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Oct 19

No secret: San Francisco is the hottest real estate market in the country

From a keynote address by William A. Witte: “Housing and Real Estate Markets: Whither California?”

The growth in San Franciso’s real estate market, fueled by explosive growth in established tech and social media firms, enables landlords to charge upwards of $250 per month just for parking.

Rents increase

The ten year average annual increase in rent has been around 4.5 %. Office rents South of Market on average now exceed those in the more established North of Market financial district, a reality that would have been unthinkable even five years ago.

San Francisco’s real estate markets stabilized

…a couple of years before those in LA. The rental increases occurring in LA now began two years ago in SF. Condo pricing also bottomed out  2-3 years ago, making SF one of the few markets nationally in which construction loans for new condo construction in select locations are available today.

A small condo project on Valencia St. in the City’s resurgent Mission District recently sold most of its units at prices over $900 per sq ft; in LA, those values exist today only in select precincts on the west side and Santa Monica.

Seamless corridor between San Francisco and San Jose

The Bay Area benefits from an extensive and effective system of mass transit, which has begun to create a seamless corridor for housing and jobs between SF and San Jose and, to a lesser extent, between SF and the East Bay.

Job growth in the City and neighboring Silicon Valley in technology, social media, and related fields, of course, has fueled this boom. It’s occurring on a smaller scale in a swath of west LA from Playa Vista to Santa Monica. Santa Monica “reads” like the SF Bay Area, enjoying strong job growth, good weather, and a challenging entitlement climate.

Hang in there till ’20, and you will make plenty…

Since this is in fact an economic forecasting conference, and in the spirit of last year’s speaker, Sam Zell,(who famously, in 1990, said “Survive till ’95,” and three years ago, “Come clean in 2013), I offer the following simplistic prognostication. “Hang in there till ’20, and you will make plenty…”

An aside about the California job market

As we have heard, the job market continues to improve in California, albeit at a modest pace, and the unemployment rate is still well above the national average. Digging deeper, however, one finds that the unemployment rate for college graduates is under 5 % in most markets, but over 12% for those with just a high school degree and over 15% for those without a high school degree. College still does matter.

William A. WitteUCLA Anderson Forecast/Ziman Center for Real Estate 6/20/12 Housing Forecast Keynote Address
“Housing and Real Estate Markets: Whither California?”
By William A. Witte, President, Related California

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