2008 was the year we grew to hate. 2009 is going to be an interesting time...

It's that time of year again, ladies and gentlemen. When we look back on the past year and review some of the ups and downs and make a few educated guesses about what the next 12 months will hold for Downtown real estate in San Francisco.

2008 was the year that the bubble started to slowly deflate downtown with sellers of both new and resale condominiums starting to reduce prices. Unfortunately for both, the investment banks fell en mass in September and it was too late. The majority of well qualified buyers found it difficult if not impossible to get a loan while banks ducked, covered and held on to their bailout money with hands clenched tight. Some developments did manage to post solid sales numbers in November by aggressively lowering their prices while most condominiums on the resale market sat alone at the dance in a corner while their corsages wilted.

Buyers in 2008 had an equally challenging year. It started out looking pretty optimistic with sales prices and values holding steady but quickly turned uncertain once Bear Stearns went under in March. After that all bets were off and you only bought if you absolutely had to or were getting a reasonable deal. If you were looking at new construction the developers didn't seem to get that the market was changing and they held firm on price. If you were shopping resales you encountered sellers that were listing their homes thinking that the days of double digit quarter on quarter price increases were still with us. By the time November rolled around sellers had either pulled their homes off the market and decided to rent or reduced their prices, only to discover that buyers were now too scared to jump in.

That brings us to today. Reflecting on what we have just discussed, let me posit some predictions for the market in 2009, yet to be born and full of hope:

Sellers will continue to encounter low consumer confidence in the face of corporate layoffs in the first quarter. Although the presidential inauguration and subsequent announcement of stimulus packages will help, its going to be tough out there. Sellers will have to be decisive in pricing to garner the most attention when they first hit the market. This also means their property will need to have it's game face on (staged decor or aggressively edited). Otherwise, buyers will go elsewhere. Homes priced and presented to sell will do just that.

Record low interest rates and banks compelled by the Fed to make loans will allow buyers who have been sitting on the sidelines to jump in. With resale inventory relatively high and some new developments going on their third year of sales, this could turn out to be the best year to buy in San Francisco in a decade. There is little new construction in the pipeline which should keep values stable throughout the year and give buyers the confidence they need to write a check.

Peace and Prosperity to you and yours. I look forward to your business and referrals in 2009.

Ground is broken for The Transbay Transit Center, let's hope they can come up with a better name for it.

In what was billed as the groundbreaking for the Transbay Transit Center last week; Mayor Newsom and several local notables turned over a few shovels full of ceremonial dirt to celebrate the start of what will become the temporary Transbay Terminal. Once the temporary terminal (Tempterm ?) is complete, demolition can begin on the old Terminal itself which has a neat quasi-deco style but clearly must go to make way for the glory that planners and developers have envisioned for the site.

Pundits and the media have been tossing around the phrase "The Grand Central of The West" to describe the new center and allude to how monumental this terminal, tower and elevated park will be not only in terms of steel and glass but to the future of Downtown San Francisco. It's sounds kind of funny to me because I grew up arriving in New York City from the Connecticut suburbs through Grand Central Terminal. A massive, dramatic city within a city, The Terminal is an ersatz Roman temple and one of the first developments in the country to employ the planning mode we refer to today as mixed-use back in 1913. Not only a train terminal, the complex boasts retail, commercial, residential and hotel space all of which is connected via underground walkways and tunnels. It is and was a triumph of modern engineering wrapped in marble, bronze and decorative Guastavino tiles. One of the reasons Grand Central is so iconic is that it's part of our collective American consciousness. The structures symbolic strength, scale and meaning are shorthand for the history, power and romance of New York itself. I like to think that this is understood by those that pass through it every day on their way to work and those that only know the building as Lex Luther's hideout in the movie Superman from 1978. Either way, it looks like San Francisco will finally have a center, a symbolic 'heart' where multiple modes of transportation will converge and people will gather. Not just to catch a train or bus, but to live, work and experience what it means to be Downtown in one of the greatest cities in the world.

Maybe there will be secret lair for Lex, too.

Don't fear the Reaper... November turns out to be a strong month for San Francisco's new development sales offices.

A few weeks back I wrote about developers finally waking up to the realities of the current market in our fair city by pricing select chunks of their inventory at very attractive (reduced) prices. Attractive enough I thought, to spur some buying activity in what might be more politely termed a "freaked out" consumer environment. Well gentle readers, I'm happy to report that it seems to have worked. At developments across the city buyers have shunned the negative and accented the positive by putting roughly 10 units into contract at each of a handful of communities from Mission Bay to South Beach and back to the Van Ness corridor.

It is heartening to know that even during a period where federal bailouts are racking up scary hash marks on the billions spent spread sheet; buyers are confident enough in San Francisco's market to put their hard-earned money toward a downtown condo. Maybe it's a contrarian view that is driving these people toward a purchase that a lot of folks might run from right now but one thing is certain: these intrepid individuals are getting some great deals on prime property.

