CFAH

San Francisco Listed Inventory: 2/17/09 (www.SocketSite.com)
Inventory of Active listed single-family homes, condos, and TICs in San Francisco rose 13% over the past two weeks (versus an average of 1.7% for the same two weeks over the previous three years) and is now running 29.5% higher on a year-over-year basis (up 14.3% for single-family homes and 40.5% for condos/TICs).
Overall listed inventory is up 83% versus February of 2006 while listed sales have continued to trend down (a 49% drop in January versus 2006). Keep in mind that “listed” (or MLS based) inventory counts do not include the vast majority of units in new developments about town and neither do “listed” sales.
The standard SocketSite Listed Inventory footnote: Keep in mind that our listed inventory count does not include listings in any stage of contract (even those which are simply contingent) nor does it include listings for multi-family properties (unless the units are individually listed).
SocketSite’s San Francisco Listed Housing Update: 2/02/09 [SocketSite]
Early January Listed Sales Results For San Francisco: Down 34% [SocketSite]

Comments from Plugged-In Readers

  1. Posted by 45yo hipster aka old school U2/war

    wheee…i’m the first to post a comment for once…so let’s carefully choose our words of whit and pithy comments…
    duh, it looks like inventory continues to incr, and prices have been softening (quite a bit in soma- but those are developers needing to sell quickly due to lender pressures.) let’s see if individual sellers due the same en mass, which leads to:
    the big question- is the detente between buyer/seller over? the detente is weakening as this incr in inventory trend continues. spring stats will definitely be interesting to watch.

  2. Posted by tony

    SS, can you please add some color here…
    “Keep in mind that “listed” (or MLS based) inventory counts do not include the vast majority of units in new development about town and neither do “listed” sales.”
    True, but, isn’t this inventory decreasing (or at least isn’t the pipeline decreasing) as builders pull back? (I recognize there are still major releases, eg, Infinity Phase II happening, but how much more is there still queued up?)
    I forget your branding for it, but would love to see an update of your “complete inventory report” (including pipeline).
    Thanks much as always.
    [Editor’s Note: That would be our Complete Inventory Index (Cii). And at the risk of tipping our hand, while the overall pipeline of near-term new development inventory is slowing, inventory of units that are available for purchase and immediate occupancy is actually growing. Additional details soon.]

  3. Posted by jessep

    “Overall listed inventory is up 83% versus February of 2006”
    This is telling. We’ll see if it continues. Wish I could get a steal in my ‘hood.
    *sigh*

  4. Posted by missionite

    Holy inventory spike Batman!
    45yo, I think sellers are increasingly going to be facing a come to Jesus moment. When you contrast inventory with volume there is an inescapable conclusion that must be reached: a property will require a very competitive value proposition in order to generate a sale in a timely manner.

  5. Posted by viewlover

    october was a high month that dropped sharply by year end. wonder how many of the 668 are adding to the 1500 and not really new inventory; static supply.

  6. Posted by Trip

    The stalemate is essentially over. It’s quite clear that buyers (with rare exception) are no longer going to pay 2006 prices. Many sellers who bought long ago can afford to drop prices considerably and still do just fine — they will do so. The big question is what sellers who bought in more recent years will do. Many of them simply cannot sell at significant price discounts because they do not have sufficient equity and could not (or will not) pay the balance of the loan that exceeds the selling price. They are simply stuck right now and praying for a miracle. It isn’t coming.
    If I were a serious buyer right now, I would not even look at homes purchased since about 2003. Odds are you’re wasting your time and they won’t negotiate realistic prices. In six months to a year this latter group will be forced to deal with it, or it will be forced upon them, and things will open up. SF realtors will start making money again someday, but volume won’t pick up until prices have dropped much further.

  7. Posted by San FromziScheme

    The stalemate is essentially over.
    I don’t really see this from the datapoints, even though I agree with your analysis that a lot of people are stuck with overvalued property and are not willing to sell/lower their asking prices at this stage. Maybe they still think they can “wait it out”?
    On the contrary, I see very resilient/stubborn sellers. Some will say delusional. But this market downturn is a first in our lifetimes, therefore you cannot blame prospective sellers from being disconnected with reality in the hope 2006 conditions will come back overnight.

  8. Posted by SF banker

    If sellers want to really get their places sold they should just drop the prices by 30-50%, sell it, and move on. Really, all of the “wishing” prices I still see out there are pretty much a pipe dream that is wasting everyone’s time.
    By the time this is all over we will be back to long term trend prices – say around 2000 or so. I have seen some “distressed” sales that are unbelievably good deals on both a short run historic (last 3 years) and potential cash flow basis (provide rents decline only slightly versus a couple of years from now and even those aren’t selling at all. The market is finished, most people have had their net worth crushed, it’s over. Fiddling around with 1.2m to 1.1m price reductions are a waste of time. I am quite positive that will be going for $575K in the next 2 years.
    I think the majority of people who bought anything anywhere in the last 3 years of this unprecedented, globally-interlocked, historic credit “blow off” expansion and real estate bubble will be underwater for a decade+ and/or default. As someone who is deep into the financial markets every single day, it is as dire as anything we have experienced since the stats I am familiar with from the GD. Financial indicators (GDP declines, global trade declines (20%+!), IPO window closed indefinitely, equity/growth financings, YoY change in home prices, new car sales, etc.) point to Armageddon. There will literally be NO ONE left to buy ANYTHING over 500K in the next couple of years.
    You couldn’t get me to buy a house if you put a gun to my head – I think there are many people out there who feel the same way. Stepping into a $900K+ asset in this market is like committing financial suicide. Talk to me at $550.

  9. Posted by 1stTimeBuyer

    Trip – what about new condo developments completed in the last 6 months, especially those in D5 and SOMA? There are some buildings that are reverting from sales to rentals, but what logic do the decision makers on pricing follow in that sector? Are they more like the post-2003 sellers?
    I’ve been thinking that they would be the most open to negotiation, but the prices I’m seeing are still quite sticky.

