CFAH

San Francisco Median Sales Price And Volume: March 2008 (www.SocketSite.com)
According to DataQuick, home sales volume in San Francisco dropped 20.6% on a year-over-year basis last month (508 recorded sales in March ’08 versus 640 sales in March ‘07). And while sales volume increased 17.9% compared to the month prior (think seasonaility), in 2004 sales volume in San Francisco jumped 39.4% from February to March, in 2005 it jumped 38.9%, in 2006 it jumped 47.1%, and in 2007 it jumped 70.7%.
As we pointed out last month, however, it’s important to understand that DataQuick reports recorded sales which not only includes activity in new developments, but contracts that were signed (“sold”) many months or even years prior and are just now closing escrow (or being recorded). Early reports of sales activity for listed properties in San Francisco would suggest a closer to 30% year-over-year decline for existing property sales.
The median sales price in March was $755,000, up a negligible 0.3% compared to March ’07 ($752,800) and up 2.6% compared to the month prior. That being said, we continue to see mix playing a significant role in supporting the median sales price in San Francisco.
For the greater Bay Area, sales volume in March was down 41.1% on a year-over-year basis but increased 22.8% from the month prior (4,898 recorded sales in March ’08 versus 8,317 in March ’07 and 3,989 this past February). And the recorded median sales price fell 16.1% on a year-over-year basis (down 2.2% compared to the month prior).
At the extremes, Marin recorded a 48.8% year-over-year reduction in sales volume (a loss of 141 transactions) and a 4.4% drop in median sales price; Alameda recorded a 47.2% year-over-year reduction in sales volume (a loss of 869 transactions) and an 18.5% drop in median sales price; Santa Clara recorded a 46.2% reduction in sales volume (a loss of 947 transactions) and a 9.2% drop in median sales price; and Contra Costa recorded a 32.6% reduction in sales volume (a loss of 470 transactions) and a 26.9% drop in median sales price.
Bay Area home sales remain at two-decade low [DataQuick]
San Francisco Recorded Sales Activity In February: Up (14.9% YOY) [SocketSite]
SocketSite’s San Francisco Listed Housing Inventory Update: 4/14/08 [SocketSite]

Comments from Plugged-In Readers

  1. Posted by REpornaddict

    No one is claiming SF housing market is on fire, BUT its relative performance to other areas is pretty amazing. To have a YOY increase in price, however negligible is a good performance.
    Yes, I know about the claimed mix factor. However surely mix is a bigger factor in other areas where sales have declined more (>40% down in numerous counties, including Marin(!)). If mix is supporting the median price in SF then it must be supporting to a much greater extent elsewhere.

  2. Posted by Mole Man

    That SOMA lofts and condos can outperform Marin retreats shows this market is substantially different from the market of the 1980s or 1990s, but how long can places like the Beacon keep prices near a thousand bucks per square foot?

  3. Posted by Dude

    “If mix is supporting the median price in SF then it must be supporting to a much greater extent elsewhere.”
    Not quite. In fact, I’d guess just the opposite is likely. Why? Because the other regions don’t have the diversity of housing/neighborhoods that the city does.
    In other words, even though Marin is a wealthy enclave, most of the homes/neighborhoods there tend to be more homogenous than they do in the city. Ditto for the east and south bay regions. So it’s easier to observe an apples-for-apples drop. Can I buy a rehabbed factory loft or high rise condo in Marin? Even if I could, should I compare them to a 50 year old rancher on a quarter acre?
    Additionally, the delta between the low end and high end in Walnut Creek or Tiburon is smaller than it is in SF (think Bayview vs. Marina), which is why mix plays more of a role here.
    These effects are amplified when volumes are low: each specific property selling skews the median more than it would in a high volume market.
    I agree SF is holding up well compared to CoCo and other regions. No question there. But mix definitely plays a bigger role here than in Orinda or San Jose.
    “how long can places like the Beacon keep prices near a thousand bucks per square foot?”
    They can’t. As I’ve pointed out, this $1,000 psf number is a myth in Soma. It’s an exception and not a rule. Most Beacon listings are asking $800 psf or in that area. Here’s one at $721 psf:
    http://sfbay.craigslist.org/sfc/rfs/644731265.html

  4. Posted by REpornaddict

    A valid point Dude.
    I do not see, however, any real change in the mix, at least in terms of % of total sales from each hood.
    apologies for posting this again, but here it is…
    http://www.blackstone-sanfrancisco.com/198.html
    The proportions of total sales from each area are pretty similar for 07 and 08. area 10 for example, 20% in 07, 19% for 08.
    surprising? yes, but there it is..
    [Editor’s Note: See comment below.]

