San Francisco MLS Activity (01-01-07)
According to a tipster, 210 listings on San Francisco’s MLS expired yesterday (there are now 700 ~650 Active listings for single family homes, condos, and TICs in San Francisco). And as our tipster notes, it’s a “pretty large number, but not surprising considering the new year would mark a reasonable milestone to end a listing agreement or a listing….”
UPDATE: Our “don’t freak out by the number of expired listings” message has somehow turned into a lightening rod for comments about the San Francisco real estate market in general. Normally we’d try to corral the comments back on topic, but today we’re just going to go with the flow (if not open up the flood gates). So let’s just consider this a formal solicitation of reader predictions for the San Francisco real estate market in 2007. And yes, all other rules still apply.

65 thoughts on “A New Year’s House Cleaning (And Reader Predictions For 2007)”
  1. The ‘big surprise’ in 2007 is how much prices in SF will go up again after 2006’s 5-8% average price rise, following 2005’s 15-20% rise.
    It’s always the same old thing we’ve heard every year, and Spring always come strong and prices move up again and then plateau or fade into the holidays.
    I’m thinking SF will be up another 3-5% this year. Anything beats not building any equity and subsidizing someone elses debt.

  2. I’ll take the other side of your prediction and say SF will be down 3-5% this year. Anything beats buying with an interest-only loan and not building any equity. That’s like renting at 2x market rent plus taking all the downside price risk.

  3. Have you guys actually gone to see ‘real properties’ instead of just look on Socketsite at the not yet built stuff?
    Go look around Pac Heights, Marina, Cow Hollow, and Presidio Heights. Prices there are definitely up at LEAST 5%, if not closer to 8-10% for 2006.
    Have you noticed Socketsite and other websites don’t go back and highlight what that rare featured Pac Heights condo finally sold for? It’s b/c it sold for a ridiculous amount, and they don’t want to reveal it.
    How many people do you know buy with no money down interest only loan? I know about 20 homeowners, and the range has been 20-50% down and the minimum is a 5 yr amortizing ARM loan. Your claim is like saying all renters are worth 4K, b/c the data says so and new home prices nationwide are down to $220,000 therefore SF is going down. Hello people, what can you buy in SF for $220,000? And, can you build new homes in SF? No, unless it’s in the ghetto.
    2007 is going to be great for SF real estate, again.

  4. It seems the real estate bulls are going out of their way to push the buy over rent argument, and then getting angry at the press (including SocketSite) for reporting any negative news.
    When the news is positive, the media reports it. When the news is negative, the media reports it. Simple. Nobody complained when the headlines were “Home prices up 20% this year.” Can’t have it both ways, folks.
    Even Robert Kiyosaki tells his apostles that the cardinal rule of real estate investing is “Never get emotional.”
    On that note, I look at buy vs. rent from a strictly economical perspective. Even if you’re right, and prices are up another 3-5% in 2007, it still doesn’t justify me buying when I can rent for 1/3 of the monthly payment and invest the difference in something risk free at 6%+. I’m better off waiting to see if prices do fall, or until appreciation on real estate can beat a balanced portfolio.

  5. Nothing wrong with renting at all. It’s just funny how some claim the world is coming to an end everyday.. it’s just plain entertaining 🙂 Imagine saving money on rent and making money in your home over the course of 5 years. What an amazing feat.
    Bottom line: No shame in renting, and creating blogs or arguments to justify your case. Same with homeowning. Without renters, there wouldn’t be landlords. Homeowners shouldn’t be so smug towards ones who are subsidizing their life style or paying off their debt.

  6. I’ll disagree with Dude’s first posting slightly on this subject by saying that building equity would also include in my book the amount of down payment as well as the horizon for how long someone will keep their property. His comments seem to take the broad brush approach.
    I agree that a interest only loan with minimal down for an owner planning to keep their property only a short period of time doesn’t make a lot of sense, but if there is a decent downpayment and a plan to retain ownership for an extended period of time, then a interest only loan may be OK.

