“Median California home prices are still creeping up, and the state’s strong employment trends should support the real estate market. But Goldman [Sachs] is worried that surging prices in the state in recent years weren’t driven by traditional factors such as strong employment and income growth. Instead, the bank reckons an increase in ARM mortgages offered to borrowers who were already stretching to buy high-priced homes fueled the boom.” [Editor’s Note: Inconceivable!]
∙ California home prices to weaken further: Goldman says [MarketWatch]
Many of us have been preaching the “disconnected from fundamentals” sermon for a long time now. I personally have been saying it for over 2 years and have been scoffed at by many of the anonymous millionaires that seem to comment here. So not every Californian/San Franciscan makes $500K/year after all?
The median may be creeping up but the Case Shiller Index is alread creeping DOWN, indicating home prices are already falling (and according the futures traders at the Chicago Mercantile Exchange it is going to keep falling)
http://www.paperdinero.com/CSI.aspx?id=SFXR&start=1987&exp=5/25/2007|8/27/2007|11/26/2007|2/25/2008&yoy=1
This is really scary stuff and not a lot of people are absorbing the facts. They are basically saying that some smart people in overpriced housing are going to potentially get burned. This would seem to indicate that the number of homes being listed should increase as these folks start to realize that the end is near; compounded by the fact that other smarter investors will ‘cash out’ while the market is still near record highs.
Inventory levels are going to be a key stat to watch. Fact is though, San Francisco properties for the most part still seem to be selling well???
Dude, I agree with you but this market seems to be slow to react.
“Disconnected from fundamentals”
It is me or has the bay area housing market just gone up even higher since a few months ago? I’m having a hard time finding anything decent under $700K.
Richard – It is not just you, the market has indeed ‘creeped higher’ from the holidays at the end of 2006. Did you read the chronicle article about the southern part of SF heating up?
Also, in District 7 (northern part of SF), the market is definitely moving higher. For example: 3321 Octavia St. closed last week for $3.7 million, but really $3.8 million since there was no buyers commission paid. Asking was 3.495 and it sold in 2 weeks! 2752 Filbert sold within 9 days for 100K over asking to $3.49 mil. Someone is buying these houses, which were in the mid 2 millions just a year or so ago.
http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2007/04/22/REGMTPCPNE1.DTL&hw=zephyr&sn=001&sc=1000
Prime
Genius. Just … pure … genius.
The subprime mortgage problem is happening now because the time periods for sub prime loan resets are shorter than the change periods for alt-a loans. Because SF has more alt-A than sub prime, we haven’t been hit yet. Our time will come.
It is interesting to see the desperation so soon: realtors desperately trying to hold onto comps. The property prime keeps boasting about up there is a great example. A seller was ONLY willing to pay 3.7 for the property, but the agent says comps are 3.8 because she shaved her commission by 100K to make the deal. Wrong. The comps are 3.7, just what the buyer was willing to pay. But it is interesting to see the desperation come out in the attempt at propping up the comps.
“which were in the mid 2 millions just a year or so ago.”
What a joke. 3321 Octavia sold for $1.7M almost SEVEN years ago while 2752 Filbert last sold for $1.45M almost EIGHT years ago. Great gains indeed but with the majority of it coming from 2000 to 2005 these properties were likely in the mid $3M range last year.
“closed last week for $3.7 million, but really $3.8 million since there was no buyers commission paid.”
I’m stunned by the stupidity of that statement and reasoning.
Median CA prices are still creeping higher?
not in SF …
’06 ’07
San Francisco $769,500 $753,000 -2.1%
http://dqnews.com/RRBay0407.shtm
Don’t borrow trouble, San Francisco!
Looks like the powers that be are concerned us poor folk have been overstating our incomes for a peek at the american dream.
http://www.freddiemac.com/news/archives/predatory_lending/2007/20070420_dbt_sf.html
Bankerboy – I can’t tell if you are being facetious or not. Are you saying that selling for $2million more for each house below after 7 and 8 years is bad? That’s like 115% in that time period over the total housing price. Assume the seller put down 20%, that’s a 575% return cash on cash. Don’t know about you, but I’ll take that return, especially on such a big number, and especially since the stock market was crappy from 2001-2003.
Have you ever sold a property? When you sell, you pay 2.5% to the selling agent, and 2.5% to the buying agent who brings the buyer. 2.5% on 3.7 million is about $93,000. The selling agent was also to find a buyer, and ‘saved’ the buyer 100k. The previous record for a SFH Marina row house was $2.75 million about 16 months ago. This blows it out of the water.
Prime
You wrote:
What a joke. 3321 Octavia sold for $1.7M almost SEVEN years ago while 2752 Filbert last sold for $1.45M almost EIGHT years ago. Great gains indeed but with the majority of it coming from 2000 to 2005 these properties were likely in the mid $3M range last year.
“closed last week for $3.7 million, but really $3.8 million since there was no buyers commission paid.”
I’m stunned by the stupidity of that statement and reasoning.
Prime, the house sold for 3.7. No economics or other factoring will ever justify the property selling for 3.8. It doesn’t make any sense.
”Are you saying that selling for $2million more for each house below after 7 and 8 years is bad?”
Not whatsoever. I’m pointing out that your statement that these houses were in the mid $2M range “just a year or so ago” is complete BS along with the rest of your calculations.