  10. Posted by viewlover

    some sellers would rather risk 50 grand for a year’s upkeep on a place with some potential for stabilization than lose 100k plus cost of selling immediately.

  11. Posted by Dude

    Great posts, Trip and SF banker. But hold on a second.
    We’ve now got foreclosure moratoriums ongoing from not just nationalized lenders like Fannie and Freddie, but also most of the semi-nationalized big banks.
    http://www.businessweek.com/ap/financialnews/D96DDJDG1.htm
    So lots of bitter homedebtors have basically been living for free since November at this point, and will continue to do so until at least March. The new administration is set to debut their housing panacea this Wednesday and implement by March. We’ll see what the details hold.
    But as I’ve predicted before, expect the government to do everything possible to slow down the price discovery process. Which, in turn, delays any eventual recovery. Yes, it just delays the inevitable, but it’s still a delay. And it keeps deadbeats in places they shouldn’t “own” in the first place, reduces inventory, etc.
    The moral hazard and adverse incentive any gubmint program will create will be enourmous, though. Almost makes me wish I had a mortgage so I could stop paying it.

  12. Posted by condoshopper

    i bet some are counting on the proposed homeowner subsidy program too.

  13. Posted by Trip

    I really do not have a solid understanding of how the large condo developments are financed. So perhaps others with better knowledge can weigh in as to how the economics might differ from single residential units. However, I can say that as a matter of straight economics, the development costs are now sunk, and the market price is what the market will pay, regardless of the sunk costs. It gets more complicated as they can revert to rentals and there are lots of assumptions that must be considered (projected length of downturn, projected market rents, etc.). But as for today’s selling prices, the market simply is not paying the prices of 2-3 years ago, and this is no different for new developments.

  14. Posted by anonn

    “But this market downturn is a first in our lifetimes,”
    That is utter nonsense unless you are 11 or 12 years old, and overlook 2001-2002’s shrinking.

  15. Posted by diemos

    loss aversion is one of those non-rational but predictable effects that need to be taken into account in any model of market behavior. It’ll be interesting to see just how far the market has to drop before people who could otherwise pay the mortgage decide to just walk away.

  16. Posted by San FronziScheme

    “But this market downturn is a first in our lifetimes,”
    That is utter nonsense unless you are 11 or 12 years old, and overlook 2001-2002’s shrinking.

    Comparing the 2001 RE blip with our current complete meltdown. Is that the current selling line at the NAR?
    An insult and a falsehood in one single line. Great work fluj!

  17. Posted by eddy

    The number of new listing popping on the market is pretty big these days.
    One interesting side note is that I’m actually seeing more and more listing popup after hours on Friday. Way more than I have seen in previous months/years. I hate to even suggest this one since I don’t want to do any ego boosting — but I wouldn’t be surprised if there was an attempt to avoid a SS feature by posting after hours on Fridays.
    The standoff is ever present. I’ve said for a few years now that comps are going to be driven by foreclosures, and by existing home sales where the buyer has the “equity” to reduce the price to incite a sale. The come to jesus moment will only come when the banks are knocking on your door to kick you out. Although it seems we are doing everything possible to prevent this from hapening.
    One thing is clear to me, if you are paying more than 50% of your income on housing payments AND you are underwater (be realistic folks) — I’d simply stop paying your mortgage. You are literally throwing you money away and the goverment is coming to the rescue. Put your payments into escrow and see what happens. You can always pay up later if it makes sense to do so; but honestly, what do you have to lose by withholding payments? Hurt your credit? If you’re 100-300+ underwater — your credit is going to take a hit sooner or later.
    Good luck to all!

  18. Posted by 45yo hipster aka old school U2/war

    1st time buyer/trip- as i alluded in my post, developers are a different animal than individual sellers for a variety of reasons:
    1. they are business w/many units on hand, and need to move them (or rent them, if their lender will permit.)
    2. most of these developers have other projects they completed, so even if they lose some $ on the current one, they will survive. or go under, if they have too many losing projects.
    3. reflecting the new reality, alot of soma & DT towers have recently lowered prices substancially.
    4. individual owners will try to hang on their home/put it on the market expecting a long sell cycle, waiting for the $$ they want. after a certain amount of time, some sellers will have to accept a lower price, some may foreclose. but in SF, there are numerous sellers who can & will wait. 2nd home folks, all cash payers, wealthy folks who can afford to wait it out. it’s all a matter of time.
    the mid class folks will be able to hold off less. sometime later this year we will probably see if lower prices stick en mass. that was the case in 91-94, which was a good time to buy. but if i remember correctly, inventory was limited to those who had to sell/gave up.

  19. Posted by Debtpocalypse

    It. Is. So. Over.
    SF Banker is dead-right. If you want to move it, you have to get out ahead of the market declines, ahead of your neighbors, and ahead of the imminent additional inventory. A place in my ‘hood came on the market back in April 2008 for $1.675m. They keep cutting the price – asking’s down now to $1.15m – but they remain half-a-tick behind the market, so they don’t get their price:
    http://www.redfin.com/CA/San-Francisco/39-Havens-St-94133/home/539801
    Sellers have to get out in front of it, aggressively, if they want to have any hope in heaven of finding a baghold… I mean, “buyer” to dump it on. If sellers of 39 Havens had been told that they’d have cut asking by a 1/3 and it would still be rotting on-market in February 2009, they’d have said, “P-shah! This is a very special property with very special views in a very special city!.”
    At +$1m, it is a very large liability for someone to assume…. And with 20%-down and jumbo rates punishing on a real basis, “It’s the financing, stupid.”
    If you were to tell them today, “Seller, you know, you’re very unlikely to get 7-figures for this place – best to cut right now to $999K.” The answer would come again… “P-shah! I am practically giving it away at $1.15m! It is special! It has views!”
    It is so ugly out there right now.
    So. Ugly.
    I take precious little satisfaction in it, even as a cash-rich renter. It is a catastrophe of historical import – any comparison to 2001/02 is down-right silly. None of us will avoid being touched. None of us.
    The tech-bubble thing was a fraternity prank in comparison. Go read about Q4 Japanese growth. Go read about Taiwan exports. Go read about Dubai. Go read about Eastern Europe. Go read about Italy, Ireland, and Greece. And Spain. And Belgium. Go read about the hiccups in the German bond auctions. Go read about the scheduled Treasury supply. Go understand the exposure of the largest banks in the world.
    “P-shah… ‘2001/02’: As if….”
    Let me put it this way. In my upscale corner of the “real SF” there are still bars on some windows here & there, testimony to a bygone era when people feared crime in their ‘hood and direct threats to their homes. They’re largely rusted now, and seemed anachronistic during the go-go era.
    I think window bars have a decent at being a more attractive marketing device than “granite counters.”
    The most beautiful thing about renting and cash-on-hand is that one can quit this town overnight if the fragile social stitching comes undone. Because the economic deterioration is extremely fast & wide and global.
    We are running global credit-excess backwards – collateral gets down-marked, diminishing opportunities to tap it for current consumption, slowing growth, causing further distress in leveraged players, who fold and have their collateral sold at firesales… renewing the collateral-markdown cycle.
    It won’t end exhaust itself until we hit a bedrock of equity-supported economic growth at the global level. Cash on the barrel.
    My $0.02.

