July S&P/Case-Shiller: Pace Of San Francisco MSA Decline Continues

Why is it that the S&P index continues to decline, but homes where I look in Russian Hill for example continue to stay stubbornly high?
Is this really the SF index, or are there other parts of the Bay in this index? Honestly, I don’t see much of a drop if any in San Francisco.
If I was Congress, I’d vote NO on the bailout too. I don’t care of Main St. gets crushed. It’s all about survival of the fittest. It comes down to job survival, and if you’re an underperformer, then you must be weeded out for the good of the economy.

Roger,
See the editor’s footnote: SF includes Contra Costa, Alameda, etc.

The top third has been stable at March 2005 levels for 6 months now.
middle tier is also stabilising it seems.

Here are the “top tier” numbers for SF since that tier’s peak in August 2007:
8/07 191.29
9/07 190.78
10/07 188.51
11/07 182.65
12/07 178.88
1/08 175.75
2/08 171.32
3/08 171.25
4/08 170.87
5/08 172.36
6/08 169.95
7/08 168.93
Down just under 12% in 11 months.
January 2000 was the baseline, at 100. February 2005 was 166.42. March 2005 was 172.01.
Draw whatever conclusions you will from those numbers. My prediction: it has all hit the fan much more strongly since these numbers (which are 2 months in arrears and which are not seasonally adjusted). We’re entering a recession (or depression) and the recent declines hit even when the economy was relatively strong. Jumbo rates are higher and lending requirements have only continued to tighten. My 2 cents is we’ll see the decline in the top tier in SF accelerate and surpass the lower tiers, which will also continue to decline but perhaps more slowly. This is exactly the pattern we saw in other markets that have been hit hard — Las Vegas, L.A., San Diego. The downturn hit the lower tiers first then the top tier around 8 months behind. SF simply started this pattern around a year after those other markets. The growing spread between conforming and jumbo loans should move this process along even further in SF. The looming Alt-A resets will also be a bigger deal here. We’ve already started to see all this develop with the growing inventory and increasing number of reductions.

My personal experience is very different from this index. I bought a 2/2 TIC with parking on the Preside side of Pac Height for $620K in Q405 to Q106. 1300 sq feet. Tell me where in Pac Height can you find a deal like that TODAY??

thank you ester.
i wish we could get the editor to highlight apples like yours-but i guess that would not play well with the crowd…

Yes, this index is bunk. I bought a 5/4 SFR in the Marina last year for $27,000. It comes with a helipad, submarine port, wallpaper made of whale leather, and has teleporters so I never have to ride the yucky bus. Tell me where you can find a pretend property like that TODAY?
Additionally, I plan to call Bob Shiller and ask hime to come out with a “My House Index” or “MHI.” Naturally, the MHI will go up 10% a year in perpetuity. Because it doesn’t matter what all the indicators say (like this index, DataQuick, even the CAR), I know that MY HOUSE has only gone up in value! Whee!

@anono
could also be due to the sample size (being pretty small)

Thanks Ester. I had a similar experience, though more recent.
Got into a 2 BR 1 Bath TIC in Lower Pacific Heights (Pine and Broderick) 6 months ago for 525K.
So I would like to know if anyone has stats on TIC, Condo price drops (if any) in San Fracisco. Not Alameda, Not Contra Costa, Just SAN FRANCISCO. And just TICs, CONDOs.

