The inventory of homes currently listed for sale in San Francisco (624), which doesn’t include the non-listing for the $28 million home on Vallejo, has dropped 11 percent over the past two weeks based on normal seasonality but remains 12 percent higher versus the same time last year.
At a more granular level, the number of listed single-family homes on the market (221) is even with the same last year while the number of listed condos (403), which doesn’t include the vast majority of new construction units on the market, unexpectedly ticked-up over the past week and is currently running 20 percent higher, year-over-year.
Last week was the first week in over a decade that inventory levels for re-sale condos ticked-up at the beginning of November.
The percentage of homes on the market in San Francisco with at least one price cut is currently 19 percent, which is in-line with the same time last year. And if typical seasonality holds, unsold listings for which there’s no urgency to sell will continue to be withdrawn from the market through the end of the year, driving the percentage of listings with a reduced price higher through December.
The Bubble is about to pop, read Wolf Street Economics Blog.
Maybe “Dave” will be right on this one topic? But not because everyone is moving to the Tokyo of the East Bay, Oakland. Oakland will pop, too. I mean, why would anyone spend $500,000 two blocks away from Crack Crazy Plaza at the corner of 32cd and San Pablo if overall prices are crashing?
What I am saying is that SF prices will flatten and drop some. That things will not start up again next spring.
It will not be 2006 again. But it will stall for a while IMO.
SF is at historic unaffordability levels, techies are being priced out, mortgage rates will rise next year making it more unaffordable.
Chinese money – which poured recently into the US, Canada and Australia, may drop off significantly. That money was coming into key markets like SF and, anecdotally, was a factor in a lot of the cash purchases, over asking price. IMO that will, if not come to an end, at least significantly slow down.
Prices will not “crash” IMO, but will fall back in overpriced markets like SF.
In other markets still more affordable than their historic average and with population and job growth I don’t think there will be a big impact.
I moved much of my real estate investment interests to other states this year. First because I can get a much better ROI and secondly because, though I don’t expect appreciation to be anything like California, I do expect the appreciation gap to narrow significantly over the next 3/4/5 years.
what does “it will not be 2006 again” mean, Dave?
The loan situation is totally different today. It was crazy back then with Neg Ams, liar loans and such. That contributed in a significant part to the hufter that was made much stricter, harder to get loans and such. One has to really qualify based on income and other factors.
The loan foundation today is much sturdier than back then. That is what I mean by it won’t be 2006 again. IMO.
Bubbles never “correct,” they always “pop,” and pop is just another way to say “crash.”
how much chnese money has poured into SF? can you provide evidence that it has had a significant impact on SF housing?
Looking at this WS blog, I feel like I am transported back to Patrick.net’s heyday.
The last bubble was nationwide and SF was merely one of the many precursors. For instance SF high prices pushed people further and further away, bringing their panic mentality along with them and convincing the $30K/Y families $350K for a SFH was ok because all they needed was to refi to pay the mortgage.
A lot of the old subprime areas haven’t gone back to the 2006 prices, and by far. These 350K sub-prime houses are still only worth 200K or 250K today and purchased with a paycheck.
To bring the SF market down, you’ll need a trigger event, like a Wall Street crash, a major thing in the Middle East, China losing its calm, or a major tech correction. Do I think SF is overvalued? Yes. But that’s the point of view of someone who’s been buying only on the dips, therefore very value-oriented.
You don’t need one big “trigger” event. The coming epic crash is the predictable and only logical consequence of eight years of ZIRP to reflate assets and bail Wall St out of its fraud-driven hole from the last pop.
Here are just a few of your “triggers”:
luxury condo building glut;
VCs fleeing their tech unicorns;
foreign (ie Chinese) flight capital drying up;
record corporate leverage on stock buy-backs;
said stock buy-backs no longer propping up stock values;
years of increasing upward distribution of wealth hollowing out consumer demand;
That’s just the tip of the iceberg.
The broken clock is gonna be right again at some point. Permabears are going to have their time in the sun soon.
“time in the sun”? wtf?
Sociopaths who play along with fraud think they’re geniuses when their properties and rents skyrocket. When the economy collapses as an inevitable result of fraudulent policy that fuels asset speculation while hollowing out the productive economy, those who refused to play along are “broken clocks.”
Chin up, extractive economy! The productive economy will make you whole! Fear not, sociopaths: people who work for a living will bail you out once again.
2b just wiped the smug smile off my face….wwhhaaaa!
But then redeemed himself at the last minute: “people who work for a living will bail you out once again.”
Good thing I’m kicking it with some Talking Heads on iTunes. And the beat goes on…
I have no idea who two beers is talking to. I would bet mostly to himself.
As a reminder I have been a bear in 2007-2012 and a bull from 2012 to 2014. A moderate bear ever since. But anti-owner (most probably rent controlled) permabears are a breed of their own, denying reality for years with their “the end is nigh” signs until the inevitable market cycle proves them right for 2 years out of 10. Then they come out from their den and say “we told you so”.
