Mortgage loan application volume for home purchases across the country fell 6 percent over the past week and loan activity is running 15 percent lower on a year-over-year basis.
At the same time, the inventory level of homes for sale across the country is running 14.2 percent higher, year-over-year, up from 9.5 percent higher in March.
And while the inventory of newly constructed homes for sale across the U.S. is now 19.5 percent higher on a year-over-year basis, the loan application volume for new home purchases fell 8 percent in May.
Small sample indicates arbitrary data point is marginally higher than statistical low point in a minimal inflection.
News at 11.
what about Bay Area or SF specific? National data is not very relevant
[Editor’s Note: See New Condos Lift San Francisco As Bay Area Home Sales Decline, but don’t ignore the big picture and trends.]
Isn’t the big picture that lending standards are stricter, money is pouring in from the tech industry, and the local political environment is artificially restricting production and turnover of housing? 30 Year rates within 80 basis points of all time lows and hugely accomodative Fed policy? The market won’t go down because you think it should.
ignore the man behind the curtain! party like it’s 2006!
Funny you mentioned that year, because it just called and it wants its material back.
I think the employment numbers suggest more of the Prince scenario (Party Like It’s 1999 aka dotcom boom). YMMV…
1999, 2006, 2014….pick your bubble!
There is way too little inventory. The Fed says inventory will rise in response to these prices and that seems logical. But it’s not happening yet in the Bay Area. I’m trying to buy a house and there is just nothing available- which creates a bidding war on anything. Families looking for a place to live might as well forget it because the builders/flippers are buying anything decent to transform into a huge luxury house.
I think it’s a combination of high prices, low interest rates and prop 13, all conspiring to limit inventory. It’s hard to see what would change this situation other than a significant economic downturn. Rising rates aren’t going to make more people sell. High prices isn’t doing it either. What will drive inventory? Without more inventory, prices will keep going higher.
We bought a house a few months back after 1.5 years of looking and two start-stops. It really sucks but hang in there bro.
Also, don’t be afraid to leave SF. I did after 16 years and actually felt relieved to be out.
We actually left SF and moved to Marin. Cashed out of a condo in the Mission recently and SFH outside of bay area. It’s a great time to sell real estate so I don’t want to sound whiney. But it has been much harder to buy than I anticipated. Our agent said he’s never seen inventory this low- sometimes only one or two listings a week where we are looking. We are trying to spend lots of money- prefer a fixer- and we can’t find anything. We’re renting and going to sit tight maybe til next spring.
Good luck. I took the asshole price and then finally gave in and added 100K to that and that is how we got our place after 9-10 offers. It was either that or stop again (for new baby) and be forced to rent a bigger place.
It sucks but I haven’t looked at a real estate listing since
The only comfort I have is I know there was one other asshole offering that much because we got to match the higher offer
We got outbid on something by $50K and we also had the opportunity to match and get the house. Couldn’t pull the trigger on $1M fixer. Wonder if it was the right call but I’m sure it will work out. Got lucky with decent rental but that always leaves you in a precarious position especially when depending on neighborhood school access.
“It’s a great time to sell real estate[…..b]ut it has been much harder to buy than I anticipated”
Um, er, you don’t see the contradiction there?
The low inventory issue exists on a national level and the failure of inventory to follow prices has been historically abnormal.
http://www.frbsf.org/economic-research/publications/economic-letter/2013/october/low-housing-inventory-factors/
This may be changing now, which is why the 14% YoY increase in inventory is significant and not just some arbitrary data point.
We just bought in East Bay after 10 years in SF, and I have to say that I’m really looking forward to living there. Got a fixer on a nice lot. The sun and a yard are the most enticing aspects, along with schools that we’ll need eventually. Took a bit for me to get over myself and pride of being a city-dweller. I don’t give it a 2nd thought now.
Zig – I have always read your posts with interest. Curious as to what made you finally pull the trigger.
Congratulations rabbits and Zig !
Thanks. Hopefully when I have more time and the kids are a little bigger I will get involved in local planning in my new home city. I think they are actually headed in a good direction. We need Electrified Caltrain now!
It wasn’t really a matter of pulling the trigger. We made many offers in SF. Once we left SF even with the Peninsula being crazy it was still not the same level of madness. Baby #2 was an influence too since we could always stay in our rent controlled place with one but with 2 it would have been untenable.
It came down to foggy suburban part of SF or an area near a rougher neighborhood or a real suburb on the Peninsula (the East Bay and Marin don’t work for us even though we like the East Bay).
I met someone shortly before my 2nd was born that said the 2nd kid would be the straw that broke us, so to speak. It turned out exactly like that.
A couple of Inner Sunset sales on SFHs that went $500k+ over asking convinced me that the City was too crazy. $1,000 per sqft is the norm in our 94114 neighborhood for condos, and we are going to be at $500 per sqft after our remodeling on the new house in the burbs. Throw in the half acre and the fact that we both work in the East Bay and the decision has been easy once it was made.