Tell me where in Pac Height can you find a deal like that?
2010

spencer,
I dont think that you can really compare a 1/1 to a 2/2 and call them apples. I don’t have to put my unit on the market to figure out how much it is worth today. One can simply look up MLS at those that are 2/2,2/1 that are in contract.
When I do that, I can up with a rough guesstimates of $700K to $750K in TODAY’s market

typical spencer mis information
“Anyway, why would anyone buy a 2bd2ba TIC enar the presidio when you can rent a 3bdr house in the presidio for $3000?”
have you seen the rentals? i guess its b/c you don’t mind low ceilings w/popcorn, carpets, hollow doors and crap quality b/c that’s what you are used to in your rental.
show me a 2/2 in pac hgts that will sell for anywhere near this price. not on pine/bush, not “lower” pac hgts. and no, your 1/1 condo does not qualify…

“I dont think that you can really compare a 1/1 to a 2/2 and call them apples. ”
You can’t call them apples but I think a 2bd 2ba TIC is more comparable in price to a 1 bd 1ba condo, than it is to a 2bd 2ba condo

“but I think a 2bd 2ba TIC is more comparable in price to a 1 bd 1ba condo, than it is to a 2bd 2ba condo”
any factual basis for this “thinking” ?
any more thoughts on crappy presidio rentals?

so fronzzz,
would you suggest that people sell into this market-get out while the gettin’s good (or bad as the case may be)??
is that what smart guys would do?

Somebody says they bought well below market in ’05, and we’re using that hearsay as a comp to discredit the entire index?
2727 Jackson is a TIC building with 2/1 units under $600K, recently reduced.
2040 Laguna is a 2/2 condo priced at $699K. There are quite a few other 2/2 and 2/1 D7 condos well below $900K, like 2299 Sacramento #12, 2121 Laguna #6.
Craigslist shows several 2-bedroom apartments in the area for under $3K. If you like the Presidio, here’s one that’s in the Richmond, but 2 blocks from the Presidio. I don’t see any popcorn on this ceiling:
http://sfbay.craigslist.org/sfc/apa/860055291.html
Coincidentally, while I was typing this, my house went up in value another $5K. Seriously. Wonder how I’m going to spend it?

“One can simply look up MLS at those that are 2/2,2/1 that are in contract.”
Without looking at the individual property, this means very little. The better measure is to look at recent sales of property that were last purchased in Q405 to Q106 and compare the relative increase or decrease on a per square foot basis. Of course, you must first determine that there has been no significant remodeling to confirm it is a real apple.
Anyone have any Presidio/Pac Heights apples that fit the parameters?

paco, your tone is so tame, I suspect a bit of irony there.
To answer to your question, I’d say I think it depends on your situation. Overwhelmingly I’d say it’s better for people who live in their own homes to weather the storm if you can afford the mortgage (less than 30% of net salary).
1 – If you want to stay in the place, just stay the course. Otherwise why plunk 1000s a month when your principal will decrease by a mere 5% after 10 years?
2 – Of course if you think your house will be your retirement, think again. Millions of boomers did the same and will be competing for fewer and fewer buyers (statistically speaking, and the population is growing faster at the bottom than at the top).
3 – If you were in for the easy bucks, just sell now and take your loss. There’s a chance you won’t see 2006 prices anytime soon. I hope you kept your day job…
A house is not an investment. It’s a product in which you live. The idiot salesmen that brought us to this grand national mess are not gonna help us get out of it. Apart maybe from the REO salesmen.

Sorry, ester, I’ll try to keep the dog from eating my homework in the future.
On the topic of fact checking, I’m highly skeptical about your supposed purchase. Because I was in the market at that same time, and NEVER saw any deals that good in late ’05. In fact, some friends bought a unit similar to yours (roughly same size, but a 2/1 TIC) in a nearby area. MLS listed, they got into a bidding war and ended up paying roughly $800K for the place. With no parking, and it was a fixer. They thought they were lucky to “win” it at the time.
So out of curiousity, how were you able to get such a good deal?

