A couple of quotes from the testimony (pdf) of Tom Stevens, the President of the National Association of REALTORS, at today’s U.S. Senate hearing on “The Housing Bubble and Its Implications for the Economy” (emphasis added):

Sales are down significantly in Florida, California, Arizona, Nevada, Virginia, and Maryland. These regions experienced the greatest rise in home prices in recent years and affordability has become a major issue. The sharp decline in sales have resulted in a much higher housing inventory (tripling and quadrupling in some cases) and these areas are vulnerable to outright price declines, particularly if interest rates were to rise further.”

“Contrary to many reports, there is not a “national housing bubble.” All real estate is local. For example, the housing market in California is extremely different from Oklahoma. Home price-to-income ratio, home price-to-rent ratio, and more importantly, mortgage debt servicing cost-to-income ratio have greatly increased in some markets to worrisome levels. Markets in Florida, California, Arizona, Nevada, Virginia, and Maryland exhibit trends far above the local historical norm, thus it would not be surprising for these markets to experience a price adjustment.”

“Due to very high home prices, interest-only, adjustable rate, and/or option-ARMS became the only way to enter the housing market for some homebuyers. In essence, the homebuyers in the coastal markets are at their financial capacity. With rising mortgage rates, homebuyers are becoming exhausted financially, which explains why sales have tumbled in high priced regions of the country.”

So ARMs and affordability are pressing problems, sales are slowing, and we’re “vulnerable to outright price declines” and “adjustments”? Who could have possibly seen that coming (last November)…
Witness Testimony: Mr. Tom Stevens, President N.A.R. (pdf) [senate.gov]
The Housing Bubble and Its Implications for the Economy [senate.gov]
Top O’ The Market To You! [SocketSite]

18 thoughts on “The President Of N.A.R. Goes To Washington”
  1. What did I say again about “fire sales” within the next couple of years? As a prospective second-home buyer, the future is bright! I can afford to wait — but in eager anticipation.

  2. As a current multi-property owner myself, I sure hope there are some ‘fire sales’ so i can continue to build my portfolio! It would be great to take advantage of desperate sellers, not knowing that in the long run they’ll be fine, but if they have a cash crunch now.. bye bye! 🙂
    Furthermore, rates have gone down steadly for months now with the 10-yr yield at 4.74%. Shhh, don’t tell the sellers and other buys that money is cheap and bonuses are at a new record again. 🙂

  3. More importantly, as a renter, hopefully other first-time buyers like myself can finally get into the market. I could care less about portfolios and second homes – just want 4 walls I can paint.
    An interesting discussion thread would be what everyone thinks is the “right” price for the city, or areas of the city. $500/sq. ft.?

  4. Right price? SOMA should be around $500/sqft.
    Prime areas in 94123 AC (Marina, Pac Heights, Cow Hollow) go from $800-1,200 sqft.

  5. Although I may be the least knowledgable in real estate, I think 500/SF sounds very low in SOMA. Assuming that the average size of a condo in SOMA runs around 1000-1100 SF, that would leave the average selling price at around $500k-$550k.
    I hope you guys are right because I will be the first one to buy at the Palms or any other nice condo in SOMA. Unfortunately, I may not be the only one. To me, that’s a steal. Forget about Pac Heights or the Marina. I’d rather save my 300-800/SF and move to the hip SOMA district.
    Although the price per square foot is very important in making a home purchase, people are also concerned about how much their monthly payment is. If rates continue to stay low, then I don’t see that much of a drop in that area. If rates shoot up faster than real wages, then $500/SF may be right (but I don’t believe so).
    Having said that, I believe SOMA will be the slowest real estate market in SF in the coming years. As everyone has said, there is just a huge supply of inventory coming up in the next few years that will cause price pressures to move downward, good for potential buyers in that area.
    I would personally stay away from the SOMA district for a few years to see how that area pans out (unless prices drop to $500/SF!).

  6. why is everyone so caught up in the price/sqft? it seems ridiculous to gauge properties on this metric and potentially disregard those that may fall above the average. first of all, there isn’t even a industry standard square footage measurement so really, how valid is this statistic? it may be one tool in evaluating a property but is at the very bottom of my list.

  7. To rut: I’ve got a beautiful condo in hunters point to sell you, it’s a bargin at $1000 per sq ft. – call me. For you I’ll cut it loose for $1,000,000. Bargin seller.

  8. Rut..you are right on the money. Those “experts” that mock your post most likely have no Real estate to speak of. They use the anonymity that this site affords them to masquerade as something that they clearly are not. Real Estate masturbation of sorts!! Patethic really.

