MARKET REPORT

Q2SAN FRANCISCO BAY AREA

2018

2018 MARKET REPORT | Q2

Each office is independently owned and operated.

The Bay Area housing market continues to improve, driven largely by economic expansion. Rising incomes and broad-based hiring supports elevated housing demand, and drives home price appreciation. For the Bay Area in particular, VC funding is a critical force in business innovation and a key indicator of investor confidence in the economy. VC funding in the Bay Area strengthened within the last year to $9.3 billion as of the first quarter of 2018—the largest amount in seven quarters—and an increase of $2.7 billion since one year prior. In addition to significant VC investment, hiring is robust amongst tech-related companies. Overall employment growth in the Bay Area continued to outpace the nation during the past 24 months, fueled largely by the strength of the tech sector and its

The Bay Area Housing Market

Welcome to our Q2 Market Report. The following pages present the current state of the Real Estate market throughout the entire San Francisco Bay Area. We begin with economic and real estate commentary presented in partnership with the Rosen Consulting Group (RCG). We take an in-depth look at national economic and legislative factors influencing the market and highlight local variables, including increased Venture Capital (VC) funding, population increase and employment growth, all of which are driving up median home prices throughout the San Francisco Bay Area. For our statistical report of the regional housing market, we take a close look at the ten counties associated with the Bay Area. This report focuses primarily on detached single family homes, with added coverage of the significant condominium market in San Francisco. All data is sourced from local Multiple Listing Service (MLS) organizations.

influence on supporting and traditional industries. A total of approximately 77,000 jobs were created within the last 12 months, with nearly 40% concentrated in tech employment. Many people are attracted to the Bay Area despite a high cost of living and declining housing affordability, because the area contains a large innovation epicenter with many high-wage jobs. In fact, the total Bay Area population rose by almost 36,000 people between 2016 and 2017. Looking ahead, the superior startup environment and access to VC funding should continue to attract highly-educated talent, and subsequently foster tech-related expansion. In addition, deregulation and the Tax Cuts and Jobs Act (TCJA) should further support growth and hiring in the tech-related industries.

2018 MARKET REPORT | Q2

Each office is independently owned and operated.

Santa Clara

Bay Area

Alameda

San Mateo

San Francisco

Sonoma

Solano

Marin

Contra Costa

Santa Cruz

United States

Napa

0% 5% 10% 15% 20%

Santa Clara

Bay Area

Alameda

San Mateo

San Francisco

United States

0% 5% 10% 15% 20%

Median Sales Price Growth (Year-over-Year)

4.3%

5.2%

6.5%

6.5%

7.4%

9.5%

10.9%

12.5%

12.6%

13.6%

15.9%

18.7%

Median Sales Price Growth (Year-over-Year)

5.2%

12.5%

12.6%

13.6%

15.9%

18.7%

Robust local economic growth, low mortgage rates and limited inventory contributed to rising home prices in recent years, with median home prices reaching record highs in many areas. The Bay Area median single family sales price increased by $140,000 within the last year to $1,020,000 as of the second quarter 2018. Median home price growth in Santa Clara County outpaced both the Bay Area and the nation within the last year, with home price appreciation in Alameda, San Mateo and San Francisco Counties closely behind. Moving forward, continued

demographic and employment growth should fuel household formation. As a result, buyer demand and sales activity should remain elevated in coming years. Specifically, the large number of high-income households in the Bay Area should sustain demand for single family housing even as home prices continue to rise. While home price appreciation may slow from the strong pace of recent years, limited inventory of homes for sale and elevated housing demand should support strong single family housing market conditions and continued home price appreciation.

M EDI A N SA L E S PR ICE GROW T H ( Y E A R- OV ER-Y E A R)

2018 MARKET REPORT | Q2

Each office is independently owned and operated.

