renovated kitchen, manicured back yard, two-car garage, and separate in-law suite.

But the $1,349,000 property has yet to attract an acceptable offer--a reflection of the new realities in Noe Valley's once red-hot housing market.

A year ago, "I think it would have flown off the market. It would have been a two-week experience," said Marc Feder. "We've had lots of people through, but I think everyone is a little gun-shy."

The landscape has indeed changed in our hilly haven of million-dollar homes. Real estate agents acknowledge that housing prices have declined, albeit modestly compared to other areas, and that the overbidding frenzy has abated.

And it's not just homebuyers who have the edge. The rising spiral in rental housing prices has stalled--and renters searching today are finding that some apartments cost less than they did a year ago.

When roses were in bloom, Noe Valley's enclave of well-paid high-tech workers, young mothers, and white-collar professionals seemed immune to the nation's economic woes, precipitated in late 2007 by a sharp rise in debts and foreclosures.

However, the shadow of the country's financial crisis started to fall over Noe Valley last autumn after several major banks collapsed and the stock market began a decline that wiped out billions of dollars in wealth.

"We had a tough October, November, and December, and everything seemed to come to a standstill," said local real estate agent Peter Brannigan of Brown & Co.

Veteran Noe Valley real estate agent B.J. Droubi estimates that home values have undergone a 10 percent decline since last fall. Even so, she called that drop "very lucky compared to the rest of the city and the country," where values have plunged precipitously.

Lowest Sales Since 1988

A real estate research firm reported that both home values and total sales stumbled during the fourth quarter of last year in Noe Valley's two zip codes, 94114 and 94131.

Prices fell 7.7 percent to $1,310,500 from $1,420,500 in the 94114 zip code during the last three months of 2008 compared to a year earlier, according to MDA DataQuick of San Diego. Twenty-two detached homes sold in 94114 during the period, compared to 48 sales a year ago.

In the 94131 zip code, values dropped by a more modest 1.1 percent to $840,000 from $849,000. Buyers purchased 42 homes in the fourth quarter of last year, a 17.6 percent slide from 51 sales a year earlier.

"The resale house sales in both zips during the fourth quarter of 2008 were record lows for any quarter in our data back to 1988," when the firm began keeping records, said DataQuick analyst Andrew LePage.

Condos Quiet Too

Condo sales also dried up. The sale of 27 condos in the fourth quarter was 52.6 percent under the 57 closings a year earlier in the 94114 zip code. Prices dropped 5.6 percent to $823,500 from $872,500.

The 94131 zip code saw condo sales decline 40.9 percent to 13 from 22 a year earlier. However, the $749,000 average price tag in 2008 was 14.4 percent higher than the $655,000 recorded in the last quarter of 2007.

The last quarter of the year also saw fewer million-dollar home sales by nearly half in the two zip codes. DataQuick said 59 homes that cost $1 million or more changed hands, compared to 114 such sales during the 2007 period, when luxury home sales remained robust.

Despite the dismal fourth-quarter--from a homeowner's perspective--real estate agents expressed optimism that the housing market would perk up as the spring home-buying season got under way.

"There's a ton of money out there waiting," said Susan Ring, an agent with Alan Pinel Realtors, who is trying to sell a $1,295,000 home on Beacon Street. "People are taking longer to make a move....They aren't just jumping into anything."

Gone Are the Bidding Wars

There wasn't a waiting game when the Feders purchased their home in 2004, near the peak of the real estate market. The couple had already been outbid on five other homes when they saw the 26th Street property and rushed to grab the three-bedroom, two-bath house. They were among 32 frantic bidders at the time, but they were victorious in landing the house for $986,000.

"It was such a surreal experience," recalled Marc Feder, 41, a principal in a San Francisco mediation firm. "It was certainly crazy."

Now the couple, along with their 21/2-year-old daughter Talia, want to move to the East Bay so they can be closer to Anne's family and to Anne's job as a project manager at Oakland's Kaiser Hospital, where she is a registered nurse.

