Sales of previously owned U.S. homes fell 8% in September (19% year-over-year) and the median price paid fell 4.2% compared to September 2006. And while some might point to a national slump as a macro trend that’s irrelevant to us in the micro San Francisco (no slight intended), any drag on the macro economy (think a potential slowdown in consumer spending) will most definitely have an impact on the Bay Area.
Stricter lending standards and higher borrowing costs are making it more difficult to qualify for loans, causing an increase in the number of unsold properties and pulling prices down. Some economists say falling home values, by making owners feel less wealthy, may reduce consumer spending.
“The credit freeze in August definitely impacted sales in September,” said Lawrence Yun, a senior economist at the [National Association of Realtors]. The negative influence was greater on jumbo loans, or loans larger than $417,000, affecting high- priced areas such as California, Yun said.
The good news? Another rate cut by the Fed is looking even more likely (think mortgage rates). The bad news? Another rate cut by the Fed is looking even more likely (think our weakening dollar).
And while some might take solace in Goldman Sachs’ chief U.S. economist’s quote that “[e]xisting home sales are still not particularly low by historic standards,” don’t forget the punch line: “Housing still has a lot of weakness ahead of it.”
∙ U.S. Existing Home Sales Fall More Than Forecast [Bloomberg]
∙ Dollar Falls Against Yen on Home Sales Decline, Merrill Loss [Bloomberg]
We’ve moved long past the ‘let’s blame the realtor and mortgage broker’ phase of this bubble and now we’re moving ever so slowly into the economic reality of the situation. M’Lynch taking a massive write down on morgatge backed securities and stating that there is continued risk in their portfolio is yet another sign. I’m sure there are more than a few SF cheerleaders out there, but the amount of evidence that we’re entering into a flat (at best) or declining (more likely) market here in the city is starting to mount.
That said, I still think that our local market is somewhat insulated from the massive declines sure to hit the surrounding areas. Should continue to be interesting to watch.
E.
I ran into a lawyer friend last night on the MUNI who said that he is seeing an “explosion” of lawsuits by people suing real estate agents and mortgage brokers for fraud. While I personally believe those lawsuits to be without merit (caveat emptor), it does add to the overall negative sentiment.
It’s only going to get worse. Check out the article about pay option arms on page C-1 of the WSJ. Those are loans that allow the buyer to make less than the payment on principal and interest, by adding the difference to the loan amount.
About 5% of these loans, designated as prime loans, are 30 days past due at Countrywide. But that isn’t the worst part.
Of the remaining on time payments, what percentage of the people who got these loans are making the absolute minimum payment, thereby causing their loan amounts to exceed far more than the balance of their homes, so that refinancing will become essentially impossible and making foreclosure all but certain when the minimum payment is no longer allowed?
80%. Almost everyone is making practically no payments and is in way over their heads. The 20% default rate on subprimes is going to look pretty good by comparison. Next year will be worse than this year for foreclosures, and it will happen in wealthy areas: these are not subprime loans.
Massive declines have already hit the surrounding areas. Talk to any Realtor in Sacramento, Tracy, Antioch, Modesto, Merced. Those markets don’t have much further to go till they hit the bottom, if they are not there already.
“Those markets don’t have much further to go till they hit the bottom, if they are not there already.”
In the light of future ARM resets, what’s the economic basis for this statement?
the economic basis for “knowitall’s” statement is the assumption that prices won’t fall below 2001 levels. There are parts of the central valley now where houses that sold for 200K in 2001 and 500K in 2005-a much bigger runup than we saw in S.F.- are now selling for 250K. While there may be some continued room to fall, the presumption is that prices won’t fall back to 200K. Lending standards have tightened but there has been a transformative shift in the mortgage market and you will never again need 50K down to buy a 250K house if you have decent credit and the income to make the payments.
While the credit bubble has cause major problems, it was probably a necessary consequence of this transformative shift in mortgage financing options. Imprudent lending was probably a natural and predictable result of lenders realizing that a good mortgage risk doesn’t need a 20% down payment but taking it too far when the supply of truly good borrowers with smaller down payments dried up in ’05-’06.
HELLOOOOOO!!! … existing home sales did not fall 8% … the ‘annual pace’, aka the NAR forecast which , declined an ADDITIONAL 8% from a downward revised August estimate.