Roger said: “What is scary was the 7% drop in the Dow yesterDAY. Most people I know just buy in live in their house and enjoy life. Not many in SF are buying b/c they want to flip. They’re buying b/c the housing stock is generally much better than the rental stock, and they just want to enjoy life.”
I don’t know how many threads I’ve posted this in, but I’m getting a bit tired of repeating myself. Roger, the reason for the nearly 30% decline in the stock market in the last year is the 10% decline in real estate!
A 10% drop in real estate is devastating. Do the math. If you own a house, how much did you put in for a down payment? 10%? In San Francisco? $1 million house? Oh, guess what, you just lost all your money.
Maybe yesterday you had $100k in the stock market? How much you have today? $93k. No big deal compared to the homeowner.
The vast majority of equity investors don’t use leverage to invest. They are in pain right now, but like the nearly 100% of recent home buyers who used very significant leverage to purchase their homes, usually upwards of 9:1 leverage.
Those people are toast. And when the next 10% comes, and they realize they now owe $100k more than their house is worth, they have a real problem on their hands.
The stock market is nothing compared to that.

finally I have some allies who understand the difference between Russian Hill and Novato.
I also was just in the market and found only one 2br with parking in Russian Hill in the mid 600ks. And yes it’s a fractional TIC. I can’t rent it out without price control but don’t care since I live in it and will do so for years.
Over the last eight years, RE in the top tier appreciated a reasonable but not outrageous 10% given how the job market exploded and a few thousand people made massive fortunes.
Was there a bubble in Novato? Yes. What does that have to do with good Russian Hil homes that ballooned at half the rate? Nothing!
Enjoy finding your 4br in Pac Heights for 500k in 2010. Continue to throw rent money down the toilet until then.

Not sure if Paco’s comment was addressed to me, but yes, I do know where the money’s made:
http://www.forbes.com/lifestyle/2005/05/26/cx_sc_0527homeslide.html?thisSpeed=65000&boxes=custom
Real estate has historically tracked inflation nearly to the penny. That’s because in the end it’s just a place to live. There’s no innovation or new value being added to the economy by a new house. Equities have trounced real estate over the years, and it’s not really close.
This last 10 year period is an outlier that never happened before, and now we’re all paying the price for it.

542 Laidley sold for $938k on 7/1/05 and for $950k on 6/27/08.
I saw it both times, it had not been significantly remodeled in between sales.

Thanks for the apple NVJ.
1.2% appreciation on that house. That seems consistent with the observation by some on this site that certain areas in SF are holding steady — at least for now. Any more data points for Pac Heights/Presideo?

542 Laidley somehow comes in line with the observation that the top tier is back to 2005 prices.
1.2% appreciation, compared with an instant loss due to buying/selling (think agent fees, taxes, other costs, like 10%?) and compared with another 10% inflation hit. And we’re not talking at what was the rent equivalent vs. interest payment and the opportunity costs (another 3% per year on 20% down?)
That’s an inflation-adjusted 8%+ loss + 10% expenses. Or a net 18% loss. Not a great investment.

NVJ, I’ll take your word on the Laidley comp as you’ve always been very reliable on this site. So let’s modify the original challenge a bit given the CSI data — how about a straight apples-to-apples comp purchased from mid-2006 to mid-2007 that has been sold for more in the last six months?
The Laidley sale is an interesting example given the rest of this thread. CSI indicates that for the SF MSA we are back to early 2005 prices (for the top tier). Several posters have been adamant that these numbers do not accurately reflect SF, only its immediate neighbors. Yet the one concrete example that has been provided — in perhaps the strongest neighborhood in the city — shows a June 2008 sale at effectively the same price as July 2005, nearly exactly as the CSI data would indicate.

Oh, and a little more info on the Laidley house:
FWIW, the place appears to have initially been listed at $1.095M in February and reduced to $998k in April before it sold for $950k.

“Maybe it was a Dutch Auction?”
Come on now, I thought we had dispensed with the “rich foreigners will save SF RE” meme. 😉

Yeah, Euros are running for their lives.
http://www.bloomberg.com/apps/news?pid=20601087&sid=az1rLwgisBgg&refer=home
We’ll be able to snap up cheap European property soon if this lasts.

trip,
when you asked,
“how about a straight apples-to-apples comp purchased from mid-2006 to mid-2007 that has been sold for more in the last six months?”
i wonder what that would prove?
selling soon after buying is a bad idea- doing so in this environment is an especially bad idea.