  5. Posted by Lance

    REpornaddict,
    I agree with you that mix only explains so much. Like I’ve said for the past six months, mix works both ways. You can’td continue to mix into higher prices indefinetly, and many folks have been using that excuse for over a year. It is irrational to me that San Francisco (despite the credit crunch etc.) is the only place in the Bay Area that has prices supported by mix. I also don’t agree with Dude’s theory on the diversity of our real estate offerings. Other counties have new “luxury” construction too. In fact, they have probably upgraded more than we have here in SF. Why are they somehow suffering due to lack of good jumbo rates (i.e. – mixing down), when things here are working the opposite direction?
    [Editor’s Note: Once again, see comment below.]

  6. Posted by Dude

    Thanks for posting – the perfect link to convey what mix brings into the equation.
    Did everyone see that link? WOW!! Average home price in District 7 has fallen from $4.5 million last year to $2.8 million this year! That’s right, folks, home prices in the Marina are down 36% from last year!!! Look for yourselves – numbers don’t lie! If mix isn’t playing a role, REpornaddict, how do you explain this huge drop?
    Now that I’ve had my fun, I think it’s obvious that mix shift doesn’t rely on which districts the sales occur in, but what types of homes are selling. The lower end stuff is sitting and seeing prices fall, often dramatically. The higher end stuff is basically flat but still moving. So overall medians remain flat as a result.
    @ fluj or FSBO – I’m curious to see if the DQ sales and median numbers foot to what the local realtors report? Were there really 500 sales in March? Just curious.

  7. Posted by SocketSite

    I do not see, however, any real change in the mix, at least in terms of % of total sales from each hood.
    Neighborhood mix is but one part of the overall “mix” equation. That being said, according to the San Francisco Association of Realtors (SFAR) sales volume dropped 16% on a year-over-year basis in February. If we rank order listed sales by district based on median sales price in 2007 (one each for condos and single-family homes), in 2008 sales volume dropped 7% in those districts above the median in 2007, and dropped 25% for those districts below the median in 2007.
    Seriously folks, we don’t simply make this stuff up (or just report what we “want” to see).

  8. Posted by Spencer

    taking a quick ruler to this graph, it looks like the median from June 2005 is roughly equal to the median in March 2008.
    3 yrs of flat prices with little peaks (and a big one in june 07) and valleys?
    I’d be willing to bet that June 09 is going to look a lot like June 04 in terms of median price.
    Thos who bought prior to Q2 04 might be in the clear in terms of negative equity, but we may see it fall due to home equity loans

  9. Posted by REpornaddict

    theres something I’m missing then…heres Febs listed sales..(SFH only).
    1: $1,300K (11) $1,325K (10)
    2: $805K (27) $825K (35)
    3: $570K (7) $660K (9)
    4: $928K (23) $825K (25)
    5: $1,500K (18) $1,315K (15)
    6: $2,235K (2) $2,300K (2)
    7: $2,491K (6) $2,800K (7)
    8: $1,500K (3) $1,375K (2)
    9: $863K (11) $820K (13)
    10: $610 (29) $660K (26)
    total 137 then, 144 now.
    meds 825 then, 843 now.
    so 1,4,5,6,7,8,9 are above the median in 07.
    their sales 74 then, 74 now. whats left 63 then, 70 now.
    what am I missing? is it condos. I dont have the mix for them available…
    [Editor’s Note: Yes. Condos represented 50% of all transactions in February 2007 versus 44% in 2008.]

  10. Posted by REpornaddict

    Dude, ha!
    clearly with 21 sales so far fluctuations in the data are much more possible than city wide.
    So, hey, theres a mix within pac Heights. more smaller homes are being sold. thats a mix – albeit the opposite mix effect than you say is occurring all over the city.
    anyway, this district will have minimal effect on median price, a much bigger one upon mean.

  11. Posted by fluj

    Dude, the MLS shows 441 sales in March.
    As to mix, I’d argue that what is sustaining the marketplace is the middle ground. Everybody I know in this industry has multiple clients who want something relatively nice, safef, and central for around ~1.2M or less. The problem is that there aren’t very many properties like that. So sellers can price high still.

  12. Posted by Lance

    Fluj,
    Do you know what the number of sales in March were from LY? Dude is attempting to discredit the Dataquick numbers, but he’s going to need to LY numbers to attempt to make his case (i.e. – apples to apples).
    I’m looking forward to seeing if there really is much/any difference in MLS and Dataquick on a percentage basis.

  13. Posted by Dude

    Not trying to “discredit” anything, I’m just curious why DQ’s numbers don’t match MLS. As I recall, they were off materially last month. Which is why the editor(s) provide this disclaimer:
    “As we pointed out last month, however, it’s important to understand that DataQuick reports recorded sales which not only includes activity in new developments, but contracts that were signed (“sold”) many months or even years prior and are just now closing escrow (or being recorded). Early reports of sales activity for listed properties in San Francisco would suggest a closer to 30% year-over-year decline for existing property sales.”
    I think we’d all agree that including January sales in March numbers is hardly good analysis.