Let’s look at what NAR has had to say about the ‘Annual Pace’ of existing home sales so far, Notice the high forecast of 6.44 million in February 2007 (compare that to the 5.04 million just reported). Also notice that as of 10/10 the ‘forecast’ was still for an ‘annual pace’ of 5.78 million units despite that fact it had already been reported that the annual pace was 5.5 million (which was revised downward to 5.48 million).
Yup. There it is. We were already down from record highs of ’05 and ’06. Now terrible August news = a poor September for close of sales.
Of course, somebody on here has once again talked doom and gloom ARM resets when ’07 is the proven ARM reset peak.
I have a Countrywide neg-am myself. Am I worried? Heck no. Why? Because I bought a three unit building with parking and a yard, and views, for 799K. I’m sitting on 250K+ in equity. And I’m getting letters from Countrywide offering to adjust my loan! They don’t want people to bail and have to foreclose upon re-set. REO is a nightmare for banks and lenders. No, they want to keep charging that interest. And the government wants the same thing. I think this actually might be an opportunity for some homeowners. Countrywide is gonna get some sort of subsidized bailout, and some of its customers are gonna profit from it.
Granted, if you can’t afford something, you shouldn’t buy it. In the end easy money has magnified this.
Anecdotally (OK, I’ll admit I’m not a database) this news has already been built in to the market. People are buying in SF, folks. Median prices remain near record highs. The rest of the country has been taking a hit for over a year at this point, yet here we are …
“Of course, somebody on here has once again talked doom and gloom ARM resets when ’07 is the proven ARM reset peak.”
You mean subprime ARM reset peak. Even then you are wrong there are a crap load of those ARMs reseting into FHCY2008.
http://www.bubbleinfo.com/statistics-2007/2007/3/15/arm-reset-schedule.html
Option ARMs and others seem to be peaking in 2009 or so.
You sound like the NAR, especially after badlydrawnbear’s post.
Here you go fluj, the latest chart of resets from credit suisse. You can see the subprimes peaking next year and then your option arm reset wave which starts in 2009.
http://calculatedrisk.blogspot.com/2007/10/prime-loans-gone-bad.html
No, I don’t. Look at the name of your source material. OK? bubbleinfo.com ?
I’ve posted a different chart on here before, I forget from where. I just searched Yahoo and I couldn’t find it. The source was a title company, if anybody else knows what I’m talking about. I’ve seen the same chart elsewhere, with ’07 as the peak.
“Of course, somebody on here has once again talked doom and gloom ARM resets when ’07 is the proven ARM reset peak.”
The graph in this article suggests you’re incorrect:
http://blogs.ocregister.com/mortgage/archives/2007/06/bofa_analyst_mortgage_correcti_1.html
And even if you _are_correct, what’s your point? Are you suggesting that a reset instantly turns into a REO?
“I have a Countrywide neg-am myself. Am I worried? Heck no.”
Not my business, but…for basic contingency planning purposes, shouldn’t you at least consider refinancing into a traditional loan? Who knows what can happen between now and when that thing adjusts?
Your $250K in equity is a subjective number which can change over time (up or down). But the loan balance is a hard number.
The chart is from Credit Suisse, had you bothered to actually look and inform your self you would have known that.
I googled it and gave you the first link that had the chart in it.
How about this site? Same chart.
http://recomments.blogspot.com/2007/07/real-estate-emotions-july-update.html
The fact you didn’t even bother to read the link I posted and are now claiming the data is wrong without providing a single shred of evidence in rebuttal tells me something.
BTW a correction to my original post: looks like 2010 is the options ARM reset peak
No, I’m not suggesting that. I’m questioning whether ’08 is the tsunami crest when I have seen otherwise. There was even a topic on here last month that had a graphic showing 07 is the year. Again, I don’t remember the original source. Do you folks really not know what I’m talking about? It has been everywhere. A lot of the 07 resets are already six months in, OK? Not all of them. But are they really all clusted at the end of the year?
Come on now. It’s always “The coming flood.” I’m saying the stuff is happening, right now, and that the rest of the country has been taking a big hit for a year and a half at this point. I am not predicting continued growth. I’m saying, maybe, just maybe, SF is not gonna get hosed. That’s all.
I am going to refinance into a conventional loan, yes. The reason I did a neg am in the first place was to have more capital in order to do some wholescale improvements.