  7. Sorry for generalizing, as I’m sure not everyone bought with 0% down and interest-only financing.
    But my point was that many core real estate fundamentals have been forgotten during the recent boom, including down payments, being sure you can service the loan under any circumstance, and (as you importantly point out), holding periods. I remember when Realtors use to tell you that you need to hold property for at least 5 years to ensure you make money on it net of fees & taxes.

  8. There is absolutely nothing wrong in renting. Different strokes for different folks. And in theory, if you can time the market, and buy at the low, that is the best situation.
    What I’ve noticed is that most people cannot time the market and either A) Never end up buying or B) Never end up buying. I know far too many people who keep telling me they’re waiting for a dip or it’s too expensive right now and they have been telling me this for 5 years now (oh and by the way, they said the same thing about the stock market). What happened over 5 years? Well probably a double in real estate values and the DOW reaching an all time high now.
    My advice, just look for a property you like and can afford. Don’t worry too much about anything else because in reality no one knows where the market will go. If they did, they wouldn’t be telling any of us.
    Oh and another thing about return on investment calculations. I’m not so sure that if a home price appreciate 5%, that it means you are better off investing in a CD at 6% (someone correct me if I’m wrong).
    If I buy a house for 700K, put 10% (70K)down, and it goes up 5% (35k) in value doesn’t that mean I made 50% on my investment? So based on my calculation, I would much rather make 50% on my investment (granted taking some risk) then 6% risk free. Leverage is such a cool thing isn’t it???

  9. My 2 Cents….don’t forget to deduct from that 35k increase the amount you made in payments, taxes and upkeep during the same period. Also, how much would you lose in commission when you sell? Over a single year period much of that 35k would disappear when compared to the costs of holding the property. Harder to calculate, as it is individual preference, is the value placed on having a fairly liquid investment such as a CD vs a non-liquid piece of real estate.

  10. .02c, that comment works in reverse too. 70k down and a 5% hit will cost you 35k. Plus another 6% of 700k to sell it and another 1% for transfer taxes. Yes, leverage is a wonderful thing; and risky! And 6% risk free is an annual return.
    As for SF RE predictions, since Socketsite asked, I don’t think the market is going to tank, maybe stay steady, or dip slightly (1-2%), but anyone that thinks the price of homes will increase 5-10% in SF is nuts. There isn’t anything in the broader market to indicate that even this market is bullet proof. I also think that there are multiple markets within SF that really should be tracked separately:
    1) Single Family Homes between $1.25 and $3M
    2) Single Family Home greater than $3M
    3) TIC’s and Condo’s (under 10 units)
    4) High-rise Condo’s
    5) Rentals
    Happy new year.

  11. Leverage is indeed a powerful way to boost ROI, but can work against you if your predictions are off.
    Also, I think your analysis is biased in the point about the last 5 years. This isn’t SF-specific, but the past 5 years have been an unprecedented anomaly in credit markets (including mortgages, which drive real estate values) caused by the Greenspan Fed taking rates too low for too long.
    Real estate moves in long cycles, not like stocks. Look at any chart of home prices over the last 20-30 years and notice the “hockey stick” in the last 5 years. Exponential growth in home prices is just not sustainable. If it were, studios here would be approaching $1.0 million by the next decade. If incomes and population are not growing by 20%/year…..
    But you’re right in that none of us know what the market will do for sure. For me personally, I’m better off sitting this out for another year and growing my savings.

  12. I completely agree with trying to time the market, looking for a property you can afford, and the potential benefits of leverage, but don’t forget that leverage can work against you in a down market. And it’s not so “cool” when a 5% drop in the market results in a 50% loss of your investment.
    Also, from a pure “investment” standpoint, don’t forget that you probably paid about 38K in interest to finance that other 90% of the house that the bank actually owns.

