It’s almost that time of year again… believe it or not, local elections are just around the corner. Without giving you my 2 cents as to which ballot measures I support (and/or how they affect the San Francisco real estate market), I’ve listed descriptions of the measures that will appear on the November, 2007, ballot in San Francisco. (The full text of each measure can be viewed by clicking on the highlighted title.)

Charter Amendments

Proposition A—Emissions Reductions and Transit Reform—Supervisors: Ammiano, Daly, Dufty, Elsbernd, Maxwell, Mirkarimi, Peskin

Provides the MTA with additional authority over contracting, staffing and fee setting; redirects additional parking fee revenue to the MTA away from the General Fund.

Proposition B—Limiting Hold-Over Service on Boards and Commissions—Supervisors: McGoldrick, Ammiano

Limits holdover service by members of city boards and commission whose terms have expired to 60 days.

Proposition C—Requiring Public Hearing on Initiatives—Supervisors: Elsbernd, Peskin, McGoldrick, Alioto-Pier, Maxwell

Requires a public hearing prior to any ordinance or declaration of policy being placed on the ballot by the mayor or four supervisors. It will require the mayor or sponsoring supervisors to introduce initiative measures at the board at least 45 days before a ballot submittal deadline and for a committee of the board to hold a public hearing at least 15 days before the deadline. Failure by the Board to hold a public hearing before the deadline shall not prevent the Director of Elections from placing the initiative on the ballot as long as there is a notice in the voter information pamphlet that the initiative was not the subject of the required public hearing.

Proposition D—Renewal of Library Preservation Fund—Supervisors: Peskin, Maxwell, Elsbernd, Alioto-Pier, Mirkarimi, McGoldrick, Dufty, Ammiano, Sandoval

Reauthorizes a 2.5 cent set-aside from the annual property tax levy, an amount equivalent to $0.025 for each $100 assessed valuation, for library services and materials (the Library Preservation Fund) for an additional 15 years; authorizes the Library Commission upon recommendation of the mayor and Board of Supervisors to issue revenue bonds (without a vote of the people) for library purposes secured by and/or repaid from any available funds pledged or appropriated by the Board of Supervisors for such purpose.

Proposition E—Requiring the Mayor to Appear at the Board—Supervisor Daly

Requires the mayor to appear personally at one regularly scheduled meeting of the Board of Supervisors each month to engage in formal policy discussions with members of the Board and to authorize the Board, in consultation with the mayor, to adopt rules and guidelines.

Proposition F—Retirement Benefits for Police Department Employees Who Were Airport Police Officers—Supervisor McGoldrick

(Applies to 62 employees of the Police Department who were airport police officers prior to December 27, 1997. Cost: Not to exceed $600,000 over 20 years.) Authorizes the Board of Supervisors to amend a contract with the public employees’ retirement system in order to transfer to the San Francisco employees’ retirement system the assets and liabilities of certain airport officers, and including time worked as an airport police officer in the calculation for retirement benefits for police department employees.

Ordinances

Proposition G—Golden Gate Park Stables Ordinance—Supervisors: Daly, McGoldrick, Mirkarimi, Sandoval

Establishes a fund for donations to the Golden Gate Park stables, appropriates up to $750,000 to the fund and requires the city to match every $3 donated to the fund with $1, up to $750,000.

Proposition H—Parking for Neighborhoods initiative—Jim Maxwell

Requires that a minimum of one parking space be created for each housing unit built in a neighborhood outside of downtown and a minimum of three parking spaces be created for every four housing units built in downtown. (The proponents of this measure have agreed not to conduct a campaign to seek passage of the measure. In exchange, Supervisors’ President Aaron Peskin agreed to carry legislation that would loosen San Francisco’s restrictions on adding more off-street parking in the South of Market and western neighborhoods. The legislation may be presented to the voters in February, 2008.)

Proposition I—Small Business Assistance Center Ordinance—Mayor Gavin Newsom

Requires the city to operate Small Business Assistance Center, specifies staffing levels and appropriates $750,000 from the General Fund to the center for FY 2007-08.

Declarations of Policy

Proposition J—Universal Wi-Fi Declaration of Policy —Mayor Gavin Newsom

Declares it to be the policy of the people of San Francisco for the city to support a wireless broadband network that provides free high-speed Internet access for all San Franciscans and protects user privacy.

Proposition K—Street Furniture Declaration of Policy —Supervisors: Daly, McGoldrick, Mirkarimi, Peskin

Declares it to be the policy of the people of San Francisco not to increase the number of general advertising signs on “street furniture.”