“In the light of future ARM resets, what’s the economic basis for this statement?”
uhhh, lower interest rates which mean mo’ pocket money. I am already at $1200 less cash interest expense annually because of interest rate cuts. Looking forward to the next rate decreases!
For all the naysayers who a couple of months ago said that Fed rate cuts don’t mean jack and LIBOR and treasury rates will keep increasing…LIBOR is way down from its recent peak (4.8% today from 5.8% in early sept) and so too are 10yr treasuries. Liquidity is returning to the markets.
Oh, by the way, here is San Francisco’s sfr (read “existing”) home sales as of today, with a week to go: 123. September’s total was 155. Look for October to be 200+. Look for November to be around the same, as activity has been brisk. Look for December to be down, as is the normal holiday cycle, Thanksgiving, etc.
The fed is struggling with the decision to cut interest rates again because lower interest rates mean a greater risk for inflation.
Greenspan has been warning of this for months now. (and yes I know there is a finger pointed at Greenspan for cutting rates for all those years as well)
If inflation comes on strong and real estate prices stagnate then the value is really going down. If the price actually goes DOWN and inflation goes UP then we all have problems.
Does anyone have a chart or data on how many home owners in SF could actually afford to buy their same home again?
The fed is struggling with the decision to cut interest rates again because lower interest rates mean a greater risk for inflation.
Greenspan has been warning of this for months now. (and yes I know there is a finger pointed at Greenspan for cutting rates for all those years as well)
If inflation comes on strong and real estate prices stagnate then the value is really going down. If the price actually goes DOWN and inflation goes UP then we all have problems.
Does anyone have a chart or data on how many home owners in SF could actually afford to buy their same home again?
I don’t know what y’all are so happy about. The national housing slump and credit crunch — and what this implies for national consumer confidence and purchasing power — are far more likely to depress your stock portolios than to lead to substantial lowering of prices for SF homes. IMHO.
“uhhh, lower interest rates which mean mo’ pocket money. I am already at $1200 less cash interest expense annually because of interest rate cuts. Looking forward to the next rate decreases!”
The question was related to resets of ARMS of Central Valley homeowners, likely from initial teaser rates. While lower interest rates will help some, many folks are likely still going to be facing a large increase in their monthly payments and almost certainly some of those will be adding to the foreclosure wave there.
It’s hard to have much meaningful debate around here. Too much emotion. Renters always see blood in the water and owners have too much at stake. If you look at any historical analysis of real estate cycles, you’d see that they tend to bust in slow motion.
Do we have a bust in SF now? Probably. It probably started 12 months ago but most people can’t see it because deflation of housing assets is very, very gradual. Tokyo declined for over ten years but mostly in inflation-adjusted terms (which makes it even harder to casually observe).
Fact is, you can’t buy a house now with 1% interest loans and expect to make 20% gains on the asset price. So, the boom is definitely over. The Fed will more than likely continue to lower rates in an attempt to engineer a soft landing. As they do that, inflation will likely tick up while prices stagnate. Could last 5 or 10 years but it won’t happen overnight. A house is not a share of Enron stock and, as an asset class, has never behaved like equities.
If you’re waiting for the bottom to fall out in SF, it won’t. Will it be more affordable in 5 years? Probably. If you want to buy but can’t afford it today, try to save money and plan to buy in 5 years or so. (Keep in mind that inflation will eat at savings and drive up rents in the meantime, unfortunately.)
” A lot of the 07 resets are already six months in, OK? Not all of them. But are they really all clusted at the end of the year?”
If it takes an average of six months for a reset to end up as a REO (a relatively low estimate from what I’ve read), then if resets are distributed evenly through ’07, then we’re only about a quarter of the way through REOs generated as a result of ’07 resets.
“I am not predicting continued growth. I’m saying, maybe, just maybe, SF is not gonna get hosed. That’s all.”
On this, I tend to agree with you. At least for the more up-market areas of the city. What I am calling you on is your belief that we’re already past the worst of the reset problem in general. On the contrary, we have a looong way to go on this.
What I’ve said repeatedly is that this stuff is happening now. It will probably continue for some time, correct. But it is not a future crisis. It’s happening now, and will continue to happen. Yet here we are, with a vigorous — San Francisco — market. I know you are not a Chicken Little, Amen Corner. But there are lots of Chicken Littles around. ’08, ’09. etc. You know lots of people on here were saying “Watch out for ’07” back in ’04-’05. Yet here we are.
