The SocketSite Scoop: Millennium Cuts Prices 15% Across The Board

“They still intend to maintain their “no negotiating” policy and claim that this will be the last (only) drop for a very long time.”
Ok. And ORH tower 2 will break ground in january … er, february … er, march … er, once we find a new contractor … er, maybe someday.

And here I thought the topic was how much weight to attach to the pronouncements of developers.

LMRIM, completely agree. Who is left to buy? The super rich have already bought, the move-up buyer is stuck for years in their current home , and first time home buyers are way priced out of the market. It is absolutely mind-boggling to me how completely clueless most of the people in the bay area are about home prices and where they are headed. We have had a 20 year period of cheap money/low interest rates and rising home prices, we are now in for a very long period of rising interest rates and lower home prices, that’s just the way the way cycles work.

I am really shaking my heads when reading all these predictions on the future.
I am not referrring to any specific individual, not because I am a nice person, but because there are more than one person that likes to do this.
There are people who got paid millions and millions of dollars each year, and they can’t predict with good accuracy. Who do you all think you are??
If you are that good , you would not be typeing these posts yourself. ONE of your secretaries would do the typing for you.
I worked in financial planning & budgeting for publicly traded companies for 10+ years now, with the last 5-6 years reporting directly to CEO/CFO.
I watch these people stuggling to see 6-9 months ahead, and you are all comfortable foreseeing the next 5-20 years.
When i was a little girl, mom used to tell me a story that started like” once a time, there was a frog sitting at the bottom of a well, looking up the sky, thinking that is the whole sky……”
In a way, we are all that frog sitting in our own well. Some know that he is sitting in a well, some don’t. That is all.

Ester, just go back and read the posts on this board starting about two years ago about where the local RE market was heading. A lot of them have proven to be just eerily accurate. And go back (if you can) and read the market predictions from other local realtors’ web sites from the same period of time. They have pretty much uniformly proven to be 180 degrees off.
Recognizing broad macroeconomic trends is far simpler than projecting one company’s performance three quarters out.

Ester, a-yup. Bernie Madoff made billions, so that proves he was a great fund manager! Well, actually, as is now clear, there’s no relation between competence and compensation, and that’s one of the reasons we’re headed into GDII. We live in a piratocracy, and the buck-an-ears are on their last big looting and pillaging spree (TARP, etc.), before they scuttle the ship and send us all to the bottom. For years, people here have predicted the inevitable collapse of the bubble into total economic meltdown, and they were inevitably called bitter, jealous, etc. (not that you, Ester, would stoop so low). Well, who was right? The willful ignorance and denial displayed on this site is stunning at best, if not actually pernicious . As CR says, “whocoodanode?!”

Hard to predict? you guys have got to be kidding. There were about 6 of us who called these declines as we fought off the likes of fluj and paco.
now as far as what’s next. prices will continue to decline in sfo. I used to think the condo index would go to the 2003 level for sfo, but I think late 1990s at this point before it stabilzied.

ester,
If you are really a numbers person you would not be posting the non-sense you did.
Once you understand easy money (e.g. credit) is gone, all you have to do is look at medium price to income levels of a market and compare them to historical levels to see that real estate prices are going down. The only question is will they over correct on the downside.
As to people not predicting this mess, well… that is also nonsense. The problem was too many people were talking their book, hoping the merry-go-round would continue as they lined thier pockets; instead of the truth. This crap about “whocouldaknow” is crap.
A retired (happily) Investment Banker

I don’t doubt that some of you have been doing a lot of study to come up with your prediction. However,
But, judging from some of your posts, I feel that your “research” has been more on a hear-say level. And let me be very specfic.
Some one used AMD as an example to say that this economy is collapsing. Someone else quoted Pfizer 400 sales layoff. Did you know that these two companies have been struggling for years 99% due to company-specfic reasons, and has little to do with the recent market/economical condition?? Did you know the Pfizer laid off 15,000 sales 2 years ago??

Tipster,
No need to feel sorry for me. 4 out of the 5 have sizable appreciation, totally maybe $700K, with one below what I paid for.
I actually have no plan to get out any of them, even if there is another 80% down like some of you predict.
But thank you for your nice heart.

So did the people who didn’t invest with Bernie Madoff.
Your so called “appreciation” has been a full on mirage.

Speaking of Madoff,
Tell half the people prices are going to go up and half the people prices are going down and you will look like a genius to someone.
Whip tee doo.
Paul
PS I don’t make predictions.

Ester,
YES, some of us saw this coming clearly… certainly much more accurately than your overpaid geniuses you work for! As for me and my wife, we sold our large house in the East Bay back in 2003 after it appreciated over 100%… maybe a few years early. But I underestimated the stupidity and greed of the “Masters of the Universe” on Wall Street and was amazed they kept this real estate bubble going for another two years! Then last year in January we moved ALL our retirement money into US Treasury’s as the meltdown got more imminent. So I guess based on your definition, I should be making millions and millions now! Wake up to reality Ester… this economy is going down the drain quickly! If you are smart you’ll get out of your property investments while you still have some appreciation to realize!

“…and I don’t make predictions”
Sure. Just like every republican I know now claims to have been a libertarian for the past eight years.
Talk about confusing knowledge with a job title.

SFOSEA. It is on topic. When buildings start making wholesale price drops that is a trend. If you want to prevent people from talking about that- go do your own real estate website.

“Status and power do not equal knowledge and ability, but knowledge and ability usually lead to status and power. Period.”
I’m afraid I don’t agree, unless you count shmoozing and conniving as an ability.

What are the price points in this building per square foot? how much higher are they than current comps at infinity and even orh?

Wow…this thread has degenerated into a cyber pissing contest. To echo Cooper’s question, does anyone have any stats on the Millenium (% sold, $ per sqft, etc.)? And to whoever does, thanks in advance for adding some substance to this thread.

“Hard to predict? you guys have got to be kidding. There were about 6 of us who called these declines as we fought off the likes of fluj and paco.”
Pretty funny. I’m delving into this because you called me out by name.
That is not a fair way to frame it. I’m pretty sure Paco and myself agreed that a change was likely to come, that it was only logical for it to come, but that it wasn’t here yet at the time. We objected to people such as yourself who continually got the current market wrong. The — still not here yet — idea of a calamitous sea change.
And in this thread, no less? This thread about a condo tower? Neither Paco nor myself were ever all that bullish on condos. It’s a supply and demand thing, IMO. You’re just all sorts of wrong, again.
Really, how many hundreds of times did you miscall an individual sale’s closing price on here, Cooper? How many hundreds of times did your possible-future-colored glasses screw you up?
The stakes are very small for people who don’t own anything and simply spout off on the internet, tho. Please by all means continue to have fun with your hobby. But keep my name out ya mouth.

Fluj are you even kidding? You argued for like years against all the people that said there was a bubble. You can’t argue against a side so nastily and personally and then all of a sudden be like oh I never argued against them. Especially when there are like 9000 threads and comments by you paco and all the other real estate snake oil salesmen saying exactly the otherwise.

“You argued for like years against all the people that said there was a bubble.”
Aren’t archived websites great?

“Dude, I’m pretty tired of your armchair baloney. You obviously aren’t trying to buy SFRs in a neighborhood where there aren’t occasional stray bullets. Everybody knows what’s going on except you, it seems.
Again, I want the change to come. Bring it on. Where is it tho? you don’t get to holler “sea change” for two years and still be correct.”
Fluj, October 10, 2007 Socketsite

…reading all of this back and forth and nonsense, I am glad I went out last night with friends and family…

“Prices will never drop”
¹
“Prices haven’t really dropped yet.”
People on this site have little regard for nuance. “Fluj you were the biggest cheerleader on here” and the like. No, not really.
I got told all the time how mean all the permabulls were on this site back in 2006 and stuff. Gotta take the bears word for it on that one. I wasn’t here.
But as far as me being the single loudest voice saying “prices would not drop.” Nope.
You don’t get to be wrong about being right when you were wrong for so long before you were right. And guess what? Most of these guys are still very wrong. 40% drops huh?