  20. Posted by Trip

    As an eternal optimist (stop laughing, it’s actually true — drives my wife nuts), I don’t think we’ll get to the point where Russian Hill residents will need to start buying bars for their windows. However, I did read in the Atlantic cover story an interesting bit about the crash and some studies about homeownership that buck the CW and seem to describe today’s stuck SF owners — an excerpt:
    If anything, our government policies should encourage renting, not buying. Homeownership occupies a central place in the American Dream primarily because decades of policy have put it there. A recent study by Grace Wong, an economist at the Wharton School of Business, shows that, controlling for income and demographics, homeowners are no happier than renters, nor do they report lower levels of stress or higher levels of self-esteem.
    And while homeownership has some social benefits—a higher level of civic engagement is one—it is costly to the economy. The economist Andrew Oswald has demonstrated that in both the United States and Europe, those places with higher homeownership rates also suffer from higher unemployment. Homeownership, Oswald found, is a more important predictor of unemployment than rates of unionization or the generosity of welfare benefits. Too often, it ties people to declining or blighted locations, and forces them into work—if they can find it—that is a poor match for their interests and abilities.
    As homeownership rates have risen, our society has become less nimble: in the 1950s and 1960s, Americans were nearly twice as likely to move in a given year as they are today. Last year fewer Americans moved, as a percentage of the population, than in any year since the Census Bureau started tracking address changes, in the late 1940s. This sort of creeping rigidity in the labor market is a bad sign for the economy, particularly in a time when businesses, industries, and regions are rising and falling quickly.

  21. Posted by Rillion

    “The most beautiful thing about renting and cash-on-hand is that one can quit this town overnight if the fragile social stitching comes undone. Because the economic deterioration is extremely fast & wide and global.”
    And go where? San Francisco has not been at the leading edge of this economic collapse. At this point I think it is just as likely that we would get people moving here to escape the breakdown elsewhere then people leaving here for greener pastures. Not that they are going to buy here and rescue our RE market but they could help keep rents from decreasing as much as they would otherwise.

  22. Posted by Jimmy C

    It’s quite easy to run around shouting that the ship is sinking after you see it’s hit the iceberg. You know who you are.
    Keep in mind, there is a ridiculous percentage of single family homes in SF proper with zero mortgage. On my block in 94131, my estimate is that of the 50 single family homes on my block more than 60% do not have a mortgage at all, or if any a minor HELOC which would be less than 20% of the value. I don’t have acess to Metroscan or Dataquick but someone who does could do a lot/block sort to determine filed mortgage liens a a percentage.
    The broad statistics don’t tell the whole story and it’s irresponsible to make statements without understanding the micro-economic of each block vs. the city or even specific zipcodes.
    But what do I know, I actually own a home. And would buy one again, because it’s a place to live, not an investment.

  23. Posted by SF Banker

    Debtpocalypse, we are on the same page. That 39 Havens place is quite nice, however I would still not buy it. We live pretty close by (I am a happy marina renter myself with a cash pile – I know a few people like myself including the family I share the building with who is a partner at a major law firm in town). The house needs some work and the taxes will be pretty high, as will utilities/maintenance, and LEASED TANDEM parking. Blech. My god what were all the buyers and now defunct banks thinking when putting such a huge debt load on a little city hovel such as this? $390K in 1988 (another mini-bubble peak) – add $150K (generous) for general wage and rent inflation and you’re in the ballpark we are all going to be visiting in the future.
    As for foreclosure moratoriums – only delaying the eventual pain and suffering, which seems to be the american way these days.
    It will be truly amazing when the banks end up owning tens of thousands of homes that need to be negotiated/managed through foreclosure, cleaned out, fixed up, maintained, marketed, and eventually sold to new buyers. From a purely mechanical/process perspective that takes a huge amount of work for just one house. Multiply into the thousands. It is going to take literally years to clear out the REO inventory. It is really mind boggling if you do the mental exercise of moving a national REO inventory into the millions. It seems like there are very few bank owned homes that have ended up on the market so far – it’s not even the “first inning” – we are still buying hot dogs and looking for our seats in the foreclosure sale market! I knew things would get really bad back when I watched the bubble skyrocket around the world in from ’04 to ’07, but I could not have even forseen the severity of this collapse.
    I am an investment banker in the technology sector and we can’t raise a dime for even the best companies or do any decent merger deals. There is literally NOTHING getting done which means ZERO revenues. Take a look around the city – you are hard up to find one bank that has completed a SINGLE transaction since last October. It’s as if 2009 doesn’t even exist. The guys I work with who have been in the financial business since the early 80s say this is so much worse than anything they have ever seen.
    The Venture Capital guys are completely dead as well – no IPOs means no liquidity event which basically renders their business model obsolete. Many funds have been bleeding 40-50 million into their portfolio co’s in stages with no end in sight. Talk about fatigue. Startups are mostly hopeless, although a few strong ones will get by for now.
    Cash/liquidity has vanished from this town – and yet people still think me-too condos are “worth” $1m+? Oh how times have changed

  24. Posted by anonn

    “Comparing the 2001 RE blip with our current complete meltdown. Is that the current selling line at the NAR?
    An insult and a falsehood in one single line. Great work fluj!”
    The 2001 “blip” was only one part of what I said.
    You should talk to some people who were in San Francisco real estate in the 80’s and early to mid ’90s sometime. It might prove enlightening. Your continued broad statements based upon nothing are worthless. I responded to what you said. Perhaps you meant something else. Because what you said was nonsense.

