From a local agent’s recent email blast:
The market has been down for so long that the inventory has dwindled…too many shoppers for too few homes…because prospective sellers have been waiting for prices to go back up. But when they see the buyer surge this Spring, you can bet that the inventory is going to build up fast….and prices are going to follow.
Keep in mind that while listed inventory is currently running 18 percent lower on a year over year basis (down from 25 percent four weeks ago), it’s dead even compared to 2008 and up 48 percent as compared to 2007. And with respect to listed sales, while the early February count (250-ish) is up 27 percent versus 2009, it’s down 19 percent versus 2008 and down 34 percent versus 2007.
In terms of suggesting prices will surge along with supply, we’ll let you work that one out.
∙ SocketSite’s San Francisco Listed Housing Inventory: 3/01/10 [SocketSite]
∙ Early February Listed Sales Count For San Francisco: Down 35-40% [SocketSite 3/09]
An email from Paragon reminded me:
snap! I knew I should have invested last year…
Yeah, it’s interesting. I’ve been noticing a significant uptick in activity since the beginning of the year. Maybe it’s just the normal seasonal spring kick — but there does seem to be real movement, especially around attractive listings.
At the same time, things are still pretty bad from a seller’s perspective. I just a did an analysis of Noe Valley single family homes and was surprised to see how badly they’d done through 2009 relative to the city as a whole. Noe Valley finished the year down 33% vs. 18% for the city as a whole. That’s a bit of a shocker for a neighborhood that is supposedly “immune.” Link to post and chart is here:
http://www.pegasusventures.net/wordpressblog/2010/03/11/noe-valley-still-goin-down/
That Paragon email mentioned by dogboy is an example of what I find so irritating about the real estate market/community in this city. It’s just dripping with anti-buyer arrogance, implying that the rest of us are somehow “not good enough.” Hey, I’m the one spending the money, I’ll choose when and where to spend it, thanks. I don’t find Realtor entitlement to be an encouragement.
Pleeezzz….same song and dance. when are realtors going to wake up and smell the coffee? Not long ago, they were an honest, hard working bunch. Not so much anymore. .1 step above used car salesman.
Buyers?…what are those? They don’t exist, right? I’m sure after April, when the tax credits expire, prices will go down. Oh wait, I meant to say after 4th of July, oh wait, after the school year starts, sorry I meant after the November elections!!
There are a lot of people out there buying now, with little good inventory. The problem is that nobody wants to sell, because they are losing so much money.
In my estimation, the market could likely stabilize at this level for the long term. With so much potential supply under water, that any uptick in prices will be met with more inventory, keeping prices around where they are today. It will probably be in a 10% band for the next several years, until all of the underwater supply works itself out.
And SS, aren’t comparisons to 2007 a little too irrelevant? I mean so much has changed since 2007, comparison to 2009 are the more suitable comparison.
I just want to say that the Starkist tuna ad on this site is awesome. Charlie the Tuna would probably be a great realtor if he set his mind to it. He’s got the egomaniac personality and he is an oily fish. Right everybody?
misha weidman- i have never undestood the attraction of noe valley for families .it is next to the mission which is populated by nortenos and surenos gangbangers.there are a lot of multifamily buildings with rentals in noe valley.if the buyers have kids and their budget is a couple of million there are more desirable areas
Isn’t there a huge “shadow inventory” that is growing because banks can’t foreclose fast enough to keep up with defaults?
Maybe this doesn’t include SF.
What malarkey. Sales volume continues to be far below the peak levels, and until that changes prices will continue to fall. Volume is stronger at the very low end where the govt once again gives away basically no-down loans (and $8000 free cash) — surprise, surprise.
As the ed. notes, the utter lack of comprehension of simple economics in the quoted passage is astounding: “But when they see the buyer surge this Spring, you can bet that the inventory is going to build up fast….and prices are going to follow.”
When inventory “builds up fast” prices FALL. It is called the law of supply and demand. Regardless, as noted above, it is the lack of demand that is the key driver of price declines now and for the foreseeable future.
@A.T. Why do we continually compare everything to peak levels? Those days are gone, and a lot (not all) of the risk is out. You have to compare against the post meltdown levels. That is like saying the NASDAQ is at 2,500, but its still below the peak of 5,500 in 2000. Its a level reset, which is why when people compare asset classes, most of the time they do it against the last 12 months, maybe 24 months max. I’m tired of hearing 2007 and 2008…get over it, its in the past. Back in 1950 a coke was 5 cents…who cares!
There have been plenty of properties discussed here on SS that have sold above asking within several days. The good stuff sell, the bad stuff that doesn’t sell is always discussed. Prices will always be lower versus 2006/2007, but I can’t wait to see the comps for properties that were bought in mid-2009, my guess is that there will not be much of a change in price.
Why does volume need to return to peak in order for price to not fall? Even on the runup that wasn’t true. I just looked at Potrero Hill yesterday, for example, and ’05 had the volume, but ’07 had the prices. It’s simply not a great time for people who bought within the last five years to be selling right now. But there are more buyers now than in the last 18 months or so. Why so backward looking all the time? The game has changed.
It seems to me that there have been very real and demonstrable 20-30% off peak comps in most prime parts of the city. More in Noe where the peak was high and short lived; but certainly in other parts of the city. There haven’t been many of these, but they are out there for sure. At the same time we have a few places selling for near-peak pricing. The green street SFH comes to mind. It’s an interesting market and I think that if you really needed or wanted to buy a home you could probably find a deal if you looked hard enough. I really don’t think we’re going to see places 40-50% off peak pricing; or 20% from 2009 levels. Over a ten year period (2020, no pun intended) it very possible that RE will have been a good investment in 2010 — at least in prime parts of SF.
as an active commercial broker who used to do residential let me say this: anyone who thinks prices are going up this year IS SMOKING CRACK.
….and I SMOKE CRACK and I don’t even think they are going up this year, or next, maybe in 2012.
Do you think obama’s proposed limitations on deductions for “high earners” will pass? I think this will impact the SF housing market more than the phasing out of the $8k first time buyer’s home credit. I guess both of these events are purely speculative. I know that the $8k credit is set to expire in april, but it appears the govt is intent on propping up the housing market at all costs, so i doubt whether this will happen in april
Annon: I think you’d be in the minority as far as your views of Noe Valley are concerned. As for your comments about the Mission, they seem out of place for a classy place like SS, in addition to being inapposite: Perhaps you consider Nob Hill “populated” by Tenderloiners or Russian Hill “infected” by the chinese in Chinatown?
SFRE, regarding comparisons to peak levels: I agree with you — in many respects they’re not relevant, certainly not to where we’re going. However, I use them regularly in my charts because I think there’s so much data out there that it can be easy to forget where we were, even a short time ago. ie. I use it primarily as a memory-jog and to give some perspective to current conditions.
anon$random: would be interested to hear your thoughts on how interrelated the commercial and residential markets are. Are funders for residential loans getting hit by losses in commercial? Where is commercial lining up compared to residential foreclosures in timing and magnitude? Thanks!
Jeff,
i dont track the residential market too much, but would say that they are connected by the economy more than anything else. there is a different set of lenders and lending standards for apartment buildings than residential properties (there is some overlap in lenders). other than the Lembi/Citiapartments foreclosures the SF apartment market really hasn’t seen too many (particularly when compared to the residential market). We’ve actually been seeing more, and expect a lot more, bankruptcy sales. There have been many predictions of mass commercial foreclosurse this year, and though it may be happening in some sectors, it hasnt happened in the apartment market…at least not yet.
Misha you’re reprimanding the wrong guy.
to paraphrase john locke-the value of a commodity is inversly related to supply and directly related to demand. however san francisco is a different sort of place.people are willing to live a crappy lifestyle to be in sf. half the households have incomes of less than $86,000.many of these people spend >45% of their income on housing and a nice home in a good area costs $1.1 million +.
if a nice house costs 12x your income and you spend more than 45% of your income on housing…. well lets just say the things that make sf so great ski vacations,sailing on the bay ,opera, symphony ,plays and fine dining . your not seeing any of it.
Misha – I think you’ve got posters mixed up and it seems as if you’re replying to meep rather than anonn.
I also disagree with meep and don’t think that proximity to the Mission is a substantial problem for Noe. Heck, the mission itself is not that bad.
Half the households income has nothing to do with what’s for sale or who’s buying in a town where 70 percent rent and only a fraction of what’s owned is ever for sale. Your Mission/Noe thing is silly too. Yes, the idea that everyone who buys a house is house poor is common on here. That’s because most of the posters would be house poor if they were to buy. It has nothing to do with 86,000 a year.
This is what Ive noticed, buyers & commenters today seem opposed to paying more than what the previous owner purchased for, be it 2000, 2005, or 2007? I realize there was a high point and we are not there anymore, but times change, neighborhoods evolve, and properties to gain value, especially over the long term. I understand not wanting to pay the 2007 inflated prices, but lets be reasonable, and pay what the market will support.
my previous comment was snarky but how can you say the mission is not that bad? in 2008 18 people were killed in 6 weeks a mission gangwar.
Spate of killings roils Mission District
Police, community mobilize in wake of 6 deaths in 2 weeks
SAN FRANCISCOSeptember 06, 2008|By Steve Rubenstein and Tyche Hendricks, Chronicle Staff Writers
Two friends who had tried to escape troubled lives by finding work at Goodwill Industries were shot and killed late Thursday on the edge of San Francisco’s Mission District, the latest spasm of violence in an area where six people have been slain in the past two weeks.
Its called the ‘Realtor Supply and Demand Curve’ (REAL-SAD curve in short). Instead of the standard “X” representing the point where supply and demand meet, price on Y axis, quantity on x axis, its a “//” diagram. You may have seen this curve before. It was used in the ‘dot com’ era where “//” preceded by “http:” and followed by “www” meant guaranteed cash, no matter what followed the “www”. So, I can absolutely say this Realtor is correct, “//” has proven to be an accurate supply and demand model to follow. Flawless, simple, and it always, always, always only goes up. What genius.
Misha,
For the “mix” reasons repeated ad-infinitum on this site, it’s not very helpful to compare the change in median SFH prices and treat it as a proxy for change in the market. If high-end buyers drop out of the market for a while (as may have happened in Noe Valley), the median price will fall, but not necessarily (or not as much as) the real price of the same or comparable “mid-range” or “low end” SFHs.
It would be helpful for you to include in your charts a $/sqft comparison (though that too can be misleading for “mix” reasons).
It would be even more helpful for you–or anyone else (SS editor, please?)–to aggregate the “apples” reported on socketsite and elsewhere into an SF-specific or neighborhood-specific analogue to the Case Shiller index. (That is, an index of market value based on repeated sales of the same properties.)
For what it’s worth, I have been led to understand that the Assessor’s Office has developed a proprietary, in-house index of market changes based on repeat sales. Serious real estate brokers should be in on this game.
Right. And like realtors, he’s an endangered species:
http://www.scientificamerican.com/article.cfm?id=bluefin-tuna-stocks-threatened-cites-japan-monaco
I’m not saying sales volume has to reach “peak” levels before there is upward price pressure. But sales volume is way, way below peak and far below even “pre-peak” levels, while listings remain very high. I’m just saying the laws of supply and demand apply. Listings and DOM remain high, and as long as sales remain low — as they currently are — the price pressure will continue to be on the downward side. The fact that sales exceed the obscenely low early 2009 levels doesn’t mean anything.