  9. Man, I’m not sure how I feel about this $500/sq.ft. talk. I’m currently sitting and waiting on one of the units in the Rincon area and will have to start making payments in a couple of years when they’re done building the bloody thing. On one hand, if the prices tank, I might shoot myself in the head. On the other, if they do tank, I suppose I can just eat my deposit and walk away and come back the next day and buy the same unit at a discount?
    I’m not a real estate genius; I’m just a working shmuck, who for reasons unknown, thought that $600,000 for a unit the size of some walk-in closets was somehow a “decent” price in the City. That’s how warped things have gotten.
    I have 2 years to see how things pan out. But I’ll tell you what…I’m gettin nervous. But then again, if I’m crying about potentially losing money in real estate, things can’t be going that bad for me. There are bigger, more important issues in this world. Our President, for one. (I know, I know, off topic and a cheap shot, but hey, sometimes those are the best kind!)

  10. SFSAL…everyone is anonymous on this site including you. Use of some shielding moniker does not reveal one’s identity. Lose your smugness pal and wake up.

  11. Only threw $500 number out there because the last time the city was truly affordable to first time buyers was around 2000/2001, when the tech bubble had popped. I was in school then and had no income, but have a few friends who were able to buy for $400/sq.ft. Yes, in SOMA, and brand-new construction as well. Since then, prices have more than doubled and wages have gone up….what, like 15%?

  12. Only time price per SF makes any sense is for a commodity condo – i.e. no view, no architecture, small bath with so-so fixtures, blah kitchen, 12′ living room. The standard thing you’ll find in any city in the US.
    If you are looking for a great deal, there is only one real option, buy something nobody else wants and figure out a clever way to turn its defects to assets (or at least neutralize them).

  13. 49Giants, where did you buy? Rincon or Infinity? And why?
    I’m curious because I’m thinking of buying there and actually know a few folks that reserved some units.
    And you’re right, if the market tanks, those buyers are out 3%. Not the end of the world, instead it just turns into a bad investment and they can jump right back in and buy it back at a deep discount.

  14. 49Giants, I wouldn’t be so disappointed with your purchase. You can think of your 3% down like a option to buy a stock at a specific price. Like stock options, you lose out on the premium if the options are worthless. I guess in your case, your “option” would be worthless if the price of your unit drops more than the 3% you put down (but that’s just off the top of my head).
    I personally think the high rises they are building are pretty sweet. If I had the income I would buy one on the top floor. But since these units are getting so much press in SF, they are a bit overpriced.

  15. I bought at One Rincon. Not a fancy unit; its the 04 plan, meaning I’ll be the king of my 600 sq/ft domain. We all gotta start somewhere, right?
    I went with One Rincon because the prices were simply better. The way I see it, One Rincon and Infinity are basically the same thing. Yah, of course there are some differences, location being the main one, but really, they’re virtually the same in terms of quality, amenities and blahblahblah. But for whatever reason, if I wanted to buy at Infinity I’d be paying more for a unit in a non-tower building. I don’t know if One Rincon underpriced or if Infinity overpriced, but there was a noticable difference. Either way, whenever I talk to people from anywhere but SF, I realize that it’s all nuts.

  16. The Infinity is OVERPRICED!!! Noooooooo … the quality is not the same between the two; One Rincon is better (finish quality & price). But … expect some upgrade packages in BOTH developments! I won’t go into my tirade again on these two projects. There has been heated debate over this ad nauseam in previous posts.
    Oh, and The Infinity has sent me an e-mail “encouraging” me to come in to make a reservation (hot sales don’t need any encouragement). When The Infinity comes to its senses, I’ll reconsider giving them my deposit. In the meantime, I’ll just sit back and watch.
    (Of course, this whole comment is just in my oh-so-humble opinion.)

  17. Does the Rincon have a 1 year restriction on selling? I’ve heard both developments are instituting a 1 year restriction on selling to curb flippers.
    Sexy & Sassy, I’ve had both Rincon and Infinity call me over the last month asking me if I’m still interested in buying so I think both sales centers are just as motivated to finish off their inventory. Rincon may have a smaller inventory cuz of their price point, but both still have amble inventory due to buyers backing out or their deposit checks bounced.
    Either way, both buildings will be spectacular with Rincon being more dramatic and Infinity having the better location (btw, the bigger and taller Rincon is getting, the closer it seems to get to the freeway. Is it me, or is that building too dangerously close to the onramp and freeway??)

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