  13. Since I sold my home on the Peninsula (for $1mm more than I bought it for) I’m happy to rent and watch prices fall in SF. Realtors are scared watching prices fall and the number of sales shrink so they have plenty of time to post at places like Socket Site saying that renters are dumb. Things will get ugly this year when so many IO loans go from the low start rates forcing people to sell…

  14. I suggest reading Irrational Exuberence (2nd Ed). Prices will
    track inflation over the long haul, excepting changes to the nature of the area/neighborhood, etc.
    We’ve seen a sharp uptrend in the past few years. General
    frenzy, plus extreme world-wide liquidity. I say we are in for
    a flat to down market, OR inflation will pull everyone’s salaries
    back to where they should be with the market. If the latter happens, expect very high interest rates, and defaults on
    var-rate loans, and a liquidity crunch. In such a scenario, you
    would see inventory grow quite a bit, so I’m not sure that prices
    could really rise in that environment, either.
    If the average homeowner paid N% of his salary to a mortgage
    10yrs back, and now the average homeowner pays >> N% of his
    salary to a mortgage, and tomorrow it goes up again, etc…
    At some point the poor guy is paying 100%? It doesn’t make sense! Think about it!

  15. YourBoss,
    That is good point. But this is a strange area with money coming from other places than a pay check. The world is different. You have independent 1099 employees, stock option money galore, gifting/inheritence. The amount of cash in this market is mind blowing. Think about all the companies in the area that have dropped serious cash on the bay area workers+yahoo, google, paypal, youtube, genentech, oracle, cisco, ebay, etc. The CA government had huge bump in taxes from Google alone in 05. This money has to go somewhere. You also have the RE equity as a result of the run up in values. It snow balls, and I do not see it going the other way. You are not going to have the W2 employees buying a home in San Mateo county unless they make over $150K.

  16. I love how we always hear that there is so much money floating around in the Bay Area. I guess all 67 employees from YouTube will keep the housing market going. BTW, Yahoo’s stock price isn’t exactly going through the roof……..

  17. Eventually you run out of richer people to sell to. Besides, everything you mention goes double for New York City (bigger bonuses, bigger economy, inheritances, international interest, etc.). New York City real estate has corrected on many occasions, and is falling again as we speak (including Connecticut and Long Island). So why should we, with a smaller population and economic base, fare better than New York?

  18. Dude and anon,
    I am not predicting where the market is headed, just that the money infused via non w2 sources does have an effect. I have no idea about the NYC, NJ, CT market. When you have a guy paying cash for 5 million house on the top of Noe valley it is a sign of the times. This is not your father’s SF. And 3:01, Yahoo’s stock could go to zero but many have already taken their chips off the table. Just like GOOG, SUN, AAPL, HP, DBLX,, and dozens of others that I can not think of right now. I am of the opinion that this wealth does tie into and has an effect on the SF market.
    As has been pointed out, there really are multiple markets within SF. And really should be more like multiple markets per individual area. Each should be looked at individually, it has been fun looking at and thinking about the SOMA condo market over the past week or so. Not sure where the buyers are getting their money but there does seem to be pretty strong demand for the new units going up at One Rincon and Infinity. I would bet there is some down payment money from a stock option sale somewhere in one of those towers…even 3:01 would have to agree with that one?

  19. “Have you guys actually gone to see ‘real properties’ instead of just look on Socketsite at the not yet built stuff?
    Go look around Pac Heights, Marina, Cow Hollow, and Presidio Heights. Prices there are definitely up at LEAST 5%, if not closer to 8-10% for 2006.”
    How many people visiting this site are in the market for a single family house or condo in district 7 or 8? Your point about 8-10% price increases in those areas is well taken, but totally irrelevant for most of us.

  20. Peanut Gallery,
    I agree there are multiple markets per individual area, but I do not agree that everyone and his brother is a millionaire. The median household income in SF is only $57k. Sure there are people who made a lot of money during the dot-com days, but conversely, there are also folks who had their asses handed to them when these same companies bombed. Folks that made their money during the dot-com days have already bought and they are in a different market altogether. If they buy again, they will be buying multimillion dollar homes not the $800k house in the Sunset. I would have to guess that the multimillion dollar housing market is much smaller.
    p.s. Where exactly is the $5M house in Noe Valley?
    [Editor’s Note: Please correct us if we’re wrong, but we’re assuming ‘peanut gallery’ is referring to the “T house.” (We just so happen to be fans.)]

