CBS Calls It A “Real Estate Rebound In San Francisco”

“The real estate tracing firm Terradatum ran some numbers for CBS 5, which show that more San Francisco properties have gone into escrow in the last two weeks than at anytime in the last six months.”
[Editor’s Note: Sales volume up on seasonality? Inconceivable!]

Last two weeks activity does not signify a thing relative to long term trends.

Isn’t this when buying typically picks up anyways? Still, not bad news, at least someone is buying out there.

You’ve gotta be kiddin’ me! One thing I learned in taking two semesters of statistics is that it is a math of complete manipulation! Get an idea in your head and, prove it using stats! Homes in Excelsior? Sunnyside? $500k Infinity condos? Come On!!!!!! Who put together this crap? And, who are the idiots that fall for it?

The news is so garbage these days. Hyperbole on the way down, hyperbole (on the still to early to even call premature) way up. But there are expensive houses selling, getting into contract, and having contingencies removed on a daily basis too. It isn’t just Sunnyside, Excelsior, and 500K Infinity condos. I’ve divulged a litany of them over the past few weeks and they’ve largely been glossed over. SOME, and I repeat, SOME bigger ticket items are moving along side this other trend.
Again, tho, I feel as the real story behind this story may be SF’s southward gentrification trend. Nowadays the rails of the train are getting greased by superconforming and 20% down for “affordable” areas. Who is more well heeled? The person who bought in Exelsior with a ninja loan for 750K in 2006? or the person who is buying for 650K and 20 percent down, in 2009?

Now hold off on the bashing for just a minute…
Hank may be right…I think below median priced homes are being sold fairly quickly…especially if a the 10-20% price drop allows someone who is living in a tiny 1 bedroom to move up to a 2 bedroom in the city.
I think the pain is being felt by what I call the “middle class luxury” units…the 2/2’s priced in the 700-1000k range that are now dropping, but still not investment-worthy for those who don’t have money to burn.
Just from reading SS, I think most of the contributors here are in that middle range, so it seems like nothing is being sold. But if you’re a family earning a modest income (and didn’t over-invest in the boom time) still living in a 1/1, now 2/2s are affordable, and I can imagine how they can see it as a chance to upgrade, given the low interest rates and gov incentives.

Then again…selling season IS coming…so Hank could be making something out of nothing…=P

Phew! I’m so happy the housing downturn is over. Okay, so what should I buy that guarantees me at least 4-6% appreciation per year over the next 10? I can afford up to $1.3M. Anyone? Anyone?

Tall Guy:
Over the next 10? Bah-humbug! That 4-6% appreciation should last into perpetuity!

Oh come on! I guess it depends on how you define “rebound.”
Did anyone seriously think that prices would immediately jump back to where they were 2-3 years ago?! A rebound is a process, and at the simplest level, an increase in sales IS a rebound of some kind. OF COURSE they aren’t selling for what they were, but they are selling.
I guess you have to feed your audience, but this site has become tedious.

I am sure with all the tech layoffs and high unemployment rate for professionals there will be plenty of people to “snatch” these properties up.

jessep, what do you define as good?
For me, as a potential buyer, low RE prices are good. For the economy as a whole, low RE prices are actually a good thing, as RE funnels too much money out of people’s pockets. Less money into RE means money put to a better use like education, childcare, consumption, diverse investments like planning for retirement or healthcare costs and many many other things. We have seen what happens when housing eats up 50% or more of someone’s actual revenue.
Of course if you have a vested interest in seeing high prices (flipper, realtor, both, home-debtor), then sure, you must love overpriced real estate.
In the mean time, for us mere mortals, RE is just a huge cash-sucking machine just like the IRS.

Ask CBS5 to investigate itself, and Hank “the plant” Plante in particular.
cbs5investigates@cbs5.com

Interesting report, but what does the lead quote — “more sales in the past 2 weeks than at any time in the previous 6 months” — actually mean?
I assume Hank means more sales than during any other 2-week period over the past 6 months. Not too surprising given that this IS the season for buying. Some of the report’s factoids — “42 offers written on a single property; 41 with 20% down — is consistent with the view (often criticized here) that there is indeed pent-up demand in SF.