The supply of good SFRs in good neighborhoods is not very high at all.
anonn, i’ll agree with you that the supply of good sfrs is low.
i do think you’re wrong that the disconnect between average incomes and home prices here isn’t relevant to the market. yes, most renters couldn’t buy anything, but that just shows how out of whack rental and purchase costs have become (itself an indicator of overvaluation).
my wife and I make 400k+ — a hefty amount even here — and have no kids and we’re shocked at how little we can afford at 3x income given our relative affluence. we don’t require a lot of space and aren’t trying for super-prime areas. i can’t see our dissatisfaction as a healthy indicator for the market.
“my wife and I make 400k+ — a hefty amount even here — and have no kids and we’re shocked at how little we can afford at 3x income given our relative affluence. we don’t require a lot of space and aren’t trying for super-prime areas. i can’t see our dissatisfaction as a healthy indicator for the market.”
Tiniest violins here.
If you can’t figure out a decent place to buy here for that income you need to reconfigure your expectations, maybe look a bit closely at how the rest of the world lives.
Only in SF would someone making $400k+ be told to lower their expectations and look at how the rest of the world lives. Schlub, I understand the tone of your point(jealousy) , but the fact is that unless you have a lot of cash, that income won’t much right now. dch’s situation is why prices will continue to slowly slide.
annonn — sorry about that! Looking cross-eyed at the wrong title. Should have been directed at meep.
Observant Neighbor (hope I’ve got that right) — I’m aware of the arguments (mostly here) about using various metrics, including medians. I respectfully disagree. I believe they are useful as long as you realize their limitations. These mostly have to do with size of the data set in my opinion.
To your specific point about “mix”: if the median is falling because more houses are selling at the lower end and less at the higher end, that tells you something meaningful about the market.
As for Case Shiller-style apples to apples comparison, I agree that’s the best way to do things. However, you need very large sample sets to be able to do that usefully, and that’s one of the reasons their “San Francisco” index is in fact the 9 Bay Area counties. Even then, they do a lot of adjustments to their comparables. I’m just a one-man shop who — despite the frequent raps against brokers and agents — is trying to do an honest job blogging on the real estate market because… well, because that’s how I choose to live my life. I just don’t have CS resources to do the apples to apples comparisons though when I come across a re-sale that looks real, I sometimes post about it.
On the per square foot numbers, I usually run those too and may post a chart. I consistently find that the charts for medians of Selling Price and Per Square Foot Price look pretty much the same. I actually did a Noe By the Foot post back in October 2009. You can find it here:
http://www.pegasusventures.net/wordpressblog/2009/10/04/noe-valley-by-the-foot/
My database is on Excel and it’s getting awfully cumbersome. If any SS readers have experience with Access, I’d love to hear about it off-line. (email me via my website).
As for Case Shiller-style apples to apples comparison, I agree that’s the best way to do things. However, you need very large sample sets to be able to do that usefully, and that’s one of the reasons their “San Francisco” index is in fact the 9 Bay Area counties.
Sorry, that should have read “5 of the 9 Bay Area Counties.”
I don’t know dch. You’re saying average. Meep is saying half the households make 86K (and that’s not verified by anything I’ve seen today). But if it’s true, the “average” earner is going to be above half the households, one. Then the average buyer is going to be above the average earner, two, and well above half the households. Again, that small group is competing for well under half the housing, and only a fraction of that at any one time. Sometimes I feel like people view this in the abstract as if it’s everyone vying for everything at any one time.
I’m straining to read jealousy there, dogboy. You don’t know how dch lives. You don’t know what he considers worthy as far as r.e. is concerned. So your if-then logical conclusion was based upon things that you don’t even know. Four hundred K can afford “nice” for a lot of people. Not for dch. That’s cool. But different strokes …
Tiniest violins here. If you can’t figure out a decent place to buy here for that income you need to reconfigure your expectations, maybe look a bit closely at how the rest of the world lives.
I think you’re missing his point.
3x his HH income is $1.2m. I agree that the type of SFH you get in San Francisco for $1.2m is not very impressive. It definitely is not something that you would expect someone in the top 10% of the SF income distribution, let alone the top 2-3% of the SF income distribution, to be living.
Now, historically, Bay Area residents have spent a higher fraction of their income on housing (relative to residents of non-coastal areas). I expect that to continue. But even at 4-5x income ($1.6m to $2.0m), the SFH inventory in San Francisco is not very inspiring.
The only conclusion is that current price levels are not supported by fundamentals (be it price-to-income ratios or price-to-rent ratios). What you think that means for prices going forward is up to you. Personally, I think it means they’ll be flat-to-declining for some time.
But if it’s true, the “average” earner is going to be above half the households, one. Then the average buyer is going to be above the average earner, two, and well above half the households. Again, that small group is competing for well under half the housing, and only a fraction of that at any one time.
You keep making this argument again and again. But it’s true of most other cities in the US as well. There is nothing particularly “special” about SF in this regard. And I’m not even talking other expensive coastal cities like San Diego, Boston, DC, etc.
Even SF’s fraction renters is not so much higher than that of many Midwestern cities. Just picking a couple quick examples, SF’s fraction renters is 65%, while Chicago’s fraction renters is 56% and Cincinnati’s fraction renters is 61%.
So yes, SF buyers are a little higher in the SF income distribution than Cincinnati buyers are in the Cincinnati income distribution. But only a little. You cannot make a logical argument that SF could support a median price that is 10x median income while simultaneously arguing that Cincinnati can only support a median price that is 3x median income. But hey, maybe Cincinnati is about to take off, who knows…
To be perfectly clear, when I say 10x and 3x median incomes, I am referring to the local median incomes. IOW, they are not the same median income – no one is disputing that SF is richer than Cincinnati.
According to 2008 census stats, median income in the People’s Republic of San Francisco is $73,798 and mean is $108,753:
http://factfinder.census.gov/servlet/ADPTable?_bm=y&-geo_id=05000US06075&-qr_name=ACS_2008_1YR_G00_DP3&-context=adp&-ds_name=&-tree_id=308&-_lang=en&-redoLog=false&-format=
I never quite understand the assertion that SF housing prices shouldn’t have a relation to income levels and/or rent levels throughout the city. Does anyone have a good reason for this besides “because I said so”? The average buyer likely makes more money than the average renter in any city. What makes SF different? If your reason is that SF has an unusually high number of renters, then couldn’t that be a consequence of housing prices not being in line with income rather than a cause?
I should note that historically, San Francisco’s price/income and price/rent ratios have been out of whack, but usually that means a reversion to mean. What is a specific reason that people think SF’s will continue to stay out of whack? Prop 13 applies in expensive neighborhoods in LA and Santa Monica and Beverly Hills too, so that’s not a good enough reason in itself.
although I wouldn’t be surprised to see the RE price declines slow or even abate in nominal terms, I have a very hard time finding any data that would indicate strong resurgence in SF real estate valuations.
the job market in SF simply doesn’t support that idea.
2007 was boom times in a big way, with loose credit and fog a mirror loan criteria as well as very high incomes.
in order to surpass those times we need either employment/incomes in the top 1-2 quintiles to surpass what they were doing in 2007, or we need unemployment etc to fall to allow more midrange buyers a chance to feel secure enough to buy.
Anybody see that right now? yeah, didn’t think so.
Even after the big 60-70% liquidity driven runup in equities etc we still have a high % of SF unemployment, and the net worths of SFers is still clearly way below what it was pre-recession.
I’ll buy the resurgent SF RE market when I see underlying income/wealth of the upper 1-2 quintiles skyrocket again. (since those are the people buying SF RE)
I’ve said this 100,000,000 times, but credit crises take years and years to play out. We’re only like 2 years in. we have several years more., more than likely most of the RE losses will come in real terms, not nominal terms.
and my caveat (also said 100M times): to know the future of SF RE you must know the minds of our benevolent political leaders. how much more crap will they stuff into Fannie/Freddie/FHA?
how many more losses will they allow the big banks to hide with accounting gimmicks?
how long with they keep ZIRP?
how about the Fed purchases of Treasuries/Mortgage backed securities?
bonus question: how long until China et al balk at buying our ever-mounting debt? will the bond vigilantes ever show up?
the future of SF RE is intertwined with the future of US politics, just like the future of all local US RE. it isn’t super “special”, although it does have its own microeconomic aspects.
“Only in SF would someone making $400k+ be told to lower their expectations and look at how the rest of the world lives. Schlub, I understand the tone of your point(jealousy) , but the fact is that unless you have a lot of cash, that income won’t much right now. dch’s situation is why prices will continue to slowly slide.”
Actually, my point was for the person (couple) making 400K to wake up to what the rest of the world is making. If you are pulling down that kind of income right now, you are officially of a different cast than 99.9% of this country and world. I’m not so much jealous as amazed by the issues that this person is having. Our world is really in a seriously hard place right now and here is someone who is having problems buying a property with this income. There is something wrong here, if not with the buyer than with the system.
And I would add, I am officially NOT jealous of anyone who makes 400K and can’t figure it out. I’m just dumbfounded. We own a lovely sfr home here in SF and make far less.
“how can you say the mission is not that bad? in 2008 18 people were killed in 6 weeks a mission gangwar.”
Not true, meep. The whole year of 2008 there were 16 or 17 homicides in the Mission, depending on how you define the borders. In 2009, only 8 Latino men in the entire city of SF were victims of homicide, as the murder rate plunged to the lowest in decades.
“Our world is really in a seriously hard place right now and here is someone who is having problems buying a property with this income. There is something wrong here, if not with the buyer than with the system.”
this is a real estate blog. his point was very valid. $1.2M should buy a person a very nice SFR in a very nice neighborhood. But it doesn’t
i am equally depressed that i make $225K and can’t afford a decent 2bdr, 2ba condo in a nice area for 3x income. I think i should be able to buy a condo with my income, but because prices are so out of whack, i can’t
Anonm, sincerely, sorry. I made a point. You’re on about “fractional renters” “special” “Chicago” and on. I’m going to pass on the direction this is headed, particularly in light of the regulars who haven’t shown up yet.
Schlub, I agree with Spencer and think you’re missing dch’s point. Its odd that an earner at the 99.9% level should only be able to afford a rather average home in SF.
What don’t people like about the areas that 1.2M buys, first? Second, why should 1.2M buy a nice SFR with a nice lot in the best neighborhoods? Where does it do that? What city? How dense is that city compared to this one?
Every time I go out to eat at some fancy place in the Mission I encounter some acquaintances from Noe. The mix in Noe also contributes to the lively atmosphere. People who move there are deliberately avoiding the boring stuffiness of seriously high zoot enclaves.
Interesting thread – surprised Prop 13 hasn’t been mentioned as a key factor distorting prices of SFH. My hypothesis is that “Prop 13” totally impacts supply in SF – many people have properties in which they pay next to no prop taxes! Huge incentive to keep the place and rent it out? Anyone have any thoughts?
“this is a real estate blog. his point was very valid. $1.2M should buy a person a very nice SFR in a very nice neighborhood. But it doesn’t”
Even tinier violins. This is an extremely desirable world class city. Reconfigure your expectations and get with the rest of us – invest in great parts of the city like the Mission, get local and quit whining! Especially making 400K, good grief. You think you have RE problems? Move outta here.
In the last few weeks the SF real estate market saw an uptick in activity. Prices have dropped significantly, inventory is low and buyers are abundant. Properties that are properly prepared, marketed and priced are selling.
i agree with you pablo. prop 13 is one of the things that keeps people holding on to their low tax basis. its one of the reasons why we will not see the 40-50% off predictions that so many have predicted.
this thread is a great example of that; to wit, many of the owners of real sf properties have never needed $400k/yr income to hold on to their houses. so even in the greatest economic collapse of a generation, sf is holding up very well.
schlub the mission had a gangwar in summer of 2008 -18 people murdered in 6 weeks.even for a world class city i think its odd to advise a couple making $400,000/year to live in that hood.