Spencer, double check your math.
A unit that is renting $2000 a month, that sounds like a fix-upper type of 1/1 in Pac height, which would sell for $600Kish today.
With $150K down, your monthly payment would be $3800 a month, not $6000 that you had there.
True, it is still way cheaper to rent than buy TODAY, $2000 vs $3800. in 17 years, you would be paying more to rent than to own.
And this is assuming 0 appreciation.
At any rate, some people would always rent, and some people would always buy. In the end, thanks for those renter that I am a landlord today. Without you, this would be not a good business for me.

Der flujinator didn’t talk soma; and paco is correct what would selling quickly prove. Plus if any one ever gives examples they are ignored anyway.
How bout this one: 251 Arkansas

paco: Presumably it would prove that you can save tens of thousands of dollars, if not more, by just waiting a year and buying in 2008 rather than 2007. Which in turn would be a very, very important piece of information for those of us currently considering buying.
Obviously past performance does not guarantee future returns, but there is no good reason to believe the downward trend will reverse itself in the next 12-24 months.

These stats don’t show the huge downdraft coming now that the tech stocks are getting crushed. Layoffs will be coming in techland late this year and early next year causing home prices in SF and the valley to crater.

I’ll agree with paco on that one. Can’t remember who, but somebody here recently posted that they bought a place in Fremont at a pretty attractive price that made buying a much better scenario than renting. So there are opportunities out there already. Just not in the 3 SF neighborhoods that many of you seem to be obsessed with. I guess I’m lucky that I don’t even want to live in 94123 or Noe – less competition for me when the dust settles.

“A unit that is renting $2000 a month, that sounds like a fix-upper type of 1/1 in Pac height, which would sell for $600Kish today.”
Nope… 4th flr 2bdr 2ba with in unit laundry and parking 2 blks from Fillmore; 1 blk from lafayette park

Boy the kitchen in that link chuckle gave looks mighty new, I hope I am right about 542 Laidley being a true apple. I definitely remember walking through it and giving it a thumbs down because it was too far north, into the fog belt. I don’t remember anything about the kitchen one way or another.
I know some of you can access permits filed with The City, if anyone can check when that kitchen was remodeled, it might be nice to know.
And it was hard for me to even find that very weakly positive Apple, so I think that most people’s sense that we are at 2005 prices, even in the stronger southern neighborhoods, is probably correct.
sparky-the-bear, list prices don’t really prove anything, you need an actual sale for it to be interesting.

Ester
Your story is becoming stranger and stranger and you’re starting to sound like other RE sh(r)ills.
Are you saying you are not only a homeowner based on a great deal you got two years ago but you’re also a landlord of a cash-flowing rental in SF?
Anything else about your “situation” you’d like to adjust?

I am not adjusting anything. the fact that one is a homeowner does not mean that he can’t be landlord at the same time.
What is strange to you??
If you say you are a human being, and then you disclose that you are also a male/female, are you adjusting your status?

It sounds like both “ester” and “new buyer” are both real estate agents with a lot of time on their hands since there are not many actual “new buyers” in SF any more. Any real “landlord” is more likely to “invest” in timeshares than a “TIC” (I sold my home a few years back and bought a second apartment building with the profit). As it gets harder and harder to refinance we are going to see a lot of people walking away from TIC loans and making the other TIC “investors” very unhappy…

NVjim,
List prices don’t count, I’ll remember that next time an apple comes out at a lower price. But really, I just stumbled by those places while looking at the MLS. I’m not going to reseach what has sold, those are listed a lot higher than when they last sold. Someone can keep an eye on them and we’ll find out what happens.