“40% drops huh?”
Pssst. fluj.
They haven’t stopped dropping yet.

Also, one last thought before I leave for the day. When in doubt, please do the following.
Ask the Japanese!
(Caveat. This is not to be confused with a Japanese friend you might have. Not a guy on your soccer team, an acquaintance, colleague, sensei, etc. No. We instruct you to, please, make sure you ask all of them. Each and every one. Avail yourself of the national query option.)

“Especially when there are like 9000 threads and comments by you paco and all the other real estate snake oil salesmen saying exactly the otherwise.”
Posted by: Keepingitreal at January 18, 2009 9:47 AM
as i’ve challenged spencer and others who are factually deficient,
please please show me a quote. out of 9000 comments you should be able to dig one up.

Some of you are still trying to say Paco is a realtor too! Paco actually advocates NOT USING REALTORS for people who know what they’re doing. “Snake oil salesmen.” Ha!
And me? Trying to sell on here? “You know what, honey I’m going to telephone that Realtor Fluj fellow from the Internet. Wait, what’s his name? Where does he work?””
The most interesting thing about this website is how people can read the same things and come up with such wildly divergent conclusions.

“Also, one last thought before I leave for the day.”
Just do us all a favor and leave for the day already Donald.

On the subject of condo deposits (and the seemingly question of which posters spotted the trends, offered advice, got the timing right, etc.), let me offer the same advice that I offered here on SS on December 18, 2007:
“If the info that available units are drifting up (meaning actual cancellations)is correct…. people who have signed contracts: take your loss and walk away.
Don’t be left doing a Miami Mambo in ’09.”

Fluj–I don’t know who Donald or why you feel the ned to attack him. In fact, I don’t know who you think you are other than a realtor who suckered a lot of people into 50% over priced homes. On the plus side all these blarney skills you’ve got are going to come in handy when they need someone to unload them on to the next sucker to avoid foreclosure. Look out belloooooww…

the initial millenium prices were so high initially that they could not be compared to the general SOMA market. the 1000 psf to 600 psf fair value metrics did not apply here. it’s way out of my personal world (like the Ritz) that i did not try to rationalize how they came up with the prices. with a 15% reduction, it just seems like it came from an arbitrarily high price, to a lower arbitrarily high price.

Tipster, I respect your opinion, but you can be offensive.
‘Anyone who buys now is a complete idiot.’
Will they still be an idiot if the Obama administration jump starts a recovery that brings back Bay Area RE? Or as esther points out, are you able to forecast with all certainty that we are not coming back from this anytime soon.
I am someone who bought in the last 6 mos., and I can’t say I haven’t had my doubts, especially reading all of the bear arguments on this site, as well as other blogs like Paul Kedrovky and others. But I had read that info before I bought, and I still went ahead with the decision. Of course it was before September, but still, I had an inkling that things were not going great for the economy.
Bottom line is, I wanted a place to live for a extended period of time with my family. I wanted the ability to do with the place as I see fit. I wanted to choose my own appliances. I wanted to live in SF. I wanted to live in a nice neighborhood.
After watching the market for 9 years, and seriously considering a purchase for the last 4, I finally saw a window of opportunity to buy and I did.
Does that make me stupid? I don’t think so. It does make me someone willing to take a risk in the middle of this turmoil. The risk not being that of depreciation of my home, but rather the risk that I could have gotten much for more my dollar. If SF RE drops by 50% in the next year, I won’t be tap dancing down Haight street, but I won’t be despondent either. A raise or drop in the value of my home won’t affect my mortgage payments.
I didn’t buy more than I could afford, I didn’t buy with the expectation for immediate wealth generation. I bought the best place I could with my current salary and savings. One that I could stay in for 5 years without a problem. I like being a home owner in SF, and it took a lot of effort to get here. I don’t plan on letting a little global economic disruption get in my way. 🙂

“Great job on being wrong for two years.”
These kind of comments miss the point entirely. Think of it this way: 400 pound gentleman, smokes two packs a day, doesn’t exercise, lives on a steady diet of bacon and and ranch dressing. Many would say that such a person is overdue for a heart attack. Others may say that, hey – after this long, this guy may go on forever. “He must be bullet-proof.”
So if the guy above doesn’t drop dead for two years, does that make those who predicted it any less wrong?
Home ownership is (or should be) a long-term strategy. Calling a market correction two years out based on some basic fundamentals seems to be more common sense rather than prescient. Yet the nay-sayers can’t help but talk down everyone who “told you so.” Enough with this “being wrong” jazz to those who said this was coming — they weren’t.

And not to be sycophantic here, but truly Satchel has been smarter than most experts that I am exposed to daily.
SO ester, all you had to do was read this little blog to be even smarter than those people that you work for that ‘cant predict 6 months down the road’
Chose you experts wisely..

Can’t say I agree Mikey, but at least you present your case well. Suppose the downturn is not lengthy, tho, for a second. What if the length of time Chicken Littles holler exceeds the length of time sky = ground? Is that nothing at all?
Also, some of these guys got individual properties so wrong, so many times. They tried to tack possible future on here and now, and we saw them do it. That was specific and measurable.

Publius
Not sure about that. The latest round of easing by the Fed has certainly helped the option arm crowd. See Mish here. Its a good optimistic analysis from a real bear:
http://globaleconomicanalysis.blogspot.com/2008/12/arms-reset-problem-vanishes-into-thin.html

“Will they still be an idiot if the Obama administration jump starts a recovery that brings back Bay Area RE?”
http://www.calculatedriskblog.com/2008/12/q3-2008-mortgage-equity-extraction.html
At the peak of the bubble credit creation was pumping about 750B/year of money into the real economy, funding about 9% of consumer spending. The end of that flow of money is what is putting us into the consumer lead recession. The obama stimulus plan is 425B/year over two years. That’s not going to be anything but some methadone to get us through the worst of the withdrawal.

mac,
Thanks for the link.
It still sounds like Mish believes the easing only extends the L-shaped recovery into slow bleeding Japan style recovery. Flat or slightly declining GDP doesn’t bode well long term for RE. With no expectation of appreciation in an L shaped recovery, I imagine demand for leveraged assets including RE does as well.
My guess is that SF housing will be more tied to price/rent ratios and unemployment rates than they will be to interest rates. I do believe Mish is correct on the effects of QE somewhat mitiagting the ARM situation, though it won’t stop the bleeding per publius’ above mentioned reasons.

Can anyone cite a positive reason for buying in this climate? As someone who has been actively looking up until about a year ago, I’ve become convinced that – barring some very unlikely act of god – SF real estate has nowhere to go but down. There is oversupply and demand has been clipped a hundred times. I can’t imagine that demand will pick up any time soon.
The sea change is here – at least as far as I can tell. When I moved here from Hong Kong 8 years back, I was very skittish about property – I simply knew too many people who were underwater and had no way out.
Can anyone point to anything at all that would suggest it’s better to buy than to rent for the foreseeable future?