  25. Posted by tipster

    “At this point I think it is just as likely that we would get people moving here to escape the breakdown elsewhere then people leaving here for greener pastures”
    Geez, how do you keep from laughing when you write a statement like that:
    “Hey, we just lost our jobs, let’s move to one of the highest cost areas in the country, where layoffs abound and few jobs exist.”
    Rillon, that had to be one of the most desperate -sounding statements I’ve seen on this site.
    The way for a business to survive over the next 5 years (at least) is to lower their costs below those of the next guy. That means companies will be moving jobs out of here as fast as they can.
    The world has changed and high cost areas have no allure for anyone any more.

  26. Posted by anonn

    “The way for a business to survive over the next 5 years (at least) is to lower their costs below those of the next guy”
    There are also going to be companies doing the very opposite of that for strategic reasons.

  27. Posted by SF Banker

    Have to share a chuckle over people moving here! Ha, wouldn’t that be great?! There are a ton of rental listings that have popped up in my neighborhood over the last few months (94123) and nothing seems to be moving. I see more and more moving trucks in the neighborhood as well.
    With no jobs, all the grads from elite JD / MBA / Tech programs will not be moving to SF to start their careers, thereby short circuiting the “prime” real estate cycle of life – i.e. move to SF (94123) after grad school and start prof. career, few years later get married, few years after that have kids and move to Burlingame, Palo Alto, or Marin. I’m seeing the high end stuff (e.g. Pierce Street north of Lombard) go on the market as rentals as well. Those little houses were going for $2.7m a pop (gulp!) 18 months ago!
    I go out in Cow Hollow or on Chestnut and it seems like 30% of the people have disappeared. Downtown is a ghost town compared to a year ago. I walk past the same set of buildings around Jackson Square between my parking garage and office and I have seen the commercial units go from ~90% occupied to ~25% occupied. I am not exaggerating!
    Any other from the Financial District set?

  28. Posted by spencer

    [Editor’s Note: That would be our Complete Inventory Index (Cii). And at the risk of tipping our hand, while the overall pipeline of near-term new development inventory is slowing, inventory of units that are available for purchase and immediate occupancy is actually growing. Additional details soon.]
    this month? 🙂
    [Editor’s Note: Or as we honestly thought about writing, “At the risk of yanking spencer’s chain….” (And yes, this month.)]

  29. Posted by San FronziScheme

    Why do I keep being trapped in these fluj non-sensical discussions? Sigh.
    Yes fluj, I do know what happened in SF in the 80s and early 90s, having had many many discussions with neighbors, friends, mostly long-timers in this town.
    To be honest, the past bubble/pop downturn from 15-20 years ago has many common elements with the current downturn. But this one is a different animal. Price appreciation in the 80s could be accounted mostly from regular inflation and growth. It went a bit too far and a healthy correction ensued, causing 5-10-20-25% decreases depending where you were. LA went down a lot, while SF did pretty OK.
    This last run-up has seen prices tripling with no good reason. Tame inflation. 3% growth. Flat salaries. The 200+% gains seen almost everywhere come from mostly one source: over-leveraging. Open the WSJ. Read it. Learn.
    This one is different.

  30. Posted by Dude

    “There are also going to be companies doing the very opposite of that for strategic reasons.”
    Please enlighten us…what are the strategic reasons for companies to seek a higher cost base?

  31. Posted by sparky-C

    Quality people who haven’t been available are now available because someone else let them go.

  32. Posted by Rillion

    tipster – I’m not desperate. But if things get so bad in SF that gangs of criminals are roaming the streets of neighborhoods that used to be good neighborhoods (the picture that was being painted by the post I was responding to) do you believe that things are going to be better elsewhere? Hasn’t the meme on this site for a last several years been that the situation in SF is a couple years behind what is happening in other cities?
    Again the employment situation in SF has been a bit better then other areas, or less worse if you think my including the word ‘better’ qualifies again as desperate. Is it going to get worse? Yes, but so is everywhere else!
    As far as if people would want to live in a high cost area (the cost is falling as you guys keep pointing out), I have a friend that has been unemployed for about a year that could get a job at a company in the midwest (which he left when he movd to SF 3 years ago) but he’d rather be unemployed here then move back to the midwest. I’ve also had two friends, one from Nebraska and one from Tennesse email me asking about the job situation here because they want to move here but only if they can line up a job.
    So yeah, for some reason there are still a lot of people that want to live in a high cost area rather then a low cost one, I wonder if that might have anything to do with why it costs more…but what do I know, I’m only a desperate economist.

  33. Posted by tipster

    Me thinks that trying to argue with a home seller whose home is under contract, and who is probably biting his nails hoping that the deal won’t unravel, is pointless.
    At this point in the process, WW-III could break out and someone in this position will tell you that everything is fine, fine, and things are looking real good, Mr. Knife-Catcher and please, oh please don’t find a loose screw on a door handle and crater the deal with your inspection contingency, forcing me to drop the price by $200K and spend another 153 days looking for a buyer.
    So arguing with someone in this position is a waste of time. They are GOING to hold their position no matter what.
    May as well call up the Pope and tell him there is no higher being: you’d probably get further.
    Capiche?

  34. Posted by Jay

    I live in SOMA myself and I never have a problem finding parking – which was difficult a few months ago. I used to have to go as many as 2-3 blocks away from the apt some times. Now I can always find something within a block and when I go away for a few days I never have trouble finding a long term parking space.
    I park on the street in SOMA b/c I’m cheap and probably will always do so. However, I’m assuming the people who do this most frequently are those new to the city.
    Not too happy about it – it means that many of my favorite shops may not exist in a few months.