“List prices don’t count”
List prices are wishing prices and no, they don’t count. An apple is an unmodified property that has recently sold and can thus be compared to previous sale prices. At best your example is an apple in the making. We’ll see how it turns out.
Plenty of people in other area of the country stubbornly clung to wishing prices for quite a while. Their rallying cry? (indignanty)”I’m not going to just give it away!”

“What’s the point of cheering for cheaper prices when you cannot take advantage of it?”
Because prices will continue falling until enough people can take advantage of it – that’s economic equilibrium. Despite the fear-mongering that Paulson’s spin machine is putting out, credit is neither frozen nor thin. Plenty of it out there for many purposes. It’s just more strict/expensive than it’s been the past few years (i.e. it’s no longer free and given to everyone – lenders have factored the risk premiums back in). As prices keep falling, more and more people will have the necessary down payment and income to buy property.

John, I think you are exactly right that the SF market is not that good for buyers right now. Jumbo loan rates are considerably higher (conforming loans are about the same, though, or a bit lower now). It takes a heftier down payment. It definitely would be nice to be able to buy a place with no- or low- down and free up that money for other things. But those days are gone forever (a key factor driving down SF prices as the pool of qualified buyers is now a fraction the size).
However, you’re ignoring another key factor. The SF buyer of two years ago is now down about 10% on the value of the home — that’s 100% loss of a 10% down and 50% loss of a 20% down. So a buyer today would avoid that loss. Form a total investment perspective, today’s buyer is much better off. Of course, next year’s buyer will be much better off yet.

“You have to put in more down payment, the mortgage is way way higher.”
I thought the whole reason ALT-A resets aren’t going to be a problem in San Francisco is that mortgage rates are cheaper now than they were before. So which is it? If mortgage rates are way way higher get ready for round two of defaults which will drive prices down even more.
Ran the numbers on a $1M condo. Assuming I can buy it for 10% less by waiting but rates go up by 2% while I’m waiting I will have to hold for at least 16 years for it to be a better decision to buy today. That assumes I can’t refinance at a lower rate at anytime during those 16 years.
My portfolio was up in ’07 and so far is up in ’08. My down payment isn’t earning a lot but is safe. I like my odds.

Some posters on this site, I have noticed, have the belief that the people on here can either “talk up” or “talk down” the prices.
I can see how that can work in the stock market. A few people piling on to buy or sell the shares of a company, especially a thinly traded one, can possibly do that.
I can also see how discussing a particular listing can help or hurt it.
But doing that to the real estate of a city like San Francisco? A blog like Socketsite?

“I have been looking, and I am going to tell you that I can afford less house than 2 years ago. And if you were looking, you know that’s true.”
I don’t doubt you amigo. It’s amazing what you can “afford” when the bank gives you a loan you have no hope of every paying off and won’t be able to make the payments on after the teaser rate period.
If the bank gave me a zero-down interest-only loan with an initial teaser rate of 0.0000000001% for the first five years then I would easily be able to “afford” a $1T dollar property. At least for the first 5 years. Then I wouldn’t be able to afford it and I would default. Then the MBS that my loan was put into would lose money. Then the financial institution that held the MBS would go insolvent. Then the government would go into a panic throwing taxpayer money at the financial system.
By 2004 it was both obvious and inevitable exactly how this was going to play out. It’s like watching a damn Kabuki play. I’m reminded of Santayana’s corollary, “The only thing we learn from studying history is that we never learn anything from studying history.”

John,
No question you are correct in all your observations. The whole point is that easy credit lead to unprecedented rise in prices. The converse also has proven to be true nationwide and in a lot of the 9 county bay area.
What remains to be seen is if real sf (d4,5,6,7,8) has immunity. I will note that real sf has been shrinking over the last year or so and d1,2,3,9 & 10 have seceded not too long ago.