2 beers, do you think all of those items above are happening now? I dont but curious which ones you think are underway. Im not a bull or bear here per se, but think the stock market is humming nicely and not in a bubble. Housing always follows the stock market, even in SF
Just my take: the DJIA has seen a retrace of the 2006 bubble top in early 2013, basically doubling from the trough. Then it has gained another 30% anticipating future growth as it always does. I think we are due for a “healthy” correction. Maybe 20-30%? If the global economy keeps slowing down, this might happen within the next 2 years. This could make the leading tech sector to be a bit more skittish and overcorrect.
Now we could perfectly be in a late-1997 situation where we think we have a correction and failure to see one will precipitate a run for the easy money.
One segment that I think could make tech push higher into bubble territory is crowdfunding as a source of Venture Capital. The little guy joining the money making party is usually the way bubbles get inflated to their bursting point. The shoeshiner gives you stock tips: run for your life.
Yes, the pump and dump stock market is humming along nicely, if by “nicely” you mean record corporate leverage buying back their own shares to pump their stock up. Smoke n mirrors, robbing Peter to pay Paul…this might be “humming” to you, but calling it a Ponzi scheme might be more accurate.
Any similarity between this and a productive economy (in which companies invest profits in capital stock, instead of buying their own stock to goose share price) is illusion.
Stock market, housing market…they’re both artifacts of Fed policy to hollow out Main St to prop up Wall St.
The foreclosure inventory is way down. It is still a factor but usually in judicial states. Judicial states actually provide a good investment opportunity still because the foreclosures have not been worked through and bargains can still be had. Assuming the location has job and population growth.
I don’t think the SF market will be brought down, an earthquake could do that maybe, but flatten and decrease a bit. Not that I can afford to invest in SF. In terms of ROI, anti-business and landlord mentality, SF and many part of California are not IMO good investments. I got out of Sacramento because the long-term prospect in that metro area do not look all that bullish. I did not for a minute consider exchanging the proceeds for homes in California. It was always the plan to move out of state. And I had a good ROI in Sacramento but have almost doubled it going out of state.
More power to you if you can afford to invest in SF.
Socketsite please quote your source saying inventory is up.
We’re the source.
We use a third-party tool to consistently query the MLS, normalize for local listing patterns and listing status (we don’t including pending sales), and track true inventory which is a function of both new listings (that’s supply, not inventory) and sales (demand).
We have a database going back over a decade.
Listings are half the equation (i.e. supply). Sales volume is the other half (demand). The listings/sales numbers can feedback on each other – low sales turn into high listings, or vice-versa. But they can also be neutral re market conditions – low listings are met by low sales, or high listings are met by high sales. Hence, the trends are critical. Before the last crash, you saw a substantial drop in sales volume (and growing listings) that preceded the price crash.
From what I can see, single family homes seem to be selling well. Condos, not so much. Nevertheless, I’d much rather be a seller than a buyer right now – single family home or condo. And as I’ve been saying for several months, I’d be reluctant to buy anything in SF – esp. a condo – unless you were planning to stay for many years and have a cushion to withstand a pretty substantial price decline if you had to sell for some reason.
Which is why we report true inventory, which is a function of both new listings (supply) and sales (demand).
Sorry to be thick, but how does a report of true inventory cover sales volume? To illustrate: there are 624 current listings. If there were 10 sales last month, the overall market picture is is far weaker than if there were 1000 sales — even though the listings number is the same. Perhaps I just don’t understand what you mean by the term true inventory.
Whatever is coming – small downturn which I think or the crash two beers thinks, IMO a great buying time is coming for investors. Now, if one is buying a personal residence and plans to stay for years then you are probably OK.
The US is many real estate markets and not all are on the same cycle. I’d be cautious, however, on SF as JR notes. Because of affordability levels, coming rate hikes and the probable slow-down of off-shore money buying here site unseen. Offering way over asking price in some cases.
Think to 2006. Worst time to buy and everyone was buying. Think to 2007/2008/2009. Best time to buy, in the general current cycle, and most were afraid to buy.
A good opportunity may be coming for real estate investors. Depending on how things play out.
In late 2008 there was a syndication in Portland that bought 27 unfinished townhomes – the 12.8 million FDIC note on them for 3 million. Height of the downturn. Yet the IRR was over 20% I just several years.
In 2011, when land entitlement was “hot” as builders had stopped building, a entitlement project in Dublin within walking distance of one of the BART stations took place. In just 3 years that project doubled investor returns.
Do your due diligence. Get educated and, if you love real estate, see what may be coming as an opportunity.
Right you are, Dave, “it’s always a good time to buy!”
amirite?
No, it is not always a good time. In SF this past year IMO have not been a good time. 2006 was not a good time.2008 and later were good times.
The best time to buy is when the market is down and that is easier to judge in real estate than it is in stocks.
And one market cycle is not the same as another in real estate.
In 2006 just prior to the “crash” if you had rental property in say Stockton you could have exchanged at the peak to Texas. Improving your ROI and protecting your assets as Stockton dropped up to 50% and Texas was sort of flat. because of all the job growth there that continues to this day.
beware of folks who tell you it always a good time to buy real estate. The head of the NAR I believe had a book out in 2006 or so saying what a great time to invest in real estate. Yeah right.
