CFAH

A Few Reduced Homes
As a number of readers have noted, the list price on 1307 Bay Street #3 in the Marina has been reduced for a fourth time (now listed at $1,069,000). Why’s that relevant? Well, you might want to look at the comps.
A new addition to the listing for 2021 Webster: “seller relocating.” And another new addition (or perhaps subtraction): a “drastic” price reduction of $499,200 (14.3%). Yes, even with the reduction it’s still listed at $700,800 over what the seller paid eight months ago. And no, it still doesn’t appear that any major work was done on the house during that time.
And while it’s still $495,000 over what one reader would consider a “grand slam” price (for the sellers), the price on 3383 Clay Street has been reduced another $500,000 (now listed at $3,495,000). Oh, and the asking price for the bones of 646 Balboa has been reduced $346,000 (26.7%). It’s now listed at $949,000.
And while we haven’t actually mentioned 2502 Leavenworth before, we can’t help but note last month’s “Dramatic price reduction!” of $955,000 (14.8%). We probably would have gone with a reduction of $1,000,001 and “Over a million off!”, but hey, that’s just us.
Damn Those Direct Comps In The Marina (1307 Bay Street) [SocketSite]
As Far As We Can Tell, Not Much Has Changed (Other Than The Price) [SocketSite]
Three Good Sized Homes, Neighborhoods, And (Mostly) Reductions [SocketSite]
That’s A Lot Of Lot Value (646 Balboa) [SocketSite]
∙ Listing: 2502 Leavenworth (5/4.5) – $5,495,000 [MLS]

Comments from Plugged-In Readers

  1. Posted by missionite

    With sellers dropping prices on a moments notice a half million here, a million there, you really have to wonder what that’s going to do to buyer confidence overall… Who wants to buy a house and have the thought lingering in your head that if you just waited another week you might have saved yourself a million dollars?
    I know this is a popular call to make, but I’ve never made it before, and seeing a string of these in the last remaining region that was supposed to be free from this kind of activity suggests to me that we perhaps might have finally arrived at the point where the housing downturn is finally hitting San Francisco in earnest.
    As a potential buyer, I’m getting out my seat cushions, cause I’m not going to be getting off my ass for at least six months to a year. This needs to play out, and I would advise any other potential buyers out there that they should be doing the same.

  2. Posted by Dude

    @ missionite: Amen.

  3. Posted by Tipster

    That’s odd about 1307 Bay Street. It’s priced down over 10% off the comps from last year, which is where most condos in district 7 have been selling. It should have sold at a little above that list price.

  4. Posted by fluj

    Missionite, I could just as easily post four properties that went into the stratosphere.
    Three of these examples are not apt, the exceptions being Bay, which surprises me, and Leavenworth, which I don’t know anything about. The other three merely illustrate that greed is not a very good marketing tool.
    1. Gee, Clay is now down to only 3.5M, after trying to get 4.4M? 4.4M, for 3100 feet? wow. They’re still waaaay over 1000 a foot.
    2. Webster now down to only 3M after trying to get 3.5M, when it sold THIS YEAR for 2.3M?
    And 3. A total fixer out on Balboa for 950K? (That’s what it should have been at in the first place, it would have garnered overbids.)
    All of those sellers were asking wildly speculative amounts. They display greed, not market trends. If they were priced right, they’d all fly. Regardless, you are wise to stay on the seat cushions.

  5. Posted by Sleepiguy

    I’m not completely trying to justify the price drops here, but some of these homes were and are significantly overpriced. No one is going to buy a home in this market when the comps don’t justify the listing price. That said, there are a couple of dozen homes priced over 2 million that have gone into contract during the last month without major price reductions. But that doesn’t suggest that the market is surging either. Reductions are real and happening in various areas.

  6. Posted by fluj

    Leavenworth too. Wow. They bought it for 1.5M in ’03, dropped 800K into it, and then they wanted 7M. Now they’re down to a measly 5.5M. This indicates wild speculation, nothing more.

  7. Posted by Sleepiguy

    The buyers of Leavenworth must have spent more than 800k on the remodel… But the location is a little iffy. It’s right off of Bay and there’s a weird (and slightly scary) cement retaining wall right in front of it.

  8. Posted by fluj

    I’m right at the tail end of viewing an 800K blowout from cottage to 900 ft cottage to 3300 foot home, with all top notch finishes. This one started at 1752 sq ft. I think I’m ballpark.

  9. Posted by Michael

    It never ceases to amaze me that anytime a home doesn’t sell it just wasn’t priced right. What brilliant insight. Strange that just a couple of years ago everything was priced right and selling for over asking. Have realtors become that much worse at pricing? And if so, why?

  10. Posted by fluj

    That’s illogical. How can you put grossly mispriced properties on Realtors? Think about it. Realtors want to get paid, bruh. If it don’t sell, no m.o.n.e.y.
    Look at Leavenworth. Its Realtor, who shall remain nameless, is a star. She was a professor at both Berkeley and Columbia Business and holds an MA and a Ph D in psychology from Stanford. She is no dummy, I assure you. She likely had to struggle to get them to drop the pice, which they finally did.
    God forbid there is such a thing as a greedy seller, or buyer. hahahahah. too much

  11. Posted by Spencer

    “As a potential buyer, I’m getting out my seat cushions, cause I’m not going to be getting off my ass for at least six months to a year. This needs to play out, and I would advise any other potential buyers out there that they should be doing the same.”
    I am investing in nicer seat cusion and will let this ride out 12-18 months. I ahve seen a lot of reductions on top of those posted here, and all my friend who bought in the past 3 years are starting to mess their pants. Those who bought prior to 04-05 are content to let 20% deflate since they have already made a ton and the prices will eventually come back up. But the 04-07 buyers are scared and we should see plenty more price depreciation.

  12. Posted by Sleepiguy

    You can absolutely overprice a home. I’ve been following the sales in my neighborhood very closely since 2001… And there have been many, many homes that lingered on the market and were ultimately withdrawn because the sellers refused to lower prices. Not every home sold in 94123 way over asking back in 05. It just didn’t happen. I’m familiar with several homes that went through multiple realtors and some significant reductions in Pac Heights and Cow Hollow in 05 and 06.

  13. Posted by Amen Corner

    “That’s illogical. How can you put grossly mispriced properties on Realtors? Think about it. Realtors want to get paid, bruh. If it don’t sell, no m.o.n.e.y”
    Here’s a concept:- perhaps realtors(tm), especially supposed ‘star’ realtors(tm), should refuse to take on listings they believe to be grossly overpriced?

  14. Posted by Trip

    I’m with Spencer. It’s not like we haven’t seen this all before. I had a lot of friends buy places in 1989-90 when we were right out of college because “prices were only going up.” They were stuck for many years regretting it and unable to move while other friends bought much nicer places over the next few years for 10-20% less. The only difference this time is the run-up in prices was even further disconnected from underlying fundamentals (incomes, long-term trends, etc.) Are prices going to fall in SF a lot or even at all over the next couple of years? Who knows, but there is certainly a considerable likelihood they may. And one bet I would certainly take is that prices aren’t going up any time soon so there is no harm in waiting.

  15. Posted by AJ

    “As a potential buyer, I’m getting out my seat cushions, cause I’m not going to be getting off my ass for at least six months to a year. This needs to play out, and I would advise any other potential buyers out there that they should be doing the same.”
    I am investing in nicer seat cusion and will let this ride out 12-18 months. I ahve seen a lot of reductions on top of those posted here, and all my friend who bought in the past 3 years are starting to mess their pants. Those who bought prior to 04-05 are content to let 20% deflate since they have already made a ton and the prices will eventually come back up. But the 04-07 buyers are scared and we should see plenty more price depreciation.”
    I wouldn’t plan on warming that cushion for too long if these properties are now priced correctly and go under contract. The biggest issue in my mind with the houses in District 7 is that sellers got greedy. The house on Clay, in particular, looks quite reasonable now.

  16. Posted by Craig

    If 3 things happen:
    1. The Fed continues to lower rates;
    2. Jumbo rates continue to trickle back in line with non-jumbo rates; and
    3. Inflation rears it’s head.
    (All likely IMO)
    The bears and those waiting on cushions (one and the same) may be sorry they didn’t buy cushions with roofs and walls.

  17. Posted by fluj

    Of course Realtors can misprice a property. I’m not saying that. I ventured that when it is way the hell off, it’s down to the seller, not the realtor. That’s the market. Realtors don’t get paid for listing. They get paid for selling.
    Realtors screw up too, tho, of course. And it’s especially tough to put a fine point on the astronomically high properties, innit? I just took exception to the “Have realtors become that much worse at pricing” comment. Two years ago stuff sat too. Believe it or not. That was the one mistake that could have been made, overpricing.