The new tax law that went into effect is concerning for some, as many think that the December 2017 changes to the mortgage interest deduction (MID) and the state and local tax (SALT) deductions may impact households by eliminating some deductions and limiting the ability to itemize deductions. Many households may not be drastically impacted, because the changes to the MID and SALT deductions are largely offset by substantial benefits of lower effective tax rates and limitations on the alternative minimum tax (AMT) that previously impacted many Bay Area residents. Upper income households are more likely to be impacted by these changes. However, these changes should cause an expected minimal impact on incomes overall, and are unlikely to drastically influence housing decisions and demand

amongst higher-income households. As a result, these changes should not substantially affect the Bay Area housing market. Another net positive of the new tax laws are the decrease in corporate income tax rates, exemption of 20% of pass-through entities income from taxation and a reduction in the tax rate for mandatory repatriation of profits earned abroad. The net effect should result in a rise in capital, thereby boosting consumer confidence and strengthening housing demand. Additionally, because many high earner households are small business owners or receive a large share of income through pass-through entities, these households in particular will benefit from these changes, giving way to stronger housing demand and boosting the local housing market.

SA L E S BY COU NT Y · SINGL E FA M I LY HOM E S

Median Price Price per Sq. FootCounty 2017 Q2 2018 Q2 % Change 2017 Q2 2018 Q2 % Change

Alameda $890,000 $1,010,000 14% $547 $617 13%

Contra Costa $650,000 $690,000 6% $392 $419 7%

Marin $1,315,000 $1,412,500 7% $733 $752 3%

Napa $675,660 $705,000 4% $447 $500 12%

San Francisco $1,440,000 $1,620,000 13% $919 $1,020 11%

San Mateo $1,455,000 $1,650,000 13% $902 $1,028 14%

Santa Clara $1,175,000 $1,400,000 19% $751 $904 20%

Santa Cruz $850,500 $902,500 6% $576 $605 5%

Solano $410,000 $449,000 10% $247 $276 12%

Sonoma $624,546 $690,000 11% $422 $476 13%

2018 MARKET REPORT | Q2

Each offi ce is independently owned and operated.

Median Sales Price: 2017 Q2 vs. 2018 Q2

Price per Square Foot: 2017 Q2 vs. 2018 Q2

2017 Q2 2018 Q2

Alameda

Contra Costa

Marin

Napa

Solano

Sonoma

San Francisco

Santa Clara

San Mateo

Santa Cruz

Alameda

Contra Costa

Marin

Napa

Solano

Sonoma

San Francisco

Santa Clara

San Mateo

Santa Cruz

$0

$450k

$900k

$1.35m

$1.8m

$0

$275

$550

$825

$1,100

2017 Q2 2018 Q2

Y E A R- OV ER-Y E A R PR ICE CH A NGE S

Some of the largest Bay Area home price increases were in the higher-priced counties of Santa Clara (19%), San Mateo (13%) and San Francisco (13%). However, the second-highest home price increase was in Alameda County at 14%. Counties with the smallest gains were Napa (4%), Santa Cruz (6%), Contra Costa (7%) and Marin (7%). In addition, home price gains continued at a strong pace between 10% and 11% in Solano and Sonoma Counties.

About Rosen Consulting GroupRosen Consulting Group was founded in 1990 by Dr. Kenneth T. Rosen. Today, Rosen and Arthur Margon are the partners and active managers of the firm consisting of 18 research professionals. Educational backgrounds include PhDs, MBAs, and graduate and undergraduate degrees in real estate, planning, finance, public policy, and economics. In addition to serving as Chairman of RCG, Dr. Rosen is Chairman of the Fisher Center for Real Estate and Urban Economics and Professor Emeritus at the Haas School of Business at the University of California, Berkeley. Dr. Rosen has authored over 100 articles and four books on real estate and real estate finance.

2018 MARKET REPORT | Q2

Each offi ce is independently owned and operated.

