Zip Code Spotlight - South San Francisco (94080)
This post first appeared in the February edition of: Cirios Trends: In Search of Real Estate Opportunities.
This month, the zip code spotlight returns to South San Francisco (94080), the “Industrial City.” While its hillside moniker makes South City sound like a place no one would ever want to live, the opposite is true.
In fact, the “Industrial” turns out to be apt, as several prominent biotech firms have their industrial headquarters here. But rather than factories belching noxious fumes, these companies kick off an ample supply of high paying, stable jobs.
A quick look at the market activity graph below shows that prices have declined in the area by a staggering 40% since the height of the market, back to levels not seen in 10 years. This has brought the average home price down to $450,000 - downright cheap by peninsula real estate standards.
The next thing to notice is the steadily declining supply levels shown by the red graph on the bottom. These numbers look to be trending back towards more traditional levels, indicating that price declines in the area could be a thing of the past.
These three factors (prices at early 2000 levels, declining supply, solid white collar job market) make our mouths water here at Cirios Real Estate. Clearly there must be terrific investments to be made in South City. The question is, how?
To answer this question, we have drilled down to look at the South San Francisco market in even more detail - specifically as regards to how home condition affects sale prices.
As you can see from the next graph, we have divided sales over a three month period in this zip code into three groups based on the property’s condition. We define our groups as follows: 1 = Move in ready, great to perfect condition; 2 = Livable but in need of some upgrading or light repairs; 3 = Unlivable, needs major repairs and upgrades. We then looked at the average price per square foot for each group. As one would expect, the best condition properties sold at the highest price and vice versa. No big surprise there.
What is interesting here is the MAGNITUDE of the differences, particularly between groups 1 and 2. The average price for the best properties was ~$460/ sqft, about $68 more than those in group 2. What this means is that for a 1,500 square foot home (the average size in the area), you are looking at over a $100,000 spread between a home in need of light repairs and an identical one in pristine condition. So, if you can turn 2’s into 1’s for significantly less than $100,000, you’ve likely got yourself a great investment.
Of course, this is assuming you buy your 2’s at market prices. If you can make purchases at below market prices, returns look even better. In today’s distressed real estate market, opportunities abound to do exactly that. (Click here to see an example of a recent investment deal in South San Francisco.)
Tags: 94080, price per square foot south san francisco, South San Francisco, south san francisco real estate