Fluj:
“Suppose the downturn is not lengthy, tho, for a second.”
Okay – I’m trying to imagine that but I just don’t see how that can happen. Look at all of the things that that contributed to the bubble – easy and available credit (not only in housing but MEW’s, credit cards, etc) drove not only RE purchases but consumer purchases, high employment, record stock market performance, etc. We have none of those things today.
Every sector of the market is contracting, unemployment is up and those that have jobs are fearful that they may not next month. Easy consumer credit has resulted in record debt, mortgage lenders will lend only to those in the best circumstances as housing prices fall ~30% YOY.
This won’t continue indefinitely, but the size and scope of the macro problems we’re experiencing seem to point that a quick turnaround is not in the cards. And to be clear, those macro problems affect the SF RE market.
Until credit markets stabilize, potential buyers are comfortable with their own financial well-being (and perhaps recover some of their down payments lost in the market downturn), and prices at least slow their YOY declines, we should expect a continuation of what we’re seeing today.
All of the above items essentially filter into this: Assuming you want to buy (which also assumes a seller connected with reality), have a down payment, and are comfortable in your own financial situation, how many lenders will lend you the money to buy an asset class that has declined 30% in the last year? It seems wildly optimistic that any of these items should turn around in six months as some have suggested. While no one can predict the future, this one seems like a good bet.

Hey check out park station summerhill homes near costco in south san francisco. They slashed prices significantly too as of last week. Down 20% from their prices a few months ago.
http://www.summerhillhomes.com/find/parkstation/

When I speak of downturn here, I speak of r.e. downturn, not economy at large. I dunno fellas. There is meta, and there is macro, and there is micro. There are bubbles (tech, credit), and there are trends (re-urbanization, web 2.0). I sat and held an open house today. I saw people in the marketplace. You might think they’re foolish. But there were a lot of them.
No bear has ever really explained the lag in say, west side LA, Seattle, Manhattan, SF, desirable Chicago, and the rest of the country. Eighteen months is a long time in the American consciousness. Yet they all could have very easily, if they were truly honest with themselves. It wasn’t ALL credit bubble. It’s capital. It’s unreported income. It’s changing workforces. And yeah, sure, it’s credit bubble.
IMO.

jj – I felt the need to mention that your calculation was very smart – one of the reasons I still read the comments.
I’m a first-time buyer. To some of you who say things like, “only a fool would purchase now,” I have 2 questions: can’t I just put in very aggressive offers in the hopes that someone eventually accepts? Second, how aggressive should I be? 30% below asking? 40%? 50%?

Jorge, Joe Friedman, Ted Kaczinscki, whatever.
You want earnest dialogue? I’m glad to do it man. Seriously. I’ve told you this before and I mean it.
High income areas took longer to register the hit, huh? Why? Tell me. Because those areas had more money to begin with? That doesn’t change the nature of the beast?
Re: 2 % — I know what I’m doing. I really, really do. But again. I did not pay to advertise on this website. Thank you for the exposure.

Catching up on all those posts.
I agree with fluj that the resiliency of the upper market was pretty amazing in a last stand kind of way. Of course there’s the explanation of high net worth that helps people with enough reserves to “wait it off” and this is definitely a big part of the 2006-2008 lag phenomenon. These people have learned from the past that things would always get better. Let the weak give up, the strong will prosper. Sure, why now? Look at the early 90s downturn. Someone buying in 1990 and selling in 1996 would have been a net loser in many instances. Had he waited until 2000 he would have gone into the black and then all the way to the moon from there.
And I feel that was the bet in the 2006-2008 lag for the wealthy: A 6-months recession followed by a gradual recovery. Big deal. That won’t affect us.
But this crisis has been going on for more than a year and collapses happen one after another. This isn’t your 10-year sanitary clean-up to remove the weak growth and let the strongest strive.
How many more 50B Ponzis are there to expose? How many more banks worried more about making the quarter than lending into a declining market? How many more millions out of a job? Those are hitting all classes. I read yesterday that an oligarch (Roman Abramovic) lost more than 80% of his wealth. and he wasn’t the only one.
http://www.javno.com/en/economy/clanak.php?id=217914
The richest are going to be the most hit in this next wave. This crisis is the result of too much confidence, and the most overly confident were the wealthiest, thinking they were immune for the sole fact they were getting insider information and who are now being clobbered for taking too much risk.
This is affecting the richest. I think the best of SF will suffer ripple effects and maybe stronger than other segments.
These are the real issues, not the sterile issue of who said what and when and for how long. Sure it took longer to get to the cliff. But the cliff hasn’t moved one inch.

By the way Flujie,
The nature of the beast was the fact that assets were overpriced and people of all classes expected them to keep increasing. Not too hard to unederstand. Unfortunately wages didn’t foloow in suit.
Word up mother flipper.

Not that you read posts for content unless they agree with your appreciation assumptions, of course.
LOL. You nailed it. This poney has only one trick and it’s called denial.
65 DOM (aka San FronziScheme)

Flujie,
Oh yeah, please reply to my comment regarding sales of 1M+. Can you show results of decreasing DOM or higher YoY prices? Are micro, macro or meta (What’s dotcomese for meta by the way?) indicators pointing to a better market in 2009? Let us know. We’re always happy to hear the latest from our local real estate magnate. I know you don’t have the courage to predict anything on this blog, but most bears have done so and been right. You end up picking nits regarding the timing, but they sure seem to have the micro and macro nailed down.
Let us know how the meta pushes this market back up.
Sincerely yours.
P.S. Glad you feel like you know what you’re doing. 1M+ with construction and carrying costs can burn a bit.

LMRiM, thanks for the link. Even Redfin had it wrong. There’s noting like basic ground work to get the real info and the people at sfhouseprices do add some value there.

Even Redfin had it wrong.
Looks like the MLS listing number was changed from the September – November listing, and then it was relisted within days with a new MLS number. There’s a lot of discussion of DOM issues, and some of the rules around it in this old thread:
https://socketsite.com/archives/2008/05/and_apple_is_withdrawn_without_selling_and_returns_with.html
If you take the time to read through all the posts there, you still can’t figure out what the actual rules are, but there are a lot of “gems” in there from our friend.

For those who are convinced you “can’t predict the future” and thus you may as well just go ahead and buy in today’s market, I’m curious what you think might stem the current price declines in SF. The demand curve has shifted way, way to the left. It currently looks like we may not even crack 100 total sales this month for SFRs and condos combined (that’s a drop of 2/3 from recent years) and inventory is way up. That is a real collapse. Does anyone truly think the gov’t will start giving $1.5 million loans to individuals with $150k incomes and no real down payment? I guess it’s theoretically possible, but does anyone attach significant odds to this?
The reason for SF’s roughly 12-month lag behind the downturn in other parts of the state has been discussed at length here. One key factor is that the spigot for subprime loans was shut off earlier. These loans, at high interest rates, were given to those who really had no realistic prospects of ever making the payments even without any recast or reset. The scheme (a la Ponzi) kept going as long as banks were willing to lend to the next subprime sucker to buy the place from the previous one. These were not that common in higher-priced areas because the loan amounts were lower. This part of the bubble had already started deflating by early 2006, driving the banks to halt such loans over the next year, and this turned the deflating into a collapse. These loans had a shorter teaser period (0-2 years). Places began to flood the market as sellers had to sell (or were foreclosed) but there were no more buyers once the banks had stopped lending. Volume collapsed and months of inventory skyrocketed. Thus, Stockton, SF D10, Phoenix, Miami, Contra Costa, etc. saw prices really start to tumble by 2006. Prices in these areas continue to fall even though volume has picked up — no bottom yet.
The funny loans that drove the bubble in higher-priced areas like “Real SF” were not subprime. These were the no-down, no-doc, neg-am etc. loans that often had a longer teaser period (3-5 years). So buyers were also buying places here (and West LA, and the beach areas of San Diego and OC, etc.) that they could not afford, but the calm-before-the-storm was stretched a little longer. Banks really did not stop making these loans until early 2008, so this bubble only really started collapsing then (although it was deflating before that, which caused the lending to end). So now we see in SF just what we saw in Stockton in 2007 — plummeting sales volume and rising inventories. We’re just not as far along in the process. As I’ve predicted before, it looks like the higher-priced areas may see even a bigger collapse than the Stocktons because the pool of buyers is smaller to begin with, the GSE backstop (at $625k) and low rates may provide some floor support at lower price levels, and I doubt Congress/Obama/Fed will be too interested in subsidizing $1.5 million home buyers enough to make enough people buy at that price level. And, of course, we are entering a long, massive recession combined with an epic stock market crash that has sapped tremendous wealth. Yes, and the Alt-A loans that fueled “Real SF’s” bubble are starting to recast (and prime loans are performing horribly as well).
How many places have sold in Pac Heights or the Marina in the last month? A handful? 50% of the listings there have been reduced. It’s the same all over town. And places pulled for the holidays are now pouring back onto the market along with new listings. There are just too few buyers — those who can’t afford it but previously bought anyway because some bank lent them the cash can no longer do so, and the much smaller pool that can afford it are not in a buying mood. And there are too many sellers, because they HAVE to sell.
So maybe “idiot” is not a good word for the very few who are buying right now. But this trend really could not be more clear, and unless someone can provide some compelling, or even plausible, reason why it will halt or be reversed any time soon (“the internet” and a plethora of trustafarians don’t cut it) I don’t see why anyone would be buying here right now.

