Trends And Developments: Tapping Into The New Real Estate Market

‘Oakland California has a unique housing market. On one end of the spectrum, there are tenements and projects catering to low income residents and on the other there are housing projects almost exclusively geared towards luxury living. Unfortunately, this neglects a large share of the market – the middle-class. This band of income earners comprises the bulk of the populace, yet they are unable to afford luxury homes and they are not qualified for subsidized housing assistance.  This interesting dynamic got me thinking. How can we satisfy market demand when the middle class cannot afford to purchase suitable property in the greater Bay Area? 

The answer rests in a solution known as macro apartments. It's a derivation of the micro-apartments which typically accommodate a single person. With macro apartments, the efficiency is extended to larger numbers of people living together in an efficiently allocated space. The San Francisco Bay Area is characterised by a substantial number of communal living arrangements, given the exorbitant costs of renting apartments. As such, we have put together a bold initiative with oWOW to facilitate the construction of 375 – 400 macro apartments in and around the Bay Area. Unlike traditional developments which focus on single tenant occupancy, the macro units focus on larger units where 3 or 4 bedrooms can be shared among multiple roommates. We have already built some 40 apartments in West Oakland and our latest project on 1919 Market Street in Oakland is going to transform the way Bay Area residents live and work. As a housing company, our objectives are clear: provide high quality, affordable housing for all income levels. This proves to be quite a challenge in the Bay Area which is synonymous with the highest median house prices in the country.

In June 2019, the San Francisco median home value was $1,351,900 (Zillow), with home values rising 0.5% year-on-year. By this time next year in 2020, prices will have risen by 0.7%. Consider that the median listing price in San Francisco (per square foot) hovers around $1,084, much greater than the San Francisco-Oakland-Hayward metro area which averages $498. Even more alarming is the average rental price in and around San Francisco at around $4600. That's at least $1100 greater than the median rental price in the San Francisco-Oakland-Hayward metro area. 

All of the trends point in the same direction: House prices will rise on average in San Francisco and the Bay Area moving forward. The median sales price of homes has consistently shown bullish momentum on all charts from 2014 onwards. From around $900,000 in 2014 to over $1.3 million in 2019, the real estate market certainly has enough momentum to keep prices high. There is widespread consensus among real estate analysts that the median sales price of homes in San Francisco is on the rise. Data indicates that 61% of the San Francisco housing market consists of college-educated individuals with a median age of 39. 61% of them are homeowners and 52% are single residents. The average household income is $78,002. 

Given this information, our company wanted to target this ‘neglected’ group of people with affordable housing that meets lifestyle preferences. There are some important San Francisco migration trends taking place, with people coming to San Francisco and people leaving San Francisco in large numbers. The largest contingent of people coming to San Francisco are foreign in-migration from Europe and Asia, followed by migration into San Francisco from Los Angeles, Orange County, and San Diego counties. Those leaving San Francisco are largely moving to Alameda County, or San Mateo County, with a large minority of residents relocating from San Francisco to Los Angeles, Orange County, and San Diego County.

Few other markets in the nation have the resilience and bullishness that we see in the San Francisco Bay Area. In fact, Golden Gate City is in a league of its own and is appreciating at a blistering pace. Statistics show that despite the slowdown in the overall real estate market, prices are being maintained. Data from Redfin indicates that the San Francisco market is one of the most competitive in the nation, with homes typically receiving 2 offers and selling for approximately 10% above the listing price. Hot homes – those in demand – sell for 22% above the listing price and are typically pending within 12 days. The average sale price on Redfin is $1.42 million and the average price per square foot on sold properties $1.02K. I realized that while this is good for current homeowners, it doesn't necessarily bode well for those looking to rent in San Francisco.

To keep costs low, we have to think outside the box. Developers need to take an active part in the process and that's precisely what we do. By reimagining housing, we can transform homes into viable products that can be mass produced at an affordable price. We unify multiple elements like development and design with construction, removing all the unnecessary elements and passing savings onto our consumers. Premium-quality housing at cut-rate prices is the objective, and that's precisely the types of projects that are now available on 674 23rd Street where 24 units are available. Many high-end options are simply unaffordable, and that's where we come into the picture to provide cost-effective solutions for an untapped market. This particular community features a sky deck, roof deck, and amenity courtyard. The eclectic mix of tenants is testament to the fact that it's working. Business owners, entrepreneurs, artists, students, professional people, and mid-to high-level management types characterize the demographic. MacroUnits are proving to be incredibly popular, and viable for flexible living spaces, luxury lifestyles, and an ingenious solution known as Magic Walls where apartments can be transformed to accommodate more people comfortably.

San Francisco has a housing crisis and it comes as no surprise to anyone living and working in the area. However, despite the numbers there are many opportunities to reduce costs for the benefit of all. If you consider that the median condo price (reported by Compass) averaged $1.25 million, and the median price of single-family homes in San Francisco was recently reported at $1.65 million, it's easy to understand the frustrations among people. New developments like 316 12 Street, and 960 Howard Street have the potential to transform the real estate market for the better, and that's the direction we are headed!"

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