Most of the people I went to business school with have a family income of over $400K (and for the growing number of couples that both work hard and have decided not to have kids way over $400K) and what I have been seeing in the last few years is that there is an increasing number of people who “can” buy a decent place, but “don’t” buy since (unless you have the cash to buy your “dream home”) it is looking like prices are going to keep dropping and no one wants to get stuck in an upside down home. I got out of business school in 1995 and from 1997 (when most people started buying homes in the Bay Area) to 2007 almost everyone made a killing and every home in every area went up. People were always ready to jump in and buy since when your kids were ready for school you could always sell the cool SOMA loft or flat in the Marina for a profit and move to Hillsborough or Piedmont and send your kids to good free public schools (or move to Presidio Heights or a Home in the Marina and send your kids to good expensive private schools).
“$1.2M should buy a person a very nice SFR in a very nice neighborhood. But it doesn’t”
Sure it does. Here is a 5/5 3300 square foot, updated single family home on a half acre with a view in a GREAT school district, in the east bay, 32 mins from downtown SF listed for 1.499, and unsold for 30 days, so it can almost certainly be had for less.
Crime rate is essentially zero. Noise, pollution and other problems are nonexistent. You can take BART in and read the paper.
http://www.redfin.com/CA/Moraga/445-Fernwood-Dr-94556/home/1219952
Half the neighborhood works in SF. People have been commuting from here for 50 years – it’s nothing new. If you want to go out to eat in SF during the week, go from work. There are good restaurants, shopping and theaters all over (and now you’ll have some other options open to you in Berkeley, Walnut Creek, etc) and they are drilling a 4th tunnel through the hills as we speak so getting to SF will soon be even easier.
Honestly, I’ve lived in cities all over the Bay Area, and each one has pluses and minuses. I’ve learned to love every area I lived in.
Or you can just be patient as prices equalize everywhere. SF held its ground longer, but real estate prices aren’t going back up. They continue to fall in areas like these and prices everywhere will continue to equalize lower. No need to move out: prices will continue to fall.
“schlub the mission had a gangwar in summer of 2008 -18 people murdered in 6 weeks.even for a world class city i think its odd to advise a couple making $400,000/year to live in that hood.”
Meep, 400K needs to figure it out. This is reality in this city, and if they can’t hang they need to move back to Oklahoma. And the whole gang war thing is really played out. The Mission is finally on the up and I am getting so tired of seeing it bashed on this site.
“How dense is that city compared to this one?”
anonn, I thought you didnt want to talk about Chicago.
@ pablo (and everyone else)
Prop 13 has little to do with the distortion of real estate prices in SF. The price distortion is the result of long term low supply versus high demand. Do you know how difficult it is to get a building permit in this city? The amount of new housing that has been built in the last 12 + years in order to accommodate demand has been very little. San Francisco has become frozen in time because of the ridiculous obstacles that exist if you want to get a permit to build ANYTHING in this city. Our “progressive” leaders, who profess to speak up for the common people, actually do them a great disservice with their policies. The fact that it is so incredibly difficult to build anything in this city is because of our planning policies, our incompetent, pathetic, political leaders, and the power that they give to all of their NIMBY constituents, and THIS is what is behind the distortion of real estate prices in San Francisco. It’s plain and simple, my friends, and its sad, bordering on tragic. Our laws and policies are slowly destroying this city and making it an unaffordable place to live. San Francisco planning policies (read: 311 NOTIFICATIONS, discretionary reviews, Sue Hestor, etc.) make it way too easy for any single person or group to restrict building activity, and thus the creation of housing, thereby restricting supply and driving up demand. When there are too many dollars chasing to few goods, we all know what happens. That’s Economics 101. That is the major factor behind SF real estate price distortion in a nutshell.
And it isn’t going away anytime soon!
i have never undestood the attraction of noe valley for families .it is next to the mission which is populated by nortenos and surenos gangbangers.
@meep,
Noe is *next to* the Mission, but it is *not in* the Mission. I’ve said this before: most of San Francisco’s eastern neighborhoods are quite patchy. Often, a couple of blocks is all that is necessary to go from nice to bad neighborhood.
schlub the mission had a gangwar in summer of 2008 -18 people murdered in 6 weeks.
Please provide some evidence of your above assertion. In 2008, the Chronicle’s homicide map shows a total of around 18 homicides, but they’re spread out over more than 6 weeks.
http://www.sfgate.com/maps/sfhomicides/
Note that since 2007, there have been zero homicides west of Guerrero, and only one west of Mission St.
If you’re making $400k a year, and can’t figure out how to get into a nice building, then you’re doing it ENTIRELY wrong.
i was wrong there were only 8 homicides in a six week period and 16 for the entire year in the mision .still not a neighborhood i would advise a couple making $400,000 a year to move to but thats just my opinion.i still believe the proximity to mission and having your children near this stuff may be why noe RE prices aren’t holding up as well as other A+ neighborhoods.right or wrong maybe some potential buyers feel the same.
S.F. shooting victim linked to Norteño gang
Authorities say he was Norteño figure awaiting drug trial
SAN FRANCISCOSeptember 26, 2008|By Jaxon Van Derbeken, Chronicle Staff Writer “The Mission District, where the Norteños and Sureños are concentrated locally, has been the scene of eight homicides since the beginning of August.Police believe that several of those killings were the result of warfare among Latino gangs.”
also why no mention that a 400k person should be able to save up a sizable downpayment in a ridiculously short amount of time; you can rent and live very comfortably on 150k so the huge remainder goes into savings.
$1.2M should buy a person a very nice SFR in a very nice neighborhood.
Why do you believe that? There *should* be flowers and cute little kittens on every street corner too, but for some odd reason there are not. Why is that?
dch, I am with you completely here. We are in the same position. Schlub likely either (a) bought his “lovely SFR” 15 years ago for $200k or (b) is house poor and spending an absurd percentage of his take-home to support a mortgage that’s 7x his income. I’d note that the latter option, which is so obviously a terrible move, is generally the one that’s recommended or given in response to the gripe you and I have — “if you’re making $400-450k, you can afford a $3M home; why are you looking at something that costs $1.2???” which is, of course, completely ridiculous. But as long as you have everyone making $200k continuing to overleverage themselves to buy $1M+ homes, this is what happens (though now that 20% down has come back as a requirement, there ought to be some serious slowing on that front).
In the meantime, I’m happy that I’m spending under $2500/month to rent the same mediocre SFR I’d be buying for $1.2M. Spending only roughly 10% of take-home on housing is kind of nice.
hahaha! this whole noe valley vs mission debate is amusing. What is *really* amusing is that over the recession Noe Valley (the “safe” choice) lost 30% value, while houses in the mission lost around 5% — and I’ve been seeing houses in the hood now selling at or above peak prices.
Look, Noe Valley is a fairly boring part of town. Yuppies with 2.5 kids might want to live there, but nothing is happening. The mission has a complex tapestry of culture, life, art, freaks, cafe’s, that is very attractive. folks are moving in.
gangwars — for anyone who has any urban living experience are not nearly as frightening as those quaking with fear in their TV room chairs might think. Sure, its not a good thing to have in your hood, not saying they are benign, but the fact is that it is very rare that the killings include people who are uninvolved with the business at hand.
So, when you hit the streets of the mission and feel the pulse of the area, what you see is tons of money rolling into the area as houses are being snatched up as soon as they come on the market, get renovate, and fancy coffeeshops and stores roll in.
Why? because it is a cool, urban, fun, interesting part of town that has far more hipsters than gangbangers (And they are dwindling as they get priced out of the area), and it is one of the only places you can buy a single family home with a yard and a garage and warm sunny days in a well connected “central” part of the city for under $1M.
but of course, if you take a “safety first” approach to life you can always buy into Noe Valley, and promptly lose 30% value.
ha!
Here is perfectly fine house for $1.2M. You should either reset your expectations to reflect reality or enjoy wallowing in your misery.
http://www.redfin.com/CA/San-Francisco/235-San-Leandro-Way-94127/home/700919
“also why no mention that a 400k person should be able to save up a sizable downpayment in a ridiculously short amount of time; you can rent and live very comfortably on 150k so the huge remainder goes into savings.”
making 400K
33,000K into 401K
———————–
367,000 pretax
201,850 aftertax
-150,000 living expense (your #)
50K into savings/year
for a 1.2 million dollar house need 20% down = 240k
Will take 5years to save this down payment. Now you know why the housing market must keep falling or stagnate. PEOPLE DON’T HAVE THIS KINDA MONEY.
Without FHA loans and/or the sub 5% rates, this house of cards will crash
Who pays a 46% tax rate taxman? No one i have ever talked to paid an actual overall tax rate of over 35% or so.
So make that $240k to live on and $90k saved a year.
But your claim that people don’t have this kind of money is contraindicted by the fact that obviously people who are buying do. When your model of reality does not fit the facts, it is kind of futile to keep screaming that reality must change.
I made a point.
It simply doesn’t support the assertion that you think it does. That is all.
Forget 3x annual income. Suppose that dch is willing to spend 4x annual income (i.e. $1.6m). What might he be able to buy?
Well, there was this property, 819 Haight, recently featured on SS. It’s listed just under $1.6m.
So basically you’re saying that a household in the top 2-3% of the SF income distribution has to stretch their resources in order to afford a modest sized SFH lying on a busy street in a so-so neighborhood with only one full bathroom. And we’re quite confident that this is not only a sustainable equilibrium, but one in which we should expect healthy price appreciation going forward. Riiiiight….
You should note that many criminal elements in the Mission do not necessarily live there. Many prostitutes and drug dealers come in on Bart, which is why a significant amount of gang activity occurs around the 16th and 24th st stations.
This information came to me straight from a beat cop at the Valencia St. station, who we consulted while considering putting an offer on a home on Capp St. I love the Mission, and it’s gentrifying, but if you think in a floundering economy those neighborhoods are just going to brighten up, you’ve got many more years to wait.
@anonm – compare to New York City; I suspect you’ll find that being in the top 2-3% of earners means about as much. You get less than you would hope.
Who pays a 46% tax rate taxman? No one i have ever talked to paid an actual overall tax rate of over 35% or so.
NVJ: I recently posted my ACTUAL income and my ACTUAL paystubs on a recent thread. (I looked at my end of year income, and then my actual check stubs from 2009).
I don’t think the above assumptions are out of whack at all although I agree the tax rate he listed might be a bit high, and yours might be low (I pay right around 35-40% effective tax rate for state plus local every year depending on AMT)
MY TAKE HOME PAY (CHECKS) ARE ONLY 54% OF MY ACTUAL INCOME. My checks were totalled $118k over the year, and my income was $219k last year. Note, I’m not talking about my tax rate here, I’m talking about the money in my bank that would let me buy a SF house.)
of note:
the following post was an effort to show that a person in my income range can “break” the 3x income rule… but it also shows how hard it really is for those of us in the $400k+ range to “afford” these $2M properties.
of note #2:
when I do my combined household income (me plus spouse) our take home numbers look worse actually, because of the AMT.
I always hear about a lot of people who only pay 20-30% of their income in taxes, but when I grill them most of them don’t really make $400k/year in INCOME (it’s investments or disbursements or something), or they are tax cheats, or they don’t know what the hell they are talking about.
it is very very very hard to avoid the tax man if you’re a W2 employee in the USA living in a high tax state.