Trip,
I appreciate your perspective. And it’s true that prices have fallen somewhat. But the Stockton = SF thing is a real stretch, IMO. Stockton is a railroad town, a crossroads for produce. SF is SF. It’s true that properties aren’t selling anywhere near as rapidly, and often for less if they do sell, more are re-entering the market, etc. However, in nearly every neighborhood a property or three is still getting sold for near-peak prices. It is really gumming up the works.
I wish some of you wouldn’t bring pre-text bias and baggage into each and every thing that you read. Take a poetry course at your local junior college or something. Seriously. The explication skills shown on here are sorely lacking.
Joe Friedman, you’re all mad at me above because I won’t shot call a better market for 2009. I never went there in the first place! If you ever took the time to read my thoughts on here, I always said, “It’s logical a corretion is coming. I welcome it. But it’s not here yet.” Too many of you guys are like, “oh he’s a realtor. He’s Mr. buy now or be priced out forever.” all that rot. Cooper, you always say that when pressed. Whatever. Wasn’t me. And you know it.
Oh, and about eight of you revel in the same joke over and over again. Only Foolio is good at it. Most of you suck at it.

Heres actually a less snarky response to ester re why some people ‘saw it coming’ and her crowd didnt. Its from Marketwatch and quotes Jeremy Grantham
“Here’s Grantham’s fascinating analysis from a Barron’s interview a few months ago: “Why is it that several dozen people saw this crisis coming for years? I described it as being like watching a train wreck in very slow motion. It seemed so inevitable and so merciless, and yet the bosses of Merrill Lynch and Citi and even Treasury Secretary [Henry] Paulson and Fed Chairman [Ben] Bernanke, none of them seemed to see it coming.”
Our government and banking leaders are “management types who focus on what they are doing this quarter or this annual budget are somewhat impatient.” However, “seeing these things requires more people with a historical perspective who are more thoughtful and more right-brained, but we end up with an army of left-brained immediate doers. So it’s more or less guaranteed that every time we get an outlying, obscure event,” a Black Swan, “that has never happened before in history, they are always going to miss it. And the three or four dozen odd characters screaming about it are always going to be ignored.”
http://www.marketwatch.com/news/story/Take-test-see-how-youll/story.aspx?guid={5A72E7D0-D556-44B1-8436-6F5D0BB3CE4F}

Someone asked a question about the Millennium and prices for 2/2 versus Infinity. First of all, the floorplans at The Millennium are less awkward than at Infinity IMHO. No curved living room and the LRs tend to be larger. The views at The Millennium are not as good as at Infinity in general, but having looked at both properties there is no comparison in terms of luxury and quality.
Millennium prices in the City residences (below the 26th floor) are now $700-$1000 sq foot. In the Grand residences they are $1000-1400. Still no bargain and there may more downside adjustments after May 15. The Millennium has very few terraces, but I have been in the building several times now since I am in contract and it is really nice. The view in my unit is better than I thought There is no comparison between this product and The Infinity’s.
I think you could get a good deal on one of the West facing units (Transbay direction) since I understand these aren’t selling. Last I heard they are over 25% in contract in total, but sales have been slow over the past few months for obvious reasons.

Because VC isn’t at all resilient, right Tipster? Dot com and 9/11 at least taught us that. When you’re gone, you’re gone forever. Right? I hope I’m getting this all down.

“Where will oil be in 18 months?”
On the commodities market where its always been subject to the usual vagaries of future traders and completely outside of the realm or influence to real estate.

someone above asked when would it not be “idiotic” to buy now.
my thoughts:
currently, the US govt is on a rampage to make the banks “whole”. they are disseminating countless amounts of money. However, we are not seeing significant amounts of monetary inflation (growth in the money supply) because the “velocity” of money is way way down from “normal” (or at least down from bubble times.
At some point that may change. As it changes, we will see a spiral of inflation. the spiral of inflation could wipe out all of the real value of your assets…
right now I am basically all in cash. (with a little oil and gold and silver).
once I see signs of the inflation, then I will likely buy assets. Not sure if it would be a house or not, I’ll have to see… but the govt will try to blow a bubble in housing and we’ll see where those forces end up.
but to be brief, I’d start looking at housing again when it looks like our currency is rapidly losing value.
I don’t think we’ll see true HYPERINFLATION, but I wouldn’t be surprised to see severe inflation in the next few years.
I’m sorry, I can’t give a time line,
but watching what our govt is doing (throwing TRILLIONS of dollars away to connected interests), I get angry and sad.
I don’t want to end up like this kid who is buying bread in Zimbabwe… not a joke, this is for bread.
======
Lastly: Ester asked why we armchair economists could see this when the big bucked moneybaggers couldn’t see it.
The answer is simple: they didn’t want to see it.
by not seeing it they raked in BILLIONS of dollars. And now they walk away from the losses (which you will pay through taxes and depreciated dollars).

Trip and Ester are both spot on in their own ways. I have waiting for a burst bubble since the nineties! 😉

This thread has been a little patchwork and winding, but taking broader strokes at the DOM issue and specifically the very role that realtors play: an important question is the value they add in the current day.
Being under the microscope is often not fun, but realtors are certainly not alone right now, as is often the case in a downturn, when all practices are scrutinized anew.
A lot of what realtors used to add to a transaction, can now be had by a buyer who has the time and desire to do their own due diligence.
The question is why is there an intermediary at all and why is it a realtor.
Why isn’t the market modelled for the buyer and seller to meet and transact and they choose.
Like most things, a lot of the reason is historical practices.
Some of the value that realtors seem to add is local market and specific knowledge of the particular housing unit for sale. In addition to that info, it seems to come down to saving time for a potential buyer, and the intermediation that any major purchase seems to implicitly require.
But what is the fair value of this role – and what will the market pay for their services.
Would we better served by a flat fee in any given market to obviate the inherent conflicts of interest. And should unethical practices (manipulations to sell or elevate one’s reputations) be raised to the level of fiduciary responsibilities?
What is off-putting after any bubble is the hyperbole, games and manipulation that seem to have played out and indeed added to the bubble that many got burned by.
There is likely always to be a role for realtors (call them what you like – used-house salesman or agents) but their future role in the real property market will certainly re-size itself in the coming years.