"I'd be concerned if ours was the only house not selling," Marc Feder said. "I don't see a lot of houses selling. People are apprehensive."

Like many Noe Valley home sellers, the Feders have dropped their price once--by $50,000--according to their agent, Ron Abta of TRI Coldwell Banker.

Abta said the house had gotten two offers, "but they've been well below the asking price. The sellers said, 'No thanks, we'll just wait.'"

In the current climate, Abta said, "buyers are digging in their heels and they're feeling more emboldened than they ever have in the last five years. They're starting to flex their muscle."

'I Can't Afford That, Darling'

The stock market collapse also has crimped how much homebuyers can afford. Droubi said financial setbacks forced one woman and her husband to stop looking in the $2.3 million range and shop for homes costing $1 million less.

"Her dad was buying her a house...and his account went down enough that he said, 'I can't afford to buy that house anymore, darling,'" Droubi said. "We had that happen twice."

Linda Gordon of Sotheby's International Realty said homes costing $1.5 million or less are selling better than more expensive properties. But she said it was critical for all sellers to set the proper price for their homes.

She cited the example of a condominium in a 21st Street complex that originally sold for $627,000 in 1998 and resold two years later for $1.1 million. The condo was listed for sale in September for $1,495,000, reduced to $1,395,000 in October, cut to $1,295,000 in November, and later pruned to $1,249,000.

The price for the condo, already four months on the market, was slashed in January to $1,195,000, she said.

Roofs Being Repaired

In today's softer market, buyers are making offers below the listing price--and asking sellers for concessions they wouldn't have dreamed of demanding in the boom market.

"If they find an imperfection, they want to negotiate" and ask sellers to pay for such items as roof repairs, said Randall Kostick, general manager at Zephyr Real Estate. That's a stark contrast to three years ago when sellers said, "I've got a bad roof and that's the way it is, and the buyer would buy with a bad roof."

Kostick said home sellers "are starting to realize and come to terms with the fact that the market isn't what it used to be." Setting the right price has become critical, "and that wasn't the case two years ago."

And if they can't get their price, some frustrated sellers remove their home from the market.

"People are changing their minds about selling," said Droubi. "They're saying, I'm going to wait for a better time to sell, or if I can't get my price I'm going to rent it."

Noe Valley Still in Demand

In spite of the weaker activity, buyers are still in the market for a home in Noe Valley. Ones with all the bells and whistles--great location, garage parking, remodeled kitchen, bamboo floors--go first.

"If it's in good shape and turnkey-ready, people are going to want it," Ring said.

Brannigan concurred: "I've had three or four recent situations where I've had multiple offers, but those were keenly sought after."

Open house tours are starting to attract larger numbers of potential buyers, and "we haven't seen that in a while," Kostick said. "I feel like we're turning a corner here. We're feeling really good about the spring, and let's see how the summer goes."

"I feel positive about it," said Gordon. "Hope springs eternal."

Rents Negotiable

The limping economy has also had an impact on the amount on rents landlords can charge, according to several property management representatives.

"I am getting slightly less than I used to," said J.J. Panzer, a broker and property manager with Real Management Company on Castro Street. "I used to get euphorically great rents. Now, it's pretty darn good, not euphoric."

For example, Panzer said current tenants in a 24th Street apartment building are paying $2,000 a month for one-bedroom units. After a recent vacancy last month, he could only re-rent the unit for $1,900.

In another case, Joan Cooper of the Rental Source listed a remodeled two-bedroom flat on 23rd Street for $2,795. She dropped the price twice last month in $100 increments to $2,595--and was still awaiting a renter at press time.

Cooper said landlords today are open to negotiating with prospective tenants.

"If you have a good candidate for a rental and they want to negotiate a little bit, I say negotiate," Cooper said. "[But] I don't think tenants should give landlords insulting offers."