  18. Posted by view lover

    That’s illogical. How can you put grossly mispriced properties on Realtors? Think about it. Realtors want to get paid, bruh. If it don’t sell, no m.o.n.e.y.
    Look at Leavenworth. Its Realtor, who shall remain nameless, is a star. She was a professor at both Berkeley and Columbia Business and holds an MA and a Ph D in psychology from Stanford. She is no dummy, I assure you. She likely had to struggle to get them to drop the pice, which they finally did.
    God forbid there is such a thing as a greedy seller, or buyer. hahahahah. too much
    Yeah, Realtors want to get paid…as much as possible! Why did the listing go for so much in the first place? To test the market and maybe get a few bites, but I’m sure the realtor fought the price but went along with it kicking and screaming just to get the listing. Given the Star status I’m sure that may play for credibility on the pricing among other realtors.
    Give me a break.
    While shopping for a second home in 2005 I saw many properties. One example, but not isolated was a property in West Portal along the muni line. It was listed for $850 or so. My realtor asked the listing agent what it may go for, the response was 1.1. Just in case no one has a problem with this, basically, the price is now at least $1.1 and anyone that puts an offer on the table will be advised by their realtor to offer at least 1.1, but more if you really want it. This was plain greedy, unethical manipulation. The house sold way over asking, big surprise.
    Now the poor idiot who listened to the “Professional” is completely fu****. But at least the listing agent was not a “star”, or they probably would have ended up paying even more.
    Not that I’m against all realtors, just can’t stand the idea that they are completely nuetral conduits to the mess the market finds itself in now.

  19. Posted by Michael

    It feels like we’ve had this discussion before. It’s not the change in rates that has had the biggest impact on San Francisco, it’s the change in lending standards. And IMHO those aren’t easing anytime soon.
    And IMHO overpricing a property is much less common than UNDERpricing a property. As fluj said, a realtor only gets paid when a property sells. No conflict of interest there…

  20. Posted by bird_man

    “And 3. A total fixer out on Balboa for 950K? (That’s what it should have been at in the first place, it would have garnered overbids.)”
    Wow you think people would overbid on this place?
    I drive by it everyday and will drop dead right there in my car if this starts getting overbid at 950. A windy day will blow this place over.

  21. Posted by Dude

    Craig – How does a lower Fed Funds rate make real estate values rise again after a huge speculative boom, especially if other fundamentals remain unchanged? The Fed lowered rates by 50 bps last month and, since then, the national real estate picture has only gotten worse, not better. I would agree with you if the only thing holding the market back was high rates. But rates are still relatively low. The disappearance of toxic loans, as Michael points out, is what has slowed things.
    More importantly, inflation will cause the Fed to keep rates flat or raise them, not lower them. And when that happens, spreads widen, not narrow, all else equal. So unlikely you see 2 and 3 happen together.

  22. Posted by fluj

    There are good realtors and there are bad realtors, of course. No good realtor worth his or her salt will be off by 20% very often, if ever.

  23. Posted by SteveN

    “Of course Realtors can misprice a property. I’m not saying that. I ventured that when it is way the hell off, it’s down to the seller, not the realtor. That’s the market. Realtors don’t get paid for listing. They get paid for selling.”
    So who’s to blame for missing the mark on the Droubi place by at least a million?
    https://socketsite.com/archives/2007/09/the_irony_continues_another_400000_off_the_old_droubi_h.html
    Thought they were the experts on Noe.
    [Editor’s Note: Not quite a million (it’s now listed at $900,000 under) but it is almost 26% off of the original ask.]

  24. Posted by AJ

    Never underestimate the power of GREED! It breeds denial and lack of objectivity.

  25. Posted by anon

    Greed… isn’t that the entire basis for this bubble? How many people bought in the last few years without thinking and hoping for stratospheric appreciation? How many bought real estate, because they wanted a home? I was just at an open house this weekend. There was a lot of foot traffic, but looks like most were just neighbors. I could hear one fellow cackling about how much his house has appreciated and if this house goes for $1.4M, can’t imagine what his home would sell for. Greed …plain and simple.

  26. Posted by gh

    I love that the Leavenworth realtors education is detailed here…PhD from Stanford. Great! “She’s no dummy”, except that she’s making $1 million reductions to the list price of her client’s home. Oops! But they didn’t cover that in Psych 101? And that isn’t a good location, unless you want close proxomity to the vacant Tower Records for your Halloween costume. Bay St. blows!

  27. Posted by rg

    I guess I’m really confused. Why should ANY of these homes be asking MORE than the house sold for in the last 3-5 years??? We’ve already established that SF real estate was overpriced since, possibly, 2001? – so who would pay more than it was worth back then? Forgive me if I’m forgetting some important “fundamental”, but as I see it, rates are back up to those levels, incomes have not risen 3-4X (mine certainly hasn’t), and no one has discovered a new rich mineral in SF’s soil that makes it worth more, have they? In fact, San Francisco has not become any more desirable than it was then (I would argue the opposite). We lost all the .com jobs and biotech doesn’t seem to have prospered as much as we were told it would. City’s gotten dirtier, homeless is far worse, mayor and supervisors aren’t any better (opposite!), Muni has only expanded the measly T line and still doesn’t run well, no better architecture (but the deYoung), weather is the same, Napa and Tahoe still the same distance away I think… Just don’t understand it at all.
    Why would I want to buy a place that’s probably smaller than places my friend’s bought 8 years ago and pay 3x as much for it? So that I can invite them over and feel awful about my finances every time I look at them? I would strongly argue that they didn’t “get in at the right time.” They simply got in when real estate prices were in line with incomes.
    As for if realtors can overprice a house? Of course they can. They are just as greedy at the sellers. Appraisers have clearly not been doing their jobs for years and, therefore, sellers are just left out there with a “skies the limit!” attitude. Show the Balboa property to ANY realtor outside of California, and they would tell you to unload it for $25k before it causes you a lawsuit when it falls down on a passerby. And a realtor with a PhD in psychology? Just sounds to me like someone trained to get into a buyer’s head and convince them that they “NEED” to spend $1 million on a piece of sh*t!

  28. Posted by gh

    No, listen to the brokers and agents…if they say all the good properties are selling at overasking and that this market is only temporary trough through 2007, it must be true.
    Yeah.

  29. Posted by anon

    “As a potential buyer, I’m getting out my seat cushions, cause I’m not going to be getting off my ass for at least six months to a year. This needs to play out, and I would advise any other potential buyers out there that they should be doing the same.”
    Make that 3-5 years and enjoy the show. Just so much fun to watch these days…….

  30. Posted by Mark D.

    646 Balboa is listed on the MLS under both “Single-Family Homes” and “Lots & Acreage.”

  31. Posted by fluj

    Such a bunch of anti-realtor armchair baloney slingers on here. LOL.
    Any one anecdote or two makes your lame cases. Again, none of your are in the mix, so shut it. Too much.
    Only realtors are greedy, huh?
    hahahahhaha. get a clew

  32. Posted by fluj

    I love how everybody on here is an expert at what goes on behind closed doors. sheesh.
    Oh, but what about the Droubi house! As if that has anything to do with anything.
    But the Droubis are realtors! Greedy realtors! A = B, fluj!!!
    Gosh.

  33. Posted by anon

    rg is raising the key point: why are so many people willing to pay so much to live in SF? I guess if we project the current trends (and if cheerleaders like fluj are proven right), by say, 2017, a typical home will cost about $4M in SF, $6M in NYC, $500K in the rest of CA, $200K in the rest of the US except in Michigan where homes will be free to anyone willing to live there. 80% of SF homeowners will work in private equity or hedge funds or be 1st generation Google employees. The remaining 20% will work for the SF government and its $20B budget.

  34. Posted by badlydrawnbear

    lets look at the news about housing in Northern Cal from the last few days.
    “Northern California is home to one over the highest foreclosure rates in the entire country.”
    http://cbs13.com/topstories/local_story_281220929.html
    ‘You can’t give these houses away,’
    http://cbs5.com/local/local_story_282022014.html
    “Roughly 10,000 homes in the Sacramento region are in some stage of foreclosure.”
    http://www.news10.net/display_story.aspx?storyid=33706
    “For the fourth consecutive quarter, the amount of money Tracy collects in taxes has dropped, this time by nearly 6 percent, the largest fall since revenue began declining a year ago.”
    http://www.insidebayarea.com/trivalleyherald/localnews/ci_7125468
    And if you are thinking, “But that is not ‘Prime’ Bay Area” lets take a look at some of the news in SF proper from our favorite source SocketSite! (and one property shark map).
    frustrated sellers dropping asking prices https://socketsite.com/archives/realrecentreductions/
    new construction incentives
    https://socketsite.com/archives/2007/10/new_incentives_and_effective_reductions_at_733_front_st.html
    developers canceling projects
    https://socketsite.com/archives/2007/10/the_californian_on_rincon_hill_no_longer_coming_soon_it.html
    evidence of rising foreclosures and a slowing market
    http://propertyshark.com/mason/Maps/?map=ca_sanfrancisco&x=0.5&y=0.4995833333333333&zoom=0&basemap=bubble2&tab=themes
    Anyone sense a trend?