Amir,
You may be right. But one should never underestimate the widely divergent perspectives of buyers and sellers. It’s future versus past. Potential versus sentiment. Hope versus hope. An intermediary is almost always necessary. As much skepticism as there is towards realtors, and sure, sometimes it is deserved, pales in comparison to the skepticism between buyers and sellers. They often simply could never be in a room together.
Not to mention that real experience and hands on knowledge will always trump HTML on a screen.

Trip @ 8:57 – excellent summary.
ex-SFer @11:00 in response to Ester –
Upton Sinclair said it well, and this should be kept in mind whenever a businessman, government official, or pundit speaks:
“It is difficult to get a man to understand something when his salary depends upon his not understanding it.”

For first time buyer-
Re: aggressive offers – it is not a simple matrix of 30% off list etc. Smart sellers are pricing agressively, staying ahead of the decrease value curve. It is not a one size fits all approach. Some seller are ready to listen to the marketplace, some are not.
Always, only offer what it is worth to you as a buyer.
Re: Re listing withdrawn properties or resetting DOM clocks, no one is hiding anything clearly – since you know about it.
Sales and listing histories are on the MLS and are easy to check.
Properties get taken off the market, for a variety of reasons, when it doesn’t go into contract.
Sellers stay or lease it, sellers can improve the property, or devise a new marketing plan with his broker, or switch staging or re-list with another agent or brokerage that may offer a fresh marketing approach.
When you change teams, it’s a different game.
A large price reduction will reset the DOM clock.
A large decrease in the listing price is also a new ball game.

I’ll let the economists chime in, but my two cents:
I’m not so certain we’re going to see inflation before this price decline has played out for many more quarters. And it looks like the powers that be are going to keep interest rates low for quite a while as well. And when interest rates begin to rise again (whether prodded by that inflation or otherwise), that will put further downward pressure on prices as it reduces borrowing power, so this will not result in housing appreciation right (in either nominal or real dollars) away.
That said, if you can negotiate 40% off recent comps on a place, and you like it and can afford it and won’t be hurt if you have to sell for some reason, go for it!

ester,
Please ignore your detractors and continue to post. You are one of the more interesting SS personalities on the “buy” side and I’ve always valued your transparency. Not many folks look at the rental potential of SOMA condos so your comments are appreciated.

Do you suppose I don’t acknowledge and understand that the absence of jumbo lending is greatly affecting the $1M+ market? There are 29 1M+ SFRs in contract or sold since the new year, 25 condos, and 28 2-4 unit buildings.
Jorge, I mentioned that you are free to email me. So if you really want my opinions, you’ll email me. On the other hand if you only want to goad me on a BBS, you’ll continue in this same vein both here and elsewhere.

Trip & Tipster
Thanks for sharing your wisdom. After all, that’s what this site is all about.
Now, for the topic of buyers representing themselves without an agent – say we have a buyer who is trained in the law (but not a lawyer) and a compulsive reader of legal documents. Say this person acknowledges that they will have to hire an attorney to read through the documents, but would prefer to do the negotiating themselves. This person presents as a pretty nice guy, and is not in a huge hurry to buy. My questions are: 1) how will this person be perceived by the typical seller in this market? 2) what is likely to fall through the cracks because this person is not represented by an agent? and, 3) is not having an agent, in the end, likely to cost more than it potentially saves?

RE Agents are sales people not attorneys; they can not give you legal advice but they can be used for RE transactions. Alternatively you can get a good RE attorney to draw up the purchase and sale agreement. On the buy side I would always use an RE attorney; even if I hired an agent. Most sellers could care less about the buyer as long as there’s earnest money in hand and the financing checks out. YMMV.

has anyone paid attention to the ad for the brannan unit flashing on this site that has just been reduced by $280,000? That’s a significant reuction for the Brannan.

“No bear has ever really explained the lag in say, west side LA, Seattle, Manhattan, SF, desirable Chicago, and the rest of the country.”
Ok fluj, I’ll give you a serious answer.
As we previously discussed prices rise when there are more buyers than sellers and fall when there are more sellers than buyers. Many things can effect the buyer/seller ratio:
Changes in demographics
Changes in employment
Changes in the availability of loans
Changes in the cost of money
All of these effects are linear. You change them and the market moves to a new equilibrium point. A different effect is speculation which behaves non-linearly.
When people think an asset is going to go up, more people want to buy and less want to sell and this causes prices to go up in a positive (self-reinforcing) feedback loop. The loop works just as strongly in the opposite direction. When people think an asset is going to go down, more want to sell and less to buy and that causes prices to go down.
How any particular micro-market behaves is the sum of these effect and because of the feedback loop can behave non-linearly. For instance, a real change in employment can cause a rise in prices which then engages the speculative feedback loop to drive the price even higher.
As much as I take people to task when they say “SF is different” as a euphemism for “SF real estate exists in it’s own universe where the laws of economics don’t apply” it’s true that every place is different and will have it’s own trajectory based on it’s own situation.
That’s the beauty of the price/rent ratio. All of the linear effect from demographics and employment have the same impact on rent as they do on price. As well, all of the intangibles of living in a particular place (weather, culture) are identical for rent and price. All that buying gets you that renting does not is an asset and the potential for a change in asset value. When the price/rent ratio changes that gives you a measure of how much speculative premium is in the market. Namely, how much people are willing to overpay for an asset based on the belief that it will be worth even more later.
In the latest episode we had one more pernicious positive feedback loop operating. When Greenspan lowered rates to 1% investors started looking for better things to invest in and started piling into MBS. As money flooded into MBS people took it and bought houses driving the price up. As the price went up anyone who got into trouble with their mortgage could easily sell or refinance and so the mortgages never went bad. Since mortgages never went bad people thought it was ok to relax the lending criterion and even more money flooded into the market. But as with all positive feedback loops it goes in both directions. When house prices stop going up people can’t sell or refinance and the loans go bad. As the loans go bad investors pull back. As money stops flooding into the market prices fall.
So we’ve got the pieces in place for our micro-market analysis.
Circa 95 the bubble starts as dot.com money floods SF leading to a real rise in prices. This engages the speculative feedback loop. Price rises extend all the way out to the central valley as people are priced out of SF. There’s a small pull back in SF as the dot.com ends in 01 but lowered lending standards reengage the positive feedback loop.
In the central valley you have people who live paycheck-to-paycheck, buying houses with subprime loans that they will not be able to pay once they reset. You also have endless open space and no planning restrictions to prevent new homes from flooding the market. Around 05-06 the flood of new homes entering the market hits the surge in sales from subprime resets and tips the buyer/seller balance. New home sellers have enormous margins and can easily undercut existing homeowners to move their properties. Prices fall. Subprime lending is shut down, further restricting the buyer pool and increasing the number of sellers as refinancing shuts down. The speculative feedback loop flips sign as people lose faith in real estate in the valley and prices collapse.
In SF there is little effect at this point. Subprime is a small part of SF. General employment is not effected. Prices hold. However, the subprime collapse sets certain thing in motion which will eventually effect the buyer/seller situation in SF.
1) There’s the psychological blow from seeing that house prices in California can collapse. I actually thought that this would be enough to put the fear of god in SF buyers but, as Darth Vader would say, “[shaking fist] You don’t know the POWER of the ‘SF is special’ meme. I MUST buy SF real estate.”
2) When subprime collapses the value of the subprime MBS will collapse. This will make vast tracts of the financial system insolvent and will precipitate a financial crisis that will restrict lending even to prime customers. This almost hit in summer 07 when the Bear Stern’s hedge fund tried to sell their securities and got a bid of 10 cents on the dollar. But we quickly entered the era of “Don’t ask, don’t sell.” and everyone was allowed to pretend that they were still solvent. It didn’t finally blow up until it became clear that AIG had no hope of covering their credit default swaps late last year.
(oh, and for the woocoudanood file. Prime and Alt-A portfolios are still to blow up and will create a second round of the financial crisis when they do.)
3) The real economy was supported by MEW at 10% of consumer spending. A significant recession was inevitable once this flow of funds was cut off, leading to a general rise in unemployment and reducing the number of buyers and creating forced sales. The consumer finally gave up the ghost at the end of last year.
4) SF mortgages start resetting in bulk in 2010 leading to payment shock and forced sales. The reduction in interest rates will cushion this somewhat but there will still be plenty of people who can’t pay their mortgage.
So we had four effects that were coming. Any of which could have tipped the speculative feedback loop into declines. All of them together were guaranteed to. The only open question being what order they would hit and which one would finally break the camel’s back. Once the psychology changes the declines won’t stop until all of the speculative premium has been erased.
And yes, this was the broad outline of my analysis in 2004.

