Three quotes from the Chronicle:
Prices in San Francisco, Marin and San Mateo counties will rise about 3.6 percent a year for the next two years even as home values in the East Bay slip, according to a Moody’s Economy.com report.
“There doesn’t appear to be much excess supply in the San Francisco market,” said Gus Faucher, director of macroeconomics at Economy.com.
“San Francisco is perpetually unaffordable,” said Faucher, who noted that an analysis showed that prices in the three counties were just 7.5 percent higher than Economy.com predicted they should be based on historical comparisons. “We think the metro area should be able to sustain that.”
Okay, we’ll ask the obvious, if the “analysis showed that prices in the three counties were just 7.5 percent higher than Economy.com predicted they should be based on historical comparisons,” why are they predicting 3.6% gains over the next two years? Not exacly a vote of confidence in their own analysis. And please tell us they’re not simply looking at “listed” inventory when measuring supply.
∙ Mixed outlook for local housing [SFGate]
I’ve seen the original Moodys’ reports, and there is some conflicting information. In one section they list the SF area as one of the nation’s “highly overpriced” zones, and say it’s 18.3% above its equilibrium price (no idea as to their math behind the calculation) for the most recent quarter. But only 0.5% over equilibrium for the historical average. But note they show standard deviation at 10% for these numbers, which is really high.
As for supply, the report I saw had excess supply at 6.6 months (dated August ’06) – not sure how that maps to your CII index.