  14. Posted by FSBO

    Been away this week so I haven’t spent much time at SocketSite, but here are the listed sales for March 08 & March 07 for San Francisco:
    March 2008
    SFH: 150 sales, $892.5K median
    Condo: 177 sales, $752K median
    Total: 327 sales, $806K median
    March 2007
    SFH: 205 sales, $880K median
    Condo: 289 sales, $710K median
    Total: 494 sales, $775K median
    So this data shows a 34% decline in total sales volume (and a higher median price increase than DQ). As info, there are always late updates to the MLS so the March 08 count may continue to rise (by a few). (The March count rose by 10 this week due to these “late” reportings.)
    I’m still having trouble understanding the variance with DQ. Our host at SocketSite has done an excellent job of explaining their methodology. I have recently talked to DQ too and they claim to update with each county every 7-10 days.

  15. Posted by REpornaddict

    Thanks FSBO.
    Curious though as the total 327 is different to the 441 posted by Fluj a few posts above.
    I know DQ do split the SF numbers between SFHs and others (as the Chron usually reports the price split – but not the volumes – on the following day). Not sure if this is available on the website though.

  16. Posted by fluj

    Because that didn’t include 2-4 units, 5+, land, or unlisted solds. I don’t think there were any of the latter.

  17. Posted by FSBO

    Another point on the accuracy of the MLS data. As I indicated above, there are always some late reportings after the end of each month. By this I mean that the listing office is finally updating the MLS record to show the listing status as SOLD – and of course adding the selling price and actual selling date. When I query for March 08 sales, I’m looking for a sale date in March 08. By mid-April, the March sales are usually 99% reported.
    I’ve only done this on a manual ad hoc basis, but I have compared numerous MLS sales (reported selling date and selling price) with other recorded sources (eg tax records, PropertyShark, etc) and found very few discrepancies. Sometimes the selling dates differ (but not by much), but the prices rarely do. A few MLS sales show a selling price equal to the listing price with an *. This indicates that the actual selling price was supressed at the request of the buyer and/or seller.
    I believe that the MLS data is accurate and consistent and perhaps the best data to use for time series analyses. Obviously unlisted sales are not available. It would be really interesting to lay out the actual MLS and DQ data at the individual property level. I may actually do this in the near future.

  18. Posted by fluj

    Lance, that was 441 out of 7420.

  19. Posted by FSBO

    fluj & REPornaddict – I believe that the 441 count was obtained by retrieving March 08 sales for all property types (SFH, condo, 2-4 units, 5+ units, etc) and for all of the SFARMLS which includes San Mateo county plus a few other stray listings from other counties.
    327 is the count for SFH + condos in San Francisco county only.

  20. Posted by fluj

    WHoops. Sorry.
    441 this March, over 1174 so far. Last March was 714 out of 7420 for the whole year.

  21. Posted by sanfrantim

    This graph shows that the run-up in prices on a city-macro level occurred prior to September 2005. Since then, we see seasonal fluctuation, but no sustained trend in SF prices — up or down. Thus, as Spencer points out, at a macro level Fall 07 prices look a lot like Fall 05 prices.
    Isn’t this fairly compelling evidence that prices are not going to fall substantially in SF, but remain stagnant, at least until the effects of the pre-2005 run-up in prices even out?
    If you compare SF prices per square foot from 2002 to the end of 2007, you see about a 40-50% increase during that time period. That’s about 8-10% annual appreciation. Hardly a bubble when viewed from that 5-year time horizon.
    Maybe this is the definition of a soft landing.

  22. Posted by fluj

    Forget it. Ugh. I made another mistake … MLS can be glitchy at times. It was actually 363 total SF sales in all categories for March 2008.

  23. Posted by tipster

    This is really wonderful, any way you look at it. As home prices slowly revert back to their intrinsic values, and are not priced in accordance with their values as entrance tickets to one of the greatest scams of all time, young families will soon start to be able to afford their own homes based on their actual incomes.
    There have been many times in history in which housing was downright cheap, and given the massive amount of overbuilding that has taken place, we are probably headed in that direction.
    In a year or two, people won’t be willing to pay a premium over the rental price for ownership of an asset class they will retrain themselves to think only goes down, and that premium also will get sucked out of the equation, making it possible for young families who actually earn money and pay their bills to buy homes cheaply, given the glut of supply.
    As the baby boomers continue to sell, sell, and sell (or watch their nest eggs vanish before their eyes), prices will continue to drop, giving the economy a chance to compete with other economies that we have been unable to compete with, and the jobs will start to filter back.
    All in all, the very start of this trend, the tip of which which we are seeing here, is nothing but positive for people locally, and for the U.S. in general.
    This is really fantastic for everyone. Even if you are a homeowner, the loss of several hundred thousand of dollars or more in equity over the coming years will be more than made up in terms of satisfaction that young families other than yours will have an easier time, and low paying jobs can return to the U.S. and still afford people who do them a decent standard of living.
    When that happens, volumes will return, albeit at much lower prices, allowing realtors to be busy again. Even if they make half as much per transaction, they’ll make it up in volume, earning every bit as much money as they are today, for just twice the amount of work, so even they won’t see their incomes stay down for long.
    Yea to all of that!