  21. Having been through a couple of very happy silicon valley
    experiences, I saw that stock options folks blew their wad of
    cash rather quickly, including home upgrades (moving).
    Most folks who made serious bucks were a little longer in the
    tooth, and moved to places with good schools (Los Altos Hills, etc).
    I didn’t see anyone with a large wallet move to SF. The bulk
    of the home runs came in ’98-00, so this last ramp can’t really
    be explained that way. Maybe a ton of lawyers just made partner?
    Anyway, I talk out my a**. There must be a study that shows
    whether household income growth in SF has significantly outpaced other (still alive) big cities in the US? One that is
    tax-return based, and not W-2 based?
    If there is no area-wide out-pacing, then irrational exuberence
    rules come into play (my last raise was in ’00 :-(… )

  22. Think the $5M house in Noe is the imo absolutely stunning modern number on Duncan above Noe street that a Google guy purchased. Can’t find it online but there was a story on the house and its buyers in the Noe Valley News (or whatever it is called). Here’s the architects site — — if I’m correct about which house is being referred to above, look under projects for T house. Back to the thread’s main point, from someone who’s spent the last two years looking hard, the view homes (not as fancy as this one mind you) in district 5 have definitely been appreciating and with very few exceptions are selling over asking to this day. I save all of my agents search e-mails and the solds on the ~$1M view homes/condos are remaining over asking 99% of the time. I expect the same to be true this spring.
    [Editor’s Note: You’re killing us over here. A link to our overview of the ‘T house’:

  23. I think when you look at the $2M+ market, we are looking at potential home buyers for which money is no object. They will buy regardless of price, but this is a small pool of people.

  24. At 2 Cents,
    But with the 35K, don’t forget to ADD the amount you saved renting. Let’s say that place would rent for $2,500/month = $30,000. You actually made 65K by buying, bc that $30,000 a renter paid is just money down the drain.
    [Editor’s Note: And with that, we’re putting an end to the “rent versus buy” tangent of this thread. If you’re sincerely interested in debating the relative merits, please feel free to join in the discussion over on our “One Free Pass” post.]

  25. So, in this market, would I be a fool to pay 95% of the asking price on a new unit near Union Square with 10% down and a 10yr IO loan? My plan is to directly apply my annual mortgage interest tax benefit towards paying off the second. (I have no debt, so it’s realistic.) I definitely plan to stay in the unit a minimum of five years, as many as ten. So, what say all you experts?

  26. Sorry, but when there are 30 expired listings for every sale, I don’t care if your home is in the land of Oz, the price will be dropping.
    And with the the subprime loan market cratering faster than a comet dissolving in the atmosphere, you can expect things to go from bad to worse.
    [Editor’s Note: We really wouldn’t read too much into yesterday’s ratio of expired listings to sales. The struggling subprime market, however, is definitely worth noting.]

  27. Sorry, but there are 30+ sales over-asking sales in my criteria range in the last half. Subprime loans are for desperate suckers and have nothing to do with the vast majority of buyers. And to the point of my prior post, the prices for view properties in desirable neighborhoods (district 5, 6, 8, and 9, not 7 please note, I’m not blue-haired!) are not dropping in my documented experience. And I completely agree that those who bought nothing-burgers with zero down and interest only loans at top prices are at high risk, but there is, as previous posters have asserted, not one stereotypical scenario for all properties for sale in all areas, so enough with the catastrophic imprecations and generalizations.

  28. Certainly. From last June (when I failed to join a bidding war for a jaw-dropping view condo above the Castro) to December, I’ve waited and watched as more than 30 houses and condos in the sub-$1.4M price range, with views of either downtown, one of two famous bridges, or the bay in district 5 (excluding Glen Park and Noe), district 6 (Alamo Square and Hayes Valley), district 8 (Nob, Russian, Telegraph hills and North Beach), and district 9 (Portrero) sold over asking. Sometimes it was a token amount like $5K and others it was more like $25K, but it was over asking. And a good friend did very well in the same timeframe and bought a Eureka valley view condo at $50K under asking, but from a relo service managing the sale for an absent owner.

  29. My conclusion — It’s like Eddy says above, there are different markets for different categories of properties in different locations, I think.