“I have a Countrywide neg-am myself. Am I worried? Heck no. Why? Because I bought a three unit building with parking and a yard, and views, for 799K. I’m sitting on 250K+ in equity.”
Whistling in the dark. Doesn’t get any better than that. Wow, 250K+ in equity, I guess that makes you a SF real estate tycoon.
Keep on entertaining us fluj.
You don’t even have a screen name, in a forum as anonymous as this one? Funny. And telling.
Whistling in the dark? Good grief. No, don’t worry about me. First, the market is strong. Second, I have cash reserves and lots of equity. Third, the market could take a 20% hit and I’d be just about OK.
Thanks for your concern, “anon.”
“Does anyone have a chart or data on how many home owners in SF could actually afford to buy their same home again?”
I wish…if we had that info, there would be nothing to debate about on SocketSite! But given that foreclosures and NODs are increasing in the city, I can tell you it’s not 100%.
I’ve read that, during the boom years, roughly 2/3 of mortgages taken out in San Francisco were adjustables of some type. I’m sure some of those were the luxury millionaires, who used exotic financing to manage cash flow and arb the Yen carry trade or put more into hedge funds, repaint their yachts, whatever. But I bet most of them were people squeezing into places they couldn’t afford any other way.
Oh, and if you must know, I’m actually planning the following. My girlfriend and myself occupy two of the three flats. The next move is I’m going to re-fi, and then move out. After that I’m going to rent the pair of them out at market value. I will cover the mortgage with a bit of monthly surplus that I plan to put in an interest bearing account to apply to taxes, upkeep, etc.
But if it offended you, I apologize. Don’t worry. That’s the last time I share personal information on here. Too many mean spirited know-nots, like you, “anon.”
My screen name is “anon”. Just in case you haven’t noticed “fluj”.
Let me know when you place with “view” and “parking” is on the auction block. 250K, holy crap, mind boggling number…
250K, on a purchase price of 799K, when I picked it up in March ’06? You cannot tell me that was ill informed.
Shoot, man. I wasn’t boasting. Obviously, that’s small potatoes in this town! I was offering a personal anecdote for why ARM resetting is not all that bad for individual consumers if they know what they’re doing.
But no. You seize on my reveal as if I’m a villain. Too much. Mean spirited toadie that you are.
[Editor’s Note: And here’s where we agree with fluj. Let’s drop the personal attacks and get back to the topic at hand.]
Fluj, you bought at the very top of the market. I hope you really do have that 250k in equity (heck, I hope you’ve got a million), but I wouldn’t go out and buy that 250k Ferrari with your “equity” just yet.
Oh six was a higphoint, sure. But that’s the end of that.
I got an off-market peer to peer deal on Craigslist for 50K less than the seller wanted, and what I paid was approximately 20% under market value at the time. The market has gone up since. (I know you guys don’t like to hear that, but it is true for my area, which I think I should not mention at this point)
If you paid “approximately 20% under market value at the time”, and you are correct in estimating that it’s now worth 250K more now, that means that $200K of your gain can be attributed to your negotiating skills and $50K to the market. A $50K gain over 19 months on a $1M property equals market appreciation of about 3% a year.
50K on 799K would be like 4.5% % then? In this micro-market for the past year and a half that sounds about right. It’s somewhat consistent with the last appraisal too. I will keep you guys posted.
“50K on 799K would be like 4.5% % then?”
A little under 4% per year. But if you bought it for $799K and that was 20% under market, the basis should be $1M when calculating the “market appreciation” as opposed to your gain.
Anyway…..back to the topic at hand….the California realtors release their numbers along with the national ones, and these address San Francisco specifically.
Sales down 45% YOY. Median price down 5%.
http://www.car.org/index.php?id=Mzc5MTY=
fluj there is no such thing as “below market value.” The value is the transaction price and nothing more or less. If comparables are going at higher prices that’s fine. Still, your property’s value is indeed the last transaction price. You won’t get that “market value” until you sell again.
Before you start touting the assessment line, assessments are only for tax purposes and nothing more.
The CAR report addresses “San Francisco Bay” specifically, not San Francisco County. I couldn’t find what additional area is included but it’s probably Alameda and San Mateo.
