Once again, the inventory of Active listed single-family homes, condos, and TICs in San Francisco fell over the past two weeks (12.0%) as is typical of a normal winter market slowdown. And listed inventory levels remain up (6.6%) on a year-over-year basis as does the number of active listings that have undergone at least one price reduction (up 18.3%).
And yes, a year-end edition of our Complete Inventory Index (Cii) is close on the horizon.
∙ SocketSite’s San Francisco Listed Housing Inventory Update: 11/19 [SocketSite]
∙ SocketSite’s Complete Inventory Index (CII): Q3 2007 (SF) [SocketSite]
Sooooo … Inventory is increasing, sales volume is decreasing, and asking prices are decreasing, lending standards are tightening and Paulson wants to freeze arm rates thus destroying returns for investors resulting in reduced liquidity.
on the upside, SF is still the city ‘everyone’ wants to live in, is surrounded by water on three sides, and still has a high household income of around 80k.
anything I am missing?
Well, inventory may be increasing, but to this casual observer it looks like background noise. Hardly the multi-fold inventory increases that are occurring elsewhere! I’ll be interested in the complete inventory stats.
Nice to see the inventory levels staying quite healthy. An increase of 76 units is absolutely insignificant.
As a comparison, Miami has 23,240 condos on the market right now and another 25,000 in the pipeline.
Inventory is indeed very low, at least of resale property. But if the properties I’ve been tracking are any indication, a lot of stuff is getting withdrawn from the market, presumably so it can be relisted “when the market picks up” early next year.
For some reason I don’t find “at least we’re in better shape than Miami” to be all that comforting not to mention irrelevant.
anon … you can’t compare SF and Miami markets. the official inventory is very low here but so are the number of sales. The low inventory is a historic norm and has been baked into home prices for many years.
November sales for SFH and condo/TICs stands at about 380. It will probably rise to about 400 when all of the reporting is in. So this indicates an inventory of about 3+ months supply. This is up from 2.2 months supply in Nov 06 (1,150 / 525). The downward price pressure should continue (particularly due to credit tightening) – but I thought that inventory levels would be higher. I know that we’re not Miami (with a 3 year supply) or even Sacramento (18 months), but I thought we’d be higher than 3 months.
People can say what they want but median prices have increased year over year and supply levels are looking nicely balanced.
This current scenario is certainly not even in the same apocalyptic universe as what people have been predicting for the last two years. These ‘boy who cried wolf’ predictions are getting awfully tiresome: “Next month their will be a collapse…no, I mean the month after that, no I mean next year, no I mean in 2033.”
Anon 1:10 — so I don’t have to repeat what has been said about 100 times here, do a search on “median” in the upper right corner of SS’s website to learn why the increase in SF median prices is irrelevant at best and is likely further evidence of a market downturn.
As we all know, the median is not indicative of the state of the overall market. And I don’t think anyone on SocketSite has ever made a comment akin to, “there will be a collapse next month.” At least not one that I’ve seen. Most of us who are bearish on the market have postulated that prices would slowly fall over 2-3 years. And evidence is building that we were right.
” to learn why the increase in SF median prices is irrelevant at best and is likely further evidence of a market downturn.”
Exactly. especially since the jumbo loans are getting tougher, especially over the last couple of months…
The most important sentence in this SS post: “inventories FELL over the past two weeks 12.0%.” No panic selling yet …
No panic selling yet. But it’ll be interesting to see what happens with inventory in December and January. Chronicle had an article yesterday about the increasing number of people who “need” to sell.
http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2007/12/02/RETATLELJ.DTL
Dude, there may indeed be those who need to sell now. But until this shows up as a trend reflected in growing inventories, such reports are inconsequential anecdotes. So long as the SF inventory listings continue to follow typical seasonal fluctuations, who can say that conditions support sustained substantial downward pressure on prices?
Maybe as you say January’s inventory numbers will support your predictions. I am simply pointing out that so far they do not.
It’s hard to know what’s going on here. Close to half of the available inventory is located in districts 9 and 10. I did some searches earlier and noticed the numbers from this morning and this afternoon show decreases reflecting the combo of withdrawals and closed sales.
There’s a very good arb trade starting to set up now, as SF pricing is just on the crest of crashing, while greater SF bay real estate is now in crash mode. Sell SF prime and buy Oakland Hills, is a good example. The key is recognizing that, while one will still see lower prices on the target purchase, one will still have banked the spread. With the capital banked in the spread, one can diversify into non-USD currencies and gold, and hunker down through the storm. On the other side, one might actually be able to pick up a second property at the bottom. So, in this trade, one shorts SF, goes long Oakland Hills–but potentially has a second short position via cash you pocket from the spread, to then buy at the ultimate bottom.
I use Oakland Hills as the example, but there will be many ways to put this trade on.
As soon as this trade gets underway, and it will, that will usher in the latent crash in SF. Because the size of the spread won’t last.