This happy occasion reminds of something that I've heard often in the real estate industry when things get challenging: People will always need to buy or sell, no matter what. This is essentially an elaboration on "Life goes on." People get transferred, lose jobs, get new ones, get married, have babies, etc. This continues to happen regardless of what the stock market does, who the president is, or if Britney Spears releases a new single.

So if you are delaying making a decision about whether to buy or sell property and its starting to have an impact on your quality of life, I recommend speaking with a professional. My contact information is on the banner at the top this page.

Healthcare is about the only bright spot in the American economy... So what does that mean for San Francisco?

There is something extraordinary happening in our city. If it were occurring in any other US burg you would certainly have read about in the newspaper or seen something about it on TV. The Mayor would be talking about it endlessly and civic and community leaders would be promoting it at every turn. Maybe it's because the only equivalent situation is in Houston, Texas and San Franciscans would be loathe to be compared to that lovely yet very different city.

Maybe. But a better answer is that they just don't think its a big deal.

Mission Bay and the new UCSF biomedical campus are a very big deal. Although the second phase of Radiance at Mission Bay and 2 commercial buildings have been put on hold (the latter even had tenants signed up), new residential, research, university and biotechnology buildings continue to rise despite fiscal uncertainty and the general economic slow down.

You may ask, why ? Because this is where the future is being created.

The next big breakthroughs in medicine--be they genetics, robotics, protein science or something we can't even fathom yet-- are being researched in Mission Bay and will be discovered or evolve here. That very large building on the UCSF biomedical campus isn't named Genentech Hall for nothing. In less than 15 years there will be three new hospitals here treating women, children and cancer.

It is generally understood that our new president is going to repeal federal legislation that currently hinders stem cell research. This coupled with the synergy of biotechnology, research and health care will drive investment and innovation, bringing people to San Francisco from all over the world. In the future when someone needs a new heart, hand or head, they will most likely be booking tickets to SFO.

This all started about 10 years ago when the master plan for Mission Bay was approved by The City. The linchpin of this plan is The Beacon (initially known as Mission Place). Completed in 2004, it is home to condominiums, Safeway, Borders and a Burger Joint. It is also home to The California Center for Regenerative Medicine (CERM). A state ballot initiative created and funds the organization that has 3 billion dollars at its disposal and a mission to invest in biotechnology. It would be hard to duplicate the conditions that are driving this investment and development anywhere else. Put it all together and its pretty compelling: This new neighborhood is poised to be the global center for the next generation of biomedical and health care professionals.

It all sounds like exciting stuff, future stuff. But it's happening right now. If you want to see what the 21st century holds for San Francisco, take a drive or hop on the T line and head over to Mission Bay.

It might not look like much on the south side of Mission Creek right now aside from the great view, but people said the same thing about a little town called Yerba Buena in 1848.

If you live at The Infinity should you drive an Infiniti ? Observations on branding and consumer behavior.

The San Francisco International Auto Show arrived in town this week and I spent a few hours there since I love cars and my current lease expires in a few weeks. It was great fun strolling among the vehicles and checking out the latest from both the Japanese and European manufacturers. I steered clear of the domestics not in principle but because there was not a single vehicle that pulled me in as I walked by. I felt like I had to stifle a yawn as I glanced over the giant FORD logo and looked to see what the next company offered. I wasn't alone.
Visitors scrambled into the seats of the Honda and Audi displays while the Buick's and Chrysler's gathered dust. The Big 3's financial predicaments certainly aren't helping their cause but I could not shake the sense that these brands had permanently turned a corner for the worse.

Could the same thing happen to a development ?

Sometimes I participate in meetings where we brainstorm names for new developments. Much like referring to the color light green as "celadon", choosing what to name a condominium is an exercise in perception management. The Beacon is still 250 and 260 King Street if the name is changed to The Bacon. Both names have connotations and associations, it's simply a matter of which ones you want potential buyers to think of. Some developments shed their brands after a few years if they are unwieldy or not particularly catchy. 88 King Street was marketed as The Towers at Embarcadero South. That mouthful has quietly faded and the buildings lucky address is now it's preferred name.

I don't think we will see any condominium Pintos or Edsels in San Francisco but there will almost always be a new development touting a sexy brand to lure buyers in with the promise of a new and better life in a new and better development.

I'm going to start my new and better life by getting a Volkswagon.

Short Sales, Foreclosures and Auctions, Oh My ! Buyers and Sellers alike require guidance in our rapidly evolving market.

I'm working with a buyer right now that is under the impression that every seller is desperate to unload their property at fire sale prices. This (mistaken) belief resulted in a weak offer that was justified with a comparable sale that had been a foreclosure. The fact that there is a much better comparable (right next door) that was not in distress and closed a few months before seems inconsequential to him. Likely due to the 20% differential in sales price I reckon.

