Here are S.F.'s hottest neighborhoods

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Market Trends

The neighborhoods seeing the highest housing price appreciation in San Francisco aren’t necessarily the ones that first come to mind when thinking about high-end areas.

A report from Paragon Real Estate found that 12 neighborhoods in the city have seen over a 12 percent compound annual growth rate since 2011. Compare that to the national average rate of roughly 7 percent during that period.

While price growth in certain neighborhoods continues to outstrip the rest, the real estate market in the city as a whole continues to reach new highs since the end of the Great Recession.

Median house prices have breached more than $1.6 million, representing a 23 percent year-over-year increase. Average dollar per square foot values have also reached new peak values.

The areas that have seen the highest appreciation generally span the southern and western edge of the city and include Visitacion Valley, the Outer Sunset, the Excelsior and the Outer Richmond. The report chalks this mainly up to the relative affordability of those markets, which allow faster appreciation than pricer areas.

Of the 17 neighborhoods listed by the report that had median house prices of under $1 million in 2011, only five held that same distinction in 2017.

Leading the way in terms of appreciation is San Francisco’s Bayview, which has seen 18.3 percent compound annual appreciation. Median house prices in the neighborhood were $300,000 back in 2011. Six years later the number is $822,500.

Another factor in the rapid ascent of housing prices has been that in more affordable districts like the Bayview, prices were deflated by the number of foreclosure sales stemming from the housing market crash.

“The less expensive homes all around the Bay Area were the worst hammered by the subprime financing, distressed property crisis, so in San Francisco that meant neighborhoods on the Southern border and the Southwest,” said Paragon’s Patrick Carlisle. “When you get down that low and the market starts to recover, you start to have a large bounce-back.”

Other neighborhoods seeing large increases include the Inner Mission, where median house prices have jumped up nearly a million dollars since 2011 and Ingleside Heights, which saw a median house price of $945,000 in 2017 compared to $430,000 six years ago.

While Ingleside Heights suffered from a similar dynamic with the subprime mortgage crisis, the recent rise of the Inner Mission can largely be attributed to an influx of younger, wealthy tech workers.

“The gentrification which had been slowly occurring for 30 years suddenly went into overdrive to catapult prices higher,” according to the report.

Bernal Heights also was a unique case because it's adjacent to the Mission and Noe Valley, it saw an “overflow effect” for people priced out of those neighborhoods.  

Still, while it’s true that the most expensive neighborhoods in the city have lower rates of appreciation, in dollar terms, their appreciation returns are by far the highest in the city.
Early on in the post-recession recovery, those pricier neighborhoods saw appreciation rates at comparable levels to lower priced neighborhoods, however in 2015 and 2016, financial markets experienced a variety of macroeconomic shocks including a drop in oil prices, Brexit and a slowdown in IPO activity.

"The most affluent homebuyers are the ones most closely tied into the financial markets, so while the more affordable segments of the market didn't pay much attention to the volatility, the luxury markets very much did," Carlisle said.

Thanks to Kevin Truong  – Multimedia producer, San Francisco Business Times