  30. Did you say over asking, or over comps last year. The properties I see are selling for no more than 10% under comps last year, and sometimes less.
    And, not that asking price matters, but is that original asking or after any of several price reductions.
    Methinks you put too much stock on asking. Any smart, motivated seller is going to ask under the market to make sure the place sells without the listing going stale. Over asking? Big Deal.
    And the lack of subprime loans mean a certain number of buyers are now out of the market. I don’t think that bodes well for prices going forward, no matter what prices going backwards did.
    “Nationwide, subprime loans, which once made up just a fraction of the mortgage market, accounted for nearly a quarter of loans written in the first 10 months of the year, the report found.”
    Wow! Did 25% of the buyers just get dropped from the market?

  31. I don’t have a crystal ball, but I have been out-bid above asking (was I in any way unclear? No, I did not say comps from a year ago) and watched more properties than I bid on go for over asking. And it was over initial asking, not reduced asking, to be clear. But again, these were properties with views in good (though not remodeled or as-new) condition. My point, which seems to be missed, is that exceptional properties fairly priced have and are continuing to sell at or over asking in the locations I listed. Telling me I put too much stock on asking is not arguing to this point.

  32. Tom, you likely do not have a crystal ball, but would you have some MLS numbers for those view properties going over listing?

  33. A house near mine, with a downtown skyline view, in North Bernal, listed at $1.325M, sold within days for over asking.

  34. Alright, for the skeptics who don’t want to search themselves, here’s a smattering from just my December search e-mails: 316187, 316661, 313459, 317030, 317598, 313619. These sold at or over the only asking price I ever saw (not to say I know for sure they were not listed earlier at a higher price and then taken off for a while), and some did not even have views. Two other examples that were acute for me were 118 and 120 Corwin (don’t have time to look up the listings), sold this fall. I seriously was considering offering on one of these, which were on the market at the same time, but 118 received a “pre-emptive” offer prior to first open house and 120 Corwin took an offer (ended up selling at $1K over, but over nevertheless) at its first weekend open house as I understand it. Both had panoramic views, and despite being on the market at the same time, and having open inspection issues with deck water damage, and not new kitchens/baths, sold lickety-split above asking.

  35. Anon,
    Yes, I was referring to the T house. And I think it was Google money on that one. As far as the median income at 57K, I think that is somewhat misleading. The ones buying the homes are on the higher end of that number. Two incomes of 75K will get a couple into a $1,000,000 house if they have decent down payment and not too much consumer debt (or $100K and $50K incomes-ie a couple with one in sales and the other hr/project management). There are nurses that make $100K in the bay area…Anyway, that is not too far of a stretch for a large group of SF residents.

  36. “Two incomes of 75K will get a couple into a $1,000,000 house if they have decent down payment and not too much consumer debt.”
    That’s insane. Even with 20% ($200,000) down, you’re talking about an $800,000 mortgage with a monthly payment of probably $5K ($6K with taxes/insurance). Normal lending standards would require a combined income of closer to $250K to qualify.
    That’s not a stretch for some, but it is for the vast majority of SF residents.

  37. anonymous at January 2, 2007 8:32 PM,
    To your question about Union Square purchase, what are the comps for that unit? Are you getting a decent deal based on the comps? Your down payment and montly nut versus your income is not really relevant to whether it is a good deal. Either it is good price in this market or not, that is based on comps and what way the condo market is moving in Union Square. Your realtor should be able to help you determine this. Obviously this is subjective and you need to trust your realtor’s opinion, but you should understand what comps and info they are basing their opinion on. It your money afterall.
    What % of the building is sold already? After you buy are they going to be giving out 10% discounts? Probably not, but they people that already bought are not thrilled about your discount (assuming the same start price).
    You need to look at your current living expense relative to you new PITI? I assume you like the place you are thinking about buying. Are you going to enjoy living in the area? Does the building have good management/reasonable hoa? Is the after tax increase in housing costs worth it to you to live at the place you are buying compared to your current living arrangement? Is the immediate block(s) around your building on the upswing? If so, 5 to 10 years should be safe assuming you are getting a good deal on the place. You should even make a few bucks on the deal…Hope that helps, good luck.