We are to lucky to live in an age where consumers have a vast amount of information at their finger tips. Unfortunately, many buyers and sellers are frustrated by information overload. Blogs, online brokers, TV, print media and cocktail party chatter all contribute to fevered speculation about the market and why you are either a sucker or a genius. Although not unique to the real estate industry, this phenomenon can prevent people from attaining their goals unless they exercise good judgement, keep an open mind and...hire an experienced real estate professional.

In other news, The Potrero held a sealed-bid "auction" this weekend for the 20 or so remaining units at the popular development. The available homes represent some less-than-ideal inventory, but also offer an enormous opportunity to purchase in a successful community in a desirable location. Come to think of it, submitting a sealed bid there would appeal to my buyer who is stuck on foreclosure comparables... excuse me while I make a phone call.

Turnberry goes Dutch with Rincon Hill tower; pass the test and you should consider living there.

originally published 11/11/08

Fast on the heels of last week's announcement of the delay/cancellation of the second tower at One Rincon Hill, Turnberry LTD has made details public on the 50% equity sale of their planned 40 story tower located close to the intersection of Harrison and First Street.

The sale to a Miami-based investor should come as happy news amidst the relative gloom we've experienced Downtown. With excavation expected to begin in the first quarter of 2009, Turnberry and One Hawthorne will be the only "shovels-in-the-dirt" high rise residential projects in San Francisco. Will these buildings come on line just in time for the return of strong demand for condos Downtown ? Consult your oracle of choice...

Speaking of oracle's, my colleagues and I came up with a quick and fun way to determine if Downtown living is right for you (assuming you haven't already made this decision which I know some of you have). It's called the Herth Downtown Ten Point Lifestyle Test. If you answer 8 or more of the 10 questions in the affirmative, then you should include downtown properties in your new home search.

Herth Downtown's Ten Point Lifestyle Test:

1. Does condominium living appeal to you ?
2. Would you consider living in a Mid or High Rise development ?
3. Are you considering living in or near the city center?
4. Does new or recent construction interest you?
5. Would you like to live near your business, work or public transit yet not have to drive?
6. Are on-site amenities such as a doorman, concierge services, or fitness facilities important to you?
7. Would you like to live near your daily destinations such as grocery stores, retailers, or restaurants?
8. Is being close to cultural venues such as museums, live music, art galleries or theaters attractive ?
9. Are you interested in a low-maintenance "lock & leave" residence?
10. Is a wide price range and comparative value a priority ?

I hope that was fun and informative. If you are still on the fence, I can help you decide whether or not Downtown is right for you. If you now know that Downtown living is your thing, you can determine which developments will suit you best by contacting me.

I know of two that will be forming interest lists soon...

Elections & Downtown non-erections: Developers bearish on short-term outlook while agents hope post-election relief will get buyers back in the swing

originally published 11/4/08

It hasn't been the most relaxing autumn with the culmination of a 3 year long presidential race and the worlds financial markets dancing an endless mambo. Added to these global and national headlines was last weeks more local announcement from the developer of One Rincon Hill that the much anticipated and delayed Tower 2 (T2) was on 'indefinite hold'. No matter where your opinion falls here it seemed to put the exclamation point on a week that many were waiting for. Several developers pulled their collective heads out of the sand and acknowledged that the San Francisco condominium market has changed for the foreseeable future and that moving product right now is a priority.

Some examples: The Hayes has a fifth floor studio with balcony listed in the mid 300's and a tower-level 1-bedroom at Arterra in Mission Bay was re-priced in the low 500's. Over on Van Ness Avenue, Symphony Towers has a 1-bedroom on offer in the mid-400's. These prices represent reductions of at least $100,000 from their previous highs and what's more compelling is they seem to work. Erin over at Symphony told me they sold 6 units last week after the price drop.

Reductions in inventory and markdowns on stock indicate that developers are retooling strategy for what they see as a prolonged slowing of demand and it seems like if the price is right one can still sell a condominium even in these uncertain times.

The return of confidence to the country and San Francisco will go a long way in allowing home buyers to feel good about getting back in the market. With the impending change in leadership and recent condominium price adjustments this may be a historic moment in more ways than one.

Does 'P' stand for 'Panic' or 'Patient' ? Perplexed prospects ponder proliferation of plum new listings proffered Downtown.

originally published 10/21/08

About 3 weeks ago I was trying to arrange evening cocktails with a good friend whose schedule was suddenly very full. "So your booked every night this week and can't commit to anything next week, what gives ?" I asked in a loving yet annoyed way that I'm told only I can do. He replied, "We are swamped, oiy.... I've haven't been this busy in a year."