  35. Posted by Rillion

    Also tipster since we are going to highlight the “most desperate things” ever posted how about your gem:
    “The world has changed and high cost areas have no allure for anyone any more.”
    Really? So no person on earth today wants to live in any high cost area. No allure for anyone? Got Hyperbole?

  36. Posted by Scott

    So funny. I’m an optimist but also a realist. I have been a bear for sometime and I think we have a long ways to go before we see bottom. I’m high earning renter (me banker – wife attorney), and do not see value in real estate. Most of our assets are in cash. It could get ugly yes.
    But I do find it funny how some people are predicting such a downturn that we need to put bars on out windows in one of the most affluent areas in the country. I mean come on. It won’t be the end of the world. Things will get better. It will take time. But it’s not the end of the world. You don’t need to bury cash in your back yard. You don’t need to stock up on water and MREs. We all won’t need to carry firearms.
    Reminds me of the crazy people who predicted the end of the world because of computer systems not being able to handle the switch from ’99 to ’00. So funny.

  37. Posted by BankerBoy

    My FiDi parking lot was full last year and is now 2/3 empty. Aqua closed for lunch and other expense account places are empty. None of my unemployed banking friends have been offered jobs in SF.

  38. Posted by Pumpkin Patch

    Scot, I like the balance here. It is all interesting from a spectator’s viewpoint.
    But, back to the graph…it is stunning. And, I am curious what it will look like by May…

  39. Posted by Dude

    Agree with Scott that the Mad Max scenarios are a bit much. There are several areas, many near here, where home prices have ALREADY fallen 50% or more from peak. Think Central Valley and Sacramento outskirts.
    Last I checked, nobody there has had to fight Master Blaster in the Thunderdome. They still have food on the store shelves, and you don’t need ration tickets to wait in line 3 hours for toilet paper. Barter economy isn’t kicking in just yet.
    So even if the most bearish of scenarios unfolds here in SF, I think we’ll be fine. But you should still stock up on water and MREs in case of earthquake, of course.
    Also, keep in mind what SF would look like after a 50% drop from peak: studios going for $100K, 2-bedroom condos in Soma selling for $400K, Pac Heights trophy mansions selling for $2 million. This would STILL be one of the most expensive cities in the nation, even after a scenario many of you think is cataclysmic.
    My, how we Bay Areans have lost perspective. We live in a country where the median household income is around $50K and the median home price is $180K. Compare that to SF both today and after another hypothetical 40% drop. Shows you just how out of whack things got during the bubble.

  40. Posted by 1stTimeBuyer

    Trip said, “As an eternal optimist (stop laughing, it’s actually true — drives my wife nuts)” So Trip is married…DAMN IT! At least tipster is single…right?
    But seriously folks, this recession has structural problems unlike any we’ve faced in a long time. I’m not using the “D” word, but it’s more likely to turn further downward that it is to turn upward. The deflationary spiral has begun, and real estate is at the point of that downward vortex.

  41. Posted by Trip

    Dude’s comments are spot on. I have good friends in Sacramento, and while the state gov’t crisis is having a significant effect on people, the housing crash really is not.* One must remember that the “market” prices and bubble in SF were set by the small fraction of homes that actually changed hands over the last 6-7 years. The vast majority of homeowners and landlords have seen their paper values evaporate but won’t feel any real pinch. Those who bought in recent years will certainly feel it — particularly if they need to sell — but that is a small pot. Of course, the small numbers of units that will now change hands over the next few years will again set the “market” price much lower.
    Life goes on. With few exceptions, we’ll all be better off with home prices that are not absurd and crippling.
    * Note that there are a few communities — e.g. Manteca — whose very existence was built on the bubble. The crash has certainly devastated those places. SF is not in this category.

  42. Posted by The Milkshake of Despair

    “Reminds me of the crazy people who predicted the end of the world because of computer systems not being able to handle the switch from ’99 to ’00. So funny.”
    Hmmmm… Y2K was an entirely technical issue and the scare was because there was no-one willing to guarantee that every mission critical system was safe and/or had a backup plan. Aside from the internet and a few other networked systems there was little or no connection between individual failures. An elevator controller freaking out and stranding passengers would have no snowball effect.
    This economic situation on the other hand is a large scale interlinked systematic problem. For example if Wells Fargo goes down its effect will ripple outward.
    No, I don’t think that Armageddon is around the corner (nor did I think so for Y2K), but those two scares are entirely different animals.

  43. Posted by notgonnabuynow

    Sellers coming to grips with reality? Not from where I am sitting. From my window I can see three houses listed at close to $1 million. I live in Miraloma. It’s an okay neighborhood but it is not a million-dollar neighborhood. (Plan C, was it?) We have a long way to go.

  44. Posted by Anna

    Paragon agent’s email this morning:
    “Buyers, the time is now. The houseing market may have turned a pivital corner. San Francisco has an elastic economy. When we hit the bottom you may miss it. Get a great deal while the market is unstable.”
    Turned a corner? “houseing?” “pivital?” The number of clueless agents and brokers in this city never ceases to amaze me.

  45. Posted by anonn

    “Why do I keep getting trappe in these fluj nonsensical discussions”?
    Because you made a hyperbolic statement that didn’t jibe with what you actually meant, it seems. I called you out. Then you qualified your statement. It is I who should be sighing. I already knew that you’re worthless.
    “Two hundred percent+ growth seen almost everywhere”
    In SF? Who is nonsensical again?
    And Dude,
    See the Intel story from last week. Or today’s USA Today story on what big tech will do. There’s going to be strategic spending for positioning reasons. I mean, that’s pretty much the CW right now?

  46. Posted by The Milkshake of Despair

    That Paragon agent is pretty funny :
    “When we hit the bottom you may miss it.”
    I’d go so far as to say that you are almost guaranteed to miss the absolute bottom since that will pass in an instant…..
    …. surrounded by a year or five of being close enough to bottom as to not even matter. Ex-SFer and others have anticipated a U shaped bottom and that seems very realistic. Real estate prices are quite sticky.
    Yeah, there might be an undershoot blip though most of us will be quite happy simply getting fair value.