“San Francisco Bay” — That is not San Francisco. For the City, there is just no way that’s true. Look at condos, last September to this one. Sales are up! (and I already told you about single family homes) :
Condominiums
District 1 Sep-06 Sep-07
Number of Sales 5 7
Median Selling Price 575,000 700,000
Average DOM 74 50
District 2 Sep-06 Sep-07
Number of Sales 1 2
Median Selling Price 949,000 703,500
Average DOM 39 57
District 3 Sep-06 Sep-07
Number of Sales 3 3
Median Selling Price 569,000 517,000
Average DOM 61 40
District 4 Sep-06 Sep-07
Number of Sales 5 3
Median Selling Price 580,000 411,000
Average DOM 44 38
District 5 Sep-06 Sep-07
Number of Sales 38 21
Median Selling Price 775,775 936,000
Average DOM 47 27
District 6 Sep-06 Sep-07
Number of Sales 14 16
Median Selling Price 667,000 752,500
Average DOM 50 45
District 7 Sep-06 Sep-07
Number of Sales 20 19
Median Selling Price 907,500 1,261,000
Average DOM 38 33
District 8 Sep-06 Sep-07
Number of Sales 19 16
Median Selling Price 625,000 612,500
Average DOM 53 38
District 9 Sep-06 Sep-07
Number of Sales 50 46
Median Selling Price 758,750 732,000
Average DOM 60 55
District 10 Sep-06 Sep-07
Number of Sales 5 3
Median Selling Price 514,000 480,000
Average DOM 76 51
jessie, the Fed doesn’t seem to be struggling with rate cuts much these days. Granted, the Fed Funds market on the CME aren’t the actual Fed, but they seem to think a quarter point cut is a given (100% at point this morning). Personally I think those traders are all one-step removed from dice rollers at a craps table, but it is a popular product.
My question to the community at large is, where do you stick your money? We all have inflation we know that. The Fed wants to lower rates to protect Wall Street and crush the dollar, we all know that. If we save we’ll be penalized. Short bonds across the board after a few cuts? Buy hard assets? That’s the typical game plan for this scenario. But the housing market looks horrible so that’s off the table. Right now I’m planning on just rolling through oil (CL) and gold (YG) futures contracts. I don’t see either of those stopping or failing to pace inflation. Ideas?
“Does anyone have a chart or data on how many home owners in SF could actually afford to buy their same home again?”
The other part of this question would be of those that could afford to buy their same home again, how many could actually get the loans. I know I can afford my place but it would be much harder to get the 95% financing I needed to buy in this market. I barely qualified for the HELOC in February before the tightening of standards.
fluj, looks like it is good to be a condo owner in the middle of SF (5, 6, and 7 especially).
After reading the CAR chart the most interesting thing to me was the strength of Santa Clara County. The SF condo speculators saying that the Silicon Valley types will flock to SF are pretty much proven wrong. They have money but they’re staying down the peninsula. They’re not coming to SF.
Those saying that “San Francisco Bay” is more than just SF are probably wishing that the study included Santa Clara County, too.
Why doesn’t SF have proper statistics on condo sales? Other cities such as Las Vegas and Miami do. Why doesn’t San Francisco? If the numbers are so strong, show them to us!
fluj, not sure if I’m reading your numbers correctly. Have median prices fallen in 6 out of 10 SF districts?
What surpised me most about fluj’s numbers is that the SF Condo DOM is actually much lower in many cases this september than last year.
Dude, you are right. But don’t get carried away with this. Statistics are not likely on anyone’s side here (including my comment above, though 5-7 have a larger sample size than many of the others).
As I’ve seen over and over again on here, you guys are going to make what you want of this. My view is the following. With the exception of 2, (the Sunset) and 4 (Southern SF) where they’re up in price, they’re way up. Where they’re down in price, they’re down by maybe 10%. Total number of sales is higher. DOM is lower. All told these number do not paint the drastic drop in condo values that I expected. I have a client who is condo shopping, right now. We’re actually seeing some decent value.
Come to think of it, how was the median sales price 949K in the Sunset in September ’06? That can’t be right.
“What surpised me most about fluj’s numbers is that the SF Condo DOM is actually much lower in many cases this september than last year.”
Yes, but these numbers are largely uselss as many properties are listed, pulled, and relisted several times. Realtors hate “stale fish,” so they manipulate these numbers to make inventory appear fresh.
http://www.sfgate.com/cgi-bin/article.cgi?f=/g/a/2007/01/05/carollloyd.DTL
o. because there was only one sale (he types as he sheepishly promises not to post again today.)