  35. Posted by fluj

    When did I ever say a single word about continuing appreciation?
    I didn’t. I said it is not really going down. And I’ve said “yet,” oh, I don’t know 15 times?
    Hey look. Disagree with me all you want. That’s cool.
    Just stop putting words in my mouth. There are about six posters on here who keep doing that. Talk about annoying.

  36. Posted by fluj

    badlydrawnbear,
    the only trend I see is you recycling stuff. In order, you go: Northern California, Sac, Tracy, then socketsite (today’s thread, rife with still overpiced properties) socketsite (about incentives — as if many new high rises aren’t doing great) socketsite (about some developers canceling, big deal) and property shark (foreclosures are barely a blip on the radar screen in SF).
    Do you look up answers to things your children ask you about on wikipedia?
    Since when is citing a blog evidence?

  37. Posted by akrosdabay

    fluj,
    What most people are saying and you are failing to grasp is that the entire market is overpriced, no?
    For some reason, you seem to claim the houses you think are priced right and are selling from 50-70% more than what they were worth just 3-5 years ago are some how priced correctly.
    Care to explain what changed in SF to made prices or “values” shoot up like that?

  38. Posted by VultureBoy

    The sky is falling!
    The sky is falling!
    Head for the central valley! They can’t *give* those homes away (and by definition, give away means a starting bid of $464K apparently for a house in questionable condition, but mostly new, in an abandoned development project)…
    I for one can’t *wait* ’til they start “giving away” beachfront property! I’m going to get like 10 of those!

  39. Posted by badlydrawnbear

    Well, fluj, if you don’t believe SocketSite knows anything about the SF market (or CBS, ABC, and the local paper) then what are you doing here?

  40. Posted by smarty

    fluj said San Francisco is the greatest real estate market EVER and housing prices will skyrocket by at least 400% in the next 48 hours – so better buy quick!
    Honestly.. I heard him say it… I’m not just putting words in his mouth.

  41. Posted by amused

    badlydrawnbear –
    I’m looking for a bunch of articles on the explosive increase in rents in Northern Cal. Help a brother out with a batch of links?

  42. Posted by Dude

    VultureBoy – You’re the only one who said the sky was falling. We’re saying a long-overdue correction has finally started.
    Regarding the central valley, BRAND NEW homes sold in the $600K range months ago are being auctioned by homebuilders with starting bids in the $300K range now. And some still aren’t selling.
    From the Mercury News down in San Jose:
    “Jackie Flores, who moved to Paseo West with her husband and two small boys in May 2006, hates to think what the auction will do to the value of her home. ‘We bought it for – I don’t even want to say,’ she said. ‘$621,000 – ugh – it makes me sick just saying that number.’”
    “The minimum bid on the empty house next door is $355,000. And, it’s bigger than hers at 3,310 square feet and loaded with upgrades and a finished back yard.”

  43. Posted by fluj

    When did I say it wasn’t very expensive? When did I say it wasn’t going to correct?
    I said neither.
    What I said, and what I continue to say, is that it isn’t going down yet. Used condos, sure. Bullet ridden neighborhoods, sure. Not SFRs in nice areas.
    Everybody is mad at me about that. Go figure.
    As for why prices went up so far, I have a theory. SF used to be the beautiful city by the Bay with no freaking jobs. It has increasingly become, first with dot com, now with tech, Silicon Valley’s bedroom community.
    How many people do you meet casually who are in software sales? Seriously. Seems like every person I wind up talking to is in software sales these days. It didn’t used to be like that.
    Just my theory. One component of it, anyway. Of course interest rates factor in big time as well.

  44. Posted by fluj

    Again, putting words in my mouth aint cool.
    400 %. hah. Find it.
    As for socketsite, it’s great. But it’s a blog. You’re on the blog, citing the same blog?
    Ohhhhkaaaaay.

  45. Posted by view lover

    I have a 2 bed 2 bath, 1160 sq. ft. top floor condo in 11 story high-rise with a tenant. My tenant was interested in buying it and had it appraised. It came in 8% less than what I paid for it in early 2004 based on comps. Just hoping that my tenant stays there long enough to see some appreciation. This was originally sold as penthouse view condo, new construction, etc., and yes, it certainly seemed worth the money in 2004. My realtor initially said there has to be a mistake when the appraisal came in this summer (before Countrywide had problems), now it’s “yeah, the market is acting wierd”.
    If anyone can wait it out, either buying or selling, they should.

  46. Posted by badlydrawnbear

    vulture boy you may want to head down to Santa Cruz and Monterey then …

    “Foreclosure statistics show no letup as a steady stream of homeowners are missing mortgage payments and receiving default notices. According to the Santa Cruz Record, default notices have gone out this year to 664 homeowners in Santa Cruz County, 437 in San Benito County and 1,939 homeowners in Monterey County.”
    “A total of 884 homes have been sold at foreclosure sales in the tri-county area, with the bulk of them in Monterey County.”

    http://www.santacruzsentinel.com/archive/2007/October/10/local/stories/02local.htm

  47. Posted by eddy

    The original listings were overpriced but there are other places on the market that are more reasonably priced and desirable that are big-time stale. That said, there are lots of buyers out there so don’t expect 10% drops in price. It’s not going to happen in SF (short of a natural disaster, in which case all bets are off). Prices will be mostly stable for the next few years so if you cannot hold on to a property for 5+ years than you might not be able to cover your expenses when it comes time to move.
    E.

  48. Posted by akrosdabay

    So lax lending standards had no play in the SF market?
    According to you it is all explained by the IT jobs and interest rates.
    In fact after the dot com burst IT job share have declined and growth rate had become negative and slowly recovering from 2004-2006.
    http://www.frbsf.org/publications/economics/letter/2007/el2007-23.html
    So there was no dramatic increase in IT jobs between 2000-2006. In fact the dollar values share of salary and wages from IT is just 20% of the total Bay Area income. So 20% of the income from 9% of the jobs in the Bay Area (not just SF proper) doesn’t explain the ridiculous price increase all across the Bay Area.
    Do you have any real data or just anecdotal evidence?

  49. Posted by badlydrawnbear

    “don’t expect 10% drops in price”

    why not? the CSI for Bay Area Drop 12.45% from 1990-1994, factor in inflation and you have an even bigger loss before prices finally rebounded started a sustained climb starting in 1996. If you bought at the peak in 1990 you didn’t see ANY appreciation until 1997
    http://www.papereconomy.com/CSI.aspx?id=SFXR&start=1990&stop=1997&yoy=0
    The price runups of this latest up cucle are substantially larger then what we saw in the early 80’s bust and early 90’s bust.

  50. Posted by fluj

    Buddy, if I could explain this phenomenon best believe I wouldn’t be on here talking to the armchair baloney slinger massive.
    You asked me. I responded. If you are in IT, that’s cool. I did not mean to touch a nerve.
    Let me ask tho, where was that 20 % income in 1999? you have to admit there has been an infusion, a big one, in the last decade.
    In a nutshell, I think the answer is a composite of interest rates, lending, wealth, desirability, tech, and a nesting impulse caused by Bush & Co.’s ineptitude.

  51. Posted by akrosdabay

    Fluj,
    BTW, according to the San Francisco Center for Economic Development’s Labor Market Information department:
    http://www.calmis.ca.gov/htmlfile/county/sanfran.htm
    The number of jobs in SF has actually decreased after 2000 all the way to 2006 with 2000 being the highest employment number. 1999 had the lowest unemployment rate. Unemployment went from 3.1% in 1999 to 6.9% in 2002, 6.7 % in 2003. I 2006 it was 4.2% the level it was in 1997.
    “As for why prices went up so far, I have a theory. SF used to be the beautiful city by the Bay with no freaking jobs. It has increasingly become, first with dot com, now with tech, Silicon Valley’s bedroom community.”
    So that statement you made above is grossly incorrect and misinformed.
    So please explain why SF prices very climbing high when unemployment was actually increasing? Since you are in the “mix” surely you can explain why prices today are reasonable for todays economy in SF compared to when there were more jobs and prices were an order of magnitude less.

  52. Posted by fluj

    And let us not forget population increases and density increases. Doesn’t it stand to reason that land would acquire value as density rises?
    http://www.npg.org/states/ca.htm
    Last, specific to SF, we constantly elect anti-building eggheads.

  53. Posted by akrosdabay

    Fluj,
    “In a nutshell, I think the answer is a composite of interest rates, lending, wealth, desirability, tech, and a nesting impulse caused by Bush & Co.’s ineptitude.”
    Greed mixed with easy money is more like it. There really are no economic factors to explain this so please don’t try. This is a bubble by the very definition of it.