This is an excerpt from the August edition of my monthly newsletter, The City Update!…

As I sit here and write the latest edition of The City Update!, I can hear the wind howling outside of my window.  The fog has hung over the Inner Sunset all day so far, while the rest of the City, from Noe Valley, to Potrero Hill, and surprisingly, even the Outer Sunset are covered in blue skies.  Yes… it’s another San Francisco summer!  But that’s just one of the many reasons I love living here.  I tend to not like hot weather… I find myself not wanting to go outdoors and do things when I feel like I’m going to melt.  The cool coastal air lets me enjoy the City and all it has to offer without breaking a sweat. 

But when I feel the need to feel the sun beating down on my skin… there are so many places to get away.  For those of you that don’t know already, I have three dogs, and there are not too many places in San Francisco where I can take them on a long hike or give them a chance to take a swim on a hot day.  One of my personal favorites is the Sunol Regional Wilderness which is part of the East Bay Regional Park District.  About 45 minutes from the City, Sunol definitely fits the bill for those days when you want to get away from the City and be one with nature, but you don’t want to go too far away to do it. 

But if Sunol isn’t your cup of tea, or if you’ve been there one too many times, or just don’t want to cross the Bay Bridge, Bay Area Hiker will help you find hikes that range from easy to strenuous, are dog/kid friendly and more, all across the San Francisco Bay Area.  They even have hikes listed by their level of difficulty, so whether you’re looking for a leisurely stroll down a meandering path, or an all day trek through the wilderness, you’ll always find a place that suits your pace. 

I ran across an article a few days ago on Forbes.com that listed the 5 Best Places to Sell a Home. Frankly, with more than half of all properties in the San Francisco Market going for significantly over asking price, and approximately half receiving multiple offers, there’s no wonder that San Francisco made the top 5. What did surprise me is that we only came in second. I mean, when is San Francisco second to anything? But whatever, that doesn’t matter too much to me… Raleigh, NC came in first, and I’ve never been there. I’m sure they don’t have Mitchell’s Ice Cream or dim sum that comes close to being as good as Yank Sing.

The fact of the matter is that San Francisco is geographically challenged. And no, I don’t mean because our location on the Pacific Ocean has turned us into a barricade that fights back the fog so the rest of the Bay Area can remain warm and sunny during the summer months. I mean that we are a little penninsula… just 7 miles by 7.5 miles. There is only so much land that is available here, and we have built upon most of it. While there are a few frontiers that have yet to be fully developed (Mission Bay, SoMa, the old Naval Shipyards in Hunters Point), they too are on in the beginning stages to becoming thriving residential communities. Mission Bay was recently listed as the eigth fastest growing neighborhood in the country (with Hunters Point as a runner up!) And while demand hasn’t quite caught up with supply yet in those neighborhoods, it’ll happen within the next few years. In the meantime, the already in demand neighborhoods such as Noe Valley, Hayes Valley, Bernal Heights and Potrero Hill are still seeing properties selling for well above asking price, and in several recent cases for $200,000 and even more over the asking price.

Overall, if you’re looking to sell a piece of real estate in San Francisco, and have owned it for at least a few years (in some cases a mere year has seen a properties value skyrocket by over $100,000 in a market of $800,000 to $1,000,000 homes), you can expect to that your investment will definitely leave you with a nice chunk of change in your pocket. And if you’re a buyer, there’s no time to buy like the present, because if there’s one thing that the history of the San Franciso real estate market has shown us, it’s that the prices here in our little City that’s second to none, always go up!

This week has had a lot of people in a panic. The San Francisco Chronicle ran a front page article about the Mortgage Crunch that’s occurring in the real estate financing market right now. But all is not as hopeless as it seems. Dan Anderson of New Source Financial was kind enough to give me a run down on the current state of the mortgage market in light of the rapid changes in interest rates that have taken place over the last week.

As expected we have continued to see volatile markets in both stocks and bonds. Every piece of news that comes out causes large amounts of variations in our markets. The most recent news involves an influx of liquidity from both the US and European monetary policy boards. The reason they are doing this is to make sure that banks have enough money to honor their commitments. Some see this as a harbinger of worse times ahead, although there is so much uncertainty that any firm conclusion drawn is more opinion than fact.

There are also rumors that the fed will indeed lower rates at their next meeting. This opinion has been priced in the rate futures at a probability of over 50%. Given their last statement it is hard to draw any strong conclusions. The last statement commented that inflation is their primary concern and the mortgage industry will be watched.