  38. $150 for $1m house? Can I just second the insanity of that? My household income of $220 won’t get us any more than $805. We’ve even got a huge chunk of a down payment from selling on the east coast, and we still can’t find a damn thing that doesn’t require us to jettison our retirement savings plans and live on ramen for the next ten years. This market has got to come down, because if we can’t afford anything, I don’t know who can.

  39. I’ll second kc. Similar HH income that will afford me an $850k mortgage–a little higher than the median house (and as first time buyers, with rates at 6%+, no down payment).
    I can’t be alone in the boat of thinking this is insane–at what point do new homeowners say screw it and, literally, the bottom falls out, leading to a correction more in line with traditional 3x income:house price (v.the existing 10x). I don’t think we’re going to fall 70%, but it makes sense that we may fall 15-20% to fall back in line with economic fundamentals.
    Unless someone can tell me what economic fundamentals changed that drove housing up in the last 3 years, rather than pure speculation…

  40. As opposed to Southern California and much of the nation, housing prices have been rising strongly here since the second half of the Nineties. However, home appreciation hasn’t been as great here in the last 3 years as in many of the more speculative markets, eg, in Las Vegas and Florida, or in Southern California.
    I don’t think real estate has been only 3X median income here for decades. That’s why most San Franciscans live in rent-controlled apartments.
    I think a collapse of prices is *much* less likely here than in places where investors/flippers own a significant share of the housing, unless there is another recession.

  41. I have lived in and around SF for over 30 years and prices here have always been a shock to people moving from other areas, even NYC, no matter what their salary or net worth. If I hadn’t bought in right away, I’d never, never have been able to afford what I now own.
    And yes, I did rent for a while – but I was also renting out property that I owned, just not living in it.
    Here’s my advice:
    1. If you find a place you like, make an offer. Don’t make a lot of weird contingencies, just focus on price and don’t be afraid to make people mad.
    2. Best time to buy is when nobody else is buying. Step away from bidding wars.
    3. If you have to live on ramen noodles for a couple of years, good for you! If you had tried to rent and wait the market out, you would never, never have had the discipline to save what you really need to.
    4. It won’t be that bad. You won’t be living on ramen, but you will be driving the same car for a while.

  42. Dan–
    I can’t claim to be an expert on Bay area historical ratios, as I have only been here 2 years, but you bring up another point:
    Until new rent prices catch up to home prices and close the rent v. buy gap, it seems that there is downside. Not that it’s a one way street–rents have to catch up, and that’s likely to be a combination of rising rent (which we see) and falling prices…right?
    I don’t think a collapse is in the cards, but a small correction wouldn’t be a suprise.
    Of course the strong rental lobby and the lack of a true free market in SF only serves to prop up the real estate market.

  43. I’m in the same situation as both of you financially. So are many of my friends, and they’re all taking a wait & see approach as well.
    I also believe much of the recent gains have been fueled by speculation – we really are a nation of flippers now. But the musical chairs are stopping nationwide, and will stop here in SF as well. Just be patient and wait. Now that mortgage standards are tightening it won’t be much longer until falling prices are more noticable.
    As for the 15 – 20% decrease needed to restore equilibrium here, very true. But even if it does happen, it may take 2+ years because that’s how slowly the real estate market cycles. Something to keep in mind.

  44. The poster above who talks about everyone putting 20%-50% down in the Marina cracks me up. I personally know 3 couples who bought condos & houses there with neg am loans.

  45. What is more likely than a 15-20% drop here is what happened in 1989-1995– actual prices dropped less than 10% total, but taking into account inflation, the price of real estate dropped much more. However, we had a big earthquake and a bad recession then.
    I was fortunate enough to buy in 1995. However, buying then was scary enough, as there was no expectation then that prices would rise.
    I have friends who have been waiting for prices to drop for years, only to see prices continue to rise. Timing the market is difficult to do. It seems to me that now is not the time for speculative buying, but if one finds the right home to live in for the next several years, and one can afford a conventional fixed interest loan, then buying now is a rational option.

  46. To answer some of the posters above who have high income and can’t afford much in SF, the people who can afford this market are locals/californians trading up. In other words, they have very large down payments.