  24. Posted by eddy

    It would be nice if these graphs used some sort of common axis where 500 listing correlated to 500k so as not to show seemingly arbitrary scale? Regardless, keep up the good work.

  25. Posted by urban_angst

    Hey tipster – lay off the hooch in the middle of the day, will ya?
    A situation where “…young families will … be able to afford their own homes based on their actual incomes” already exists here in San Francisco. Don’t be hatin’ just because there is a stranglehold on supply that has been created by the NIMBYs and affordable housing activists in our midst. (Save the Cow Palace anyone?!?) I’m guessing that you bemoan the current environment because the young families that can do this are the rich young families.
    The only way to make San Francisco “affordable” for all families (middle and low income included) is to unleash a wave of developmeent and density that just won’t be acceptable to the hoardes that fear Manhattanization (each for their own reason).
    We’ve only got ~770,000 seats at our table and they’re creating people faster than we can create seats.
    On a side note to sanfrantim: Right on brother! Just because housing is expensive here many falsely believe that we’ve had a bubble. In reality we’ve experienced a more stable and measured appreciation (8-10% annually) that won’t undercut too many homes too quickly. We’re pretty insulated on this one.

  26. Posted by DerrySF

    Fluj @ 13.14,
    You are absolutely spot-on here! As someone who is in fact looking for a 2BR flat in a safe, walkable area N. of Market priced around $1.2M (94114, 94117) I can vouch for the fact that properties meeting this description and in good nick sell instantaneously after a dozen offers, and $100K+ over asking. So, for the record, I for one am not experiencing the retracting, collapsing market being described, and in fact eagerly anticipated, by many regulars here. Just sayin’

  27. Posted by akrosdabay

    Urban_angst,
    “Hey tipster – lay off the hooch in the middle of the day, will ya?”
    You should heed your own advice!

  28. Posted by San FronziScheme

    Tipster, that was a beautiful post.

  29. Posted by Shocked

    ” In reality we’ve experienced a more stable and measured appreciation (8-10% annually) that won’t undercut too many homes too quickly. We’re pretty insulated on this one.”
    Yes – We’ve reached a “permanent new high plateau”. It is a new paradigm.
    Also, Palo Alto is no longer prime.
    City………… Zip……..Median Price..Change
    Palo Alto…..94301…..$1,010,000…..-37.4%
    Palo Alto…..94306…..$1,050,000……-4.5%

  30. Posted by Spencer

    “:If you compare SF prices per square foot from 2002 to the end of 2007, you see about a 40-50% increase during that time period. That’s about 8-10% annual appreciation. Hardly a bubble when viewed from that 5-year time horizon.
    Maybe this is the definition of a soft landing. ”
    I think 10% annual appreciation from 2002-2007is a bubble. 4% average vs. 10% over 5 yrs leads to 20% vs 50% appreciation.

  31. Posted by Spencer

    to furhter the inference….. we had a 50% appreciation when we were only supposed to have 20%. This has to correct somehow.
    If that means that the numbers stay flat from 2005-2011, then i guess you could call it a soft landing. I think that is pretty much guaranteed.
    i don’t think too many people would estimate that SF prices will be higher in 2011 than they were in 2005.

  32. Posted by San FronziScheme

    DerrySF has a good point. Safe friendly places are very much in demand.
    Call it post-gentrification or call it “middle class flight” (white flight is irrelevant in SF, imho).
    Everyone wants to get the best for his family and will go 120% to capacity to get it. Which leads us to over-stretched couples with big questions for the future on their ability to maintain the same lifestyle over the years. Maybe appreciation will help them as it helped the people before them. I wouldn’t count on it.

  33. Posted by tipster

    “As someone who is in fact looking for a 2BR flat in a safe, walkable area N. of Market priced around $1.2M (94114, 94117) I can vouch for the fact that properties meeting this description and in good nick sell instantaneously after a dozen offers, and $100K+ over asking.”
    Well, then you can buy my twentysomething friend’s condo flat, that’s been sitting in district 7 on the top floor with two car parking for $1.250M for the past couple of months, which they are selling at a loss, and was the subject of a previous Socketsite thread.
    https://socketsite.com/archives/2008/03/apples_to_apples_3342_divisadero_two_bedroom_condo_in_t.html
    Be sure to bring 11 more offers, in addition to yours, that is, so you can have your “dozen offers”, though I think it’s a little late to have sold “instantly”. They’d be happy to take your $100K+ over offer, or any offer.
    By the way, regarding the other thread in which fluj is being accused of being a “shill”, a shill is someone who poses as a buyer, but really isn’t one. When fluj posts, he is certainly not posting as a shill. I have no idea why you made me think of that, DerrySF, but thanks for your helpful information from a “buyer”, I’m sure we all believed your every word.

  34. Posted by fluj

    Well obviously you didn’t, Tipster.
    I was thinking of SFRs more than condos when I said that. You guys always poo poo people who are actually in the market whenever they post something, tho. I still don’t get that.