Everyone that has been on the sidelines for years has rushed back in, in one huge jolt.
The fed has done everything they can. 300 billion home rescue, 0% interest rates, 8k cash back, 800 billion stimulus, etc.
If this jolt is sustained, all the way till December, then SF has officially weathered the storm. If this jolt begins to fizzle by May, then this will mark the beginning of total capitulation. The Fed has no more cards up its sleeves and there are no more desperate buyers just waiting to RUSH in. The market will drop well into 2010 until Jobs start growing by leaps and bounds again.
We will see what happens.

It is something positive though
I feel like a lot of bloggers on this site refuse to look at any good news…. They refuse to acknowledge anything positive.
I agree that this video is a positive, especially the part about 20% downpayments. At this stage of the bubble unwind, it is important that new victims be encouraged to sacrifice their capital to the credit deflation (thereby lessening the future demands on the general taxpayer), and with videos like this the media and REIC are playing their roles in this salutary process.

“I think housing falling to 500k is good news for us (me).”
Other than 1 brs at the Infinity, that wasn’t in the piece. The 5’s? Old crappy 2/1 houses in the 6’s are way out in the Sunset, need work, or are in bad neighborhoods.

Chuck 2 – my sentiments exactly. I only want what people my age and income status had ten years ago – a nice enough 3/2 in the avenues. It doesn’t have to be Lake Street, it doesn’t even have to be the Inner Richmond.
And no, anonn, we’re not there yet.

“Here are some hard numbers on what is going on and put the lie to any notion of “pent up demand””
Yup, it’s mathematical impossibility. dec/jan/feb sales add up to about 300, which probably means over 500 sales in the past 6 months. If they closed 500 in the past two weeks, all of SF inventory will be gone in less than 7 weeks.

UPDATE: And in related news: SocketSite Sees Seasonality (Versus Signs Of A Rebound).

In the video Hank discusses something about Wells offering low rates.
1) I called Wells today, the revised increase conforming of 729k est has not been re-introduced yet.
It will be interesting to see if we get a higher # of homes closing once this is initiated. This should help the around 1mil props that could be, or are in trouble right now/ not moving as well.
In the interim does anyone know of any banks that have re-introduced the higher limit again?

Every time a stock goes down fiat money goes to heaven too, so that’s not very worthwhile information.

It is kind of interesting that people still buy here, but month to month market volumes have been going down for years now. There are many I know with cash on the sidelines, and none of them are even really looking because prices going down is a huge turn off for anyone potentially paying real money that they earned.
Actually, anon, if you can really be thought of as such when you use the strong voice and opinions you project, LMRiM has posted enumerations of various reasons for buying including several that are unrelated to price.

housing in the bay area (much less SF) has been more expensive than renting the equivalent for well over 20 yrs
Good point. This probably brings us back to Ronald Reagan times, when he decided that debt was good and started the mindless deregulation that brought us where we are today.
Numbers don’t add up and haven’t added up for a while (overall debt, own vs rent insanity). Time to go back to balancing the check books, I guess.

“The reality is that housing in the bay area (much less SF) has been more expensive than renting the equivalent for well over 20 yrs!”
45YOH, I’m not sure this is true — do you have anything that supports it? I can only offer my own experience and that of many friends who bought in SF in the late 90s. By buying then — in a time of dot-com inflated rents — we were ahead in the rent vs. own analysis from day one. That’s actually the main reason we decided to buy (my wife was against committing so much to a down payment) — it made sense financially. I suspect this is the norm and the last 7-8 years when the result has been reversed is the anomaly. But I admit I have no long terms rental and sale price data on it.
I do agree with you that I don’t think we’re going to go back to late-80s prices. And I can almost guarantee that March to May sales numbers will increase. But that won’t establish anything. I can also almost guarantee that July-December numbers will decrease. Those will reflect nothing more than seasonal norms regardless of the broader trend.

it would be tempting to buy an entire block in detroit. Bulldoze it and create a walled compound.
Yeah, and hang a huge banner “rich folks live here, come rob us please”.

Well, the japanese model does include samurai retainers to man the walls.
Local jobs! I like it! Trickle down economics at work!

“theoretically speaking, a steadily increasing market is the best for an investor (IMO), as it allows you to pull equity out of exisitng assets and apply them to new ones…with the likelyhood they will too incr. in cvalue.”
Ah yes, classic ponzinomics. It works great … until it doesn’t.

Terrible reporting. Why is Brendon DeSimone referred to as “Real Estate Expert” and never “Paragon realtor”?