  54. Posted by fluj

    yeah, tech jobs left. then tech jobs started coming back.
    In 1995, when I moved here, there were no jobs.
    Let me ask you this, why does it have to be at an all time high to be a factor? So what if it isn’t 1999. It also isn’t 2002.

  55. Posted by Dude

    I posted this on the NAR thread but it got lost there – sorry for the double post. According to the California Association of Realtors, prices in the city are already down 2.5% from the peak, and expected to fall further in 2008. NorCal as a whole is down 16%. And this is year 1 of the downturn.
    http://www.car.org/index.php?id=Mzc4OTg=

  56. Posted by fluj

    Greed mixed with easy money does not explain what is happening right now, today, in SF. Money isn’t very easy right now.
    Oh, wait, I know. Hangover. No wait. Froth.
    You have your opinion, clearly. You are a bubblist.
    Talk to me in a year.

  57. Posted by fluj

    I believe it. But where are the prices down tho? Nowhere historically desirable. And even historically undesirable areas are now desirable — Glen Park, Potrero, and Bernal.
    No, prices are down in the southeastern portions of the city, and in the south central part like Lakeview. Go get you one. Buying in Bayview near 3rd street will pay a terrific return in 10 years. I’m not kidding. The city is moving that way.

  58. Posted by badlydrawnbear

    “don’t expect 10% drops in price”
    For what it’s worth, the futures traders at the Chicago Mercantile Echnage expect Bay Area prices to drop 24% in the next 5 years
    https://socketsite.com/archives/2007/09/theyre_betting_against_san_francisco_on_the_chicago_mer.html

  59. Posted by fluj

    One last word.
    Fence sitting is not a new phenomenon in real estate.
    toodles

  60. Posted by Unowho

    Promise?

  61. Posted by akrosdabay

    “yeah, tech jobs left. then tech jobs started coming back.
    In 1995, when I moved here, there were no jobs.
    Let me ask you this, why does it have to be at an all time high to be a factor? So what if it isn’t 1999. It also isn’t 2002.”
    I prefer to call my self a realist. But you seem to be quite ignorant. I posted real data, not blogs or anecdotes.
    Come to me when you can hold a cogent and educated argument.

  62. Posted by VultureBoy

    “vulture boy you may want to head down to Santa Cruz and Monterey then …”
    That’d be a great plan except that the beach regions only have a 5-7 month supply while the surplus is in Watsonville (a Stockton wannabe at best)…
    According to that article:
    Scotts Valley stands at 8.2 months, followed by Aptos at 6.7 months, Capitola at 6.5 months, and Santa Cruz at 5.9 months — all indicating price stability. In August the index in Scotts Valley, Soquel, Santa Cruz and Capitola was five months, closer to the four-month mark where prices are likely to rise.
    “Watsonville is getting hammered — high-end stuff on the beach is holding up really well,” said appraiser Bruce McGuire, calling it the fourth down cycle in his 32 years in business. “Every seven to 10 years, we go through a correction, then it starts up again”
    We’re going to be going back and forth about this for quite while methinks. As for Santa Cruz, the next few months are typically slow so unless something apocalyptic happens, we won’t know much more until Spring ’08.
    What would turn me into a doomsayer would be another dotcom crash. Barring that, in a region where bus drivers, firemen, and police officers are making $100K+, we’re in fantasy land.

  63. Posted by curmudgeon

    fluj gets beat up a lot for having opinions. Opinions that appear to be based on at least some involvement in the market, and some anecdotal, non-scientific evidence (I haven’t met that many software salesmen, but then again I know several mid-thirties google retirees, so my anecdotes might be different lol). Nonetheless, it is clear the fluj isn’t coming completely out of left (or even right) field.
    We all have opinions, people. This site is great at exposing them, and generating some constructive conversation. But this thread has had a lot of flaming going on, and I’m getting tired of it. Just thought I’d say so.

  64. Posted by fluj

    akrosdobay,
    Why so acerbic? No IT dude bar bash after work today? The ping pong table all booked up during recess?
    Jeez man. Ignorant? Real nice word choice there.
    Your point illustrated highs and lows. What part of tech is coming back, and living in the city, is incorrect? None of it.

  65. Posted by Unowho

    I know {s}he couldn’t do it.

  66. Posted by fluj

    well i was gonna till somebody called me a mean name

  67. Posted by eddy

    Regarding the 10% drop comment, I was specifically referring to San Francisco and not the “Bay Area”. You will see 10% drops in lots of places and perhaps more. Not to fuel this thread any further that it has already been torched by fluj and badlydrawnbear ; but if you can provide some evidence to state that there are not a ton of buyers on the sideline in the bay area looking to pounce on any softness in the market than I might think differently. But from what I can see, any listing that is fairly priced is flying off the market. Sure, lots of over priced places on the market but there is a lot of liquidity in the market right now in terms of both active lookers and value seekers. Lot’s of multiple bids on good properties priced well. Which means that there are multiple people bidding on San Francisco real estate.
    Lastly, please don’t confuse Bay Area stats and metrics with San Francisco proper. It’s like comparing Jersey City and Brooklyn to Manhattan; and even those are more realistic comparisons. I even commented on the CME thread:
    “This is very valuable and it’d be nice to actually have a link to the site as well as a tutorial on how to read the bid/ask as this is a very tangible data point on the market — even if the definition is broader than most people here are interested in (SF proper).”
    Who on this forum cares about Bay Area stats?
    E.

  68. Posted by akrosdabay

    Fluj,
    Had you responded in half way decent manner I wouldn’t have to be so brusque.
    Until you can present a well reasoned argument for your position not some he said, I heard or I saw anecdote I will consider you a fair bit ignorant. Since you went so far as to call me a bubblist.

  69. Posted by akrosdabay

    I presented a general trend of IT jobs in Sf bay area (broad) to illustrate that SF does not have as much tech positions as it has been claimed.
    I would go so far as to say there are more IT jobsin Santa Clara county than SF proper or county.
    So far I haven’t heard one reasonable explanation for the run up in prices and why that is justified economically.
    I think the psychological effect of the past few years still lingers and it will take time for reality to sink in especially in desireable areas like SF proper. House price growth rate has already slowed significantly this year.

  70. Posted by anon2

    “Who on this forum cares about Bay Area stats?”
    I do! I am thinking very seriously of selling and buying down on the Peninsula. If I can sell my 2bd condo for the cost of a nice small house down south ,(and it looks like I can, looked at one last weekend), I am outta here!

  71. Posted by fluj

    Do you deny that more tech money is buying real estate in the last few years than ever before? Perhaps it is because some areas of the South Bay have been hit harder, and SF is perceived as safer. Tech companies are busing employees these days for the sheer fact that so many live in SF. That is not anecdotal.

  72. Posted by fluj

    And why, again, do people cite a small slide from an apogee as evidence?
    House prices are down from an all time high. And somehow that equates to troubling? I honestly can’t grasp that. Not when most people want to live in their homes for long periods of time.

  73. Posted by pica1986

    I can’t speak to tech workers who have lucrative profit sharing deals, but from a salary perspective a lot of tech workers relying on a single income still can’t easily afford the current home prices in this city. Salaries tend to range from the low 100’s to around 175K for the mid to senior level developers, architects, PM’s, etc. With 20% down, that still gives you a 600K + mortgage for a mid-level property in the city. Assuming you have no other debt (credit card, student loans, auto, etc.), or people to support, it’s still a big stretch to buy at the current prices. While the tech industry is better off as far as the volume of jobs, wages aren’t increasing that much and the days of rampant IPO’s and equity buyouts of start-ups are long gone. There’s a few here and there, but it’s not a frequent event like in the 90’s – which is why huge valuations of sites like FaceBook make the headlines instead of just being another blurb in the financial section.
    The point I’m getting from reading many of these posts, is that the run up on prices wasn’t due to a real increase in the value of real estate assets. It’s because the previous controls on lending were abandoned and the unrestrained access to credit increased the number of buyers in the market and thus superficially inflating the demand. Now that the spigot is drying up due to the tightening of lending standards (requirements for equity and proof of income), the demand will decrease, thus returning the real estate assets closer to their actual value. So while population density does affect this, so does the financial ‘density’. An asset only has real monetary value if there’s a buyer that can actually pay you for it, right? I’m sure there are still wealthy people out there who can afford to buy without a large loan, but are there enough to support the market prices over the long term? This whole theory of some high-income class, be it tech workers or foreign investors, continuing to keep up inflated asset prices appears to be very unsound.