  47. Posted by EBGuy

    Barter economy isn’t kicking in just yet.
    Maybe not in your part of town:
    In a small, backroom office at the Community Reformed Church in East Oakland’s Sobrante Park district, a handful of local residents are running their own neighborhood bank. Instead of U.S. currency, though, the transactions are recorded in hours and minutes.
    As a side note, I am starting to see a couple of “underpriced” REOs in my neighborhood (across the Bay). Underpriced, as in FOR (friends of Realtors) scoop them up, or the listing gets “pulled” after a couple of days. I suspect the banks are overwhelmed and the agents (REO specialists, some not familiar with the area) price them to move immediately. With enough inventory, these soon become “the comps”; time will tell if flip is still alive and well over here.

  48. Posted by anon

    Wow, if I listened to some of these posters here I’d relocate to countryside, build a bunker, stockpile food and buy a shotgun! Jeez people, get a grip.
    I hate to quote Pat Buchanan, but after 9-11 he had a interesting column about how Americans will survive this, that we’re made of “sterner stuff.” Real estate prices are going down, they may stay down for a while. But the the world is not ending.

  49. Posted by diemos

    “Last I checked, nobody there has had to fight Master Blaster in the Thunderdome.”
    One thing I’ve always wondered about the Mad Max scenario is, “Where, in the post apocalyptic future, do you find that much hair gel?”

  50. Posted by Rillion

    raid gavin’s house…

  51. Posted by San FronziScheme

    Thanks goodness fluj is there to remind us arrogance and shortsightedness are what brought us where we are today.
    Lessons be learned!

  52. Posted by waiting2nest

    I have a vague recollection of one of the regular posters (can’t remember exactly who) predicting DOW 7500 quite some time ago. Well, we’re there today.

  53. Posted by Dude

    Thanks anonn. I checked intel’s press room on their website. They’re investing $7 billion to refurbish manufacturing facilities in Oregon, Arizona, and New Mexico. These facilities will employ 7,000 people. Corresponds to their January 21 press release that they’re closing facilities in other areas (including Santa Clara) which will affect 5,000 to 6,000 jobs that will be redeployed.
    http://www.intel.com/pressroom/archive/releases/20090121corp.htm
    So as tipster correctly pointed out, they’re working to reduce costs by moving production out of the bay area and to cheaper locations.
    The only USA Today tech story I saw was more negative than positive. Basically says that big tech is laying people off today, but hoarding cash in case good investment opportunities come up.
    http://www.usatoday.com/tech/techinvestor/2009-02-16-tech-startups-economic-troubles_N.htm?loc=interstitialskip
    What else you got?

  54. Posted by 1stTimeBuyer

    Thanks Dude. Here’s more info giving a historical comparative perspective on the severity of our downturn. Read em and weep…or at least wimper quietly.
    http://www.economist.com/finance/displaystory.cfm?story_id=13110352

  55. Posted by Delancey

    Scott said:
    Reminds me of the crazy people who predicted the end of the world because of computer systems not being able to handle the switch from ’99 to ’00. So funny.
    Scott, a disaster averted due to much work and expense against a fixed deadline does not mean that disaster was phony. And no, I was not doing any of that work.

  56. Posted by Stumped

    >>>>You couldn’t get me to buy a house if you put a gun to my head – I think there are many people out there who feel the same way. Stepping into a $900K+ asset in this market is like committing financial suicide. Talk to me at $550.

  57. Posted by anonn

    Tipster, thank you for going personal apropos of nothing more than trying to back up fronzi’s obviously errant hyperbole. That he himself backed off after its idiocy was noted.
    Dude, I realize what the stories said. You did not contradict me. Way to leave out that Intel is shuttering inernational in favor of domestic … AND viewing this as a chance to acquire. Also thanks for ignoring that the — yes, negative — USA Today article’s only positive point exactly dovetailed into what I said.

  58. Posted by SF Banker

    >>>>> Think about it though folks….if all the houses and condos now worth well over $550k today won’t sell until they are worth $550k…what kind of an economy will be left for ANYONE to buy a $550k property? That means that hundreds of thousands of people throughout CA will be in debt for over $500k and not have an asset AND not paying property taxes, AND likely unemployed! Can’t wait to snatch up a $550k property with beggers, homeless and the hungry standing outside me door! Call me MISTER POTTER! Get off my lawn Oliver Twist!!!
    Stumped, that is exactly the problem. I actually think the “market clearing price” is in this range for all that so-so housing getting listed en-masse for $900-$1.1m. Historical prices as well as intrinsic value based on cash flow, relative rents, etc. seem to point to this price level being about right. Take a look at prices some of the small homes in Diamond Heights used to sell for in 1998-2002 – many went for $250-350K! They are now (not) selling for $950K+! So, we can all agree that prices are headed downward – but how far? If they indeed go that far, a good portion of homeowners will be de facto or de jure bankrupt and the banks will be inundated with millions of REO houses. If this happens, the consumer driven economy is finished. Unfortunately, I think this is exactly what is going to happen – now that prices are dropping they are unlikely to stop until they hit *at least* this point. Which implies pretty much the blighted vision you outline.
    That is truly scary, and I fear will be the severity level of the fallout. The bigger the binge, the worse the hangover.

  59. Posted by Louis

    There is clearly no floor in the housing market yet, based both on technical trends – like the chart at the top — and just plain sentiment.
    WSJ economist poll says 10% more to go down on home prices.
    One note – re economist story above – having worked in both US and japanese real estate finance – i do not think the bank bubble here is a fundamentally bad or will take as long to fix. As bad as this seems now and here — the japanese sense of unreality on bubble values was worse, and the denial of the need to fix was both worse and culturally deeper.

  60. Posted by Tall Guy

    Dear Editor,
    Where do we start the “Over-under betting pool on bottom-timing?” topic?