Congrats to you. I hope it all turns out best for your family.
According to Redfin, inventory in the “land beyond the hills” (some of the outer ring suburbs) is up 50%+ in May. Admittedly, this is coming off record lows, but every bit helps. Last time around, this inventory got absorbed by NINJA buyers. Hopefully, this time around, it can help moderate or stabilize the “price wave” making its way out from the core.
Everyone thought the rise of Brooklyn would mean the demise, or at least the price stabilization of NYC real estate. This did not happen. I for one am glad to see Oakland / East Bay prices rising. Plenty of room.
Though that ‘rise’ is confined mostly to a thin layer facing Manhattan. The bulk of Brooklyn remains unchanged. Speaking of which, did you know that part of Brooklyn is below sea level?
“The bulk of Brooklyn remains unchanged. ” I call shenanigans.
Maybe someone thought that, but it isn’t very persuasive.
What’s more likely is the “mile wide inch deep” phenomenon. With low inventory/transactions across the country, a small volume can spread out over a wide area. Just as people mentioned above with low SF inventory pushing people to look at more far flung communities.
When inventory normalizes, there will certainly be some areas with the depth to still attract wealth, but ‘plan c/d’ areas that are now only being considered due to lack of inventory in the a/b areas might see drier times.
As I’ve mentioned before, low transaction volume presents a problem when trying to turn around a previously marginal area since it makes it difficult to get a critical mass of new entrants.
“When inventory normalizes”
What will make inventory ‘normalize’ other than continued rising prices?
Even if interest rates jump, and make the financial cost of ownership go up, there is no reason for people either sitting with a low cost basis or new entrants who paid higher prices to suddenly put homes on the market.
Moving up, Moving down, Moving out,… whatever reasons people had to move or sell in years past. Plus new constructions, seeing a lot of cranes around.
If you look at the fed paper, it’s pretty clear that inventory has followed prices in the long run and we’ve had abnormally low inventory the past few years. This was obviously anomalous enough to have someone at the fed go through all the trouble of writing a paper on it.
And the fact that this is national (and that there is frothiness in the outskirts of NYC and DC as well as SF) points away from the theory that a wave of Twitter Trillionairs has suddenly decided that SF is their home forever and they’re never leaving. #reversiontothetrend
We are working out of a balance sheet recession that is restraining transactions. If you live in Tracy and you want to move up/down/out you can’t if you are still underwater, and you probably won’t if you can’t sell to break even. The only variable that will bring more sellers out onto the market is rising prices.
I am unconvinced that without some credit shock or diminution of the importance of the tech industry we are likely to see the current San Francisco market dynamics will change much in the next 24 months. Prices move higher.
“If you live in Tracy and you want to move up/down/out you can’t if you are still underwater, and you probably won’t if you can’t sell to break even.”
I also would have thought this was the major factor, but the fed analysis showed the opposite. Areas with rising prices actually showed the greatest inventory declines. Presumably expectations of future price increases are enticing people to hold off selling in hopes of even better prices in the future. Given that this effect doesn’t seem local to SF, the tech thesis seems unlikely. And as we’ve seen in the past, expectations can change rather quickly.
it’s not that. it’s the inability to move up. only downsizing works if you wish to remain in a locality. that fact precisely constrains inventory.
I’ve heard people advance this somewhat circular theory before. Essentially that no one is selling because there’s nothing to buy. Inventory is low because inventory is low.
Mainly, you have to think that if thats true, why didn’t it happen before. Possibly there’s some critical level below which the market ceases to function well. But that’s not entirely convincing.
Also, from the top of this post, inventory increased a significant 14% YoY while loan activity dropped 15%. So it hardly looks like people were just waiting on the sidelines for a little inventory to unclog the market.
It don’t happen this way before because lending was so much easier and inventory was larger.
This discussion offers a lot – great thoughts re: the local market and the undeniable outlier strength of San Francisco proper vs. the surrounding areas and the rest of the country as a whole. However, as we just learned – beyond any reasonable doubt, in the 2007 bubble – we are not immune to the macro level fluctuations of the market. The national numbers do matter. imo they are a “canary in the coal mine” for the rest of us.
The short term focus of too much/too little inventory, etc. can and eventually will be overwhelmed by national trends. I’m not ready to call “bubble” or “top” yet. This could just as easily be a temporary pause before another leg higher. But, I am watching with interest and I do think it is clear that risk is elevated.
I sold my place in Noe at the end of last year well over asking and feel pretty good about that. No idea if I top ticked the market or sold way too early – time will tell. But, I had a two year window to sell and demand was very high. Works for me. I would not buy at current levels, happy to wait for a better opportunity.