Note that even if prices have “only” fallen by 10%, buyers also now have the luxury of full inspection and financing contingencies. That is something they did not have last year and it has value. If there is 50K in foundation damage, you no longer have to close. Last year you did.
Also, the stuff that you are seeing for only a slight discount is the stuff that is in tip top shape and location. The realtors are telling the sellers not to bother listing homes that have big problems or need a lot of updating or other work, though some are still making it to the market.
Two years ago, you had all sorts of crap hitting the market and all of it sold quickly. That stuff is rarely being listed any longer. When it is listed, it’s basically hitting 3% per year over 2004 or 2005 prices. That’s up from 2004-2005, though not by much, and WAY DOWN from 2006 and 2007.
Also note that the patelco rate is only for loan amounts up to 1M. On a 2.5M loan, you “merely” have to put $1,500,000.00 down. So they are hardly going much above the conforming limit and then you have to take up the slack.

John wrote:
> Let’s be real, few in SF buy for short term.
John must hang out at the PU Club since that is one of the few places in SF where most of the people are long term SF residents. Most other places in the city I will bet that half the people in the room moved here after Art Agnos was mayor…

PresidioHtsRenter,
On SS, once I used the 7-year duration (which is the average # of years held by owners in whole US) for some math, and someone else showed us the data showing that average SF owner stay for 10 years.
You can also use math – there are about 700K to 800K SF residents, so about 250K households. 30% are owners, so there are about 75K inventory. If average owner held 10 years, that means about 10% of that exchange hands every year – 7500 units.
That is about what we see from the sales data – 600 units per months (2008 has been even lower).
Another way to look at it – go to PropertyShark.com and get a free account. Search for a property in the neighborhood you are interested in. Go to the map section, and one of the map shows you when was the last sale of each unit in the neighborhood. You will see in most neighborhoods, new owners are few and far in between.
And I consider 10 year to be long term – not 2 to 3 years which SS likes to highlight.

another rent/buy calculator for publius:
the NewYorkTimes version:
http://www.nytimes.com/buyrent
(don’t know how to activate this shortcut link)
[Editor’s Note: To Rent Or To Buy, That Is The Question (That Only You Can Answer).]

Talking “RE” up or down?
I wish we could talk mortgage rate up or down.

In the last two weeks, 30 single family homes in San Francisco sold above asking and 30 below asking. 6 sold at asking.
Condos: 18 over, 33 under, 12 at.
TICs are hard to track due to many developers only list one or two of the 3 or more properties in a complex in MLS. I just don’t trust MLS for TIC stats.

PresidioHeightsRenter,
First of all, I’m not a real estate agent. I’m a small business owner.
Also, stop acting like TIC’s are owned by a group of neighbors who share a mortgage. This is no longer what TIC’s are about.
TIC’s are now fractionally owned. If my neighbor goes bankrupt, it does not touch my loan or credit prospects. The ONLY difference between a condo and TIC for the most part is that rent control applies to a TIC.

yo renter,
“If you can’t convert to a condo it is going to be very hard (if not impossible) to get an individual TIC loan in the future.”
why do you say this? do you have any idea what you are talking about? your ignorance vs. the facts….hmmm, i think i’ll go with the facts.

What happened to all the talk about the convergence of the lines indicating the bottom? Seems like that misguided notion has not been brought up.

newbuyer,
Agreed 100%, the only material difference is the rent control on rental $$ increase.
smaller difference such like having to maintain a spreadsheet among the owners to calculate the tax since it came in one bill. Inconvenient there.

Buy, buy, buy!!! You heard it here first, we hit the bottom – just won’t see it on a graph for a while.
Anyone who buys right now needs to have their head examined. Seriously.

“4545 25th street: recently listed at $100K over what they bought for
Posted by: sparky-the-bear at September 30, 2008 1:53 PM”
“Feel the burn.”
I feel a bidding war starting in Noe.

Is the demand for $3M Noe beefed-up mansions down? With Google still under 400, this could help validate dub dub’s Google lazy indicator.