  74. Posted by akrosdabay

    I doubt there is more tech money in the Bay Area today than during the dot com boom. I even posted real data to that effect. IT jobs in this area ( total bay area) were 13.3% of total jobs in 1997, today they are a little over 9%.
    The starting salaries in the tech industry hasn’t gone up much. The money in options is far less because most established companies like Cisco, Sun, Intel and AMD still have far lower stock prices than thier peak during the dot com boom. Most of those companies have laid off a significant amount of their workforce since the dot com boom. I pretty sure most of them have less employees today than during the boom.
    Google and VM ware don’t have enough employees for them to make that much difference. Google has 13000+ employees world wide and only 2500 or so pre IPO. Considering google has been doubling their employee strength over the past couple of years adding 1500 or so employees a quater. So the recent hires over the last couple of years don’t have much in terms of options or money. Google also doesn’t pay that well because of the perks like free food. VMware has 3000+ employes worldwide. I doubt there are more than 6000 google employees in the bay area.
    All of these companies have their main campuses and headquarters outside SF proper. Given that traffic on 101 is no where close to what it was during the dot com boom. I would hazard a guess that most of the employees of these tech companies live out side SF proper.
    Tech industry incomes have kept in track with inflation not doubled or tripled like house prices.
    So where is all this new tech money coming from then?

  75. Posted by eddy

    QUOTE = “Who on this forum cares about Bay Area stats?”
    I do! I am thinking very seriously of selling and buying down on the Peninsula. If I can sell my 2bd condo for the cost of a nice small house down south ,(and it looks like I can, looked at one last weekend), I am outta here!
    ————–
    Fair enough 🙂

  76. Posted by emmett_brown

    This thread makes me nostalgic for usenet.

  77. Posted by Stanley

    Why is it that Socketsite never highlights all the examples of prices reaching record highs? If you want to see declines, you’ll see it. If you want to see new record prices you’ll see it. Socketsite is too one sided.
    What about 1330 Chestnut St sold for $1,050,000 mil last yr, and sold for $1.55 mil this yr? What about 3221 OCtavia St., or 1361 Francisco etc? There are so many examples.
    Let’s just try and keep things more balanced AT LEAST.

  78. Posted by Mole Man

    Mostly stagnant prices along with inflation have taken real prices down before.

  79. Posted by VultureBoy

    “The starting salaries in the tech industry hasn’t gone up much.”
    Really? My base salary is up 71% from 1997 when I arrived here. People who started at my company at my level are making within 2-3% of the same. So um, we’re just flukes?

  80. Posted by akrosdabay

    “Really? My base salary is up 71% from 1997 when I arrived here. People who started at my company at my level are making within 2-3% of the same. So um, we’re just flukes?”
    You do understand the word “starting” don’t you. So people starting at your company at your current level are making the same as you are today. Are you still at the level a college grad would come into your company? Obviously not! So your salary isn’t a starting salary.
    So your salary has gone up roughly 6% per year over the past 10 years. Sounds like what I said doesn’t it?
    Houses prices have gone up 200-500% in the mean time. Does that make sense?

  81. Posted by anon

    Having worked for a large Silicon Valley tech company in financial planning, I can tell you for a fact that annual salary increases have historically been in the 4% range.

  82. Posted by akrosdabay

    “What about 1330 Chestnut St sold for $1,050,000 mil last yr, and sold for $1.55 mil this yr? ”
    1332 Chestnut St exact same size sold in 1997 for $500,000.
    A 210% increase in 10 years! And a 51% increase in 1 year. What changed in that property? Location? How does such valuations make sense?

  83. Posted by FYI2

    The link FYI posted:
    “The Wikimedia Foundation, the force behind the popular online encyclopedia Wikipedia, is moving its headquarters to San Francisco this winter, further solidifying the Bay Area’s position as the epicenter of the Web 2.0 movement, which focuses on collaboration, community and user-generated content.”
    “The foundation, which began in June 2003 in St. Petersburg, employs six full-time employees.”

  84. Posted by akrosdabay

    Wow! Six full time employees! Man the house prices in SF are going to sky rocket with all that tech money pouring in.

  85. Posted by akrosdabay checker

    House prices don’t go up because salaries go up.
    House prices go up because demand increases faster than supply increases. Certainly part of the demand increase has been easy money from the past few years, but to try and say that house prices should have only increased by X amount because salaries only increased by X amount is ignoring economic reality. More people want to buy a place here than can. House prices rise until a happy medium is reached – which may be far higher than the salary-based prices would support – because there are OTHER ways to live in a place (like, I dunno, renting) than buying a house.
    Econ 101 dude.

  86. Posted by akrosdabay

    Please don’t ever take Econ 101 you will fail miserably.
    Price tracks Demand. Demand is fueled by easy money. Easy money didn’t come from salaries.
    I wonder why all the top economists are calling this a bubble.

  87. Posted by akrosdabay checker

    dude,
    I didn’t say this wasn’t a bubble. I said that using salaries as a guide to house prices is questionable at best. They are related, but not tied together.
    You are correct in your statement “Price tracks demand”, yet you keep making statements implying that “Price tracks salaries”

  88. Posted by pica1986

    “Really? My base salary is up 71% from 1997 when I arrived here. People who started at my company at my level are making within 2-3% of the same. So um, we’re just flukes?”
    No, I would hope that someone who has been working in the same industry for 10 years would increase their salary as they become more skilled an experienced. But the fact that you tout your personal increase in salary, which I’m assuming is a result of an increase in experience & skills resulting in promotion(s), as a comparison to starting salaries makes me question whether your salary increase is indeed a fluke.

  89. Posted by akrosdabay checker

    The only reason that in many places salaries do track prices is that in many places it is very EASY to add supply when demand increases – keeping prices more in line with salaries and keeping up with demand. EVERY place in the US where it is NOT easy to add supply when demand has increased see salaries supposedly “out of whack” with prices – see NYC, California, Boston, etc, etc.

  90. Posted by akrosdabay

    So a house that was 500K in 1997 became 1.55 mil in 2007 how again? Please explain it in terms of demand then?
    There are less jobs today than there were in 1997. The jobs there aren’t paying 200% percent more since then. The population has decreased 4.2% in SF from 2000 to 2006.
    http://quickfacts.census.gov/qfd/states/06/06075.html
    Where did the demand come from? Could it be people that who should not be able to afford a house here are able to buy homes with toxic loans?
    Why shouldn’t the prices crash here then?
    So far I haven’t heard a single real reason why the prices should even stay stagnant.

  91. Posted by akrosdabay checker

    “Where did the demand come from? Could it be people that who should not be able to afford a house here are able to buy homes with toxic loans?”
    Demand came from easy money and easy lending standards – I think that’s pretty well established. And again – I think there will be a correction, never said there wouldn’t be. I just take exception with the fact that you keep bringing salaries into the debate – they have very little to do with where prices will end up.
    Again – so you understand – I’m not saying prices won’t fall (and possibly far!). I’m simply saying that it will be because demand has decreased, not because prices need to come back into line with salaries for some reason you pull from the clouds.

  92. Posted by akrosdabay

    How are people paying their mortgages?
    “I’m simply saying that it will be because demand has decreased, not because prices need to come back into line with salaries for some reason you pull from the clouds.”
    Let me get this straight. Demand comes from having money to pay. Having money to pay came from easy loans. Loans over the past few years were out of whack with income because they NINJA loans. So logically houses tracked the money, which did not track incomes and house prices and income went out of whack.
    Historically someone would only lend you money if you demonstrated income enough to pay the loan. People would only qualify for loans that their incomes supported usually 3x-4x you income. So the money, which is the demand in this equation was always tied to income.
    We can all agree that the lax lending standards are gone or are going away. What will demand do then? Track income.
    Income and house prices are inexorably linked.
    What happened over the last 5-7 years was not real. So making up your world view of economics with such a narrow definition of demand is dangerous. So much so that people believed that demand (easy money) would always be there and overbought. You are making the same mistake millions have already made and are paying for ( no pun intended).

  93. Posted by KK

    “So far I haven’t heard one reasonable explanation for the run up in prices and why that is justified economically”
    Whether its tulips, tech stocks or real estate, asset prices are a by-product of supply and demand as has already been stated. Does the geographic boundaries of the city impact development, i.e. supply, yes. Does easy money fuel demand? You betcha. But I’m surprised nobody has cited the impact of rent control. Rent control and specifically the limit on condo conversions and evictions restrain natural market forces. Obviously if more people want to buy in certain locations than there are properties to meet that demand then prices will be bid up. These factors combined with the inherent desirability of SF go a long way in explaining the niche SF market.