My dear friend you see, is a very talented and currently in-demand stager. At first I thought it was odd timing given that if a sale occurred within 60 days these sellers would presumably be moving during the holidays. Not much thought went into this seemingly off timing again until I went on tour downtown today and was surprised by how many new listings there were and by the eye-popping asking prices.

Some examples:

A freshly listed corner 2-bedroom at The Brannan on a higher floor with a spectacular view, approximately 1300 square feet. 1.8M. Hm.

A top floor view 2/2 with a large balcony in a mid-rise on Rincon Hill clocking in at 1200 square feet. 1.425M. Oog.

An impressive and new-to-the-market 3-bedroom 3.5 bath corner loft at 200 Brannan. At least 1700 square feet. 3.388M. Whoa.

What put my visit to these lovely homes in perspective was my first stop that day at The Beacon. A friend and former colleague has the listing for a corner 2/2 on the top floor with a balcony. It's a lovely spot with forever views that was sold 2 years ago by the developer for 1.25M. A price that was considered a good value at the time.
It's 3 days away from foreclosure unless the seller gets it in contract as a short sale. 1250 square feet and asking... 999K

That leaves us with 4 high-end condominiums being marketed against a backdrop where potential buyers are looking for value and opportunity and sellers seem to want to cash out or just get out. Even if the sellers are 'testing the market' one has to wonder about the motivation and timing of that decision.

What's important to understand for agents and buyers navigating this market is that these mixed messages are a symptom of the general confusion and apprehension about what the future holds for our economy. As with all situations where the outcome isn't predictable there are great opportunities for those that are confident and maybe a little fearless.

Now about that cocktail...

You can hear a pin drop: Downtown condo sales centers quiet in wake of roller coaster global markets.

originally published 10/15/08

Escorting a client Downtown to tour models and sales centers is always a pleasure for me. It gives me the chance to get to know my client better, browse available inventory and catch up with friends and colleagues. During recent tours it was clear that my client was the only potential customer in the store which made for lots of attention from the staff and a slightly eerie feeling.
It doesn't look like the number of visitors to sales offices will increase any time soon unless developers and marketing companies get creative.

Traffic has slowed to a trickle in most new construction sales offices in San Francisco. A trend that began about a year and a half ago has gained momentum with roiling global markets giving even well-heeled buyers reason to wonder if now is the best time to buy. A colleague told me earlier this week that she had 4 visitors to her Downtown sales office in the past 10 days.

So what can be done to get more people up into the model homes ooohing and aaahing over the view ?

Signature cocktails, themed events, and 'Meet the Architect' wine and cheese soiree's have culminated more recently with one very nice Downtown development allowing potential buyers to spend the night in a model home to get the full living experience. Including, it would seem, putting your feet up on the Eileen Gray coffee table, having the concierge arrange
a night on the town and testing that fancy shower head from Waterworks.
There are some developers that have gone so far as to increase commissions to 4% and even lower prices. Yes, hell has frozen over.

While we all hold our collective breath in anticipation of election results and if the funds being pumped into our financial system have a positive impact; buyers have never had developers as motivated to move product as they do now. These are strange times indeed and even stranger are the fantastic opportunities for buyers and sellers right now.

The trick is convincing my client that being the only one in the sales center is a good thing.

Downtown inventory absorbing at a slow yet steady pace. Developers hustle to move product with the outlook uncertain.

Originally published 10/7/08 

Monday brought a new client and a new mandate: a 1-bedroom condominium with a view that's also within walking distance of the CalTrans station on 4th. As I put our tour together for the morning I realized that something I didn't anticipate had happened in Mission Bay. Inventory that was piling up until about a month ago was, for the most part, gone. The Beacon had only 14 listings, about 2.5% of the building's units, were active on the MLS. Six months ago, that number was almost double. The Beacon sold out in 2006 as a condominium conversion. After checking in with the sales team at 170 Off Third, I was told that they are sold out of studio and 1-beds and have but a handful of 2-beds left. Jessica at the Potrero had a similar story: Just two 1-bedrooms available out of only 11 left overall.

A little far from the train station but under consideration was The Metropolitan. It is great place to find value and competition among sellers for nicely finished units with views. Bonus points for the building since it still looks fresh and appealing 4 years after completion. There I found only one 1-bedroom; a high floor with a nice view. One 1-bedroom available out of 342 units. Hm. Given the above there was only one place to go for new product that shows well and is reasonably priced: Arterra.

My client and I looked at a handful of 1-bedroom's and the sales team seemed open to writing creative deals. With a reported 40% of the building yet to be sold, we had a wide selection of homes and developer incentives to consider. A perfect storm for today's selective and value-conscious buyer.

It will be interesting to see where these numbers move in light of all the drama we've endured in the past few weeks. There are many challenges in the business of real estate in late 2008 yet there are still people making deals, getting loans and closing escrow in San Francisco.