  47. Dissenter: Good point, and it describes my own situation. I am now in a property I never could have afforded had it not been for a series of “trade-ups” resulting in a down payment I never would have been able to save over the same number of years. However, I have to point out that not every one of my sales/purchases was a great move from a financial standpoint. I had a couple of clunkers, including my first sale. As I read postings on this site, it concerns me that so many first-time buyers express a requirement for an $800k home with 100% financing. My advice? Don’t try to second-guess the market, just start small and modest. And, plan on ten years or more to attain the home you really want.

  48. Very valid points, SeeHsee & dissent. But many in our situation are in their 30s or even 40s and want to have kids one day, if we don’t have kids already. We can’t realistically buy a studio for $450K and wait 10 years in hopes that it doubles. Why would we when you can rent a full house (garage, yard, etc.) in Parkside or the east bay for the same payment?
    What’s becoming obvious from many comments above is that first-time buyers are effectively priced out of this market. So the REAL question is whether a market can continue to function with only move-up buyers, or whether prices need to fall to allow first timers/transplants to buy.

  49. Dude,
    You could buy a cheap condo and rent it out. If you are making anywhere close to $200K you could use a write off. Keep renting in the Sunset as long as you don’t get OMIed. Hopefully in few years the condo will go up some (maybe 5 plus years now, would have worked better 5 years ago but water under bridge). Anyway, now you are in the game (but I get the feeling your not sure you want to be which I completely respect). Buying in SF is not for everyone. But once you are in, at least inflation will be good for one of your assets.
    Or cross your fingers and wait till prices drop 15-20% and pick up a home on the cheap…There are no guarantees in RE, which makes it soo much fun.

  50. Why assume we’re first-time buyers? Like I said, we sold on the east coast (forced to come here for a job) and don’t fit in something “modest.”
    Is the market here only for single, childless Californians who can wait ten years? No wonder your population is falling! We’ve been here six months and already we’re dreaming of the prices in DC or Seattle. Even NYC seems reasonable now – at least you can take public transportation from cheaper areas that aren’t suburban hellholes.

  51. kc: You say your income is 220k. You can buy an $800k house in a number of SF neighborhoods, or in the East Bay. You may be a little further out, but there are $800k houses in the City. I don’t think it’s worse than NYC, where you would need to go well into Queens or Brooklyn to buy an $800k house– houses in the gentrified parts of Brooklyn cost more per square foot than in most of SF.

  52. Dan – as a former New Yorker, I have to disagree with you on that one. Check out craigslist – you can get new construction in areas like LIC or Williamsburg for around $600/sq. ft. One bedrooms for under $500K. These neighborhoods are 1-2 subway stops from Manhattan and very safe. And your money goes a lot farther if you are willing to commute out to the island or joisey.
    To get the same bang for your buck here, you’d need to BART it all the way out to Concord. But then again, if you’re going to do that, you might as well pack it up and move to Arizona, where you get the same scenery and weather as Concord for half the price.

  53. First time home buyers with 0% down…. this is exactly why this market is due for a correction. At a certain point, prices will become so high that there will not be any buyers with the income or means to buy. The no. of first time home buyers will dwindle. It is a pyramid scheme waiting to collapse.

  54. New York is a different beast altogether and sure, you could live in “Joisey” or out on the “Oy-land” but the commutes can be hell, too. As well, the weather SUCKS. I should know, I was born in New York, grew up in CT and don’t miss it at all although nothing’s more fun than a weekend in the Big Apple. As for weather? Please, I’d take a Concord summer over a Phoenix summer in a heartbeat, besides, aren’t recent homebuyers in Phoenix, along with places like Vegas and Broward-Dade (Fla.) watching their home values dwindle?
    Bottom line, until SF crubles into the Pacific it will remain a huge draw…50 (?) square miles at the tip of a peninsula and the most scenic city in America (sorry, Seattle). People will always want to live here, that is, of course, unless Chris Daly or Tom Ammiano ever become mayor. Then I’d consider packing up and leaving.

  55. deshard – agreed with you on all points. One of the main reasons I left NYC was the weather. And you forgot to mention how much cleaner, greener, and quieter SF is. SF will always be a draw and will always be pricey. But it’s a question of relative value.
    Living here should cost a little more than Boston, Chicago, or Philly, IMO. Maybe 10-20% more. But not 100% more.
    And for the record, homeowners all over the country, including most places here in California, are watching their home values dwindle these days.