So overall could we stretch to buy a $2M home if we were dumb and got an IO loan that would then bring PITI to about $10k/month (which is my income)? Of course, we’d still have wifey’s salary to live on (another $10k/mo). HOWEVER
Big V wrote:
> Why? because it is a cool, urban, fun, interesting part of town
> that has far more hipsters than gangbangers (And they are
> dwindling as they get priced out of the area), and it is one of
> the only places you can buy a single family home with a yard and
> a garage and warm sunny days in a well connected “central”
> part of the city for under $1M.
The Mission is a cool fun place to go for dinner or a drink, but I don’t see major gentrification happening any time soon. While I have to admit on my visits to the Mission I see far more trust fund “hipsters” (with iPhones, track bikes and messenger bags) than Mexicans, but it has more to do with the places I go than with the actual demographic mix of the area. When the 2010 Census numbers come out I’m betting that Latinos will be the majority of the area and small groups (like people from El Salvador, Sureños, Norteños, MS-13 members and the remaining few old Irish ladies) will outnumber the track bike riding “hipsters” (on any given night in the Mission I bet that at least half the “hipsters” in the Mission actually live with their parents in Marin, the East Bay or the Peninsula)…
Dan,
“In 2009, only 8 Latino men in the entire city of SF were victims of homicide, as the murder rate plunged to the lowest in decades.
Sounds like Archie Bunker statistics or something… Does their ethnicity diminish the loss?
ex SF-er,
“I max my 401k every year, I put just shy of $900 per check for 16 checks into the 401k, so my first 16 checks are about $900 less than my last 10 checks.”
What is the strategy there? To shift tax withholding towards the end of the year?
@anonm – compare to New York City; I suspect you’ll find that being in the top 2-3% of earners means about as much. You get less than you would hope.
You’re trying to argue that SF could support NYC prices? Really?
“New York City” (i.e. Manhattan) has a population density of 71,000 per square mile. San Francisco has a population density of 17,000. Anyone who seriously tries to compare these two cities has never visited at least one of them.
compare [SF] to New York City
I’m apologize, but I still can’t get over this. SF == NYC? Really??
Look, even if you don’t know anything about the two cities, you can just read the first few sentences of the Wikipedia entry for each city and quickly see how absurd this comparison is.
“New York is the most populous city in the United States, and the center of the New York metropolitan area, which is one of the most populous urban areas in the world. A leading global city, New York exerts a powerful influence over global commerce, finance, culture, fashion and entertainment. As host of the United Nations headquarters, it is also an important center for international affairs.”
“San Francisco is the fourth most populous city in California and the 12th most populous city in the United States, with a 2008 estimated population of 808,976. The only consolidated city-county in California, it encompasses a land area of 46.7 square miles on the northern end of the San Francisco Peninsula, making it the second-most densely populated large city (greater than 200,000 population) in the United States. San Francisco is also the financial, cultural, and transportation center of the larger San Francisco Bay Area, a region of 7.4 million people.”
What is the strategy there? To shift tax withholding towards the end of the year?
wish it were so.
True answer: Laziness.
I forget because it’s been a while, but I believe I simply set my 401k contributions to be 10% of my gross income. It made since when I set it up because I had a lot of other bills back then (student loans, new home, etc etc etc), and it allowed me to dollar-cost-average into my 401k. I also THINK I set it up my first year of practice (before I was a partner) and my salary was around $150-160k or so, so the 10% per check would max the 401k over the course of the entire year.
Over time my gross income rose to under $9k/check, and therefore the 401k contribution is just under $900/check. (which means it maxes out part way through the year instead of by December).
It simply doesn’t support the assertion that you think it does. That is all
Sure it does. That’s why you tried to change the subject.
And I’m sorry, but it’s a dense city. If you want to buy in a nice neighborhood then buy a flat. Because this talk of not being able to afford a nice lot in a nice part of town is very pie in the sky. Period, end of story.
@Spencer: If you are pulling down $225k, and cant find a nice 2/2 condo in the city, then you are not doing something right. At 3x salary, you can get something for $675, which buys a lot right now, at 4x salary, you can get something for $900k, which gets you something REALLY nice. All those years you have been paying rent, I am sure you have enough for a sizable down payment.
I can see how you when you look at places costing ~$700k you think “This is all I get for 3/4 of a million dollars?”, but the fact is that living in a desirable city [arguably the 2nd best in California], you will have to pay a premium. If that wasn’t the case, then everyone would want to move to Danville or San Mateo!!
IMO too much thinking about the correlation between income and home affordability in SF. many people choose to live here AFTER they have become “rich”. if u got money and can live anywhere you want in the US, SF is probably very high on your list. we underestimate the number of buyers who have already made their nut. to support this thought i would cite the many cases of 100% cash or high down payment sales, especially in the real SF. does anyone keep accurate statistics on this?
So your actual overall tax rate is
100 – (118+ 16/212) = 37%
Which is a bit higher than mine. We are in pretty much the same boat, but I have a few more deductions.
I agree that a household making $400k isn’t buying a $2M house on salary alone.
“dch, I am with you completely here. We are in the same position. Schlub likely either (a) bought his “lovely SFR” 15 years ago for $200k or …
In the meantime, I’m happy that I’m spending under $2500/month to rent the same mediocre SFR I’d be buying for $1.2M. Spending only roughly 10% of take-home on housing is kind of nice.”
Schza – I bought our 4 br 2.5 ba house 9 years ago and have a 620K mortgage and pay exactly the same amount as your rent.
If you make 400K a year and can’t figure out how to buy a decent house in this city, I submit to you again, as I originally did up-thread, you need to reevaluate your expectations. And realize the “gang war” Mission stuff is a lot of TV news hyping.
The people arguing are saying the following. They want to sock away the maximum 401K contribution. They want to travel as much as they like. They don’t want to not consider any and all luxury items they ever considered previously. And they want a SFR, the prize of the marketplace, in a nice area, which I’m assuming is areas 7, parts of 8, and the best parts of 1 and 5. Not an adequate SFR, but an impressive one, is the gist I’m gathering. For 1.2M.
FormerAptBroker wrote:
The Mission is a cool fun place to go for dinner or a drink, but I don’t see major gentrification happening any time soon.
Then you have not been paying attention for the last 5 years. Get out of the Bars and go learn the neighborhood. Walked around 24th and Bryant recently? Look at the people — this area is FULL of artists, tech workers, south bay commuters with good jobs, etc. The trouble is, the areas immediately around the bars/restaurants that all the tourists from elsewhere in the city go to are the crappy parts. Get deeper in — around Bryant (and the quadrant of housing from 19/20th down to 25th….) — and suddenly the area comes to life again.
And plenty of gentrification. Houses are being sold the moment they hit the market and getting painted up and repaired. Fancy shops are going in everywhere. There is a constant parade of new coffee shops, trendy clothing, art galleries, expensive restaurants, etc.
Even Mission street is changing — the heart of the ugly — and it is even seeing fancy high end restaurants and bars open up.
And the “hipsters” being trust fund hipsters that live in Marin with mom? really? that is absurd! Most of the folks you see on the streets live there (maybe not at 16th and Mission, but in the actual neighborhoods).
Thanks, spencer, schza, anonm, and ex-SFer; I didn’t think to check this thread overnight and you made my point much better than I did.
Schlub, I know I’m extremely fortunate, especially on a worldwide basis. However, it’s precisely because I am so fortunate — all available evidence puts me in a small top group of earners even in sf — but still am not excited about what’s in my price range (see 819 haight) that this market appears unsustainable. That’s all. If you or others read any whining into my post it certainly wasn’t intended, and I apologize if I came off that way.
Like schza, I’m sitting this out in a rent controlled apartment until it makes sense to me to buy. This may be a “world class” city that people stretch to live in, but that vague point — without numbers to back it up — doesn’t provide the data-driven analysis I need to see before I commit to a 7 figure purchase.
Who would want to live in the Mission? Its nice for a couple of hours, but definitely dodgy. I once went to dinner at a restaurant there, and this homeless lady came up to me and said “You better watch your car and be careful where you park”. She seemed nice, and I don’t think she would do anything to my car, but the fact that at 7pm someone would say that to you, is kind of creepy. And I am not driving a DB9 or anything fancy!
Schlub wrote:
> Schza – I bought our 4 br 2.5 ba house 9 years ago and have a 620K
> mortgage and pay exactly the same amount as your rent ($2,500/month).
Where did you find an IO loan (without a tax/insurance impound) at 4.84%?
If by some chance you have a 4.84% IO loan you might want to re-fi in to a perm loan soon while rates are low.
Anonn, obviously no one is arguing that. I’ll refrain from using your favorite word to describe what you’ve done. The argument is simple: using the standard 3x income formula, someone making $400k a year cannot afford a very nice place in SF. Your response, though you’re not explicit about it, is that people should just spend more than 3x income — which, of course, you have a vested interest in people doing.
Ex-SF’er – You should have lied and said the strategy was to get the money into the 401k sooner in the year so it had a bit of extra tax-deffered time to grow during the year. Then it seems like at least you have a strategy for it rather then having to fess up to the truth. 🙂
For the record, I agree that this whole “mission is a scary gangland” thing is ridiculous. While I wouldn’t want to live on 26th and Florida, I really like 24th street (and FAR prefer it to Noe’s 24th stretch), Folsom, and everything west of mission (though I think that’s really more Dolores Heights/Countryclub Mission at that point). The mission is not like Hunter’s Point; I’d be interested to see the Census numbers too but it feels pretty damn gentrified to me (again, more so as you go west).
I wouldn’t categorize the Mission as gang-land, but I think there are WAY better places to live in the city.
In late 2006/early 2007 I looked at a couple of places within a few blocks of 24th & Mission. Some blocks felt fine while others were a bit intimidating. Of course the neighborhood wasn’t a deal breaker as I ended up moving to the heart of the Western Addition. I must compliment the SFPD and the city attorney Dennis Herrera though because the gang injunction and stepped up patrols have made noticable difference in how safe the neighborhood feels.
Anonn – what would you recommend to a client like me that came to you and asked for help finding a place?
Let’s say 1.3m or under and I have no interest in pac heights, russian hill, or other traditional “prime” areas; I prefer hayes/duboce triangle, etc. St Francis Wood and Moraga are out, too. Should include 1 car parking but be walkable to bart or muni so I can get to work without driving.
Perhaps I’m not looking in the right places; steer me to them.
Like schza, I’m sitting this out in a rent controlled apartment until it makes sense to me to buy.
Yet another reason the SF real estate market is out of whack. It’s nice to know that rent control is helping keep “poor people” and “artists” in “their” homes. (not blaming those who take advantage of the stupid laws that have been enacted around here)
Anonn, obviously no one is arguing that. I’ll refrain from using your favorite word to describe what you’ve done. The argument is simple: using the standard 3x income formula, someone making $400k a year cannot afford a very nice place in SF. Your response, though you’re not explicit about it, is that people should just spend more than 3x income — which, of course, you have a vested interest in people doing.
Arguing? No argument. It’s a given. And it’s a mentality common on this website. Using a standard 3X formula, and using the metric laid out, people who approach things that way cannot afford a very nice SFR in a very nice area of SF. Agreed.
The 1.2M SFR ship sailed away from the very nice ports 10+ years ago. It’s ridden out two economic maelstroms while at sea ‘lo these many years. And it looks a lot like a 2.4M ship in my telescope from high atop my Bernal Heights crow’s nest. I’ll ignore the lame way you didn’t quite say that I’m trying to tell pie in the sky types to open up their pocketbooks. I’d rather eat my right arm.
“If by some chance you have a 4.84% IO loan you might want to re-fi in to a perm loan soon while rates are low.”
Yes, we know. And yes, we have one on our equity line. Realistically, it’s going to be a while before rates go up high enough for me to be very worried though.
