IS IT BETTER TO INVEST IN SAN FRANCISCO OR BURLINGAME?

 

Co-Author: Ilya Dorfman (Local Vector)

Recent real estate crisis hit San Francisco hard, but it did not take long for prices there to bounce back. This remarkable market bounce back helped to strengthen perception among investors and lenders alike that San Francisco is a great place to invest. Prices in the entire Bay Area followed, but especially on the SF Peninsula market, along the 101 Expy corridor. Burlingame in particular, with immediate proximity to SFO Airport and 20 min away from San Francisco is in high demand, due to its location and excellent schools. Burlingame is considered to be the third most desirable City to live in Northern California after San Francisco and Palo Alto. So, we were quite surprised when we found out that one of the lenders we were working with expressed reluctance to do business in Burlingame.

We set to prove that Burlingame is as good a location for investors as San Francisco. First we analyzed the year over year price changes in 3 locations: Burlingame, San Francisco and San Mateo County.

Fig 1 - % of house value change from previous year

As you can see, the green curve representing Burlingame's residential price changes from 2007 tracks the blue line representing San Francisco quite closely. But there is something nicer about the green curve: the year to year changes are not as rapid (the angles are not as sharp) as in the case of San Francisco. However, the percentage of the change of Burlingame properties at the end of 2009 was slightly smaller in San Francisco (7%) than the one in Burlingame (8%).

Fig 2 compares the year to year residential price change in San Francisco and Burlingame to this in the entire San Mateo County (orange line).

Fig 2 - % of value change from previous year for SF, Burlingame and SM County

The overall San Mateo County value drop in 2009 compared to the drop in Burlingame and San Francisco was significantly greater. The change for Burlingame and San Francisco is approximately half of the change in San Mateo County.

Based on this simple analysis one can easily observe that the quality and safety of investment in residential real estate in San Francisco and Burlingame are remarkably comparable. And how about the future? Obviously, we don’t have data for that! But we are very encouraged by increases of the quality of life measures in Burlingame such as a significant growth of the API index of its schools. Assuming that quality of life is reflected by demand, please  note a sharp increase in the value of sold price per square foot in Burlingame in 2012, but especially in 2013 as shown in Fig 3.

Fig 3 – Sold price per square foot

Investors definitely should take notice of Burlingame, if they have not done so already.