This is real news. Everyone in the real estate industry is talking about the 42 offers in the Exclesior. All the action is in the 798K and under price point. Why buy a condo when you can get an SFR for the same price? If you are in it for the long haul, as a primary, it’s a much smarter buy. I call this the spring of “the millionaire next door” buyer. The cautious buyers are dropping off the sidelines and jumping into the pool because the water is fine, Fixed rates are low and buying is a good idea as long as you not a flipper. Glub glub glub.

“and consequently a good investor is one that can think on their feet, change directions, and seek opportunities in uncharted waters.”
And just so you know. The correct end-game strategy at this point is to load up a few of your properties with as much debt as possible so you can own the others free and clear. Then when prices fall you can walk away from your debts and keep a few income producing properties.
Whaddaya say LMRiM?

so who was this daniel guy?
why were his comments pulled??
[Editor’s Note: The first line from Daniel’s comment: “Real Estate Agents are absolutely liars!”]

42 offers? If you offer anything at 90 cents on the dollar, you get a lot of offers for that deal.
As an example, the price of nearly any car you can buy will fall over time. If I list a 2 year old car for sale at half of blue book, I’ll get lots of offers. This doesn’t mean that cars are going up in value, or that cars are suddenly more desirable, quite the contrary, the car is going DOWN in value. But at any price point, people buy cars, and people who will ONLY offer if you give them a steal are ALWAYS out there, no matter what the market is doing.
This doesn’t mean that buyers will suddenly offer any price for homes, but it means that, as always, people will look and if they see an outstanding deal, they’ll go.
It does NOT mean that if they see an even ordinary deal (e.g. 95% of blue book) that more than one or two will jump. So to extrapolate anything from 42 offers is preposterous. I can pretty much guarantee that 38 of those offers were nowhere near the selling price.
Buyers are not “dropping off the sidelines, the water is fine”, because prices follow J-O-B-S, and those aren’t doing so well right now, but if you price something low enough, people will try to get it. Goodness, even if I don’t want a 2005 Pontiac (I’d never buy one), if you offer it for $1, I’m going to try to buy it from you if only to turn around and sell it for more, even if I’m not seriously in the market for that car. 42 offers in a market with low volumes just means it was priced really low. The water is fine indeed.

Trip, when I bought in 1995, it was still more expensive than renting, because interest rates were much higher then. I refinanced in 1998 at an interest rate 2% lower, and starting then my mortgage was less than (by then higher) 1998 rents for a similar place.

fronzi- interesting. pat on back is well deserved, depending on your next investment move and personal needs. i can’t imagine your plan back then was specifically to sell SF RE, wait, and buy in again. perhaps alot of stock folks would nod their heads, but RE investors know that the cap gains, sales commissions, transfer taxes, and overall hassle usually prevent repeated buy/sells based on up/down market conditions(unless you’re a flipper, a flipper in good times may i add.) also, a good, stabilized property you know first hand, with a decent tenant mix and in good condition, has specific value to you per se. (i’m sure you’d agree with that.)
but of course i don’t know your personal desires, maybe you want to cash out or invest elsewhere. as for me, i still have alot of years to be in the market. i like my properties (some of my units being off RC is a big incentive 🙂 i’ll probably not be buying anything until values start rising again and more importantly, banks start lending to investors again with anything close to decent LTV’s. but someone who is in a strong cash position could be looking at making a move into SF RE.
as an aside, i’ve been meaning to comment on the “is your home an investment question?” short answer: it depends. while many people have strong opinions on this, i know that in my personal case, my home was an investment- an instrumental one. as i gained equity in my first condo, i was able to take out a 2nd position against it, and invest in another property. sure there is risk, but the whole point is that i had access to money. a renter can’t do that (unless they make bank, and are diligent about saving it, then they can invest that; and a few SS bloggers aside, 98% of renters are not/will never be in that position.) also, many older folks in SF cashed out of their pricy homes, brought a condo at a fraction of the cost in AZ/FL/etc. and retired. for them it was alos an investment. so again, it depends.

LMRiM: think FHA loans. 3.5% down if under $750K, and you can probably still get the seller to do closing costs.
I suspect the insane amount of action in the east bay, and at the low end of the SF market, are people doing exactly what you are stating. The fraudulent buyers have just moved downstream. But don’t worry: more buyers in the last two weeks than in the last 6 months means people are figuring out how to work the system, as usual.

SFS,
That scenario only works if they are specuvesting a primary residence. Which as a definition isn’t what I would call a specuvestor. Otherwise the banks want 40%-50% down if you already have a home. So I think it is more home buyers than investors. In this lending market most investors are still on the sidelines because 40% is a nice chunk of change.