Median Price Price/SF # of Sales DOM

Q2 2017 $1,315,000 $733 741 43

Q2 2018 $1,412,500 $752 716 40

% Change 7.4% 2.6% -3.4% -7.1%

Y E A R- OV ER-Y E A R COM PA R ISON

2018 MARKET REPORT | Q2

MARIN COUNTY

5 Y E A R T R EN D : M EDI A N SA L E PR ICE

5 Y E A R T R EN D : # OF HOM E S SOL D

2014 2015 2016 2017 2018

20142013 2015 2016 2017 2018

4 quarter rolling average

4 quarter rolling average

Marin

$1,412,500

0

200

400

600

800

Apr 2013

Jul 2013

Oct 2013

Jan 2014

Apr 2014

Jul 2014

Oct 2014

Jan 2015

Apr 2015

Jul 2015

Oct 2015

Jan 2016

Apr 2016

Jul 2016

Oct 2016

Jan 2017

Apr 2017

Jul 2017

Oct 2017

Jan 2018

Apr 2018

716

351

550615

741

335

513527

715

341

521

635721

383

529

623

775

417

558

695786

$0K

$375K

$750K

$1,125K

$1,500K

Apr 2013

Jul 2013

Oct 2013

Jan 2014

Apr 2014

Jul 2014

Oct 2014

Jan 2015

Apr 2015

Jul 2015

Oct 2015

Jan 2016

Apr 2016

Jul 2016

Oct 2016

Jan 2017

Apr 2017

Jul 2017

Oct 2017

Jan 2018

Apr 2018

2018 MARKET REPORT | Q2

Each office is independently owned and operated.

M A R IN COU NT Y SA L E S

SA L E S BY CIT Y · SINGL E FA M I LY HOM E S · Q2 2018

City Average Median High Sale Price/SF # of Sales DOMBelvedere $4,092,647 $3,300,000 $10,000,000 $1,205 17 118

Bolinas $1,118,500 $1,136,000 $1,377,000 $846 4 106

Corte Madera $1,660,076 $1,437,500 $2,625,000 $819 16 24

Dillon Beach $841,400 $900,000 $1,050,000 $473 5 136

Fairfax $1,070,729 $945,500 $2,525,000 $632 30 22

Forest Knolls $850,000 $850,000 $850,000 $451 1 36

Greenbrae $1,750,898 $1,660,000 $2,850,000 $782 15 34

Inverness $1,338,800 $1,365,000 $1,800,000 $810 5 20

Kentfield $2,999,164 $2,492,500 $6,795,000 $962 22 22

Lagunitas $976,500 $976,500 $1,173,000 $547 2 46

Larkspur $1,990,273 $1,930,000 $3,800,000 $1,028 22 24

Mill Valley $1,995,263 $1,722,500 $6,000,000 $897 128 32

Muir Beach $1,657,500 $1,657,500 $1,700,000 $728 2 21

Nicasio $2,017,500 $2,017,500 $2,285,000 $561 2 206

Novato $1,148,218 $1,100,000 $2,800,000 $505 134 34

Pt. Reyes Station $1,600,000 $1,600,000 $1,600,000 $627 1 22

Ross $4,220,012 $2,600,000 $10,125,000 $1,089 17 58

San Anselmo $1,576,507 $1,375,000 $3,200,000 $760 55 25

San Geronimo $1,722,500 $1,722,500 $2,200,000 $793 2 28

San Rafael $1,424,277 $1,245,000 $5,550,000 $628 175 34

Sausalito $2,350,000 $1,900,000 $5,850,000 $1,063 11 79

Stinson Beach $2,043,429 $2,100,000 $3,695,000 $1,579 7 89

Tiburon $3,435,068 $2,977,500 $7,400,000 $986 35 91

Tomales $650,000 $650,000 $650,000 $370 1 57

Woodacre $1,098,688 $1,124,500 $1,450,000 $552 6 38

Marin County $1,788,634 $1,412,500 $10,125,000 $752 716 40