From what I recall from my undergrad Stat class, sample sizes need to be greater than 30 for the results to be meaningful. In which case, none of this is relevant except district nine. The weird thing is that it actually shows a drop in the median home price…..hmmmm..
“The SF condo speculators saying that the Silicon Valley types will flock to SF are pretty much proven wrong. They have money but they’re staying down the peninsula. They’re not coming to SF.”
Thank you. I will never understand why so many in the city still think everyone wants to live here. Yes, they like the Bay Area, but that does not mean they have to buy a SOMA condo. I am watching Peninsula prices very carefully as I want to buy a home and give up the condo lifestyle myself and I am very tired of the drive. People keep talking about that price declines outside the city won’t do anything to prices here, but what about if many people like me start to move out? I could sell my 2bd. and get a pretty intersting place in Menlo Park and be 10 minutes to work.
If you want a ton of data on just SF proper, look here:
http://www.rereport.com/sf/
As many have noted, comparing a single month’s prices and volumes to another single month is pretty much worthless, particularly with the tiny sample size of SF sales. This site shows the broader trends pretty well. I don’t see how one can reasonably argue that numbers for the “SF metro” or “San Francisco Bay” etc. — which includes San Francisco — are nevertheless largely irrelevant to SF proper. You would have to show me that the numbers for the immediately surrounding areas included in these broader MSA compilations are way different from what SF itself is experiencing. I don’t see it — the immediately surrounding counties are just not significantly different from SF in terms of home prices, population composition, etc.
Trip, I disagree. Pretty much every place in the San Francisco Bay Area is safer than San Francisco proper. Yes, even Oakland is safer (and cooler now).
I’d like to see property transactions and see the effects of rising SF crime (along the lines of anonandon’s post above).
Unless everyone in SF buys their homes with cash and no mortgage, home prices must fall. The buyers of nonconforming mortgage paper were CDOs and the buyers of CDOs just got snuffed.
I agree that a sample size so small is pretty much worthless. If a couple of the worst properties in a neighborhood are purchased as ‘fixer-uppers’ and then the next month a couple of the nicest homes are sold then the stats would show 2 homes sold for say $500k and then the next month 1 or 2 homes sold for 1.5M. The numbers posted don’t account for ‘comparables’ which would probably be science unto itself as different as SF is block to block.
I am sure someone would then post that their neighborhood is the best and that they are immune because they just had gains of 300% in ONE month in their elite neighborhood.
I would agree that SF is ‘different’ from the rest of the Bay Area but I think it is a stretch to say it is deviated away from statistical averages of the entire Bay Area (including SF).
Different meaning that a different crowd wants to live in SF versus Marin or Oakland or Silicon Valley but each place has a crowd that would not want to live in the other place.
“The SF condo speculators saying that the Silicon Valley types will flock to SF are pretty much proven wrong. They have money but they’re staying down the peninsula. They’re not coming to SF.”
[Removed by Editor] I’ve lived in several [soma/sobe condos] over the last 4+ years and a good number of the residents commute to silicon valley or parts of the peninsula, either by driving or caltrain.
“”The SF condo speculators saying that the Silicon Valley types will flock to SF are pretty much proven wrong. They have money but they’re staying down the peninsula. They’re not coming to SF.”
[Removed by Editor] I’ve lived in several [soma/sobe condos] over the last 4+ years and a good number of the residents commute to silicon valley or parts of the peninsula, either by driving or caltrain.”
I too tend to look at continuing increases in southbound commute times, as well as exploding Caltrain ridership southbound in the morning, and Ebay, Google, and Yahoo buses from the city as more evidence than the typical Socketsite poster who says [Removed by Editor].
[Editor’s Note: Seriously folks, attack the argument not the individual.]
scurvy, where do you live? half of the condo owners in south beach and mission bay commute to the valley every day. the rest work downtown. [Removed by Editor]
fluj, you gotta stop digging holes with this personal data. your 250k in equity is not real until you sell. you might want to stop banking on that.
I think the point of the conversation about South Bay tech employees is if home and condo prices on the Peninsula were to start to go down about 10 to 20%, would it make the decision of whether to do a long bus-train ride as attractive if you could by a larger unit or home closer to your office? I will always believe myself however that Peninsula real estate will perform better than the city except for maybe parts of 94123 and other select areas.