  94. Posted by akrosdabay

    KK,
    Your argument would hold true if only SF home prices rose. However, pretty much every city, town and county in SF Bay Area and pretty much California rose in lock step.
    I wonder if demand and supply explain that. Houses in Fremont have risen 200% just like they have in SF Marina. Not to mention Tracy, Stockton and the like.
    I don’t think inherent desirability explains this. SF has always been desirable but it is not immune to market conditions. If and when the rest of the Bay Area collapses, I doubt if even the most desirable areas in SF will hold their values.
    If all agree to that then I’ll leave it at that. But some on this forum seem to think desirable areas in SF will only go up in price from now. The point I am trying to make is that even the most desirable areas is SF are overpriced. There is no reasonable price. The desirability of those areas were already priced in 7 years ago and are at current valuations because the entire market is up. Those areas will be higher in price proportional to the rest of the areas.

  95. Posted by rg

    Akrodabay – you are right on and asking all the pertinent questions! Facts – population went down in SF, glut of condos has been added (especially this year and into the next few it looks like), and salaries are stagnant (I think it was the Cron. that published a 1.6% increase in 2005, which is totally eaten by inflation btw). There is NO concrete reason for appreciation in San Francisco, let alone the amounts we saw, and all you agents and homeowners trying desperately to hold onto their homes “value” need to have a serious Come To Jesus moment.
    “but are there enough [wealthy buyers] to support the market prices over the long term?” – NO. Look at the salaries that recent college grads are making: Entry architects (my profession) are making about $32k. Masters of Arch. from Harvard or Columbia (6 of my closest friends) gets you $50-%55k. And those are “professionals.” Think about all the teachers, receptionists, janitors, etc. out there who get minimum wage. Where are they suppose to go? I even know 2 doctors who make less than $150k working for Kaiser and UCSF. That doesn’t buy a median house either and you went through all that education! Where is your next buyer going to come from when you’re asking $1 million+? God knows that few other areas of the country (or WORLD) has higher incomes than SF/California. The buyer pool had to dry up sometime, especially when it mostly never existed at all when you count in sub-prime. So, SF becomes a ghost-town.
    For flug: I only know 1 software rep. and he works off of commission (isn’t that the norm?), so I know for certain that the years where he makes over $100k are a big deal. Also, “couldn’t find a job in 1995”! In 1995, I had friends who worked for small, unknown companies called Intel, Sun Micro and Oracle. Those companies paid 6-figure salaries at a time when a nice 1-bedroom apartment cost under $1000/month and houses averaged $350k. I have friends who own homes where their mortgage payment is $1200, while I pay that much to rent a studio. I also had friends in ’95 who had already sold their first and second tech. start-ups for millions. You know what the difference was back then??? Those guys, with all that money, still considered paying over $300k on a mortgage unreasonable. Now, that’s talking about following the Federal standards for % of income that should go towards housing. We’ve gotten SOOO lost from that reality that I fear we won’t wake up until the ground shakes again, if ever.

  96. Posted by viewlover

    All of these arguments about supply and demand have really been all about demand. The supply is an equal force in order to have price equilibrium. The housing supply has been low in San Francisco for a long time. Just because people are predicting a crash will homeowners all of a sudden have a fire sale. These are long-term assets and not day trading stock. Yes, there may be some corrections necessary, but none too much off the normal economic cycles to correct for some of the liberal lending policies and whatever else got us here. If there is the crash some of you salivate over, the capital loss will hurt everyone, and unless you have a stash of very liquid cash, in EUROS, you will be left waiting to buy cause you still ain’t gonna be able to afford it. A receding tide sinks all ships.

  97. Posted by badlydrawnbear

    while I know this won’t end the debate about why prices have risen, I thought I would throw in an outside opinion …

    “This is the weirdest downturn in the history of California,” said GU Krueger, vice president at Irvine’s IHP Capital Partners, one of the largest U.S. investors in residential development. “Most previous downturns were driven by super-high interest rates or very weak economic fundamentals. This one is neither. It’s driven by prices getting ahead of incomes and by the drying up of financing that was making the run-up in pricing possible.

  98. Posted by anon1

    Yes, BDB (badly drawn bear), agree with that quote. We’ve never seen anything like the price appreciation of the 2000’s in terms of what drove it. Historically, r/e prices are driven by employment and income growth and demographics. But the 2000’s have been driven by financing, first by the secular low in rates in the summer of ’03. Then, when rates started inching higher and people called for the end of the financing driven appreciation, the mtge industry pushed the proliferation of affordability products. First, the move into ARM’s, then IO Arms, the pay options Arms and so on and so forth. House prices vastly outpaced average monthly payments, especially in the top 10 MSA’s like SF where a huge percentage of mtges in ’04 and ’05 were IO ARM’s. It didn’t matter if you weren’t really paying down principal as long as the perception existed that non-stop appreciation would bail you out. The price of a house became much less relevant in people’s minds– they only cared about the monthly payments and trying to grab a piece of the action. Real estate is a slow and inefficient market and is fundamentally auto-correlating as a result. It goes up sometimes because it is going up, as dumb as that sounds. In this case, many people perception that perception to sustain the boom to its very last breath. There are mitigating factors as to why I don’t think it falls precipitously here. You can’t short real estate practically. Housing is usually the last thing to go when household finances are stretched. And perceptions are slow to change. sub-prime and Alt-A are gone but people don’t seem to care about that much. All it will do, is help median prices higher by taking out the low end of the market. But even as the jumbo/conforming spread re-normalizes partially, borrowing costs are higher and the shift back into fixed rate (and higher fixed rate at that) means that people are going to have to start buying their houses again (as opposed to essentially leasing through IO’s and hoping to get bailed out by the market.) Lending standards are tighter. These things are not blips for just a month or two. The move back into fixed rate actually peaked in ’05, although fell much more precipitously over this year. so while I don’t believe in doom and gloom, I would guess that a more protracted slow leak is a decent probability outcome. Yes, they are not making any more land in SF and it’s a beautiful place to live. But that is a blind argument to say that valuations never matter and fundamentals never matter given what I’ve described above. Just my long-winded two cents on the matter. . . .

  99. Posted by badlydrawnbear

    sorry, forgot to source the quote. From today’s SF Chron
    http://www.sfgate.com/flat/archive/2007/10/11/chronicle/archive/2007/10/11/MN5ISN7GA.html

  100. Posted by sanfrantim

    What we currently have in SF is a stand-off between buyers and sellers. Hence, the failure of 2007 inventory levels to outstrip 2006 levels(even taking into account the many new condos coming on the market) as reported by Socketsite. If the bottom were falling out of the SF market, wouldn’t we see rapidly rising inventories, as we do in many other Bay Area markets?
    Prices will remain near their high levels so long as owners can and do put off listing their homes (or withdraw their listings) until they get their price. Barring a rash of foreclosures in SF (and SF Gate recently reported that the 2007 foreclosures are DOWN in SF, as compared to 2006), those who overpaid in 2005 or 2006 are not likely to put those listings on the market anytime soon. These recent overpayments thus are not good news for the so-called “vultures” waiting to buy. [I know, I know, anyone can point to individual exceptions where recent speculators are ditching their properties for losses, but isolated examples do not indicate a phenomenon.]
    With 2007 rents 20% higher than 2006 levels, many current owners have better options than to sell into a down or flat market. Those who have owned for 5 years or more can cover their monthly TIPI by leasing, and hold and wait for a better market.
    Simply put, if the supply of desirable SF SFH’s is Down, prices will remain high.
    Is there evidence that such supply is increasing and will outstrip current demand? It could happen, but short of that, mass foreclosures, or a seller’s panic (read “earthquake”), why should prices fall out, even if home prices here are out of line with any number of pricing theories?

  101. Posted by diemos

    People have to put their houses on the market when their teaser rate expires. Subprime had 2 year teaser periods and they are resetting in 07 and 08. Alt-A had 3-5 year teaser rates and they will be resetting in 09, 10, 11.
    Central valley purchases were mostly subprime, SF purchases were mostly Alt-A. You just need to look to the central valley to see where we will be in a couple of years.

  102. Posted by Dude

    Diemos stole my comment. Sellers can only ride this out provided they can hold their property for 5+ years. I believe that most of them cannot.
    http://www.businessweek.com/common_ssi/map_of_misery.htm
    And I’m amazed at the number of fellow bears on here lately. What is this, Yellowstone?

  103. Posted by sanfrantim

    If I were a buyer-in-waiting, I wouldn’t pin my hopes on the SF market/owner being just like the central valley.

  104. Posted by Bubba

    What percentage of homes in SF used alt-A in the past few years – not percentage of homes purchased, but percentage of homes that exist in SF – ie total housing stock?

  105. Posted by diemos

    “If I were a buyer-in-waiting, I wouldn’t pin my hopes on the SF market/owner being just like the central valley.”
    Where it counts they are identical. They both used “creative” products to buy houses that they could only afford during the teaser period. The only difference between subprime and Alt-A is thier fico score and the amount of money they borrowed.