  35. Posted by San FronziScheme

    tipster, a shill can be either a fake buyer, a clapper, a cheerer, or someone who just wears a nice smile for a living.
    Shills can be Active or Passive.
    Active shills can sometimes be found on eBay, shills are active bidders who either retract after having conned the real bidders, or just a proxy for the seller.
    Passive shills are a bit more hard to pinpoint.
    Go to the Stocks Message Boards and you’ll get an idea on the extent of the shill effect. Sometimes employees will post cheerful posts on their free time. Sometimes, even the CEO will do that (A la “Whole Foods”).
    In general, the passive shills have a vested interest in the specific business or industry they are promoting.
    Realtor shills know that image is everything in the Real Estate business. Shiny Lexus SUVs, perfect smile, hair, talk. Positive words.
    Shills work on the “pack psychology”.
    Say you go to an open house and see no one but a lonely bored Realtor. You’ll have a different behavior than if there are 5 other people rushing to visit the place. Which is why the 1-4PM sunday is the industry standard. You look for a home and have to see as many as you can to increase your chances. You run and rush and have to fight your way through people with the same time constraint. The others are the enemy who can get the house before you. You’re in a fighting mindset already.
    Another thing I’ve seen a few weeks ago is a Realtor talking to neighbors while the staging was taking place. She was telling us to come back during showing time. Sunday 1-4PM.
    OK, there’s also the “Realtors have a family too” thing. Who wants to waste their WE at work when you have kids?

  36. Posted by Miles

    As to why the MLS and Dataquick numbers are different – they are compiled from entirely different sources. MLS numbers only count listings and sales listed through agents on the MLS – so it excludes most new development sales, agent sales not listed on the MLS, and sales from principal to principal where an agent was not involved (egads – yes it happens quite a bit). Dataquick gets there data directly from the county recorder by examining the deed itself and is going to include new developments, non-mls agent sales, and principal to principal sales. They are still going to miss some sales from the principals trying to hide the transfer, but they are far more encompassing than just the MLS sales.

  37. Posted by tipster

    Hi,
    As a current seller, I can weigh in. I just can’t BELIEVE how BAD this market is? I mean, I’ve been trying to sell my 5bd/4bath completely new, rebuilt from the studs last year SFR in pac heights on a double lot on upper Broadway, with a 3 bridge view from every floor, for weeks for $500K, and I can’t get a single offer. I’m so frustrated with how bad the market is, I just can’t believe it?
    Do you get it now, Fluj?

  38. Posted by San FronziScheme

    fluj, I’ll side with you on that one. We’re debating the value of the market when there are actual sellers/buyers posting here and some are really hurting.
    For some prospective buyers, what they are looking for is the missing piece in an otherwise pretty successful life. Good job, happy marriage, kids or prospect to have kids. And San Francisco used to be their town.
    Now these are part of the less lucky in the current demographics. You got empty-nesters who are clinging to their homes (thanks to Prop 13 that penalizes downscaling), rich out-of-towners hunting for second homes, usual lucky ones with new money or old money.
    They don’t see the prices in their segment going down. I’ll just tell them this: bunch a 1000 of you together, go to the Bayview district and buy the slums out. It will cost you 1/3 of the price, the place will be gentrified and safe overnight because of your presence and you’ll have the house of your dreams. This might be what’s happening right now but at a very slow pace and with much whining from the locals.

  39. Posted by John

    tipster, you need to see a doctor.

  40. Posted by amused

    … and in other news, Google shares are up more than $76 in after-hours trading based on stronger than expected growth.
    As a result, Ragnarok has been postponed until next week when AAPL reports.

  41. Posted by San FronziScheme

    tipster is one of the sanest around here.

  42. Posted by Dude

    Can’t stop laughing at tipster’s last 2 posts – classic. Seriously some of his best work.

  43. Posted by That's Ridiculous!

    Tipster for Mayor–no, wait! For Chairman of the Board of Stupefyers!

  44. Posted by John

    Tipster is over-qualified for board of stupes.

  45. Posted by Jimmy (Bitter Renter)

    I’m not really sure why there’s a controversy here about pricing. Nationwide, the main impediment to rising prices has been a shortage in the availability subprime mortgages given to fraudulent buyers. Since there were very few of those mortgages used to purchase in SF (except in Bayview perhaps), we haven’t seen any effect from the credit contraction IN THIS MARKET. (After all, who wants a $550k crapshack in Oakland when its utility as a vehicle for defrauding Bear Stearns via cash-out refis has been eliminated? Hence falling demand for ghetto fixer-uppers.)
    But the Alt-A credit contraction / reset / Option-ARM catastrophe is just now starting. 70% of purchase loans in SF fall into that category. Will the wave of resets that will soon hit SF have any effect or will the rising tide of equity just wash everyone’s sins away? It all depends on peoples’ cashflow.
    We’ll know the answer after it’s all over sometime in 2010. But I personally know more than a few Option-ARM financed owners who are trying hard to refinance into a fixed mortgage and cut down on their discretionary spending now that they have to pay not only ALL the interest but also some of the principal every month! Cashflow will soon get very tight for a lot of people. Hopefully (for them) they were smart, didn’t pull out 100% of their equity and can refinance into a fixed mortgage before their Option-ARMs explode.
    Hopefully (for me) they can’t refi and then (as fluj would say), Ragnarok!!