We’re in the heart of the inner Mission. It’s gentrified tremendously since we’ve been here. Tons of families, professionals, gays, straight, blue collar, white collar, people who work at Apple and Google, all ethnicities, blah blah blah. We have 2 community gardens, everyone knows each other on the block. It’s proper city living.
I think it’s just the lawyers and finance people who are making gruesome amounts of money who are scared to live here, which is fine!
annony, no argument there — it’s preposterous that I benefit from rent control. But I’ll use it to my advantage while I save up to buy.
Do you lecture your clients (sellers) about their unreasonable expectations?
The truth is that the sellers won’t budge, the banks won’t lend, and smart folks like dch aren’t willing to buy.
Kinda sucks for those who make a living on transactions.
@anonn:
“That’s because most of the posters would be house poor if they were to buy. It has nothing to do with 86,000 a year.”
As a lawyer at a large, prestigious firm, I make *substantially* more than $86,000 a year. And I would still be house poor if I were to buy. Makes me wonder who buys all those fancy houses…
dch, in your case the first thing I would look at would be houses that have been sitting at ~1.5M for a while. A 10% haircut gets you almost there. A 15% off list and you are there.
“this thread is a great example of that; to wit, many of the owners of real sf properties have never needed $400k/yr income to hold on to their houses. so even in the greatest economic collapse of a generation, sf is holding up very well.”
Even if it’s true that people who have expensive places in SF now never paid as much for them relative to income, what keeps those inflated housing prices sustainable? No one’s been able to explain that. At some point either those people or their heirs typically sell their houses, right?
On a side note, do you think increasing retirement of boomers will have any effect on all of this?
The 3x income thing is nothing more than a dumb guideline. By this logic, people should spend a certain percentage of money on their food, on their car, on their travels, etc, regardless of income. But people don’t. Everyone has different lifestyle priorities.
Let’s say 1.3m or under and I have no interest in pac heights, russian hill, or other traditional “prime” areas; I prefer hayes/duboce triangle, etc. St Francis Wood and Moraga are out, too. Should include 1 car parking but be walkable to bart or muni so I can get to work without driving.
131 Elsiejust sold for 1.31M, on a nice block in Bernal about 12-15 minutes walk from BART.
Will take 5years to save this down payment. Now you know why the housing market must keep falling or stagnate. PEOPLE DON’T HAVE THIS KINDA MONEY.
5 years to save a down payment on a house sounds very reasonable to me. How long does it take most people to save 20%?
131 Elsie just sold for 1.31M, on a nice block in Bernal about 12-15 minutes walk from BART.
I know the house (knew the people who lived there and know several people on that block). I think 12-15 minutes to BART is a stretch (and even if you can speedwalk to make that happen, it will suck in the rain). The layout is weird too — not great for a family (the former owners had 1 kid and even then it wasn’t ideal).
dogboy, your idea of a lecture is pretty different from most people’s idea of a lecture. I said something flatly and briefly there. A lecture is longer form. There are a couple of lectures in this thread and none of them are from yours truly. Now, do I need to make clients understand what is possible at any given time? Frequently. I try to be flat and measured when I do so.
dch, I assume you’ve looked at the Waller property that’s been sitting at 1.299M for a month now? Sight unseen it sits on a very good size lot.
This is a interesting thread, but I’ll add my two cents. My wife and I make around $300K, have a hefty mortgage, max out both of our 401Ks, and we still manage to sock away another $40-$50K a year. I’m struggling with how a couple making $400K can’t save a down payment and buy a decent place. If you have kids in private school, then I kind of get it, but otherwise something is seriously wrong. Are you trying to buy something in Seacliff?? I also agree with the previous poster that 5 years to save a 20% down payment seems totally reasonable no matter where you live.
“The 3x income thing is nothing more than a dumb guideline.”
It’s not *that* dumb. The traditional lending ratio by banks is 28% of gross income, but that’s a much bigger percentage of net.
If you make 200K and are looking at a 600K house (assuming 30-year fixed, 20% down), $4667 is 28% of gross monthly income, which is already a stretch, considering that could be more than 50% of net income.
Check out http://www.paycheckcity.com/netPayCalc/netpaycalculator.asp and plug in 200K per year, withholding as married and 0 withholdings for federal, single and 0 withholdings for CA, and assume $300/pay period for healthcare and 7.5% withheld pre-tax for 401(k). That gives you $4550 semi-monthly. Are you really going to spend $4667/mo on your mortgage in that scenario?
And mortgages look good at 5%, but what if they went back to 8%? That’s 39% of net pay on your mortgage for only a 3X mortgage (5%: $2577; 6%: $2878; 7%: $3200; 8%: $3522; 9%: $3862). If we moved to a 4X mortgage (5%: $3437; 6%: $3837; 7%: $4258; 8%: $4696; 9%: $5150), then you’d spend 47% of net pay on that 7% loan. You can repeat this exercise for 5X if you’d like to show what some people in CA sign up for. And let’s not forget that mortgages hit double digits in the early 80s.
There’s a reason 28%/36% with 20% down was concerned prudent lending.
Shza, thanks for the perspective. That part of Bernal is well served by Muni though, even if BART is a bit of a stretch. In any case, even if this house doesn’t suit dch’s needs, it’s an example of a “nice” house in a good neighborhood at his price point. If you want to live in SF you do have to accept things like odd layouts, even at 1.2M.
A quick map of change in the mission for those who dont know….
As has been pointed out, the western end of the mission has become *very* gentrified, especially at the foot of liberty hill, dolores park, etc.
That change is pushing eastward, even encroaching onto Mission Street itself.
The central north end of the mission is undergoing a lot of change too — this is more along the lines of old warehouses that have been rebuilt as $800K condo’s around 17->20th and alabama -> bryant streets. That is tied to the “Media Gulch” area redevelopment. While $800K condo’s may not seem like fancy single family homes, it represents an influx of professionals with good jobs and disposable $$ into the area.
On the east side of the mission, there is a block of area centered around bryant st running from the above mentioned condo conversions down through 24th/25th that is also changing quickly. This area has lots of actual single family homes rather than condo’s, and so it also very popular int he sub-million dollar market (and there are many buyers in this range). So, there is lots of new blood flowing in here. If you dont know this area, come check it out — it actually feels like a neighborhood, and is full of interesting things happening. Sunny too, if you like to garden in the yard you just bought.
and on the south end, 24th street is really active. Again, especially at the eastern end of it, around bryant street. This is the commercial anchor for lots of the change of the eastern end of the mission. Not yet on the map for the uniformed tourists from the rest of the city, but full of good things.
So, change and renewal are coming at the area from all directions. Its the middle — mission->van ness streets, that are the remaining nasty area’s, and even those are changing.
And the interesting thing is, the real estate market in this part of town staid active and hot through the last few years. Rather than backsliding into ghettohood, the area held value better than all the high-end “safe” parts of town. So, the change in the area is likely to keep going as the economy improves.
As far as having a homeless person make a strange comment to you on the street — that happens everywhere in the city! If you are shocked by homeless folks and their antics, you might just do better moving to the suburbs. Or try having a heart and giving them a few quarters — they need it more than you do.
The mission is at that really interesting point of transformation where it has passed an inflection point, where it has momentum that is so strong that the worst recession in 100 years did not slow it down, but the transformation is not yet “obvious” to the uninformed and fearful.
jon wrote:
> 5 years to save a down payment on a house
> sounds very reasonable to me. How long
> does it take most people to save 20%?
Most people never “save” an amount equal to a 20% down payment on a home. Only a very small number of Americans will put off blowing money on “stuff” to save up a 20% down payment (most people that make 20%+ down payments are doing it with real estate capital gains, stock gains or gifts).
. I’m struggling with how a couple making $400K can’t save a down payment and buy a decent place. If you have kids in private school, then I kind of get it, but otherwise something is seriously wrong.
Lance, do you have children? I find that people on SS consistently and grossly underestimate childcare and education costs. For us, e.g., with one in preschool and one not old enough for preschool — and, as is typical with jobs that pay these salaries, no ability to get home in time consistently to manage a daycare pickup — our costs are:
– nanny: $45k/year ($14/hour when she just has the one, $18/hour when she has them both — that’s actually *below* market)
– preschool: $20k/year (full year; not just 9 months)
The nanny costs are actually probably a bit higher since there are inevitably times when we need her to stay late or come on a weekend.
There are also various other costs that come with children (clothes, books, summer activities, extra groceries, museum and zoo memberships, etc.) that add up.
Our costs will obviously go down once we no longer have a need for a full-time nanny (i.e., when both kids are in some kind of school); and will go down even more as the kids enter school (we’re in Piedmont now, so that will be free). But that’s how $400k (gross) can be less than it seems it should be for now.*
*I fully understand that plenty of people make due on much less; not trying to complain — just trying to respond to your question.
Anon E. Mouse, a rate sheet that came out yesterday had 30 year fixed jumbos for up to 729,300 at 4.875. I have no earthly idea where you’re getting this $4667 nunber.
Schza – 400K couple are childless!
Big V – Thanks for the excellent and positive assessment of the Mission, it’s very accurate. We live in the Bryant area of 24th you mention and it’s fantastic.
“up to 729,300” is relevant to this discussion how?
Anon E. Mouse, a rate sheet that came out yesterday had 30 year fixed jumbos for up to 729,300 at 4.875. I have no earthly idea where you’re getting this $4667 nunber.
Shza, I responded to an example Anon E. Mouse gave. That is why I addressed Anon E. Mouse by name. If you’re going to query people maybe you should read the thread.
you got me anonn. he did say $600k. touche.
$4667 is 28% of monthly gross for someone who makes $200K. That was explained above — it’s the traditional maximum for mortgage payments. Mortgage payments + other debt are not to exceed 36% under traditional lending. I’m not sure why you’d be so confused. I even followed up by giving payment amounts at various interest rates for 3X/20% down mortgages and 4X/20% down mortgages.
OK. Now I understand what you meant.
“If you can’t figure out a decent place to buy here …. you need to reconfigure your expectations, maybe look a bit closely at how the rest of the world lives.”
As an example of how the rest of the world lives, here is what $850,000.00 buys you deep in the heart of Texas.
http://tinyurl.com/y8wsg5p
Maybe this particular offering is not to your taste, but other examples in other locations abound. For the first time in my life I am seriously thinking of moving. Vancouver, Seattle, Honolulu, Portland (ME or OR), even Manhattan and LA are all looking pretty good to me now.
throwing my own 2 cents (wrench?) into the mix –
my fiance and i are also in the $400k range and we are in escrow. we thought long and hard about how much we can afford, and at one point *considered* stretching ourselves to $985k, but ended up with a small 3/2 condo in the inner sunset (btw we LOVE the inner sunset! def an underrated neighborhood) for closer to $900. why so conservative?
20% of $1M is a lot, but you also have to add in furniture and closing costs. and sure, we have it, but do we want to put all of our eggs in one basket? i’d want at least $100k liquid after all is said and done for a cushion in case one of us loses our job. who can rely on anything in this market?
dcr says he’s childless, but will he and his wife be childless forever? i want to have kids eventually, and with the cost of daycare and nannies sucking out another $2-3k per month per kid (and possibly more if you end up having to pay for private school), you really have to factor that into your long-term financial planning.
so yeah, maybe we were too conservative, but 2.25x is what we decided would let us sleep soundly at night.
Btw, if you look at the HAMP report, you’ll see averages for percentage of gross pay for “front-end” vs. “back-end.” Front-end is payments/interest/taxes/insurance + HOA and is allowed to be 31% (vs. 28% for traditional lending for PITI). Back-end includes all debt, liens, alimony, car leases, and investment properties. The back-end figure after modification is 59.8% of gross pay. Wow.