CDOs are getting downgraded, right? Isn’t saying that all jumbo paper is bought by CDOs a bit of oversimplifying? I read a quote from a Bear Stearns higher up, and to paraphrase, he said, “In a nutshell, we screwed up with sub-prime.” CDOs are a stew. They aren’t just any one thing. To say that ALL jumbo paper is gonna get hosed … I dunno. People have been taking out high priced mortgages forever. Were they all purchased by CDOs in the past five years? They weren’t. They’re everywhere. In the end most mortgages are backed by responsible people making real payments every month. (Granted, CDOs became insanely popular without known controls.)
CDOs were not the only market for jumbos, just a part of it. Jumbos getting done today are mostly held by originating banks, which is why they’re cherrypicking only the quality borrowers (i.e. people who can actually pay the loans back). That being said, banks are still writing loans at very attractive rates, provided you have good credit and at least 10% down.
This whole SF vs. the peninsula argument is conjecture at this point. What we need to look at are historical home prices for all counties in the bay area, regressed against each other. That will tell you the correlation of the SF market to the bay area and California as a whole. Any idea where one can find this data? I haven’t seen it but I bet the markets are more closely linked than most San Franciscans would like to believe.
“if home and condo prices on the Peninsula were to start to go down about 10 to 20%, would it make the decision of whether to do a long bus-train ride as attractive if you could by a larger unit or home closer to your office?”
If prices fell 100% in the south bay I would not move back there. (Becoming a landlord would be a possibility though. ;^) The CalTrain commute is cake, and I only have to do it 2-3 times a week anyway. A lot of work in the south bay is quite amenable to telecommuting.
See, here’s the thing (for me at any rate). When a statistic is touted as “San Francisco” and it is in fact “San Francisco Bay,” there is a difference. The latter is going to include San Mateo county. San Bruno, DC, South City, Redwood City, etc., all of these are going to bring down median values. Any way you slice it.
There are wealthy communities in San Mateo county, to be sure (Belmont, Burlingame, Woodside, Atherton, Hillsborough). However, these areas are not as populous as the more blue collar San Mateo County cities. I am not disparaging San Mateo County. I like the Peninsula a lot. This is a simple point of fact.
“In the end most mortgages are backed by responsible people making real payments every month.diemos”
Countrywide is seeing rising defaults on their prime option arms and they haven’t even started resetting yet.
http://globaleconomicanalysis.blogspot.com/2007/10/option-arm-reo-problems-at-countrywide.html
For every person I know that could never live in the east/south bay, I know a person who would never move back to the city. No accounting for taste, I guess.
But my belief is that San Francisco real estate doesn’t march to its own drummer – our home prices are highly correlated to the east and south bay, mix being taken into effect. I would love to see historical data disproving or corroborating this…I just can’t find it.
I’m willing to bet most of the people commuting to the south bay are either single or dinks. I did the commute thing for several years, and at least for me, I’m never doing it again. 3 hours a day is way too much to spend commuting. From my personal experience, none of my co-workers lived in San Francisco and I worked for a large tech company. Oh wait… there was one guy that lived in Noe Valley, and he was single.
Does anybody know if more cars now leave the city in the morning than come in on 101 and 280? So does this make Noe Valley and Soma a bedroom community of the Peninsula for “singles”? What does this say about the importance of San Francisco in the overall Bay Area?
I think ease of commute to Silicon Valley did help put Noe Valley “on the map”. That’s why I think there is upside opportunity for other neighborhoods further south. But in the next cycle.
most of the people commuting to the south bay are either single or dinks … or are parents who have not yet gone toe-to-toe with SFUSD.
Let’s face it. Noe Valley is not a great place for singles, gay or straight. Is it easy to jump on 280 though? yes.
There in lies the other problem …SFUSD. Another reason families leave SF for the peninsula. If you are already saddled with a huge mortgage and paying for private school, there’s really not much left. If you have more than one child, then you are sunk. $40K+/year for two kids.
It is interesting in that for all of the diversity that San Francisco claims to have, the one group it is really missing is young families with children. We are really becoming a “no-children” ghetto.
There are a dozen or so mayoral candidates listed in the current Election Voter Guide, giving their “why I should be elected” writeups. Only 2 explicitly mention improving schools. Newsom and Pang.