  46. Posted by San FronziScheme

    Well, this market is special. There’s plenty of money in this town.
    But houses prices have a tendency to follow local average wages. The locals either buy the places at some point in the game, or they rent your place which has pretty strict rules of ROI of its own. Some economists say house prices are in average 3 times annual salary, others say 4. Bubble areas are more like 6-7, which gives us quite a way to go down to the average. And all things being equal, things tend to over-correct after a statistical anomaly.
    That’s not to say that prices will lose 75% overnight.
    But look at Japan for an example of what could perfectly happen. Prices lost 60% from 1987 until 2 years ago. That was a long painful contraction. The central bank did everything to motivate inflation for salaries to catch up on home prices. salaries didn’t catch-up, but house prices slowly went down. And people stuck with 60-year mortgages are very bad consumers (they did not walk away en masse like here).
    Then again, it’s a different country, unique city.
    A rule of thumb is that houses cost 50+% more than what people think in the long run. New roof, paint, plumbing, electrical, redecoration, landscaping, waste water (gotta love those trees on the sidewalks, and they all love water, and the plumbers love re-laying those pipes every 20 years, not talking of dry rot, worms and more). Nobody can deny that all of this is happening on a recurring basis and will shocks whoever stays in a place more than 5 years. The current market is spiff-it-up/sell-it then buyers don’t see the true cost of ownership in their updated homes. Let them add 2500+ to their 5000/month plus kids tuition plus taxes plus the rest and those 150K salaries in average will never be fat enough. And there’s no refinancing yourself out of the payments when prices stagnate.
    Rent control looks really nice at this point, if you can afford to wait.

  47. Posted by NoeValleyJim

    Yes, except San Francisco homes have been priced at 5X median incomes forever.

  48. Posted by Mktwatcher

    Rent controlled and getting really tired of waiting. It’s especially discouraging to hear one of my employees say her friend lost a bid on a house in San Mateo last week that went for $150 over asking. As long as the economy continues to hold up well here, I don’t think those prime properties people described above are going down any time soon.
    On the other hand, SOMA and South Beach are starting to look a lot like downtown San Diego. Wouldn’t touch it as much as I like a few of the individual developments.
    One last thought in typical SS fashion: The pictures in the many listings at the Beacon almost uniformly make me depressed.

  49. Posted by Justin

    “On the other hand, SOMA and South Beach are starting to look a lot like downtown San Diego.”
    Amen!

  50. Posted by The Milkshake of Despair

    “…San Francisco homes have been priced at 5X median incomes forever”
    Isn’t SF median income somewhere about $75K ? So you’re saying that we can expect median home prices to adjust down to $375K ? Wow ! That’s quite a dire prediction.
    I guess median income could also double. Is that what happens in a recession ?

  51. Posted by Jimmy (Waiting for Ragnarok)

    I think it would be more instructive to look at median income of the 30% of San Franciscans who are homeowners.
    Since 70% of people in SF benefit from landlord-subsidized artificially low rents (I’m not one of them but I wish I was!). The odds of someone who’s paying $1200/mo for their rent controlled apartment ever converting to being an owner are virtually nil under any circumstances.

  52. Posted by REpornaddict

    The Chron actually reported resale median prices for resale SFHs within the dataquick numbers as 826k – up 0.4% YOY. This suggests that condo prices are pretty stable too, as overall median prices are up 0.3% YOY.
    The interesting thing though was this article on rents
    http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2008/04/18/BUHM107C0Q.DTL
    rents in SF up 14.4% YOY.

  53. Posted by Jimmy (Waiting for Ragnarok)

    Rents up 14.4%? Only about 80% more to go… then renting and owning will be equal!
    Of course I’ll have moved out long before that (I prefer working to commuting … how odd is that?), but I digress …

  54. Posted by San FronziScheme

    The median income was 67K in 2003. But in the median you have people who will never be in the RE market, i.e. subsidized housing or people living stacked in slums, therefore this skews the statistics on the income. I know very few people who make less than that and much more who make double that.
    http://www.census.gov/acs/www/Products/Ranking/2003/R14T160.htm
    But for now SF RE is pulled up cash, not salary. Wait for the pendulum to swing back and salaries will matter again in the pricing of this town.

  55. Posted by view lover

    MSN has an article this morning about home prices being unaffordable to most middle class Americans all across the country. Homes have appreciated 64% since 2000 but incomes only 16%, or so. Even with housing prices falling, the analyst believes it will be a future generation that will be able to afford a home. Pretty depressing. This problem is not unique to SF.