My main take is that SF has undergone a worforce and economic shift that has coincided with both easy credit and an American re-urbanization.
Fluj: I agree totally. However, I will change “coincided with” to “partially CAUSED BY” easy credit.
almost all boats were lifted by easy money policies. real Estate, banking, Tech, Medicine, Commodities prices, Venture Capital money, Hedge Fund money, Tax receipts by municipalities. Almost everything (except for the economies of the rust belt/deep south)
Thus, almost everywhere EXCEPT the rustbelt and parts of the deep south saw massive price increases due to their “special” way of manifesting the common credit bubble.
SF saw tech gains.
Iowa saw corn prices explode
Wyoming saw Oil/Nat’l Gas prices explode
Silicon Valley saw huge VC funding boom
Manhattan/East Coast saw amazing Hedge fund fundings.
SoCal had Mortgage lending boom.
and so on.
So SF IS special. Just like farmland in Iowa, and downtown lofts in Minneapolis, and vacation homes in Utah. they’re all special.
and all of those places say “we’re special. we cost so much because of the XXX boom. we should cost this much”. however, they forget that their specific XXX boom was underpinned by easy money. So as we see global unleveraging those underpinnings are ripped away.
So there isn’t as much money now for VC capital, or as much money for hostile takeovers, or as much money for Hedgies to lever up, or as much seed money for new tech adventures, or for corn for use for biofuel.
thus, those prices must fall to non-credit bubble pricing, BARRING GOVT INTERVENTION. (and there will be significant intervention).
where is that level? I dunno. but as I’ve said many times, I don’t know why 2000 pricing is unreasonable, as those prices were supported by a major BOOM itself (the tech/.com boom).
almost nowhere has changed much demographically from 2000 in a positive way that would explain higher prices today vs 2008. thus, 2000 prices would seem reasonable. as would 2001 prices or 1998 prices. I’m not a fortune teller.
But 2004-5-6-7 prices are clearly out of wack with fundamentals (again barring the govt.).
unfortunately, these credit events have a way of taking YEARS and YEARS to sort themselves out. and unfortunately, they tend to OVER correct to the downside.
I’ve said this so many times I cannot count:
“watching this downturn will be like watching the paint dry of a painting of grass growing.”
only 3 more years left per my original estimations. It’s falling apart faster than I had planned, and so I wouldn’t be surprised if the bottom comes as quickly as 2 years from now. now the recovery on the other hand… who can say? it could be a few years after that? or maybe 10+ years like japan. who knows? it all depends on just a few people, that all change tomorrow (Obama, Geithner, Bernanke, Shumer, Feinstein, Sheila Bair, and like 10 other people).

“No bear has ever really explained the lag in say, west side LA, Seattle, Manhattan, SF, desirable Chicago, and the rest of the country.”
Fluj. You and I had this debate a year ago. I told you one of the reasons San Francisco would fall is because all real estate markets operate with a lag historically. One a critical mass of them fall, they all do. You told me I was full of $##$#.
It happens every single time, always has and did this time too.
I don’t understand how you can be a realtor and not like, study real estate while having such a know it all attitude. I guess if you are wrong all the time you must just be super comfortable with it.

Cooper your theory is not in keeping with what occurred here. I’ll leave your guesses about my acumen and your trite reductions alone. You never reacted to my pointing out how incredibly wrong you were, on dozens if not more properties, for years either.
Diemos, I’m going to get to your points later on when I have more time.

SFOSEA
You asked about pricing in the City Residences. Initially they were in the 1200 per sq foot range. Great layouts, no view. With the reduction they should be in the $1000 range. Can’t confirm this, but someone told me that HOAs are higher in the detached cube because there are fewer units. HOAs in the Grand Residences are $1300 for a 2200 sq foot unit as a benchmark.
I can’t help myself, but I am going to chime in on the unfortunate left turn this thread has taken.
Bears are a curious lot in my opinion. They seem to get a charge out of the financial misery of others’ irrational exhuberance,they perennially forecast doom (I assume because they feel a certain insecurity in always running against the grain), and then once in a while they get it right. The bears have reason to growl right now. They predicted the collapse in the housing market and they were right, even here in SF. But the other pattern that has repeated through boom and bust cycles in the past is that once the bears convince enough people to join them in their joyless rent-controlled dens, the cycle is generally close to being over.
Not sure where we are on this sine curve, but just as the bulls were predicting that prices would continue to rise forever, and they were clearly wrong, so does the bear argument of decades of asset destruction seem somewhat melodramatic. Clearly this recession will be deep and painful, job losses will continue, but the Bay Area will hold up “better” than some other areas because our economy is reasonably diversified (certainly compared to Stockton – jeez). It is not all about Web 2.0 and Silicon Valley VC. Biotech, insurance, financial services and even tech will lead us out of this. The Bay Area is not “done”.

“once the bears convince enough people to join them in their joyless rent-controlled dens, the cycle is generally close to being over.”
weatherman, what do you mean by this? I’m not being snarky — it’s just that this seems to be the central thesis and premise of your post but I just really cannot tell what you are saying.

Ok thanks.
I think you are right, was not sure if realtors have access (guessing by the post you may be one?)?
Any idea how long it takes for new building sales prices to become available to the public typically be it via tax records, or other means?

Trip –
It was just a bad analogy for when otherwise bullish people become bearish, i.e. when the bears’ arguments start to resonate and everyone gets extremenly pessimistic. I guess I see that as a contrarian indicator.

This may have already been stated above, but the Infinity’s prices were already, on average, about 10-15% higher than ORH’s even as far back as 2006 so any comparions between the two projects might be a red herring.
One of the reasons I chose ORH over the Infinity was because for an equivalent sized condo with a similar view (20thish floor corner unit facing twin peaks and downton), the price wasabout 15% higher than the unit I ultimately purchashed. Granted, I reserved my unit on the 2nd day of the preview week so the disparity may be more or less attributable to that particular circumstance.

debtpocalypse said :
It’s not only about the resetting of rates. It’s about the recast of pick-a-pay Option ARMs which are hitting percentage-of-original-loan thresholds hit far earlier than anyone previously assumed or modeled.
A tidal wave of them is due in the next few years. Period.
=================
I agree, but I haven’t been able to find specific data about these loans in the Bay Area. I’ve seen nationwide graphs, and I know these loans are common here… but I’d still love to see some localized data, if anyone has it.
peninsula renter.

Uh oh. Obama is expected to unveil his replacement theme for Bush’s “ownership society” and it doesn’t look good for homeowners expecting a bailout from their foreclosure problems.
His theme: responsibility.

Diemos, my man. Sorry for the lousy HTML misuse. I tried to make your comments all italics and mine normal. Man did I botch that one. Who is that ever ugly. Would it kill Socketsite to put some easy quick tags and a preview function on here?