  106. Posted by VultureBoy

    “Entry architects (my profession) are making about $32k. Masters of Arch. from Harvard or Columbia (6 of my closest friends) gets you $50-%55k. And those are “professionals.” Think about all the teachers, receptionists, janitors, etc. out there who get minimum wage.”
    Alas, I have to say it, if they’re not paying you a living wage, then you need to either change occupation or accept that this is your lot in life if you wish to stay in the bay area. In contrast, my frickin’ 24 year-oid contractor is clearing 90K a year doing remodels, which are booming right now for him. Experienced police and firemen in Fremont are making 124K and 136K according to the SJ Mercury News last week. My ex-gf, a lit major who taught for years and years and years at 40K/year, bluffed herself to 85K plus a 15K signing bonus at her first SF startup a year ago. Meanwhile, her 22 year-old economics major manager demanded and got 122K as his starting salary straight out of Harvard.
    That’s the world I’m seeing. My ex is right on track to buy a 500K studio condo sometime in the next year as she has put away about 80K over the past decade by living frugally.
    I’m really not trying to troll, but I live in a world where a lot of people are getting ahead. Admittedly, I have a lot of friends who aren’t, and by aren’t – they’re in their mid-30s and *still* making

  107. Posted by fluj

    2007 is almost over. It contains more resets for ARMs than 2008.

  108. Posted by diemos

    Behold! The infamous credit suisse chart on upcoming resets.
    http://www.autodogmatic.com/forum/viewtopic.php?t=280&highlight=resets

  109. Posted by sanfrantim

    diemos, very informative chart, but it says nothing about the ability of SF homeowners to afford their mortgages after they reset. You cannot assume that, just because SF buyers used an Alt-A loan, they cannot afford a more traditional one.
    I’d be interested to know whether anyone here has a friend or acquaintance (or client) who bought a SFH in SF in the past 2-3 years, but put the SFH on the market at a substantial loss (or plans to do so soon) because of a resetting mortgage?

  110. Posted by akrosdabay

    sanfrantim,
    Its too soon to be looking for that data. As pointed out the downturn has just started. What the coming months and years will do to the psyche of buyers and sellers alike is yet to be seen.
    However, given the drastic change in attitude of sellers over the past couple of months is an indication. Remember, the buying frenzy didn’t start overnight it took years to brew. People saw and heard friends boasting about their gains and then eventually more and more people joined the party.
    I would assume the similar trend will permeate the downturn.

  111. Posted by fluj

    Akrosdabay,
    Your high handed apprisals are strictly armchair.
    “The downturn has just started” and “Change in the attitude of sellers.”
    lol.

  112. Posted by diemos

    Well sanfrantim,
    I certainly CAN assume it, (and I do) but you’re right that I can’t prove it … yet. Time will tell.
    Were the buyers in SF the legendary finacial geniuses who only took out funky loans because they had better investments for their money and were using cheap financing to maximize their returns?
    Or were they chumps who were told, “Buy the most house you can, it will maximize your appreciation.” and will be unable to hold on once the reset hits?
    Over on patrick.net they have an acronym to describe this arguement.
    CHUMPS (Cunning Hard-eyed Ultra-savvy Market ProfessionalS): Acronym coined by HARM to lampoon the bulls’ argument that most recent buyers who used exotic loan products are market-savvy professionals who fully understand the downside risks and are financially prepared for them.

  113. Posted by akrosdabay

    Fluj,
    I was not about to attack your profession but since you are so pertinent with your ad hominem attacks.
    Realtors are the worst people to predict the housing market. the NAR has been consistently wrong over the past few years revising their estimated monthly. The CAR is no better with their chief economist now claiming she missed the signals last year.
    In the words of Warren Buffet, ” Never ask a barber if you need a haircut.”
    Pardon me if I don’t take your anonymous anecdotal evidence seriously. For all I know you are an armchair real estate shill.

  114. Posted by fluj

    The web is awash with Warren Buffet quoters these days.
    Who is predicting the market? Not me. No, it’s you who are predicting the market. Numerous times, in this very thread. You’re predicting a sea change. You’re even saying that it’s already happening. Well, it’s not. Not around here. That’s why it’s hard to take you seriously.
    “Change in the attitude of sellers” — do tell? What’s the change? They want EVEN MORE money?
    Do you even know one seller?
    Get off it.

  115. Posted by rg

    second that, akrosdabay. fluj – you’re not convincing anyone with your marketing scheme. Total conflict of interest, so your predictions have no weight. Hope you invested those 2003-2005 commissions well, because you may have to live off them for a while.
    VultureBoy – thanks for the perspective on what people you know are making. I know that it’s all true. Architecture is a horrible career to be in if you’re looking to become rich. However, all of those “high” salaries you quote only make me think one thing: NONE OF THOSE PEOPLE CAN AFFORD AN AVERAGE SAN FRANCISCO HOME/CONDO EITHER!!! You better stop your ex-gf from buying that $500k condo, because if she’s only making $85k/year, that mortgage payment is 1/2 of her income! We are so short-sighted in this city that we forget the guidelines. My best friend in Chicago makes twice that salary as a lawyer and her husband is a chiropractor prob. adding another $150k/yr to their income. With a $300k household income, their MAX. condo price they’d spend 2 years ago was $350k. That’s the reality of the rest of the country, even the big cities.

  116. Posted by fluj

    The only prediction I ever made was that October will show better sales data than September. That’s it.
    I have said numerous times that a correction may be in order.
    But we are simply not seeing it in SF. Sorry if that offends some of you, but it’s true.
    As for marketing, I haven’t even told you what my name is. And none of you are gonna ever buy anything anyway. Whatever.

  117. Posted by akrosdabay

    I am not predicting the market just pointing out the obvious. I am sorry that gets under your skin.
    I realize your very lively hood is at stake here. I can understand why you are so defensive.
    Yes I know one person that just listed their property in SF. It hasn’t sold yet.
    Sellers are dropping prices at the drop of a hat. All your real estate shilling won’t stop the inevitable. Any asset bubble eventually resets to the norms. There is no denying that an asset bubble has formed in SF real estate.
    Cheers.

  118. Posted by fluj helper

    Don’t worry about rg, fluj – he also has stories about how the Bay Bridge was “wide open so you go 90 at all times” in the mid-90’s. His posts are amusing to read, but don’t take them seriously.

  119. Posted by fluj

    Get off it, man. Nobody knows what’s going to happen.
    “Sellers are dropping prices at the drop of a hat.”
    Bullshit.

  120. Posted by akrosdabay

    Fluj,
    Care to define “around here”? Any specifics, zip codes, streets or particular houses you can articulate, so we take you seriously.

  121. Posted by fluj

    Have you not read what I posted in the thread beneath this one? I posted four anecdotes about my recent attempts to secure my client a fixer property in desirable neighborhoods. Have a look.

  122. Posted by badlydrawnbear

    “it says nothing about the ability of SF homeowners to afford their mortgages after they reset”

    I have made this point before but I will make it again. These ARM owners have 3 options.
    1. make the new payment amount, which means less discretionary spending putting a drag on the US economy (consumer spending makes up 70% of the US economy).
    2. refi into a new mortgage, most likely with a higher monthly payment, which means less discretionary spending putting a drag on the economy.
    3. sell/foreclosure adds more ‘motivated’ sellers and inventory to an already distressed housing market putting further pressure on home prices.
    Also consider that the foreclosure process take several months so that pain of those ARM resets, starting OCT 07 SEPT 08, will likely extend into 09 as homeowners try and hold on and prevent a foreclosure.

  123. Posted by diemos

    Now let’s not beat up on fluj. He’s actually right that the correction hasn’t reached SF yet. From trolling around on zillow.com my read is that the wave is in outer contra costa county and in alameda county has just breached the altamont pass heading east.
    My prediction for the beginning of panic and capitulation in SF is when the closings start at One Rincon Hill in spring 08, then continueing to accelerate as the Alt-A reset wave begins in 09.
    By 2011, half-off peak prices on everything in SF.

  124. Posted by fluj

    Again, 07 is the biggest year for ARM resets. It has been happening all freaking year, folks. Oh, so now it’s October that the panic starts.
    Actually, I’m going to go out on a limb and make a prediction, other than October sales data will be more robust than September’s for SF.
    My second prediction is that you guys will still be talking about the coming tsunami early next year, but that it still will not have hit yet.

  125. Posted by emmett_brown

    akrosdabay, I would say that Realtors are the worst economists, but the best at predicting what is happening on any particular block.

    The deals fluj listed in the other thread match the interest I’ve seen at open houses. Of course, people at open houses doesn’t imply actual offers. I’m totally bearish on the next 6-8 years, but I’m still not seeing any drops in Noe/Fairmount. Quite the opposite. Scarily so. Glad I’m not actively making offers.

    My prediction: 5% drops per year starting next year for 3-5 years. Then the anchor drags along the bottom.