  56. Posted by tipster

    Honestly, ViewLover,
    We have what’s known as a “free market”. If people can’t afford something, prices fall until the market reaches equilibrium. Not instantly, but eventually.
    It doesn’t take a generation for that to happen. CoCo county fell 25% in a year. If SF falls 10% per year for a few years, prices will be back in line with incomes in 5 years.

  57. Posted by view lover

    honestly tipster, I know all about free markets, that’s why we have the high prices we have now. Be it driven by cheap money, fraud, bad loans, its all part of the mix in a free market. The free market also has managed to keep wages low, and so forth.
    I’m just posting what the one analyst said about it taking a generation, and it was not specific to SF.
    Your forecast of 10% decline in Sf per year is way off and quite utopian. That equates to 61% drop in prices over 5 years. If that happens, what do you think will happen to the ovearall economy? Yeah, things will be affordable when we’ve reached hell in a hand-basket.
    Besides, even if it is only 5 years, that’s a long time to get to affordability, don’t you think? Children grow up, people retire, die, etc. during those 5 years.

  58. Posted by Recent ORH buyer

    “To furhter the inference….. we had a 50% appreciation when we were only supposed to have 20%. This has to correct somehow.
    If that means that the numbers stay flat from 2005-2011, then i guess you could call it a soft landing. I think that is pretty much guaranteed.”
    Spencer,
    My goodness, where do I begin. I guess you have magically determined that the actual appreciation for San Francisco real estate from 2002-2007 was “only supposed to have” been 20% over that time frame. We must get every property in the city to personally apologize to you for appreciating for by more than the amount that your infinite wisdom has determined to be the appropriate amount.
    As if that’s not bad enough, you must truly be a prophet with your ability to “guarantee” a flat housing market for San Francisco for the next three years [“numbers stay flat from 2005-2011”]. We definitely need you [and perhaps even your pussy cat] as our new compliance officer[s] at our money management firm. That way, I’d be able to have you sign off on any ludicrous claims and even be able to make “guarantees” to that effect. I’m sure the SEC would love that.
    Here goes – We “guarantee” to make you 20% per year for ever after, and Spencer [and cat] have signed off and determined that this is “supposed” to be so. Woohoo!!
    By the way, thanks to sanfrantim and urban_angst for adding some objectivity and much needed sanity to the discussion.

  59. Posted by San FronziScheme

    Good point, 5 years is en eternity for a lot of people.
    The current national RE crash is unique. Nobody expected it to be so fast.
    I was earlier comparing our situation with Japan that had a 15+-year contraction that led to 60% losses. It was new too.
    But we are different from Japan. In Japan, people upside down just sucked it up and and risk aversion created a painfully slow correction.
    Everything is different in the US. The code of honor is called the FICO score and big deal if it goes down 200 points in a year. People know they can recover, they can negotiate and business has to go on.
    Florida is a good example of that. People send their “jingle mail” and voila. You’re no more a destitute when you get repossessed, just an overachiever who went too far.
    My advice: play the rental business on boths sides of the market. Stay in your SF rent-controlled place or get one. Then buy some rental properties where nobody’s interested, preferably out of SF where rent control does not apply. Auctions are a good start. Do your homework. See what rents, what doesn’t. Crunch the numbers, and when you’re done crunch them again multiplying your costs by 2. If the numbers add up, buy, rent out and start hunting for more. You’ll build equity faster if you stay away from 10-years+ mortgages and good rental income always appreciates.
    But competing for the 3BDR/2BR that every middle class couple wants in this town will leave you frustrated or overstretched. I’ve tried it, the people are just bankrupting their future just to make a point.

  60. Posted by urban_angst

    You do know that Rent Control is going to be abolished in California this summer, no?

  61. Posted by ex SF-er

    “You do know that Rent Control is going to be abolished in California this summer, no?”
    source please… this would be interesting.
    I heard squawking about it a while back… but am just wondering if it is actually taking place.
    Thanks in advance.

  62. Posted by tipster

    Didn’t mean to imply that prices were going to fall by 60%, just that prices could easily fall by 10% per year for a couple of years, and wages could catch up to that in 5, and presto: affordibility.
    As for rent control, there are two provisions on the ballot that essentially abolish all government controls on property. If your neighbor wants to put up a nuclear power plant? Feel free. Adult bookstore across from a pre school? By all means. Neighbor wants to earn a few bucks dismantling cars in their front yard? Go ahead. Someone on the coast wants to build a mega resort and block public access to the beach? No problem. Neighbor wants to build an apartment complex in their back yard? Nothing you can do to stop them. Skyscraper in the suburbs blocking all your light? By all means. Put up a twenty truck UPS parking garage next to your home? Absolutely.
    Oh yes, and rent control would also be abolished if one of the propositions passes.
    Think it will pass? No one else does either.