But they are stuck in a primary residence at least, it could be worse. These new buyers will have mortgages that get paid down so stuck as they may be (in the future) it won’t be the same as a vacant place for sale following the market down or rented at some lower number scenario.

Great, now I’m getting this email from developers:
NEWSFLASH!
CBS5 Reports on Local Real Estate Rebound…

SFS- so did you sell your SF RE investments specifically to get out/buy in again later? or was it a lifestyle change? as mentioned in my previous post, RE usually does not lend itself to sell/buy market timing, and i was wondering what your intentiones were BACK WHEN you sold.

i appreciate your candor SFS. your experience sounds very similiar to many who brought investment property in SF in the 90’s (certainly up to 98.) the main difference is the finacing/leverage, as most in SF did not put 40-50% down (20-30% is more like it.)
the rent/value ratios in SF are similiar, 200+ in most cases. my whole schtick was buying properties that could be redeveloped to a higher and better use, such as converting an SFH to 2 units, expading into unused basements, etc. so my rent/value ratios are much more reasonable.
we’ll have to see if the “twice in a lifetime” scenario plays out. in essence, it already has in lesser areas, and ares prone to booms and busts, where values are already +/- 50% off their peaks. but one of my whole points of investing in SF is that the city should weather the downturn better. regardless of how low SF prices reach, i strongly suspect the rental market here will fare much better. i.e. i think there is virtually no chance that SF RE will be -50%, and that the rental market will also be off by -50%. but as for heavy discounting, i suppose you could get some great deals on miami/vegas condos now and try renting them out. personally i do not like boom/bust markets at all, and would not put my money into them. these are the places where values do drop by 50%, AND the rents drop too (too many vacancies all at once.) no thank you!

Be sure to come back and give us all the details once you close escrow. We love anecdotes.

Outsider are you saying the same unit you contracted at $500psf was offered to you for $1000 in the past? If not is the unit a true comp to what was offered to you for $1000psf?
If what your saying is true (not that it is not) way to go.

45yo,
You probably got a good deal of RE war stories to tell I guess.
About pricing, my point of reference is the house I rented in premium NV until last year that was sold in 1998 for less than 450K. Typical little house with 2000sf but not all of it perfect. The buyers had seen prices starting to go up and were afraid to be priced out (yes, even at this price). A similar house but in better shape down the road sold last year for 1.6M+. There’s a lot of bubble built into that price despite all the Realtor talk of shifting demographics. A Honda is still a Honda, even if the salesman tell you it’s a sportscar.
I have seriously considered Miami Beach but not LV. MB is a bit tricky, even if prices are much much better than 2006, the time I started considering buying property there. The main issue I have with new MB condos is that most recent towers have excessive overhead/HOA fees. Often the HOAs fees will eat 20, 30 and up to FIFTY% of the potential rent! (actual rent, not “wish” rent lingering forever on CL). If you want to do long term rentals, you cannot have high costs like that as you don’t want to eat Mac’n’cheese to subsidize tenants all your life like many investors that bought in 2004-2007, it’s not healthy. I don’t know how that can be resolved as a lot of those fees are structural, i.e. the cost of running the building safely and properly. My target will probably be well established small condo complexes, 4 to 8 units, where HOA fees can be more manageable with no elevators, minor landscaping, no extravagant needs like Valet parking or 24/7 security. In short not the Albino Pachyderms that have been sitting empty for ever. My limit will be 150/sf for a 2BR to make it work with a less than $1200/m rental and $200 HOA tops (rare gem).
About Vegas, I haven’t been there in a few years. I do believe some of the city will be sitting vacant for a while from what I could gather. The population that came and made it expand so much is the highly mobile types. They’ll move out and move on as quickly as they came. And the Casino industry will not save the day as they have big problems of their own. Apart from the casinos and RE ponzis, what was Vegas about, by the way?

Outsider Congrats, you will love the community; welcome. You clearly got a great deal. I too would have selected a tower unit vs midrise if I was shopping for a 1 bd; I think they get more light plus having the balcony is a bonus. Higher floor, larger sf midrise are great however; a few floors have higher ceiling heights and some have very large terraces.

