The Latest From Chip & Par – Feb 2025 Market Insights

Hello lovely people,

"Never underestimate the power of mindset and hope,"

said St. Anthony's CEO, Dr. Larry Kwan. "What I love about this moment is that it models two things important for significant change: a heart of service and showing up." That was his sentiment on Mayor Daniel Lurie as the two toured the Tenderloin recently. San Franciscans’ seem to have the same idea, as they made it clear it was time for a change by appointing him in November.

Is a similar positive sentiment rising in our local job sector?

JPMorgan Chase inked a deal to expand its San Francisco office by 60,000 square feet as it consolidates workers called to report to their desks five days a week.

Meta occupied more offices in the City at the end of 2024 than it did a year earlier, growing to 9 million square feet from 7 million square feet.

As Google prepares to move out of 320,000 square feet at One Market Plaza, it has inked a lease to expand its office by 134,000 square feet at Hills Plaza at 345 Spear and 2 Harrison streets, in the Embarcadero. Google will expand its footprint at the two-building Hills Plaza campus to 550,000 square feet, from 416,000 square feet (San Francisco Business Times)

Did You Know...

If you want to know what the interest rate is on any given day, look to the 10-year treasury yield and add 2 to 2.5 points. The White House is shifting its focus on lowering Fed rates to lowering yields on the 10-year Treasury, which directly impacts mortgage rates. (TheStreet) Why? Because The Fed is an independent government agency. They answer to Congress, which designed the Fed to be free of any political influence. If the President cannot ask Jerome Powell to lower interest rates, lowering the 10-year yield could be their work-around.
A recent analysis estimates the cost of a newly constructed home will increase by nearly 5% if the White House’s proposed tariffs are implemented (John Burns Research and Consulting). Canada and Mexico are two of the largest suppliers of imported steel to the U.S., about 35% of all imported steel in 2024. The average US home typically uses around 10 to 15 tons of steel in its construction. (WSJ)
"More capital has been raised in the last three years than in the history of private equity, but it hasn't been deployed. The era of post-financial crisis regulation, lawmaking, and politics is dead and gone." Jeffrey Levine (Houlihan Lokey, MSN)

In our real estate market, January began with gusto. What we find intriguing so early in the year is the robustness with which the market is moving. Our Compass Silicon Valley office shared that in January alone, at least 26 properties sold for $200,000 or more above the list price, with 16 surpassing $400,000 over asking.

2258 Beach Street (home of the late John Warnock, founder of Adobe)

On market Jan. 7, seven offers, six all cash.

1795 Sanchez; on market Jan 17, twelve offers, sold in ten days.

~Did both benefit from coming on the market while there was very little inventory in January? Perhaps...

2268 Pine street; sat on market last year for $4.350m.

Reintroduced last week for $3.950m on Compass Private Exclusive; offer within three days without ever going on the MLS.

~Is this a lesson in the importance of strategically pricing a home AND testing market interest without formally going on the market? Definitely...

Latest numbers are in. We’re paying attention to the value trends chart below.

Until the 2020 pandemic,condo sales actually surpassed single family homes.
Pivot to detached housing post pandemic, single family homes become super competitive.
Sustained competition. First time home buyers now find themselves priced out out of certain neighborhoods as inventory of single family homes shrinks and prices rise further.

Will this segment of consumers reconsider condos as most companies require their employees return to the office?

We saw some evidence of condo sales on the rise. E.g., in District 9 (east cut with mainly high rise buildings) — in January alone, 38 listings went into contract and 65 closed escrow. The highest sale was wait for it….the grand penthouse at 301 Mission - Millennium Tower for $9M. Do you remember the leaning Millennium Tower headlines not that long ago??

Will the condo trend continue? It’s too soon to tell, but we certainly hope so!

Report created in good faith using data from sources deemed reliable but may contain erros and subject to revision. Last period fibures are prliminary estimates based on data available in early January. All numbers approximate, and may change with late-reported activity.

You want more charts, you get more charts

Drum roll please…..

Here are the Bay Area 2025 James Beard Award semifinalists courtesy of Eater SF.

Ok, I’m going to ruin it by telling you that I loved seeing a random bar on Geneva Ave on this list, so I immediately trekked it out to the Halfway Club. It’s as old school as it comes with an outdoor patio, a back-room with a massive tv and live music. Check them out soon!

Last but not least, let’s talk about the Cost of Housing.

The cost of buying or renting goes well beyond a rent or mortgage payment, and these days those additional costs really add up. TOGETHER, COMBINED is a more accurate picture of the cost of housing. Below are some of the costs of housing everyone needs to evaluate before making moves:

1. Purchase price.

2. Mortgage payments.

3. Rent payments.

4. Real estate taxes.

5. Closing costs. (loss of interest income from this)

6. Loss of interest income from capital used for downpayment.

7. Insurance (this~!)

8. HOA fees.

9. Utilities.

10. Yard, pool maintenance.

11. Repairs.

12. Rental management fees.

13. Future rent escalations.

14. Future mortgage escalations based on loan package.

Of course, after all of this, there are the offsets like a tax deduction on mortgage interest, etc. Longterm, the biggest potential upside to ownership to offset these costs is the longterm appreciation of a home that could generate a capital gain that is tax free up to $250k/500k. And equity building too.

However, too many people speak about purchase or rent prices when speaking about the cost of housing without referring to ALL the additional costs. Then there is decorating, moving, painting, furniture.....

Without complete inventory of all the facts, there are never real solutions. Or smart decision-making.

Until next time. Have a great weekend and happy Valentines!