  63. Posted by pica1986

    It’s on the June ballot. There are 2 competing initiatives led by eminent domain measures, Prop 98 (eliminates rent control) and Prop 99 (does not eliminate rent control). The way Prop 99 is written though, if it passes it automatically overrides Prop 98 even if Prop 98 gets more votes. Whole thing is very confusing. Every renter I know, which is most of my friends & co-workers, is very aware of these competing propositions and turnout for June voting isn’t historically high. So I would say it’s very far from definite that rent control will be abolished, but it’s still very much a possibility.
    As a renter, it would be a shame to see my rent increase, but I can afford it. As a future home buyer, it will definitely hurt my efforts to save up a down payment and save for my retirement. Sure would be nice if they would toss out Prop 13 while they were at it to help level the playing field though…

  64. Posted by anonm

    Wow, I didn’t realize until just now that Marin actually saw a price decline of over 10%. Forget it, that’s game over – it’s only a matter of when, not if, we see double-digit declines in SF now (not that that wasn’t already the dominant opinion around here anyway).

  65. Posted by SanFranciscoJim

    We have what’s known as a “free market”. If people can’t afford something, prices fall until the market reaches equilibrium. Not instantly, but eventually.
    Not really. The free market implies that prices go up or down with supply and demand. And the “free market” has determined that San Francisco homes are more desirable and demand a premium, apparently one that is greater than you are willing to pay.
    Only one county in the Bay Area saw home prices go up last month, which one was it? Hmmm, I wonder…
    There is still quite a bit of demand to live in this great city: witness all the bellyaching from people who have not figured out how to swing it.

  66. Posted by Dude

    Hey jim – what about those of us who can easily afford to buy, but choose not to, because we can see prices falling in the areas we’re interested in?

  67. Posted by fluj

    DQ for Marin median showed 4.4%, not 10?

  68. Posted by anonm

    I’m referring to the existing single family homes numbers published by the SF Chronicle today (also sourced from DQ). For that group, Marin is down 49.5% in volume and 10.6% in price. Only SF was steady (in prices, down 36.7% in volume). But if even Marin is going down, then clearly nowhere is immune.

  69. Posted by andy

    Sanfronzischeme: When you say You’ll build equity faster if you stay away from 10-years+ mortgages and good rental income always appreciates. Can you explain? thats exactly what im doing now and thinking of doing, but not sure what you mean by 10+. Are you saying 30 year mortgages are a bad idea for rental property purchases? Wanna go in business together?

  70. Posted by sanfrantim

    Now that GOOGLE stock has come roaring back, let the SF real estate appreciation take off again! Or, so say some on this site.

  71. Posted by fluj

    Yeah. Many on here predicted the imminent decline of Google’s stock first, SF RE second.
    Gotta laugh at “Stay in your rent controlled apartment here till kingdom come. Stack chips. Buy non-rent conrtolled building elsewhere. Stack more chips.” — No hypocrisy there. Nooooo.

  72. Posted by dub dub

    @sanfrantim — the patented google indicator only applies to *good properties in SF*.
    And these won’t “take off”, they just track what google is doing — it now predicts 2007 prices, just a fancy way of saying don’t expect bargains on houses you want to live in. You are competing with people in the Google Industrial Complex where a few hundred thousand extra is no big deal (it’s found money).
    You are going to have to decide what you want more: “owning” a nice house in SF, or getting a “relative bargain” on a house purchase.
    Do not underestimate the awesome predictive power of the lazy google indicator 🙂 🙂

  73. Posted by John

    Where is Satchel?

  74. Posted by NoeValleyJim

    Isn’t SF median income somewhere about $75K ? So you’re saying that we can expect median home prices to adjust down to $375K ? Wow ! That’s quite a dire prediction.
    I guess median income could also double. Is that what happens in a recession ?

    I think a bit of both will happen. I expect that incomes will go up and home prices will go down, mostly due to inflation and eventually we will get back to 5-6X median income. I think it will take 10 years to work itself out though. I doubt if the recession will last that long.
    It is entirely possible that the median will settle at a point slightly higher than that, since it is getting more desirable than ever to live near good jobs. I don’t except the current 12X to last forever.

  75. Posted by Jimmy (Bitter Renter)

    Satchel was recently schooled by the commodities market, and his macro-trading strategies lost his hedge fund over $1B in the past 3 months. He’s down and out, living on Larkin St. behind a dumpster in the Tenderloin …

  76. Posted by anonfedup

    Thanks Jimmy, but it was a very rude personal attack that drove Satchel and others away. I thought he had valuable things to add, and would prefer people to disagree with his postions instead of personal insults. It seems people start throwing insult bombs whenever they don’t have a good response to a logical argument.

  77. Posted by Jimmy (Bitter Renter)

    Really? People attacked Satchel? He was just about the only reason to log on to this site…
    Maybe he’ll start his own blog as soon as the city installs free municipal wireless in the TL!

  78. Posted by view lover

    Who insulted Satchel? I thought he had a thicker skin, after all, he could certainly dish it out.

  79. Posted by dub dub

    Can someone refer to the article thread/insult which allegedly drove him away? Maybe he is on vacation!

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