Just to focus in on one of fluj’s major arguments – namely that people are “sentimental” about owning and are not rational economic optimizers (the other major argument being that SF is special, has become increasingly special, and has fundamentally changed in character because of tech and because people now “love cities”):
Unless people suddenly got more “sentimental” about owning versus renting, than the propensity towards this sentimentality is already there in the historical data.
If they did “suddenly” become more sentimental, then they could just as easily become “unsentimental”, couldn’t they? We should consider that large, visible losses may be a catalyst for such a change.
The fact that some people are more emotional than others is doubtless true, and is already in the historical data, which aggregates preferences.
As a thinking bear, there is nothing I have ever seen put forward by the bulls that I haven’t considered. I’m open to being surprised, but at this late stage I doubt I will be.
I’ve watched markets (all kinds) for more than 15 years, and I’ve seen all this a hundred times. SF is going to get a bigger adjustment this year IMO than last, and last year’s was worse than most understand or will at least admit (the volume declines mean that the “true” extent of the price declines have not been fully revealed).
A better description of what has gone on in SF than what is typically offered by the bulls can be found by noting that the cumulative effects of supply constrictions in SF (caused by distortions like Prop 13, rent controls and draconian building restrictions/regulations) were amplified by a generalized credit bubble and mania. A very good overview description of what went wrong in housing markets that I just came across is contained in the postscript to this very interesting article (the whole thing is worth reading):
http://www.mises.org/story/3296

ps – lmrim – re post number one –
you may already know this – but when millenium developed the 4 seas at the end of the dot com bubble – they lost half of their pre-sale book, and had a really long climb back.
in that project that really did have a strict no-neg policy and even bought a few resales to keep them off mkt and preserve their pricing for remaining units on the tail of a long sell -out.

And you are very correct about prop 13 distortions. Not to mention the zaniness and power of San Francisco city councilpeople (a city council that has only become as powerful as it is, coincidentally and oddly, in the same timeframe as the loosening of credit), and rent control. You’ll notice that I didn’t mention 7 X 7 and running out of land. But hey what the heck, 7 X 7 and running out of land just the same. My take is that it is not so simple as “credit bubble, period,” so why not?

“real” SF market can’t go down, great time to buy, etc
Wow. I’m speechless. I spent all this time typing out what I think is a balanced viewpoint. I never once was an “up up up” or “can’t go down” or “buy now or forever hold your piece” guy. And that’s what you say.
This site continues to amaze with its polarization abilities. People can read the same thing and see something entirely different.
To answer your question, I bought a 3 unit building in 2006. My money is where my mouth is. But I knew what the hell I was doing. Like my clients do too.

The SOMA/SB market dropped roughly 15% since mid-Sept’s financial crisis became national news. So the Millenium’s announced price drop is just a lock step move. Of course at $1200 to $1800 per SqFt to start it is WAY above the market… I think they’ve got another 20% to go before even luxury buyers should take them seriously.
As for the bulls vs. bears argument, I suggest the bears go out to Solano, Contra Costa and the like and buy there… per this report http://www.thegoldmanreportblog.com sales are WAY up BECAUSE prices are down over 40%.
Since SF is not special, they won’t mind living in Stockton or Vacaville. Enjoy.
fyi – there was most certainly a bubble in SOMA… $1000 per SqFt to listen to and stare at a Bay Bridge off ramp and dodge homeless and traffic and grime to get to a grocery store when you could pay $800 per SqFt for a Pac Hghts place was and is just outrageous. Supply keeps coming to SOMA/SB (well, not so much any more – but Infinity 2, BLU, Milennium – it’s still coming) whereas it doesn’t in the north end of town. SOMA/SB/MB will get hurt more in ’09 and won’t recover for years. But Pac Hgts, Marina, Cow Hollow, etc… don’t hold your breath… sanity will return and these neighborhoods will be worth more than SOMA/SB as they should.

I suggest the bears go out to Solano, Contra Costa and the like and buy there…
Great suggestion. I thought about that as I prefer numerous smaller investments than a few bigger ones. One downside though: SF bears need to be cautious when investing in these counties. The RE bubble created a lot of fiat jobs in construction and other no-skills services that benefited lower wages areas. These jobs are gone. This is where the needle hit the bubble, so to speak. And this is where the economy is hit the most for now.
Sure prices are down 40 to 50% locally from peak, but 1 – make sure you can find roadworthy renters (would Modesto and the new University be a good bet?) and 2 – remember prices DID more than double in 10 years, sometimes tripling, leaving maybe some wiggle room on the downside.
I’ll stick to SF for now because of the high quality of new renters, and as said fluj, it’s 7X7 and not much room for expansion. It’s the actual “they don’t make anymore of the stuff” paradigm even though speculation on this scarcity gave too much confidence to specuvestors and created overbloated areas. East Bay counties can sometimes “create” land whenever they like by simply converting agro land to housing.

above, someone talked about “all the bears this” and “all the bulls that”.
too many people assume that current bears have always been bears, and that current bulls have always been bulls.
I’m a RE bear, and have been since 2005 in San Diego and 2006-7 in Chicago/SF/Midwest. I have put my money where my mouth was. (I’ve bought property in the midwest as recently as 2003, and sold SD in 2005, etc).
But i was a RE bull from 1999-2005.
Likewise I was a huge Stock bull from 2003-Summer 2007, and was still mainly long until winter 2007. In fact, you can read my posts right here for that info.
I was a commodities bull BIG TIME in early 2008. then a big time bear in late 2008. Again, you can read about it.
I was a Treasuries bull from Jan to Dec 2008. Now I’m getting bearish again.
at some point I will be a RE bull again. Not now. At some point I will be an equities bull again. Not now.
so “bear” and “bull” are transient phenomena IMO.
to be uber-one or the other is foolish IMO.
but that said, using the arguments like “you’ve been bearish and wrong for years so you’re stupid” doesn’t work, at least not with me. Because I haven’t. I had very particular reasons for when I switched from one to the other. And I do switch easily. with data, that is.

SFS – the new UC campus is in Merced, not Modesto. They’re quite a ways apart.

anon. Good point. I stopped by last year while on the 99 and always confuse the 2. I should never post after midnight.

The threads are all a little slow today, but I’m stuck watching the markets (incidentally, unless we get a radical change in the last 30 minutes, we’re looking at by far (more than 2SDs I bet) the worst performance of the markets on an inauguration day in the modern era).
So, to revisit a theme developed above (see Posted by: Keepingitreal at January 18, 2009 9:47 AM, and associated posts), and to roust up Der Fluj, here’s a choice quote that both addresses the topic (lux condos) and gives the lie to fluj’s position now that he hasn’t been a cheerleader:
“It’s over. Sorry. Scare tactics are dead. San Francisco never really took a price hit and it won’t, either. Gee, this one bedroom SOMA condo only got $1.3M and not $1.5? Boo hoo.
Posted by: fluj at June 23, 2008 9:57 AM” (emphasis added)
https://socketsite.com/archives/2008/06/a_concerning_comp_and_empty_shell_at_the_ritzcarlton_re.html
Looks like as late as June 2008 (!!) our fluj had no inkling what was coming. So much for “in the trenches”. (Sorry for “piling on”, fluj, but you’ve called me out one too many times and you’ve been wrong continuously, and yet like 137 DOM I admire your indominable spirit in this fight against the markets that you are nevertheless going to lose).

exSF-er, you’ve called every major move in the equities, commodities, and real estate market over the past 5-10 years. My portfolio is a train wreck and I need your help. What’s your crystal ball saying now.
Here are the asset classes I’m interested in:
Domestic equities (large cap)
Treasuries (short and long maturities)
Commodities (oil, natural gas, gold)
Corporates (HG and HY)
Alternative (long/short, macro, distressed, PE)
Municipals (AAA only)
Please provide you 3mo, 6mo, 1yr, 2yr predictions. No numbers or estimates needed, just “up” or “down” will be sufficient over the respective time horizons. And forget about real estate. We all know that it’s going down and there’s no efficient way to short.
Thanks in advance.