  61. Posted by RogerRabbit

    I am in the market currently for SF. Condos are still selling at 2006 prices FYI from what I am seeing

  62. Posted by yeediddy

    “So, we can all agree that prices are headed downward – but how far? If they indeed go that far, a good portion of homeowners will be de facto or de jure bankrupt and the banks will be inundated with millions of REO houses. If this happens, the consumer driven economy is finished.” – SF Banker
    Though SF Banker exaggerates the math logistics – his conclusion is absolutely true. The consumer driven economy in the US is done. And its about damn time.
    For far too long Americans have relied way too much on the use of credit – first via credit cards, and evolving into secured lines of credit and mortgages. I remember being bombarded with credit card applications when I first stepped foot onto my college campus back in the early nineties. Me and all my peers racked up tens of thousands of dollars in charges for basically nothing. I was a lucky one – it only took me close to a decade to get that credit monkey off my back. Some of my other friends? Not so lucky – they’re still paying back their charges, while living on float charges from month to month.
    Despite the short term credit burden – they continued to borrow – this time leasing BMWs and Benzes. After all, whats another 500 – 600 a month?
    Needless to say, very few of my friends are homeowners, or are even in a position to purchase a home (specifically no downpayment). I don’t think this is abnormal – I believe that this is representative of Generation X and Y – and is across the country (I’ve spent time in NYC, Buffalo and SF).
    My point right now is that there are other factors affecting the any recovery of the economy – the shift of philosophy from being consumers to savers, and a near 2 generations of homebuyers who do not have the ability to purchase homes. I think these 2 factors will help keep the bear market trending downwards (and hopefully reset prices where a family can actually afford to live in SF).

  63. Posted by tipster

    “Think about it though folks….if all the houses and condos now worth well over $550k today won’t sell until they are worth $550k…what kind of an economy will be left for ANYONE to buy a $550k property? That means that hundreds of thousands of people throughout CA will be in debt for over $500k and not have an asset AND not paying property taxes, AND likely unemployed!”
    I start businesses. That means I invest in office space and equipment and pay people’s salaries until they are profitable and carrying their own weight. What I can tell you is that if housing prices dropped to a nickel per month for rent (an extreme example, but work with me here for a minute), I could pay people a fraction of what I would have to pay them today to enable them to lead better lives, and that opens up a whole world of possibilities. Everyone could have a job and live like kings if I was able to pay people $1K per month. I could even hire people to sew clothing and they would have great lives and they would be profitable.
    Now contrast that with a world in which rent was $1 Million per month for the tiniest place. How could I pay people enough to keep them here? It would be impossible. Housing prices would skyrocket but everyone would be unemployed! The economy would ultimately collapse. Worse, people would not want to work: they would just go out and buy property and refinance it or flip it. The economy would collapse because nothing of value would ever be created.
    This is almost what has happened. Housing prices got so far out of line that jobs are now evaporating. And no one was willing to work when all that easy money was available. Not only could I not afford to hire people, when I did, few really were willing to do anything.
    So no, the economy of 5 cent housing is really better than the economy of $1M housing. But it may mean people will need to actually do something productive. It’s kind of hard to make a living selling 5 cent housing. But all we have had is an economy where people sold each other ever increasing housing and cashed out their ever increasing equity, having been achieved through nothing at all except for higher and higher levels of debt. That’s an economy that scares me.
    An economy where hard working people can afford quality housing doesn’t scare me at all. It might scare the easy money crowd, but I’m looking forward to it. Will 23 year old bankers make millions in that economy? Nope. So what?
    Bring it on.

  64. Posted by Rillion

    An interesting article about how the crash will effect cities versus suburbs and reshape America.
    http://www.theatlantic.com/doc/200903/meltdown-geography/

  65. Posted by SF Banker

    Tipster, that is a great example. Cheap housing is actually good for society since capital can be deployed to more productive uses vs. mortgage payments. There is very little in the way of innovation/value, etc. in housing – it is really a zero sum game for everyone except agents.
    What I see as a banker really scares me. We are working with several exceptional technology companies (based in the valley of course) with excellent, cutting edge products that are very profitable. Many of them are running on fumes in terms of cash, and need money to invest in sales engineers, inventory, and development and test equipment (i.e. fund their growth). Us bankers are finding it nearly IMPOSSIBLE to find them even a small, conservative amount of financing they need to achieve their growth goals (including hiring actually employees at ~$100K/year). It is unprecedented. I’m talking about potential category leaders with a global market that runs into the billions who cannot get a few million dollars to fund some necessary investments. And yet there is somehow $800 billion dollars about to be pumped into propping up housing, backing bad debt, bailing out xyz, etc. Yet, the very engines that provided so much of the valley and american wealth are literally dying on the vine now.
    It is a sad state of affairs and it has really hitting home for me that the true engines of our economy are dying in front of us, yet all the media and politicians ever talk about is bailing out legacy auto companies that lost to Asia long ago and bad mortgages. Doesn’t anyone remember how beneficial science, technology, innovation, and investment in advanced research and product development brought us so much wealth in the first place? Have we all given up on learning real skills and doing real work? (and before I get ripped for being a banker, I was an engineer and computer scientist who did primary research earlier in my career – paid my dues there). This is a clear sign to me that both the Bay Area and the US in general is clearly in a great decline… How depressing.

  66. Posted by House Guru

    Looking at the inventory trajectory combined with defaults in Option ARM loans, rising unemployment and credit card delinquencies, I foresee more trouble for the SF housing market.
    When people see their mortgages inflate on their under-water condos, they will walk away from their 5% down payments. 2 bedroom lofts will approach 1 bedroom places. $550K for 2BD is certainly very likely the scenario within the next 12-14 months. There will be so much inventory that the only way to make a sale is to squeezes prices down.