The professionals, so-called, are IMO, little more than talking heads.
You’re referring to David Lereah, whose name fittingly looks like a cross between “liar” and “diarrhea.”
You got it! Chief economist of the National Real Estate Association in February 2006 when his book came out – “Why the Real Estate Boom Will Not Bust”.
I have a great video on this.
But yeah, Shiller saying on Fox in 2013 it was a bad time to invest and being knocked out of the park by a “no one” – at the time – in the debate who disagreed. Leave it at this – Shiller was wrong.
I don’t get it Dave. You’re always taking up Oakland. Why didn’t you put your money where your mouth was and 1031 your stuff into Oakland? This out of state you’re doing is a mistake IMO. You’ll get zip appreciation, and if Oakland (finally) gets real traction, you could do very well if you choose the right gentrifying hood. I’m sure 2b would agree with me too.
If I was less seasoned and had more energy I’d be in Oakland. But the comedy-tragedy that is the SF RE market is just too rich for established investors to pass up. Tapping equity to get more of the goods is just too good a game to pass up, if you can do it. Plus I know the circus dynamics of SF too well (tech-boom-high-rents-political-crybabies-silly-illegal-laws-dumb-overbidding-inevitable-gentrification) to pass up on another round in the city. But this second round of dip into the greed pot may be it for me, as I’m quite sure that I’ll get the cashflow I need and more equity than I know what to do with.
Having Peskin return to the BOS will ensure that nothing substantial gets built and rents remain sky high. It’s a nice warm comfy feeling of SF politics as usual 😉 and a fine time to plan for an early game over exit. Will need to think up some new hobbies soon.
I’m careful where I invest and one criteria is the historic appreciation. I only invest in markets where the appreciation has ben greater than inflation. Not SF numbers but I am happy with 4/5%/year. The focus for my rental homes is ROI. Good positive flow which partly use to pay down one of the homes.
For appreciation my focus is on real estate syndications. In those the appreciation can he huge and turnaround time just 2, 3 or 4 years. I doubled my money in a Dublin entitlement project in 3.5 years. Just got involved in a Mountain View entitlement syndication near Google. So I don’t preclude Bay Area investion but only do it in syndications of carefully chosen projects.
Comment on Peskin. I think you may be right. That he will block any project that needs to come before the Board. Like the Gang project. Does 3M need to go to the board? I think they are asking for height exemptions and such so, if it does, he could possibly kill that project. As currently designed.
I think you’re really misreading the affordability “issue” in SF. Look at any expensive and exclusive city- it’s unaffordable! Paris, HK, Mumbai, Tel Aviv, etc., etc. and I’m not even taking “world class” like Manhattan or London. These cities decouple from typical affordability.
For SF specifically, there are several key reasons: 1- internationally desireable, so people from all over with means choose to buy here. 2- existing owners usually have lots of equity, so they can trade up or stay put. They normally don’t have to sell or liquidate, as evidenced in the Great Recession. 3- nimbyism reins supreme, so little new construction. 4- and of course rent control helps keep hanger-ons here and marginal rent sky high.
Sure we have had a huge appreciation run up the last 3 years which is why it’s slowing down. But it’ll pick up again. And again. And again. No reason to sell SF RE unless you have to. And I sure as hell wouldn’t trade it “down” for some out of state cash flow deals. (But you did say you had stuff in Stockton, which is a different story, and did get creamed last recession. It’s just that I would have traded it towards discounted D10 in SF a few years ago. Then you’d be singing a different tune, and perhaps doing the happy dance in 2015 🙂
SFRentier,
I own my personal residence in a “suburban” SF neighborhood. I like the detached homes windy streets and lawns but get grief for that from some here. But that is OK.
I started real estate investing in the late 90s. I could not afford SF as an investment then. So I chose Sacramento (Rocklin) and bought a nice 3/2 for 100K. It went to 390K at the top and down to 220K right after but when I sold it early this spring I got 340K. Big appreciation hence need for exchange.
We agree to disagree on out of state. But to mention one location which will see big appreciation over the next 4/5/6 years as well as good ROI now. Hamptons Road Virginia. I am looking to purchase a home there. Reason? Panama Canal.
Bay area real estate can still be lucrative. The best investment I have ever made was Dublin. Doubling my money. Pulte bought the entitled land from our group. They are building Dublin Heritage there as we write. MV is a just recent investment. Apartment complex closest to Google and one of just 3 sites MV has designated for high density housing. At this time.
Syndication deals can be especially lucrative in markets like SF because of the things you mentioned.
My strategy combines ROI and appreciation. They tend not to go hand in hand.
On SF, I am saying a stall and small pullback. I don’t see a crash at all.
Ok, fair enough, now that you lay out your strategy more clearly. I get it, and it sounds reasonable. I thought you were one of the “SF can’t go higher due to affordability” types. People say that every run up, but never seem to be around to question when the next run up appears. I remember people laughing at $500k condos and lofts in the mission in the late 1990’s/early 2000’s. Well, those “suckers” that brought those are having the last laugh now. With blue chip RE time is on your side.