  126. Posted by akrosdabay

    “Again, 07 is the biggest year for ARM resets. It has been happening all freaking year, folks. Oh, so now it’s October that the panic starts.”
    Bullshit. Most the ARMs resets “start” in sept. and october. The fall out of which won’t be felt for a few months later. foreclosures from rate resets usually lag 6 months. Most people default after the rate reset not at the time.
    I know friends of mine that took out 3 year ARMs in july this year. Guess when that will reset genius, that’s right in 2010.
    The more you speak the more ignorant you seem.

  127. Posted by akrosdabay

    I am sure there are people bullish on real estate. I have a few friends that are too. Most of them however made a complete 180 on housing in the last couple of months.
    I think emotions are pushing people to those open houses. It is safe to assume that many of them don’t read all the articles on the state of housing unless it is on the new daily. Even then they will most likely assume Sf is immune. Just look at this thread alone.
    Time will tell what will happen. I am not making any predictions but I can safely say the absolute lunacy of over bidding has died down to a trickle and will follow that trend.

  128. Posted by VultureBoy

    “You better stop your ex-gf from buying that $500k condo, because if she’s only making $85k/year, that mortgage payment is 1/2 of her income! We are so short-sighted in this city that we forget the guidelines. My best friend in Chicago makes twice that salary as a lawyer and her husband is a chiropractor prob. adding another $150k/yr to their income. With a $300k household income, their MAX. condo price they’d spend 2 years ago was $350k. That’s the reality of the rest of the country, even the big cities.”
    35% actually…
    That said, I think she’ll be putting 20% down when all is said and done (the parents are going to kick in a bit) and if she gets 6.5% that’s about 2500/month with about 450/month property taxes or about the equivalent of about a $2000/month rent considering this is all tax-deductible, which isn’t all that far off from her current rent. So yeah, she’s going to have to make some hard choices about whether she’s in SF for the long-term or not, but if she is, I don’t see the problem.
    I think just about everyone here (excepting the 300K+/year DINKs) is making some sort of compromise to remain here (and that’s definitely a problem but of a different sort). Your friend sounds way too conservative to me, I think the 28% rule is much more realistic from my own experience (and sometimes violating it a bit if there’s a plan behind it beyond flipping the house in a year).

  129. Posted by fluj

    akrosdobay, you are the epitome of blog troll. good luck with your sourness. I’ve had enough.

  130. Posted by james

    dont forget about the average 700/mo in hoa dues on top of all that akrosdobay and vultureboy. fluj, the reset stuff is spot on. look around. it’s scary. foreclosure reports are up twice this month from last. it’s ain’t over. whether or not it affects anything around our here is still up in the air however.

  131. Posted by fluj

    Actually, one more thing. Stop calling me ignorant while spouting your nonsense about sellers dropping prices and the climate changing in SF. It’s patently false, bucko.

  132. Posted by akrosdabay

    Yeah so developers offering free cars and vespas to try and boost sales, is also patently false, eh?
    I seriously doubt you know what a troll means.
    I have provided a lot of data to back up my discussion while all you have done is name call me and others. I think it is obvious who is trolling here.
    I provide a decent argument and all you can do is call me names. What and ignorant little baby! Don’t forget to take your toys with you before you go.

  133. Posted by fluj

    Again with the “ignorant” slam.
    Your data doesn’t back up your argument, or lack therof. I offer real life factual experiences with the current market for SFRs. Did you even look at that?
    You on the other had attempt to apply macro data to a micro system, and it is not valid. SFRs in the city are going strong. I never said condos wouldn’t take a hit. Don’t bring the Vespa offer into this.
    If priced correctly, SFRs in most neighborhoods have troves of buyers waiting to pounce right now. Deny it all you want. It’s a fact.

  134. Posted by diemos

    “… most neighborhoods have troves of buyers waiting to pounce right now.”
    Waiting for what?

  135. Posted by fluj

    Waiting for a good property to come along!

  136. Posted by akrosdabay

    Oh I get it . SF in you posts meant Single Family not San Francisco.
    So the weakness in condos in not a weakness in the San Francisco market. So real estate in san francisco is just single family homes?
    Next month you will claim that SFRs that have a lot size X and are detached with a view are doing well and that defines the market.
    “Price correctly” another loaded term you can change later when you are proven wrong. You will just claim the houses were overpriced so they didn’t sell.
    Try again!
    I see no point pursuing this discussion any further.

  137. Posted by diemos

    “Waiting for a good property to come along!”
    Huh. Two years ago nobody cared if the property was good or bad as long as they could win the bidding war. That sounds suspiciously like a change in buyer sentiment.

  138. Posted by fluj

    I stayed talking about one thing the whole time, homesource. You’re just a troll mining for buzzwords and spouting empirical data. You probably don’t have any desire to purchase, ever. Somebody just hipped you to a fun place to exchange nasty 1’s and 0’s.

  139. Posted by akrosdabay

    homesource?
    I made one point through out this thread.
    Homes across the bay area including SF are way overpriced. More and more buyers are figuring that out. So sellers aren’t able to price at will and get away with it like they were as of few months ago.
    Homes are overpriced because people speculated and believed the myth that house prices would reach the stratosphere.
    You could argue that a select rich people will buy a house at any price in prime locations in SF. But that does not define the SF market which is declining. The rate of increase in house prices have declined. Eventually they may reverse and cause losses.

  140. Posted by fluj

    “Eventually they may reverse and cause losses”
    There! You said it. Thank you for admitting you don’t know what’s going to happen.

  141. Posted by akrosdabay

    Unlike you. I don’t talk out of my nether regions ( word starting with a).
    I haven’t made price predictions in this entire thread, Have I?
    I have asked pointed and provided data for why the prices increases weren’t sustainable or explained by the underlying fundamentals. You haven’t been able to challenge me on a single point and provide a well explained counterpoint.
    The data does point to the madness of the last years decreasing and buyer sentiment changing. These do point to a slowing housing market.

  142. Posted by Dude

    “It is difficult to get a man to understand something when his salary depends upon his not understanding it.”
    Upton Sinclair

  143. Posted by Michael

    “I would say that Realtors are the worst economists, but the best at predicting what is happening on any particular block.”
    A slightly different take: I do think realtors can provide great insight into what HAS happened on any particular block, but I don’t [think] the majority are very good at predicting what WILL happen.

  144. Posted by John

    “A slightly different take: I do think realtors can provide great insight into what HAS happened on any particular block, but I don’t [think] the majority are very good at predicting what WILL happen.”
    Actually, most people can predict WHAT will happen, the trick is on predicting WHEN it will happen.

  145. Posted by movingback

    Fluj – you need to give up and get back to work. For the sake of (good) Realtors everywhere, stop arguing with the people on this blog and find something else to do. You need to maintain some dignity. Please.

  146. Posted by rg

    VultureBoy – for the sake of your ex-gf, I’m responding (although it will prob. get lost in the argument between fluj and akrosdabay):
    If she’s making $85k/year, she’s only bringing home about $62k (28% bracket). I’m ignoring the bonus, bc who ever knows, that could end- and it will probably go to a vacation or nice gift anyway. That’s $5,166 per month take home. You’re correct with the $2500 payment/month on the $400k mortgage (don’t even get me started with “parent’s chipping in on the down payment”)- although it’s probably safe to assume a bit more as rates rise. BUT, on top of that there will be HOA (say $600), prop taxes ($450), insurance (not sure- about $200/month?) and utilities ($200?), which SHOULD be included in the “housing costs” portion. That’s easily $4,000/month! That’s 75% of her income!
    If YOU dumped her, be the man and advise her against it. If SHE dumped you, let her burn.

  147. Posted by rg checker

    rg, that’s 75% of her take home, which is VERY, VERY different than 75% of her income – because one of the LARGE reasons to own a house are the tax advantages. Your math is flat out wrong because you fail to take tax advantages into account.

  148. Posted by Spencer

    Personally, i think you have to be insane to buy a $500K home on a $85K income, even with 20% down.
    I think you need almost double that income to be comfortable with those mrotgage payments. This person is headed for financial disaster, IMHO.
    Although the guide is to spend 25% of you annual income on housing, I think it is OK to spend 30% in the bay area, but I would not go any higher.

  149. Posted by anon

    In reponse to rg’s list of additional costs for a condo, I had a stupid question – Don’t the HOA dues typically cover insurance, or are certain types of insurance not covered by the HOA dues?

  150. Posted by Rillion

    It depends on the property. My HOA dues are about $400 a month and include earthquake insurance so my own insurance is fairly cheap, just $355 annually on a half million condo (part of which is covering my stuff not my condo).
    If the HOA doesn’t include earthquake insurance in this city then you do not really have insurance for your unit.

  151. Posted by redy

    1307 Bay St. is now in contract. Looks like all this publicity helped in the sale. Now if I can get some info from SS before you post, so I can scoop it up, that would be great! 🙂

Comments are closed.

Recent Articles