  67. Posted by Mavo

    SF Banker, I could not agree with you more! Kevin Phillips described all this in his excellent book “Bad Money” a from last year. We built too much of our economy on shuffling money around and not enough on real productivity.. i.e. technology, research, innovation and good old manufacturing. The only real innovation being done for the most part of this decade has been financial innovation as Greenspan was so fond of telling us… and you see where that has led us!
    An economy cannot be built on everybody flipping houses and using their equity as a bottomless ATM!
    We are seeing a once in a lifetime meltdown. It seems to happen every 80 years or so. There is another excellent book called, “The Fourth Turning” that goes beyond economics and real estate to describe how every fourth generation goes thru “interesting times” as the Chinese say!

  68. Posted by San FronziScheme

    OK, my very last post to fluj. I am officially NOT responding to the crazies anymore after this one.
    You misinterpreted my original post and have been waving my disinterest in futile debates with lunatics as a victory. You are sadly mistaken.

  69. Posted by Debtpocalypse

    It amuses me the reaction to my suggestion that one might eventually want to quit a Californian city in economic & social distress.
    How’s the quality of life in Detroit these days?
    How was the economic circumstances in Reykjavik this time last year?
    If the events of 2008 didn’t sober one to the prospect of financial scenarios expanding beyond one’s own limited imagination, then I guess little will.

  70. Posted by diemos

    “I am officially NOT responding to the crazies anymore after this one.”
    Now, now, SFS. You need to embrace the crazies. That craziness is the heart of the bubble and only once it goes away will it be safe to get back in the water. Flujie’s capitulation is one of the signs I continue to watch for. The other being when ester comes by to tell us she’s walked away from her alligators.

  71. Posted by vox

    From the comments on this board I infer that there are now mad fortunes to be made in:
    a) window bars
    b) cage match arbitration venues
    c) Dippity Doo
    d) the music catalogs of early ’80s hair bands

  72. Posted by anonn

    “OK, my very last post to fluj. I am officially NOT responding to the crazies anymore after this one.
    You misinterpreted my original post and have been waving my disinterest in futile debates with lunatics as a victory. You are sadly mistaken.”
    Dude, do me a favor and stop pouting when your shortcomings with regard to language use are pointed out. We are not in the same room. You wrote what you wrote, and it was, “this market downturn is a first in our lifetimes.” That was false. Your history of misstatements and inane platitudes and parroting doesn’t garner any credibility either. But nobody seems to be particularly crazy and least of all yours truly.
    “Capitulation,” from Diemos. I am not on here saying that the market hasn’t shifted. You might have a look at that Atlantic article too, bro. It’s very much along the lines of what I”ve said regarding population/workforce shifts. We’ll see who will capitulate Mr. 50% Market Decimation Precicter. Actually, no we won’t see who will capitulate. You won’t be around. With no stakes ohter than razzing, why would you take your lumps in 2012? I’m betting against it.

  73. Posted by SocketSite

    We’re moving the tech/Valley discussion and a couple of related comments to:
    The Bailouts Are Coming But Is The Bay Area Dying On The Vine?
    Now back to inventory and sales…

  74. Posted by EBGuy

    this market downturn is a first in our lifetimes.
    FWIW, crunching some C/S numbers, there was a 6.9% from April 01 to June 02. At a minimum, around 2% can be contributed to “seasonality”, so we’re talking about less than a 5% drop. I don’t think that made much of an impression on anybody (or surely not as much at the 1989 bubble crashing, of which I have only vague memories of water cooler conversations from those who were “locked in”…)

  75. Posted by diemos

    “I’m betting against it.”
    Why not? Might as well make it a trifecta of losing bets.
    I’ll be here. January 1, 2012 to take my lumps.
    Perhaps you might like to revisit the discussion we had a little over a year ago about second great depressions.
    https://socketsite.com/archives/2007/11/when_good_comps_go_bad_in_the_marina.html

  76. Posted by Jimmy C

    Remember there were significant job losses in 2000-2002 in SF when every .com started laying off their 26 year old vice presidents and shutting their doors. (not to mention layoffs as Schwab, Visa, et al)
    Did real estate prices go down despite the downturn, no because mortgage rates were low and capital was available.
    I know plenty of people who will pay anywhere from 1 mil. to 1.5 mil. and can afford the payments and have stable jobs, but can’t get a jumbo loan without an usurious interest rate attached.
    If/When capital opens up, things could change…
    Or am I just tired of all small group of riff raff who seem to love patting each other on the back as they agree with each other over and over that things are going down… all the while, none of them having a clue about why. More like a weather report rather than a forecast.

  77. Posted by San FronziScheme

    Jimmy C,
    Yes we do have some clue, if you’re following discussions. Many asset classes are overpriced. This was fueled by uncontrolled leveraging. Did I miss anything?
    Prices have to come down even though at some point “capital opens up”. And that’s simply because few will want/be able to take the chance. No matter how deleveraging happens, it IS happening. This overlap between lower asset prices and increasing capital is where a lot of the “riff raff” here will hopefully snatch up property when they feel the time is right.
    What’s your story? What makes you so sure you’re not “riff raff”?

  78. Posted by Dude

    “but can’t get a jumbo loan without an usurious interest rate attached.”
    Mortgage rates today are still near historical lows across the board.
    http://www.fhfb.gov/default.aspx?page=53
    The average rate on jumbos, taken from 1980 to 2006, was roughly 8.5%. Back out the inflation of the early 80s, and the average from ’87 to present day is about 7.25%. Today it’s around 7%, so still below average.
    Maybe there’s a reason your wealthy friends can’t get those loans: the lenders know the properties are still grossly overpriced, and won’t lend without 30% down. They’re doing your friends a favor.

  79. Posted by SFwatcher

    Jimmy C,
    Agreed capital was available in 2000-2002 even when people lost jobs. That capital (subprime, Alt-A, no money down, negative-amortization) is the reason we got into this mess. I don’t think banks will make the same mistake right now(maybe in another 5 years). So, forget the capital availability which you were referring to….

  80. Posted by anon

    For those that are interested, Redfin reflects that 39 Havens sold on 5/7/09 for $980K (originally listed at 1.675M in April 2008 and reduced several times down to $1.15M). I never saw it but it was mentioned earlier in a comment on SS.
    [Editor’s Note: Moved to the thread on which it was mentioned.]

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