Our jumbo loan rates, any loan over $417,000, are still high. At the end of the day this means that the cost to finance a loan over $417,000 has increased. It does not mean that loans are not available nor does it signal any reason that we should stop doing business. The increase in cost can be easily addressed through a seller concession. In this case the seller will provide some of their proceeds from the sale in order for the buyer to obtain a lower rate. We still have one lender who has not raised their rates. I don’t have a good explanation as to why; however this can be saving grace should you be facing any financing difficulties due to rate increases.

Change is always unsettling and this case is no exception. The cost to finance has increased, however this does not mean our market is tanking. Our current market requires a little more due diligence but this is no reason to expect our market to disintegrate.

You’ll be hearing a lot of talk about a rapid rise in mortgage rates that increased rates on some loan products up to 1.5% in just 3 days. While this affects the real estate market all across the country to some degree, the impact is especially noticeable in markets like San Francisco and New York where real estate prices are higher than anywhere else in the country. Monica Di Perna of Guarantee Mortgage took a moment to explain what’s going on:

Late last week was a very significant week in the mortgage industry. To begin with, here is a little simple rundown of the history of what has happened and how we got to this week.

A few years ago, investors on Wall Street grew an appetite for higher interest rates. Since banks have been giving us little interest on our savings and money market accounts, Wall Street created other vehicles that yield higher rates. Wall Street told banks that if the bank charged higher rates on loans that are harder to obtain for many people, they (investors on Wall Street) would purchase those loans quickly from the banks. The scenarios that were considered higher risk were:

-Borrowers that couldn’t show income
-Borrowers that couldn’t verify employment
-Borrowers that couldn’t verify seasoned money
-Borrowers that had credit scores lower than 680 but higher than 630 on their credit report

Wall Street, in essence, was creating ALTERNATIVE guidelines for the mortgage industry. The mortgage industry has traditionally implemented very conservative guidelines of borrower money, in order to prevent potential meltdowns in the housing industry. But Wall Street told the banks to sell these loans with these alternative guidelines. The banks for the last 2-3 years have offered to consumers very aggressive loan products with very loose guidelines.

Everything was fine for a while. The bank would provide, for example, a loan with a Zero down payment on a purchase on a Single Family Home that costs $1,000,000 where the lender will NOT verify income and only require that the borrower have $25,000 in reserves after they purchase. This loan was originated by the bank, and then the bank would sell this loan (along with many other loans in a bundle) to Wall Street where they were called “Mortgage Backed Securities”. The bank would make a profit by selling this loan of $1,000,000 for $1,100,000 (estimate) and then start all over and make more of these loans.

Meanwhile, Wall Street got higher rates on these alternative investment products and the investors were happy… That is until the loans started going into default. Wall Street realized that their guidelines that they implemented and fed the banks, were not wise guidelines. So last week Wall Street called lenders and basically stopped purchasing these loans from banks. The problem is that, now, banks can’t sell the loans to get that quick $100,000 per loan (or however much they would get) and now they will have to keep that loan on their books.

But, remember, the banks are conservative (historically) and they would not have implemented/allowed these guidelines to exist because the guidelines are too risky…but the investors on Wall Street wanted these loans. So last week the banks/lenders couldn’t sell these loans…The problem is that the banks relied on getting these loans off their books for two reason: They are too risky for banks (we keep our money in banks and expect safe policies) and also, the banks don’t make the kind of money they need to make these days on SERVICING these loans…So this week the banks are going to tell us that they are out a LOT OF MONEY. Theoretically, rates should be lower next week because the stock market decreased significantly…when the stock market goes down, it means there is fear,when there is fear, people move their money out of the stock market and into the bond market. This makes the bond market do well and the price of a bond goes up (attractive) and the bond yield goes down. So we would expect that rates will be lower tomorrow. But last week we saw that lenders raised their rates suddenly without any apparent reason. I called a Representative at a bank and asked him what happened. He didn’t even believe me, so he looked at his rates and then said “Wow!” He hadn’t even realized his company had raised the rates, and and he didn’t know why.

Friday evening after the major sell off of the stock market, I spoke with some Reps at other banks and they gave me a summary of what happened. This week, even though the bond market did great, rates may be SIGNIFICANTLY HIGHER NEXT WEEK because the banks/lenders are hurting right now. They can’t sell their loans, which means they have to raise rates to make some money for their losses and their overhead costs, and if they raise rates, they may not get many loans right now. We will see…Could a 30 Year Fixed Mortgage reach 7.75%-8% this week??? I really hope not…we will see…

There is ONE CERTAINTY, buying a home and getting a loan, will mean that conservative, old fashion guidelines for loans will be a more common way to borrow money in the coming weeks. I hope this helps to understand what I believe is going on in the markets. Let’s see how tomorrow looks like together…