After founding a successful brokerage in Marin County, Mark A. McLaughlin took a plunge in 2009 when the real estate market was at a low ebb and purchased the Bay Area's Pacific Union brokerage based in San Francisco.
It was a gamble that has paid off. Since then, Pacific Union has added 200 agents for a total of 640 in 27 offices covering the greater Bay Area and Tahoe, and grown commission income from $49 million to $160 million on a sales volume of $6.7 billion.
Picking up on a growing foreign appetite for U.S. real estate, the company recently launched a Chinese initiative with a social media marketing campaign in China and "concierge" service for Chinese investors and buyers in the U.S.
A cyclist, wind-surfer, snowboarder and risk taker, McLaughlin is a combination of laid-back sportsman and driven executive -- until recently he didn't own a suit, a necktie or a pair of socks, which is fitting for a former competitive sailor -- but he also starts his workday at a CEO-like 4:45 a.m. He hosts a webinar twice monthly in which he discusses market trends.
McLaughlin met with this newspaper recently to discuss some of those trends.
Q: Bay Area home prices have soared in the past two years, and seem to have no upper limit. A recent report said the region had more million-dollar home sales in the past quarter than ever before. What's going on here?
A: I think three things are affecting the Bay Area in general, and they are even more pronounced in the four western counties -- Santa Clara to Marin. The No. 1 thing is that population growth in the Bay Area is outpacing the housing supply by a factor of 2 to 1. Population growth in Contra Costa County was 3.5 percent from 2010 to 2014, and new housing starts were 1.4 percent. Alameda County had 4.2 percent population growth and 1.3 percent new supply.
Second, the unemployment rate is amongst the lowest in the country in some markets. In three of the four western counties, it is really at full employment, assuming that about 4 to 5 percent are not employable.
Q: These are the tech jobs that the region is famous for, right?
A: Most people focus on tech and social media jobs. They are exceptionally high-paying jobs. But of the 25 largest employers in San Francisco, almost half are infrastructure employees. They're in government, health care, education, things like that. And as the population grows you need more of that. One of the top employers in San Francisco is Starbucks. As the population grows, you need more Starbucks.
The third thing affecting prices is that this is just an incredibly desirable place to live, from education to culture to weather to recreation to being an international city. If the jobs maintain themselves, then the population is going to keep growing and driving real estate up. I think San Francisco is going to get to the point where it meets the world stage. We're still trading 30 percent lower in price per square foot than the world's top cities, such as New York, Hong Kong and Beijing.
Q: You can't buy a house on Starbucks wages. Isn't affordability declining?
A: I agree. But the affordability index is more than trumped by the number of people coming here who can afford a home.
Q: Is supply another factor keeping prices high? Why aren't more people selling and moving up, or downsizing?
A: I think we have such ferocious demand that the inventory comes and goes off the market so fast that the perception is there's no inventory. We are busy now. We're expecting some pretty significant new inventory in late August.
Q: Any other reasons why inventory might be low?
A: Move-up buyers are certainly not as prevalent as in years past. If you have credit and liquidity you're going to get a mortgage, but the experience is miserable. It's like having a root canal. There are not a lot of people saying I'd like to sign up for a root canal. The process is more an issue than the number of people with good credit.
Q: Pacific Union launched a Chinese initiative last year. What are Chinese buyers telling you? Why are they so keen on investment in the Bay Area?
A: I think number one is diversification of capital out of China where the government could be changed overnight. Two, real estate is far less expensive here than it is in Beijing, Shanghai, Guangzhou -- the top-tier cities. It's a very good investment here and the quality of life here and education is just fantastic.
Q: What made you finally break down and buy a pair of socks last year?
A: Before (U.S. Ambassador to China) Gary Locke invited me to the embassy, I didn't own a pair of socks, a suit or a tie. It was a black tie function, so I actually upgraded my wardrobe pretty significantly in the fourth quarter.
Contact Pete Carey at 408-920-5419. Follow him on Twitter.com/petecarey.
Mark A. McLaughlin
Born: Southern Pines, N.C.
Education: The Branson School (formerly Mount Tamalpais School); UC Berkeley, social science
Jobs: CEO, Pacific Union since 2009; Morgan Lane, president, 2006-9; Sperry Van Ness International, interim president, 2002-5; Loopnet, 1999-2002; and other previous real estate management positions
Boards: Former chairman, St. Francis Yacht Club
Family: One son and two daughters
Five things about Mark A. McLaughlin
1. He doesn't wear socks, ever -- well, almost ever.
2. He snowboarded the Vallee Blanche in France in April with his 21-year-old son.
3. In April, he biked from the Golden Gate Bridge to Santa Barbara, 390 miles in three days.
4. He gave up racing big sailboats 16 years ago as too time-consuming when his second daughter was born, deciding "family first."
5. He wind-surfs and kite-sails.