This thread has gone six kinds of sideways.
Regarding the Millenium, this has been grossly overpriced from day one, so no surprise on the reduction. Don’t get me wrong – a 15% blanket drop is definitely meaningful, especially given it comes from the tower that refused to negotiate and catered to the uber-wealthy, etc. But it doesn’t move this place close enough to market IMO. What’s the new tagline in their sales office?
“Soma’s worst value in new condos has now become less bad!”
In my opinion, there’s a “luxury curve” to be evaluated here, for lack of a better analogy. The curve picks up steeply but goes flat thereafter. So the delta between, say, a Beacon unit that hasn’t been upgraded and a unit at the Infinity is huge. But the delta between a nicer unit in the Infinity and the Millenium is barely noticable (unless you’re some kind of appliance fetishist or something). So why should the pricing be 20% higher here?

“To answer your question, I bought a 3 unit building in 2006. My money is where my mouth is. But I knew what the hell I was doing. Like my clients do too.”
I see.
You bought in 2006 when everybody and their brother was buying. That’s not so interesting.
My question was, are you putting new capital to work right now in SF real estate. Just trying to gauge your level of conviction based on your actions with money at risk. Marketing pitches just don’t cut it.
I’d be interested to hear from Paul H and other RE agents out there who have been touting that now’s a good time to buy. You guys have the inside scoop on market data, foreclosures and new listings and should be best positioned to buy relative to us non-experts. So are you buying?

Sunny Jim,
That’s a great read. I love all Rothbard’s stuff.
The inauguration speech was pretty bad. Unlike the campaign speeches (which were excellent, and clearly ghost written), maybe O’bambi really did write that one 🙂
As for most predictions, let’s revisit in threads as the year progresses (and in threads where they might be a little topical), but just a few, now:
1. 2009-2010 will be great years for freudenschade, especially for the Real SF ™
2. Hyperinflation won’t happen for a good long time I bet. Tough to say the timing, but we have to have the depression first, so maybe 15 years? Many unforecastable events could throw this off, but it will be a while. The USD will hold in there for a while, if only because the rest of the world is just as scewed if not more so (maybe Singapore and nearby countries will do relatively better)
3. I like the Section 8 idea more and more (I know you are doing this), and wil probably do one or two properties to get started by end of the summer. I’m seeing potential cap rates of 13-17% (with a little sweat equity) if my contacts are to be believed.
4. CA is going to be toasted. $70 BILLION spent on K-12 education? Between the unions, the waste, and the uterly clueless voters, I don’t think the state is governable. I’m glad I’m not working for a W-2!
5. I’m not sure we’ll get “panic” by the sheeple. Probably more like a gradual beatdown as they realize that the Messiah is not going to be able to fix anything, and is more interested in creating voting blocks to ensure reelection than solving problems. Panic will set in for individuals who trust the government to give them a comfortable retirement after about 10 years from now. Investment advice: go long tins of cat food!

weatherman: Like you, I’ve been in most of the newer Soma buildings, and I agree that the Millenium is nicer than the Infinity (although I think Infinity has a better location). I’m just saying it’s not an order of magnitude nicer than an upgraded Infinity unit. Not enough to still be asking for $1,000 psf when Infinity is struggling to sell in the $750 psf range and Beacon units are going in the $600 psf range.
I guess we just disagree where they lie on the spectrum, that’s all. I think Millenium, Brannan, and Infinity are closer than Infinity and Beacon. I’d add BLU to that first group as well (my personal favorite). Not that I have anything against the Beacon – this city needs more Beacons and less Milleniums and BLUs. I just don’t think the Millenium should command a 30-40% premium over Infinity. Just my personal opinion.

LMRiM:
“CA is ungovernable”
Dan Walters (SacBee columnist) hits on this often and for all the reasons he lays out, I partially/mostly agree. (I can elaborate, but won’t here)
Re. home buying sentimentallity/irrationality/”lifestyle center”: tho it’s always been built-in, I think you understate its potence (among the “sheeple”, which is to say most people, which is to say the market makers)
Fluj:
Re. demographic change/urban-core rebirth.
I think this is happening, but perhaps not (yet) to the extent you see. I think the trend has legs and will affect the market in the decades to come, but it’s my sense that not enuff people are doing it yet to affect the market to the degree you suggest.
It would be interesting to see if there are any studies by HUD, RAND corp, Packard foundation, Leg. Analyst Office, etc. that show I’m underestimating it and it’s more like you say.

I like Blu too but the units don’t have outdoor spaces, neither does Millenium. A little bit of a patio goes a long way in my opinion.

I didn’t realize until this thread that Satchel ([Removed by Editor] or whatever his handle is) is completely around the bend.
His boilerplate hard-right lunatic fringe “Messiah” commentary about Obama, blaming CA’s problems on education and unions, etc… he’s one of THOSE. Wow. No wonder I’ve always found him an unrelenting [Removed by Editor]. He likes Bush/Cheney, Fox News, Ron Paul, Ann Coulter and Sean Hannity. That’s all I need to know.
BTW — he’s wrong about the resiliency of the economy. Yes, it’s bad. No, it’s not getting better soon. But he and his deregulation advocates (like Phil Gramm) caused it. And his prognostication right now is nothing more than shallow popular sentiment obfuscated by quasi-sophisticated financial market blather. He’s like Jim Cramer, except afraid to show his face.
He’s just another anonymous Internet poster (like me!). Unlike me, he’s upset about what’s transpired today. Today was rad.

RE: Millenium vs. Infinity location.
Saying the Infiniti is in a better locale is a matter of opinion that can certainly be debated. Personally, i think Millenium is in a better location, especially if you like to walk to most places, work in the financial district or are a foodie and/or nightlife person. The choice of restaurants and nightlife are far superior near Millenium and you can quickly walk to many more city attractions and shopping. In other words, it is much more central. I spent time in South Beach and near the ballpark this weekend and personally think it is still a traffic filled dead zone devoid of any character, good restaurants or anything interesting (besides the ballpark). Although the embarcadero has beautiful views, it is filled with tourists and IMHO is only a couple of steps above fisherman’s wharf. I now i will get a lot of flak for this, but SF is all about neighborhoods, and this area still barely qualifies. maybe in 5 more years, but not now (again IMHO). Also I think Infiniti is the single most externally ugly building of all the new buildings in downtown or SOMA or South Beach or RIncon Hill ( although that blue radiator building is damn close)

ex Sf-er,
Thanks for your thoughful reply. My question was half tongue and cheek, and your response is appreciated. I agree with you that markets are in a state of disarray and even good money managers have no idea how to invest in this environment.
We’ve already executed the six things that you recommend – all very prudent given the damage already done. My investment approach lately is the “bailout” play. I think Bill Gross hit the nail on the head saying essentially: figure out where the government is going to do a bailout and get in before its announced. Financials, Agency Debt, Autos have all been working lately (at least on the credit side).
At some point over the next couple of years perhaps SF real estate will be a good investment again…

Could the amateur investors and economists move your comments to a yahoo finance chat board?
This is a real estate site. This particular thread is about 15% reductions at the Millenium. I suspect the majority of readers are not interested in whether any of you did or did not predict anything.
Thank you.

Most of the places listed seem more Mission Bay to me?
You forgot the other direction – within walking distance of the Infinity: Local/Kitchen and Wine Merchant, Chaya, Boulevard, Perrys, Slanted Door, the new Peruvian place, Embarcadero and surrounding shops, rest, bars and movies, Cosmopolitan, Hotel Vitale, etc.