–The Kid
What ever happened to the arbitrage between selling your house, pocketing the 5% zero-risk rate of return and renting for 1/2 the cost of your mortgage? Then waiting to pick something up at the market bottom a few years later? Isn’t that easier and less costly in terms of transactions than the sell-in-SF / buy-in-Oakland-Hills maneuver?
Incidentally, that’s what Mark Kiesel (Exec. VP of PIMCO Bonds) did over a year ago. Now that Orange County’s RE market is tanking he’s probably quite happy with his move. (In a followup interview, he was quoted as saying “nyah nyah nyah I told you so!!”) 🙂
http://www.ocregister.com/ocregister/money/housing/article_1170959.php
I doubt we will ever see anything close to what happened in Miami.
There simply wasn’t enough building here. (I’ve ranted about the anti-growth policies here many a’time!!!)
However, I’ll be interested to see what happens when closings start happening in Infinity and ORH.
I’ve always that that time period to be the bellweather (or harbinger) of the medium term future, for 2 reasons:
1. the credit crunch should have been long enough to impact the “fog a mirror” lending standards
2. it will add a significant amount of units of inventory in a relatively short time period.
(I’m thinking that many people buying in those units will be vacating another unit… either a rental or something they own)
will the inventory include quickly flipped ORH/infinity condos? just wonderin…
regardless… watching a housing downturn is boring and takes many years usually, just like in 1989-1996… most of the damage is done by inflation anyway!
and despite what the bears say (and I’m a bear, no doubt) I still feel that the overall sentiment in San Francisco is “Real Estate never goes down here” and “we’re special” and “it’s different here” and “everybody wants to live here”
No big RE drop can happen until some of those ideals are questioned by the general masses… The turnaround in sentiment can be quick. It was less than a year and a half in San Diego from “everybody wants to live here, you better buy now or you’ll never be able to buy” to the new consensus of “yeah… be careful cause the market sucks”
I certainly agree that reasonable arguments can be made to support the position that SF prices are now in a downfall and the position that they seem to be holding up okay. As a threshold point, that these two end points frame the debate is a huge change from the dominant position less than a year ago, which is that SF prices are continuing and will continue to climb rapidly (is anyone still asserting that position?).
One concise source of very current data I just came across is here:
http://www.sfnewsletter.com/Docs/SFN_SANFRANCISCO_2007-11-23.pdf
Scroll down to the top of page 3 and note the abrupt downturn and very recent shift in the supply/demand analysis from “seller’s market” to “buyer’s market.” Anyone have any idea how this line is derived?
The market may be changing, but I am still surprised at the volume of traffic I see at open houses in SF, even for not very inspiring properties.
Trip – the Altos Research site is very interesting. Their Market Action Index for San Francisco did make a sharp turn in Sep from Sellers Market to Buyers Market (from about a level of 40 down to 22 with the buyers market starting at 30). Miami’s 90-day average is at 17 with some recent weeks below 10. They said the Index is a barometer of supply and demand. I looked at the free sample detail report (San Jose) – it showed inventory, recent sales volume, DOM, % listing decreased/increased. I also found a couple historical reports from them on the internet to get a few more data points. It doesn’t appear that the Index is a simple linear function of sales volume and inventory. It’s obviously related to a months supply-type number – but they must be including some other variables. Notice the granularity at the city level – you can get separate data for places like Bonny Doon and Muir Beach. (And it looks like the Index goes to zero in weeks when there are no sales.)
At any rate, the MAI says that we are a BUYERS MARKET – just like Miami, Denver, and Las Vegas.
From the blog at the Altos Research site, for the Market Action Index, it looks like they may factor in changes in the mean and median days-on-market. Apparently, a heating or cooling market is indicated when the median DOM changes faster than the mean DOM (or vice versa). See the March 8 2007 blog entry. The author really didn’t explain the MAI – but he did talk about market transitions. In an early post, the author promised to explain the MAI calculation, but I can’t see that he ever did.
FSBO, thanks for digging into that. Obviously we don’t know the precise details of how Altos determines a “buyer’s market” vs. “seller’s market,” but from their analysis of the factors you’ve uncovered, their trend line does look reasonable. There is a steady downward trend (i.e. toward a buyer’s market) all throughout 2007 with a major dip in September corresponding with the credit crunch and the ending of funny money loans and tightening of non-conforming loans (the latter are once again at about a full point higher than conforming loans). The trend line has continued downward from there.
One surprising point is that the trends are nearly identical in SF for SFRs and condos — median, DOM, MAI — except $/sf has fallen quite considerably through 2007 for SFRs but remained about even for condos. Conventional wisdom says that SFR prices in SF would hold up better than condos, but this appears to be untrue.
Doesn’t “buyer’s market” mean it’s a good time to buy? Or am I being too simplistic.
A buyer’s market means that the demand for property is less than supply so the advantages shift to the buyer in terms of price negotiations. It does not mean it is, or is not, a good time to buy.