The average before modification under HAMP for those same loans was 45% for front-end and 76.4% of gross pay for back-end. Double wow.
Anonn, the Waller St. house, which I haven’t seen in person, reinforces what I’m saying. That’s right near some projects. It appears to be a fine house, certainly not spectacular.
110 elsie is another place I’ve looked at and it’s quite nice. I didn’t make an offer because it’s not convenient to commute by bart — that’s one hell of a walk.
If this is what you get for 400k/year, who is buying the very nice places in good locations and how do they afford them? Stats indicate that there just aren’t that many people with more money.
THAT is the issue I’m concerned with here. What can sustain the market at these levels?
a lot of this has to do with the homeowners comfort level.my home was purchased at around 3x income.i paid signfigant down payment ,fixed rate loan and did not spend my homes’ equity. i wanted to save money for retirement and be prepared for an economic downturn.
others get a home at 5-6x income and spend 50% of income on housing.in my opinion thats not enough disposable income to enjoy life,save for retirement and have a cushion for emergencies.but what’s right for me may be wrong for someone else.
OK. But if you’re concerned about projects then why mention Hayes Valley?
What about the Inner Richmond? Is that something you’ve thought of? A lot of those homes are well built, with very large lots, and they’re near a lot of good amenities.
Next thought. Have you looked at places that have been lingering at $1.5M? a 10% discount takes them down into your purported price range.
Fair enough — perhaps I like hayes more in concept than reality. Recently, I’ve been looking at corona heights homes within walking distance of muni (current dream home: 67 ord).
Inner richmond’s not an area I’ve looked at seriously. I’ve always thought of the houses there as pretty small. It’s also not what I’d call a great location — foggy, you have to rely on muni buses to get downtown, and the tree-free streets can be depressing.
I’m sure you can find fine houses there, but if that’s what 400k/year buys, who’s able to buy the nice houses in good locations, and where are they getting their money? I may be a broken record, but that’s my fundamental question about the market and the sustainability of current prices.
I don’t usually look at 1.5m places, but if there are some that are sitting (but still desirable), I’m all ears.
I’m sure you can find fine houses [in the inner Richmond], but if that’s what 400k/year buys, who’s able to buy the nice houses in good locations, and where are they getting their money?
I think you’re answering your own question…if your ‘dream home’ is listed at 2.1m, and you don’t want to consider the foggier/more residential parts of the city, then your definition of a “nice house” is actually pretty narrow. You’re competing with people who either make more money than your $400k/yr–and there are enough of those in this town to buy those places for more than 1.2m–or people who make less and are not being financially sensible.
I’m not trying to be unsympathetic, but you’ve got to have realistic expectations…and yes, I would’ve thought that the phrase ‘realistic expectations’ should be banished from your vocabulary if you make $400k. Not when it comes to buying a house in SF.
who’s able to buy the nice houses in good locations, and where are they getting their money
I told you dch, you just didn’t want to hear the answer. They are either moving up and have significant equity in their first home, they are getting a one time windfall from their job, usually stock or sometimes bonuses, or they are relying on family wealth.
If you think that 400k/yr is a significant income in a place like Pacific Heights, you really don’t understand San Francisco at all. Use Property Shark to look up who owns the properties you would like to buy and then Google for them. Most of them will have net worth $50M+.
If your only idea of a “good location” is Pac Heights, the Marina and Presidio Heights, you are going to be perpetually disappointed. That last comment is not directed only at you dch, but at all the $400k/yr home shoppers who don’t think a place like St. Francis Wood is a “good” neighborhood.
Vanillablue, I’m certainly not asking for sympathy — I deserve none. And I don’t expect to be able to buy a place like 67 ord right now; it’s bigger, in a very good location, and is far nicer than what I’d expect to afford. Thus the term dream house.
My issue here is with the assertion that there are enough super-rich that, even at 400k/year, you have to buy a starter home in the inner richmond and hope for further appreciation if you ever want anything more. Given the stats I’ve seen on income and wealth, that doesn’t seem sustainable long term.
My income is lower now than it was a few years ago, but I’ve been approved for a noticeably bigger loan (I have 20% to put down) because rates are so low, meaning the same monthly payment obligation can get me in a pricier home. When rates go up, hopefully after I buy, I suspect I’d be approved for a smaller loan, so I think the real question will be, will income rise fast enough to offset that, or are people buying well within their means right now so higher rates won’t be an issue?
I give up. I already said I don’t want to live in pac heights, but apparently that doesn’t fit with your preconceived notion of what my expectations must be.
I just want to see actual data on how big this pool of move-up/trust fund/googleaire buyers is, because it’s got to be sizeable, and sustainable, for these prices to make sense.
5-6X income? What the hell are you talking about. You could buy a home with payments that were literally millions of times your income!
Here’s an example: you earned $100K per year, and saved up a 10% downpayment on a $1M home. Then you lost your job!
$1M purchase price. Zero down. 5% interest only. You could EASILY use the ten percent down payment you had saved to make the payments, property tax and HOA for the first year and a half. You didn’t need any income at all! A stated income loan with good credit got you $1M easy.
Two years later, it’s worth over 1.3M. Refinance and take $300,000 out. At 5% interest, your payments are 5416 per month, property taxes are another $1000. Say $586 in HOA to make it an even $7000. That $300,000 bought you 3.5 years of payments. Remember, this is on ZERO INCOME!! You’ve been living there for 5 years, paid nothing but the 10% down you had saved.
Now add a $65,000 income to the equation, and you can see why bay area real estate has held on as long as it has. I’m sure there are still people in this boat earning $5,400 making their $7,000 per month payments. It was so easy to do. And you could hang on for years. An option arm loan bought you even more time.
The appreciation allowed people to live far beyond their means. When they got low on money, they just refinanced and used that money to make the payments.
It will be years for thins all to unwind. Can’t refinance and take cash out any longer, so as those people run out of funds, they get about 18 months and then out they go.
“If by some chance you have a 4.84% IO loan you might want to re-fi in to a perm loan soon while rates are low.”
“Yes, we know. And yes, we have one on our equity line Realistically, it’s going to be a while before rates go up high enough for me to be very worried though”
Oh, now I see. Schlub, I’m glad that it has worked out for you (so far). Meanwhile, those of us unwilling to take on inappropriate risks via exotic mortgage products were outbid by people like you. And now you have the nerve to give dch a hard time?
dch, it depends what you mean by ‘starter home’. 4BR/2BA with parking and a yard is a starter home in most of the country, but here that’s $1.2m in West Portal. Just my opinion, but if you’re spending $1.2m, you should be planning to stay long-term, not move up to something more in 5 years. Sustainable? Hell if I know, but that’s how it is.
HomeHunter — home prices are somewhat dependent on interest rates. After all, the initial financing cost of $600K at 8% is the same initial financing cost as $800K at 6% (and if you’re doing IO, it’s the same through the IO period). The difference is that it’s much easier to pay off that $600K principal than it is $800K.
Note that we’re also talking about the difference between a $4400 payment vs. a $4800 payment on those two loans because of the difference in principal. A $654K loan at 8% is approximately the same monthly payment as $800K at 6%. As such, rising rates should cause housing prices to dip. Overall, people would be much better off with higher rates and the resulting lower housing prices..
In the aggregate, housing prices take into account all kinds of factors, including tax deductibility of mortgage interest and financing costs. The problem is that housing prices move very slowly due to the relatively few number of transactions. That’s why housing busts take so long to work through the system.
“110 elsie is another place I’ve looked at and it’s quite nice. I didn’t make an offer because it’s not convenient to commute by bart — that’s one hell of a walk.”
It is walkable from 24th and Mission to 110 Elsie, but a little easier if you lived just a little lower on the hill. I take BART from my home in NW Bernal all the time, including with luggage to/from the airport. It takes me 10 minutes walking down the hill, and maybe 15 minutes walking up, pulling a full suitcase.
That is why I said it wasn’t just directed at you dch. There are other $400k/yr income posters on this thread. What are some neighborhoods you would like to live in?
You already said you don’t want to live in the Inner Richmond, St. Francis Wood or near the projects, but said you liked Duboce Triangle. I don’t think there is any spot in Duboce Triangle that isn’t within a few blocks of projects. You also said you didn’t want to live in Pac Heights. So where do you want to live?
Have you thought about Glen Park? It is clean, quiet and safe and definitely near BART. 1035 Chenery is right across from Glen Park Canyon, which I think is a great spot.
Your larger point about home prices being unsustainable on incomes alone is 100% valid. There is no way that San Francisco home prices can stay this high from incomes alone. But so far, a tremendous amount of wealth has been created by people building businesses here. These are the people grabbing the $2M+ properties, by and large.
I have said before that I expect a long slow gradual decline in prices, but given the pace of innovation here, I could be entirely too pessimistic. Every 20 years or so some big new technology comes along which shakes things up and causes another boom. This one is starting to get long in the tooth though and I don’t see anything on the horizon. This might just mean that I am not looking in the right place though.
4BR/2BA with parking and a yard is a starter home in most of the country
This is just sick and wrong and a great example of what is wrong with this country. 40 years ago average home sizes were 1400 square feet. People have been Supersizing everything for so long they have lost all touch with reality.
“Oh, now I see. Schlub, I’m glad that it has worked out for you (so far). Meanwhile, those of us unwilling to take on inappropriate risks via exotic mortgage products were outbid by people like you. And now you have the nerve to give dch a hard time?”
Marque, there was no exotic loan made. We were just smart – we got an equity line at the right time because we needed to do earthquake retrofitting. The bank gave us a prime minus .5%, so it’s almost free money – we didn’t ask for it. There was no inappropriate risks – we have a stellar credit rating and perfect payment history. We refi’d again this summer on our main loan and got it even lower.
400K income could easily buy a good house in this city – we make less than half of that. 20% down on a good place in the Mission, Bernal, Excelcior,etc. and these people would be living well. As I say, rearrange your expectations if you want to live here. Same with NYC, Paris, London, etc. Or, move to Texas back country, it’s pretty.
For some families owning a home makes sense, even if you have to go above the 3x figure. My partner and I (architects) gross $135k / year (I’m part-time) with 2 kids in public school. We’re selling our condo (purchased as TIC in 2001) so we can afford a SFH. But just try renting a decent place near your school for a family with 2 kids and a dog. Given what we’ll pull out of our condo (for move-up buyers this can be sizeable), add in some savings, and we can look for SFH’s up to $750k (obviously, we’re looking at a level below what many consider acceptable, but at least we can improve it over time.) Our mortgage will remain around $220k. Yes, most of our nest eggs are in one basket, but maybe the basket’s important. Are we insane, or acting rationally in an insane world?
NoeValleyJim, there are a lot of things I would describe as “sick and wrong”, but a 4BR/2BA is not one of them.
@Big V: I gave the lady a buck since she seemed nice enough. And if it was only a few quarters that would be different. How much is she taking in from government support, when she really doesn’t do anything to make society a better place.
dch,
I posted something and it didn’t load or whatever. But there are 12 properties in areas 5 priced between 1.2M and 1.5M right now. Most have been lingering for a month or more. For pretty obvious reasons, that’s a particularly tough pricepoint right about now. I’d think there would be some room for negotiation within that zone for at least some of them. This is especially true of condos, citywide, within that range right now. But I’m talking areas 5 SFRs.
“Why? because it is a cool, urban, fun, interesting part of town that has far more hipsters than gangbangers ”
Big V: you are suggesting that hipsters are a postive?
I agree that they are probably more desirable than gangbangers..
although they do have a tendency to beat up on Marina types for all looking the same and never leaving their own ‘hood – and then end up all looking the same and never leaving their own hood themselves (I still don’t think I have seen a hipster outside the Mission..).