+1 to anon.
I, too, did the commute down the peninsula for a long time (5 years). I’m never doing it again. 3 hours is way too much lost time in the day. Also, I felt so detached from everything. All of my coworkers lived in the south bay, not in SF. When I got back to SF, I didn’t know very many people because I spent most of my day down the peninsula. It really wasn’t worth it.
In the end I had two choices, leave my job or leave SF. I’m single and have no kids, so I left my job and took a 25% paycut to work at a startup in the city. Now I have a 5 minute commute and am very happy.
If I were married or had kids, I would have left SF. Complete no-brainer. And that was my point. Married couples are more influential and have more clout than single people (tax breaks and societal factors). Yes fluj you might know some people that commute down the peninsula. My point is that overall, their numbers are small, and sadly the people are insignificant in the big picture.
Oh and of the tech workers I know that lived in Soma but commuted south, they *all* moved out of Soma after their first year’s lease was up. They moved further into the city where there was more going on. Let’s face it, living in Soma is very bland in many regards and sub-standard in others — especially considering how much it costs to live in that part of town.
The mission is now full of south bay commuters as well. I live there and my building is full of south bay commuters and is slowly filling with young couples with kids. We are here in the city, just not in SOMA. Why? It’s sterile, boring, expensive, has little to no green space, no schools, and did I mention expensive? I know a ton of south bay commuters living in the city and almost all of them do not live in SOMA. This is why Yahoo, Google etc… run so many buses with routes all over the place. That said, many of the south bay commuters I know drive down there on 280 and only have to go down there 3-4 times per week.
No offense, but why would anyone want to live in San Jose, or Palo Alto, or…any where else in sprawl valley? It costs just as much to get a small house there as a decent apartment in S.F.
house (with land) vs. apartment…hmmm…lemme think
“The three counties with the lowest likelihood of default were all in the Bay Area: San Francisco, Marin and San Mateo.”
Enough said.
http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2007/10/26/MNODT1L4R.DTL
Yes, SF’s foreclosure rate has only tripled in the last year. Since other counties have seen an even more horrible downward trend, I guess that means everything is just dandy here in SF (and the Pittsburgh Pirates were even worse than the Giants this year, ergo the Giants’ season was just great).
Thanks to Trip for the following data reference:
“If you want a ton of data on just SF proper, look here: http://www.rereport.com/sf/“
Assuming these Sept 07 sales figures for SF SFH’s are correct, anyone care to speculate on how they are consistent with a view that market prices for SFH’s, year-over-year, are trending down??
Median price is up 6.6%. Average price is up. Buyers paid a higher percentage over listing than they did last year (3% over list), and they are doing so more quickly (‘days-on-market’ are down).
Careful what data you’re looking at, sanfrantim. I agree that one cannot possibly conclude anything with 100% certainty. But you’re just comparing a single month — 9/07 — to a single other month — 9/06. If you were to compare 9/07 to 8/07, the picture is dramatically different — serious declines in both average and median prices. Click on the links under “San Francisco Monthly Trends” and you get 3-month moving average which seems to present a pretty reliable picture. But things are changing rapidly throughout California, and any snapshot is just that.
So you think the YOY figures for the SF market are not relevant? Do you think it is signficant that the national median price IS down year over year?
IMO, it makes sense that, given the seasonality and variability of the market, year-over-year stats are more indicative of longer-term trends.
I’m not saying anything is or is not “relevant.” I’m just saying one cannot draw any meaningful conclusions by comparing statistics from a single month to those from a single other month. That applies double as to drawing any conclusions about long-term trends.
Fair enough. I tend to be an agnostic as to long-term SF pricing trends too.
On the other hand, some on this site do regularly make such predictions about where they think the SF market is going. Some speculate that prices in SF will fall, year-over-year, and, my modest point is that September’s sales figure do not support such speculation.
I have friends looking to buy in SF who regularly ask me my opinion about where pricing in this market is going. I want to give them good advice.
If anyone has data that support a prediction that prices a year from will be lower than they are
now, I would be VERY interested in that data.
Trip, not to beat a dead horse . . . but this is not just a one-month-to-one-other-month limited comparison (your valid point). The SF sales figures you pointed out to us show a modest increase in median price, 2007 over 2006, for 10 of the past 11 months! The only exception was Feb 07.
I’ve got to think that is significant.