  56. “you can get new construction in areas like LIC or Williamsburg for around $600/sq. ft. One bedrooms for under $500K. To get the same bang for your buck here, you’d need to BART it all the way out to Concord.”
    Sorry– new construction for condos in Williamsburg (Brooklyn) now can cost close to $1000 per square foot. For example:
    There are cheaper condos in Brooklyn, but there also are cheaper condos in SF. For example:

  57. Socketsite is too fun, happy Friday afternoon everyone…What could be better than bloging away the end of the week about the state of the SF/NY RE marktet.
    Thanks for doing the leg work Dan. Cheapest place I saw on your list was $734 per sq foot. And many were closer to the $1,000 per sqft. That is not too cheap in my book. Not saying prices are not coming down, but lets not let the facts get in the way of a good blog fest. Anon, post some $500 spft 1 bedrooms for us please. Dan did not find any…

  58. Dude, there were no $500k 1 bedrooms in Williamsburg in those listings– though there were some studios in the $400s in outer Billyburg, and some condos in less desirable areas. Most of those NY Carigslist listings are bait and switch– if you read the ads carefully, not just the headline.
    Anyway, I did link to a 450k 1 bedroom on Mission St. below Bernal Heights, and the brand new Mission and 15th St condos–just a block from BART–are in the 500,000’s to low 600,000’s for a 2 bedroom– so there are cheaper places in SF, too.

  59. Dan – Yes, there are cheaper places in SF as well. Plus you haven’t even pointed out the biggest flaw in my argument yet: That I’m posting properties in the BK while all SF property is technically “in the city.” So to go apples-to-apples we’d need to look at Manhattan, which is definitely over $1,100/sq. ft. Although I maintain that Brooklyn/Queens are better comparisons for certain areas of our city, including the Mission, Sunset, and Parkside areas.
    But the point many of us are trying to make is that San Francisco home prices have become detached from economic reality. We have a fraction of New York’s population and economy and over twice the land area. We should not be approaching their prices. We should be paying a little more than the Bostonians.

  60. Dude, you can say what “we” “should” be paying all you want but price law is what it is, and the prices are driven by actual buyers paying them. You may be correct that SF prices are unsustainable but to put normatives on what is driven by price law is not reasonable. Boston is a different market due to weather alone (not to mention Boston drivers, political/municipal corruption, I’ll stop now…:-) and has certainly come down in the last year plus. No argument that SF is pricier and may not stay as high as it is, but just as some above compared NYC to SF and found the differences, there are as many to Boston. And the prices here are driven by a lot of wealth in the area (or coming into the area from more expensive places like Hong Kong) willing to pay what is paid.

  61. “Anyway, I did link to a 450k 1 bedroom on Mission St. below Bernal Heights, and the brand new Mission and 15th St condos–just a block from BART–are in the 500,000’s to low 600,000’s for a 2 bedroom– so there are cheaper places in SF, too.”
    500,000 – 600,000 for living in a war zone. Not exactly cheap. I used to live in Bernal Heights. Moved away because of the crime.

  62. Realtor here. January is already looking pretty good. Newer sales data is showing homes in the $1,500,000 and lower range in a variety of neighborhoods going into contract within 15 days of listing. This is for early January too. It usually picks up quite a bit in February through May. But that said, pricing is VERY important in this market. Buyers are not willing to just offer asking or well above for any place. It has to be clean, show well, have no glaring problems, and priced appropriately (not cheap, and not based on peak prices from summer of 05).
    My prediction…entry level to $1,000,000 plus single family will see about 5%-7% appreciation. More expensive houses will have less appreciation. Condos in traditional neighborhoods such as Noe/Castro/Duboce, or Fillmore, North Beach, Haight will hold out pretty well with some appreciaton. SOMA and South Beach will be relatively flat because of current and planned new construction.
    Those smart shoppers or with smart agents who are willing to negotiate on less than perfect properties will find deals. I just bought a condo in December for 11% less than the appraisal..but smelled like a cat and had not been painted in a decade.

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