Its kinda like that fascist/communist thing where the two extremes start to resemble one another. or the last scene of Animal Farm. Or something…
I think hipsters are generally more culturally literate and artistically inclined than Marina types, which I think is a positive for a neighborhood. Though I agree the snobbism is obnoxious.
“Why do you believe that? There *should* be flowers and cute little kittens on every street corner too, but for some odd reason there are not. Why is that?”
you live on the wrong corner. i get this every day
“I can see how you when you look at places costing ~$700k you think “This is all I get for 3/4 of a million dollars?”, but the fact is that living in a desirable city [arguably the 2nd best in California], you will have to pay a premium. If that wasn’t the case, then everyone would want to move to Danville or San Mateo!! ”
I am still living in a desirable city, in the most desirable neighborhood and paying $2100/mo in rent (<10% of income) for something that would costs $1.2M to buy. ($6500 mortgage or 35% of income + huge cash outlay on a depreciating or flat asset)
Melon, i applaud you on your conservative and long term approach. if there were more like you in this country, state and city, we would be much better off.
Sure it does…And I’m sorry, but it’s a dense city.
Your original point – which was about where in the SF income distribution the average buyer might lie – had no relation to density. To double-check, I reread your first posts. If you were trying to make a point about density, you failed to communicate it.
Also, you are confused about the comparability of an earner and a household. Dch is talking about his household income; that is the relevant metric in any responses to him.
@Spencer: I highly doubt you are paying $2100 month to live in a 2/2 that costs $1.2MM today.
^ rent control allows many to do just that
The people arguing are saying the following. They want to sock away the maximum 401K contribution. They want to travel as much as they like. They don’t want to not consider any and all luxury items they ever considered previously. And they want a SFR, the prize of the marketplace, in a nice area, which I’m assuming is areas 7, parts of 8, and the best parts of 1 and 5. Not an adequate SFR, but an impressive one, is the gist I’m gathering. For 1.2M.
I’m not sure that this is really MY argument. My argument is that in the end, houses are bought by money. Those of us who make $400k/year simply make more money than those of us who don’t.
Thus, traditionally housing prices are supported by income. True, some areas have people stretching more than others. (SF always has had and always will have a higher price:income ratio compared to Minneapolis as example). However, over time in general the price to income FOR A PARTICULAR area tends to be within a certain range, which is true for SF as well.
Starting about 10-15 years ago, the price:income range for SF ITSELF changed. The reason was partly due to govt programs, loose lending, the first tech bubble, and other evolving characteristics etc.
But now here we are, and even the highest of SF earners are told that they have to “stretch” more or decrease their expectations.
Thus: it would seem that there is little room for SF to move upwards in valuation. What next, have the $1M/year households stop whining and have them live in a 3/2 in the Ingleside nabe?
AS for me, the first time I posted my income stats way above, I SPECIFICALLY stated that a person in my income bracket can ignore the 3x income metric. (you can copy the time link and google it to get the original post)
that said, I think lower-income people are unrealistic about what a $400k/year person is going to put up with. Do you really think they’re going to shop for clothes at Kmart? Do you really think they’re going to eat canned soup and SPAM for lunch? MOST IMPORTANTLY: do you really think that they are going to live off of 401k money alone in retirement? They’re going to send their kids to State University on an athletic scholarship? hahahahahaha.
FWIW: I do often shop at Target/Kmart. I do actually eat 1 can of Progresso/Cambell’s Select soup every day for lunch. I am EXTREMELY low brow (which is why my house cost less than 1x income)
But I’ve done the projections and talked to many advisors on this: in general people of my income level need MORE money in retirement than they did while working. because they want to go golfing and learn to cook in Italy and do pro-bono work in Nigeria. And that all costs money.
Money that is sucked away by a $10k/mo PITI payment.
So I have a hard time imagining that SF prices are poised to go up from here. Especially during a massive balance sheet (credit crisis) recession. Especially in the immediate aftermath of not one but two bubbles that hit SF.
I have posted the actual income demographics of SF HOMEOWNERS before. The income levels are shockingly low. However, this data is skewed by a lot of older owners. (so they own but are retired so no income, or they’ve owned for 30 years when a Janitor could buy a place in Noe).
I would love to see the income demographics of those buying homes every year, but I’ve never come across that data. it would be enlightening.
But it would seem to me that there are only so many newly-minted tech bajillionaires and sheiks and Debutantes who still need to buy in SF, so I disagree with the “SF income isn’t important to SF RE” arguments
As for me personally: COULD I stretch into a $2M SF home? of course. And live house poor the rest of my life. Could I easily manage a $1.2M home. Of course, and give up more than you might expect to do it. I personally won’t do it because I’m retiring at 45, so that’s why I’m so frugal. I do NOT expect other $400k-ers to be like that by the way.
However, that takes care of the $1.2M homes. Now who is buying the $1M homes! And $900k? And 800k? and $1.8M? and so on!
The problem for me isn’t that $400k/year people can’t afford $1.2M homes. It’s that in AGGREGATE SF buyers don’t seem to be able to afford homes in AGGREGATE. And IMO this was demonstrated admirably when loans dried up in SF (low to no sales) compared to what happened when loans were reignited by the government.
Ahh, I see, rent controlled. But for someone coming to the city today, they can’t find a place to rent for $2,100 that would be equivalent to a $1.2MM building. For $2,100 you are barely getting a 700 sqft place with no parking.
@ex-SFer: Nice post.
I agree it would be great to know the demographics of those who are out there buying now. If there are any realtors out there who can give some basic stats of the population who are buying or just bought, it would be appreciated.
Just out of curiosity, who do you think the buyers were that sold out the Infinity or the Arterra? Of the ones who just are filling up Blu, etc.
“For $2,100 you are barely getting a 700 sqft place with no parking.”
Not true. For $2100 I’m getting a 950 sq ft, newly remodeled place in Jackson Square with a view, but no parking. I moved in less than a year ago.
Yeah, one thing about hipsters always made me wonder. I never understood the kid who got made fun of for the way he/she dressed 10 years later making fun of somebody else for his/her clothes.
Your original point – which was about where in the SF income distribution the average buyer might lie – had no relation to density. To double-check, I reread your first posts. If you were trying to make a point about density, you failed to communicate it.
Also, you are confused about the comparability of an earner and a household. Dch is talking about his household income; that is the relevant metric in any responses to him
I also talked about hipsters. Why didn’t you dispute what I had to say about that? DCH gave me his ear. Why didn’t you? I’ll answer. Because you’re not viable. You pipe up here and there and disagree with me from time to time and try to talk about Chicago. Good luck with that.
NoeValleyJim, there are a lot of things I would describe as “sick and wrong”, but a 4BR/2BA is not one of them.
It is precisely this attitude, that first time home buyers, with little to no down payment and no credit history are entitled to homes 50% larger than our parents lived in their entire lives, that got us into this whole debt mess to begin with. Where else in the world does a first time home buyer, or any home buyer for that matter, live in 2000+ sq ft home?
You can see the massive sense of entitlement in the other posters on this thread as well, who think that because they make a very good income, feel like they should not have to compromise in any area of their lives. If you want to retire early, spend lots of money on world travel in your retirement, etc, etc, you have to make sacrifices in other areas. Even if your income is in the top 2-3%. But Americans have been fed the line of bull that they deserve to live beyond their means for such a long time that people just can’t comprehend that the real world is full of tradeoffs.
What is happening in San Francisco is just the tip of the iceberg, believe me. It is happening all over the country and will be going on for a very long time, as people finally learn to reset their expectations to reality and live within their means.
I know a family that is currently in the market for a SFH in Noe or thereabout and because I have paid attention to what happened to their property, I have a pretty good idea what their finances look like.
They bought a two unit home on our block for $1.2M in 2004. A year later, they sold the bottom unit for $775k and then initiated the condo conversion process. Very recently, the sold the top unit for $895k. They have children and were tired of conflicts with the downstairs neighbors over noise. So they walked away with about $400k in profit and presumably still have their initial down payment, so they have $600k or so to put down. I am not sure their exact income, but it is probably in the $200-250k/yr range. So if they take out a mortgage at 3X of their income, they will be shopping in the $1.2-1.4M price range. They are young enough that they can expect some future raises and they have their kids in public schools, so 3X is probably not a big stretch for them. You can get a pretty nice 3/2 in Noe for that or an even bigger place in Glen Park or Bernal.
And this couple only bought six years ago, anyone who purchased before them would have even more equity to bring to the table.
I suspect that there are very many buyers in the same boat as this couple, but cannot prove it.
Ex-Sfer,
If you are serious about wanting that sort of data, who has put how much money down on what over the last however long, I’ll consider it. You’re asking a realtor to spend dozens of hours to look at hundreds of sales and catalog them on a website so that a bunch of anonymous people who bash realtors at every chance they get can dispute the information. So yeah, paypal me $2500 and I’ll consider it. But for free, the last two offers I wrote, in the last week and a half, were 40%+ down on ~800K houses. One was family money for a young couple just starting out. The other was for two UC scientists who have made some terrific financial decisions over the years.
Realtors do not have information on the incomes of those who purchase homes.
The last two people I know who bought homes work in my office and used FHA loans with 3.5% down. One bought a condo in SOMA and the other bought a house in Concord. Neither one can afford their place unless they get big pay increases over the next decade.
Realtors do not have information on the incomes of those who purchase homes.
Some realtors will ask buyers to provide copies of their W2, pay stubs, and proof of funds in order to provide the seller with a stronger offer. Or so I’ve been told.
Yes, recently, it has been sellers asking for verification of funds. “500K down on a 750K house? Great offer, but prove it first.” — that sort of thing. Despite what everyone on this website thinks about people not having a lot of cash around here, it’s commonplace.
Interesting posts, for sure.
Regarding high incomes and buying power, I can see where people like dch and shaza are coming from. But I also understand schlub and ex-sfer’s POV’s. These discussions just go to prove how diverse peoples handling of money is, how much timing and sheer luck can predict your financial future! We live in a society where on the one hand we has enemorous flexibility on where to live, how to invest, What businesses to start, etc. All these variables lead to a tremendous variety of outcomes when we look at financial results under the hard lense of a microscope.
To add more anecdotal data on personal finances, here’s my story: in the 90’s I was a marketing manager at various tech firms, trying the stock option thing. Along the way I brought a 2 unit bldg in Noe valley with a friend as tic (this was when tics were not common at all and Noe was a sleepy hood) as I bounced from job to job, taking well deserved breaks for international travel, etc I realized that I wad not saving squat. My incomes also sucked, as only 1 job broke $100k (this was mid 90’s.) so I was some schlub riding the high tech roller coaster with a middling tic in a modest neighborhood.
Then I had my own niche business late 90’s to early 2000’s, where I liked being independent but again was not making a great Income (though the deductions made $60k feel more like $100k!
* And that is one of my points regarding the deception that high incomes equate to wealth. Many folks with business or the self employed net alot more than their gross would have you believe. I think w-2 income is very limiting, especially high incomes w/o business or investment deductions.
It was in 2003 when I realized there was an opportunity in real estate. Interest rates dipped really low, and banks were lending. By that time my tic went to condo, and it dawned on me that the only money I ever made was in RE. At that time Noe was becomming generic- yuppified and I got tired of living there. So I borowed against my condo, brought a lucrative fixer in the mission (converted a SFH to 2 very nice units), and never looked back. Since then I developed a couple of other projects in SF- one was 2 units/basement addition/tic to condos which I sold after a 5 year hold. That basically paid my wife and I’s living expenses for 4 years. The second project, 2 units and an office are just completed and I am holding them for casflow, along with the 2nd condo, below where I live. At this point I can sustain our city livestyle on the cashflow from the RE. All this done in the last 7 years. Mind you, on paper my income totally sucks (I am still using rolled over ‘losses’- my profession on my returns is professional RE investor (as I do live off my RE assets) and we get to accumulate unlimited losses YtoY.
So my scenario is 180 degrees different than high income w-2 folks. Now let’s reverse engineer my lifestyle to match w-2. My condo in the mish is conservatively worth $850k (a rambling 4br/2ba flat with libary/study, large open lr/dr/kit, breakfast area, garage, deck, nice yard, Nice HW floors, high ceilings). I’ll use $3500/month as rent equivalent. Wifey and I spend about $4k/ mo on all other expenses. So $7500 per month you would need to pull in at least $15k, probably closer to $20k per month in w-2 to make that work.
So here is an example of someone who’s income on paper totally sucks, yet is able to live well in SF (FYI we have no kids and don’t plan on ’em). I basically used previous home equity (my first condo In Noe) and parlayed that into a few good RE holdings in the city that cashflow to support our lifestyle.
So to answer dch’s question, there are alot of ways to make money/have equity work for you. Add in other people with family wealth, and others that made alot of money with start ups/ google/etc and that is how SF’s housing costs are so high. Also keep in mind that many high earning w-2 earners also brought initial homes, or invested in stocks, etc and made cap gain money as well.
I’m with anonn 100% on this one. Furthermore, if you subtract the ~66% rental stock, skip the less desireable D10/outer ricmond- sunset hoods, you don’t have alot of desireable housing stock left. Also, as in my case, many who live here and are well situated, have no intension of leaving the city. Add in the fact that SF is a destination city for many well to do’s, and the supply/demand curve is permanently biased. You really have to encompass alot of factors beyond salary/housing cost to understand SF’s housing market. Sorry but I think ex-sfer just misses this! You can’t put into an analytical equation, as it entails so many social, cultural and psychological factors. At the end of the day, 18 months after the scariest recession in 80 years, SF RE is down on average between 10-20% (w/o D10) which is alot better than most places! And the rental market was not devestated either.
As an example, I just rented 2 brand new units in the mish. (and btw, I am totally with schlub on the desireability of the mission). Lemme tell ya, they went like hotcakes! One went to a lawyer/ tech worker couple, the other to a single female high earning tech exec. And no, my bldg is not near Dolores park/bi-rite brigade, it’s on 14th st near so van ness! So why did they choose to live there? 1- my units are really nice, I know how to use space well and design nice kitchens and baths. Ironically the morons miss it and the quality tenants notice the details. As a landlord I love self selecting tenants biased towards quality. 2- it’s well known the mish is getting gentrified and people want to live in a neighborhood that they feel connected to. They want to be part of the process/community. They want to live in a neighborhood of mixed ethnicities as well as class. Cause it feels like a real world place. Of course my bldgs represent the upper end of that range, and I’m cool with that role. But at the end of the day the mish till represents a wide mix of people, and it’s a great place to live where I feel alive. The success of my rentals bear the fact that others feel the same way too.
This also flies in the logic of the of comments by poster meep, who is clueless about the mish. And former apt broker, if you are indeed ‘born ‘n raised’ you should no better! Of course, the mish is not for everyone, and I don’t need to talk it up. But the reality is that there are plenty of folks, well off folks who do like it. Proof is in the pudding…and btw, when is someone going to open a gourmet pudding cafe on el corazon (24th st east of mission st)? It’s a beautiful Sunday- time for brunch in the hood! Peace out.
Ok, not believing I read about 80% of all this, particularly since a good bit of it is off topic, e.g. Mission gangland or gentrifying (or both), but just wanted to give credit to SFRE for an insightful and thought-provoking post:
“In my estimation, the market could likely stabilize at this level for the long term. With so much potential supply under water, that any uptick in prices will be met with more inventory, keeping prices around where they are today. It will probably be in a 10% band for the next several years, until all of the underwater supply works itself out.”
Thanks!
A significant part of the plan for stabilizing the market involves foregoing foreclosures and there are plenty of anecdotes about people who have not paid their mortgage for a couple of years without consequences. But when people see their neighbor not paying their mortgage with no consequences how long will they go on paying their mortgage?
The January HAMP report showed 5.2M mortgages 60+ days late. The February report had 6.0M mortgages late. How long before a critical mass is reached?
Trying to hold the market away from equilibrium is like playing whack-a-mole. Unintended consequences have a way of popping up.
45y/ohipster -are the surenos and nortenos based in the mission ? the city attorney of san francisco thought so.
Civil Gang Injunction in the Mission
According to the San Francisco Superior Court’s Order Granting Preliminary Injunction of October 12, 2007, the Safety Zone enjoining members of the Norteño gang “is defined as an ‘L’ shaped area generally bordered by 23rd Street to the North (but extending to 21st Street at Alabama Street), Valencia to the West, Cesar Chavez to the South, Potrero Avenue to the East, and extending to encompass La Raza Parl, also known as Potrero Del Sol Park.
gangs sell drugs.drug dealers need guns.
gangs + drugs + guns = not a nice neighborhood.
my comment about the mission was in regards to it being a desirable place to raise a family.i am hearing from childless people saying how great it is because of the vibrancy, culture and dining.i want to hear from people with children who are able to afford to leave the mission for someplace like presidio hts or st francis woods but who stay in the mission because it’s a nice place to raise a family.
I also talked about hipsters. Why didn’t you dispute what I had to say about that?
You weren’t replying to me. Don’t be silly.
Everything you’ve referenced about gangs in the Mission is over two and three years old, at least. That injunction has had real positive results on the community over the last couple of years.
I agree with you on the family/Mission thing.
I have been in Noe for 3 years now, just had our first kid.
I was fairly ambivalent about Noe, and definitely found it on the boring side.
But, with a new born (4 months) have to say, great ‘hood to have a kid in.
Definitely superior to Mission in this regard, in my opinion.
So it looks like a battle of mission hipsters vs. Noe soccer moms! Personally I find mission hipsters much more palatable than noe’s entitled soccer moms hogging up the sidewalks in their oh so previous neighborhood. Hipsters make way better coffee too (Martha bros vs. Ritual or four barrel? Come on!)
but seriously, everyone seeks out different people and atmospheres in their little postage stamp of the world.
Oh come on, the Mission is swarming with families and children and baby strollers. There’s a relatively new park called “Ninos Unidos” (children together) on Treat and 23rd. The park is a wildly successful place teaming with playing children every day of the week. Garfield Square has also been renovated and it’s soccer field is constantly being used by kids and grown ups alike.
Yeah but those are “minority” families so they don’t count.
+1 on Martha Bros. being terrible (and weirdly overrated) coffee. One thing I do not miss at all from living in Bernal (very nice ladies there though).
Our kids used to go to Parque des ninos unidos all the time with their nanny; it is a great park.
“Kid Friendly Mission District” in this past weekend’s NY Times.
Rillion, I was going to bring that up but thought people would have a fit.
I prefer the more urban parts of the city vs the sanitized sections, but if I had young kids, and all else being equal, I would choose Noe over the Mission. In fact, the decision wouldn’t even be close.
Hmmmm, the article (try his link) also appears to feature SFRE’s homeless woman: On the next block, a homeless woman joined us, complaining that “it’s a terrible thing when you have to steal cupcakes to eat.” Overall, a positive read, though, and made me want to visit (with the kiddies in tow).
Anyone want to comment on the legality of the short term AirBnB.com rentals featured in the write up.
^ ebguy- I dint think the city has B&B’s as legal use in residential hoods (but I may be wrong). If that is the case, go ahead and rent short term all you want
“i want to hear from people with children who are able to afford to leave the mission for someplace like presidio hts…”
Who can afford Presidio Heights?
WRT kids in the mish: I live around the corner from Ninos unidos and I swear I have seen bonafide white children there on numerous occasions.
As I mentioned, you may well have seen my kids there. With their Latina nanny, granted.
Schlub, yeah, playing with fire with a comment like that but I just get a bit tired of the constant bashing of the historically minority majority neighborhoods like the Mission or Western Addition.
@Rillion: I dont think people are bashing minority majority neighborhoods like the Western Addition, because they have a majority of minorities. They are bashing, because they are more unsafe than the surrounding areas. I personally don’t care if the people around me are minorities, since its the content of their character that counts the most. What I do care about is crime rate, quality of life crime rates, etc., and areas such as the Western Addition have higher rates of those than other areas.
I wholeheartedly agree SFRE.
Rillion claims to be ‘playing with fire’ by stating that preferring Noe to the Mission is ‘minority bashing’. I actually think its the complete opposite, the safe Politically correct party line.
In fact, given the instant suggestion of minority bashing/racism, it seems anybody who states that they would prefer their kids to grow up in Noe over the Mission are the ones ‘playing with fire’. When in fact all it takes is a quick glance at a SF Crime Map to back it up as a completely sensible preference.
“I wholeheartedly agree SFRE.”
SF Examiner Police Blotter
Check it out. You have to go back a number of days – past days of multiple events in Pacific heights, marina, Nob hill, Richmond, Suburbs (San Mateo), Glen Park, as well as the usual suspects like Tenderloin – before you come to an event in the Mission – the same event is listed as Noe Valley – a stolen car, seemingly driven between the neighborhoods.
This is exactly why I said I was playing with fire, I said people here bash neighborhoods, yet you now put quotes around ‘minority bashing’ just as you did with ‘playing with fire’ which implies I said that people were bashing minorities, when I didn’t. Have some integrity and don’t put quotes around words you put in my mouth. I even qualified that the neighborhoods I was referring to were ‘historically’ minority majority cause I have no idea what the exact current racial make up is of those neighborhoods and I did not want to accuse people of bashing minorities. But I get accused of it anyway.
And to break it to you two but there is crime in almost every neighborhood in SF. Remember those threads about crime in the Marina? Ultimately I think its more classist then racist, the attitude that somehow poorer neighborhoods are not family friendly compared to richer neighborhoods, even though the poorer neighborhoods probably have more families.
http://spotcrime.com/ca/san+francisco
is what I used re crimes, and compared Noe and Mission, as were the two ‘hoods most under the microscope here. I think its clear theres significantly more crime in the Mission despite he proximity of the two.
You said a bit more than just that people bash neighbourhoods to be fair.
I agree you didn’t exactly say ‘minority bashing’ and I apologise for mis-appropiating that quote to you. But you did say you are tired of the constant bashing of the historically minority majority neighborhoods like the Mission or Western Addition.
Which does imply you somehow feel the bashing is linked to their status as minority majority – and also that bashing of non minority majority hoods eg Noe,Marina doesn’t bother you much – although these hoods are bashed quite a bit – certainly on this site!
If he didn’t mean “minority bashing” he would of said something else like “poorer neighborhoods” or something. Anyway the semantics are not the end of the world, and he clarified it in his later post, so its okay.
I use the spotcrime as well, and definitely more trouble in the Mission vs Noe. That’s why all else being equal, Noe wins hands down over the Mission. Its not even close – 99 times out of 100 times Noe would win if you have kids. This is the reason why prices are consistently higher in Noe.
That examiner site is misleading the way it groups hoods..it looks like it groups all crimes in Mission or Noe as Mission/Noe.
Couldn’t confirm as didn’t go back far enough to find a Noe crime. Certainly one mentioned above was in Mission (Shotwell). Not sure whete you got the info it was driven between the hoods.
Suspect its the same for other hoods too eg Pac Hts and Marina grouped with Japantown and Polk Gulch.