Diemos it depends. I feel bad people may be underwater but on the other hand if they wanted the unit bad enough to pay $1000+psf for a 1bd, or even consider it well it’s a bit hard to feel sorry for them. I just assume they wanted those unit’s bad enough to pay the premium as people do with many things not just RE. I personally will never understand why anyone paid $1000+ psf. I know of some units in Tower I that although never fetched around $500psf were not too far off, advertised at at around $600-$650psf. It depends on what floor, how you negotiate with the sales team I suppose, etc.

fyi, the first line from my comment above was tipster’s.
if you price something low enough, people will try to get it. Goodness, even if I don’t want a 2005 Pontiac (I’d never buy one), if you offer it for $1, I’m going to try to buy it… “tipster”
How about a little reality check:
The home in question was 44 Dublin. A 975 SqFt 3BR, 1BA asking $589,000.
Meanwhile nothing within a 1/2 mile radius had sold for more than $589k in over 5 months. Yet this one gets 41 offers.
Also, per the MLS, there were 48 homes within a 1/2 mile radius of 44 Dublin with 1 bath that sold in all of 2007 and 2008. Average sales price of $589,260, median of $605,000.
$1 pontiac indeed.
[Editor’s Note: Sorry sfrob but you’ve got the wrong house. And the right house paints a very different picture. Plug in tomorrow for the scoop and real reality check.]

Diemos & gowitheflow: It is easy to say someone paid too much in hind sight. If the current price is $1500/sq ft, they would appear real smart. I thought $500/ for a nice unit ( only seven in the tower ) protects my down side a bit but that’s not to say it wouldn’t hit $400. Case in point – I wanted the new BMW M3 badly. It came onto the market late 07 and dealers were asking $15-30k over MSRP and getting it. I bought mine at 1k below invoice in August and thought I got a steal. Then came the crash. I don’t even want to know what I can get one for now. During my first visit at The Infinity a couple of weekends ago, there were 1 br units with city view that probably would sell in the mid 400k. The desire to meet investors ’09 first quarter expectation is what motivates the developer along with wish of not having to carry the huge HOA on unsold units. Anexation of Tower I and II opens the door for standard fixed rate conforming loans but I am concern over the % of rentals as the high number could derail any future financing and send the value of the development into the dumpster…

About hindsight/foresight, the housing bubble was probably the easiest bubble to recognize that I have ever seen (or read about). Even easier than the NASDAQ/tech bubble, which itself was blazingly obvious.
Residential housing is a nonproductive asset. Therefore, it is ultimately dependent on aggregate income to support its valuation. It is simply impossible to quickly raise aggregate productivity/income, as it is dependent on the aggregate productive capacity of people generally, so the rapid rise in value was unsupported. Unlike even sector bubbles, like the NASDAQ for instance, it was impossible to imagine that the US population as a whole (or even the population of a large area like a city or MSA) suddenly chanced upon some miracle productivity pill.
Like all bubbles, it is extremely difficult to call the top. However, given the exponential ramp up in so many areas in the US from 2003 through about 2005/06, it was very clear we were in a parabolic blowoff stage and that the whole house of cards was going to fall apart soon. People could argue whether it became ridiculous in SF in 2004 or 2006, etc., but given the high transaction costs inherent in an illiquid market and the huge risk in any highly leveraged asset, it’s largely an academic question.
BTW, $500 psf for a nice place in Infinity T2 doesn’t strike me as a crazy purchase decision. Sure, the value might go down, and probably will a bit, but as a second home for someone who could afford it and is tied to the area, I think someone could feel justified in having made a good risk/reward decision for his own circumstances. One thing for sure, I don’t see that $500 psf purchase falling 20-30% from here, which is more than I can say for a lot of SF real estate right now 🙂

SFS,
I don’t disagree. But the localized bubbles were certainly part of a much larger, practically worldwide phenomenon (which hints at the true source of the housing bubble: primarily the monetary and regulatory policies of the monopoly supplier of the world’s reserve currency, the Fed).
A long time ago I read some academic/experimental studies on bubble (it might have been Kahneman and/or Tversky – if anyone knows for sure, please post :)). Using college kids as “lab ats” in controlled experiments, the researchers identified 3 necessary conditions for the formation of valuation bubbles:
1) Large ratio of new entrants relative to historic patterns (so, less experience for the marginal purchaser);
2) fundamental uncertainty as to the “true” value of the asset/good (it’s hard to get a bubble going in the cost of a loaf of bread, or in utilitarian clothing, for instance); and
3) presence of easy credit (the experimenters set up a “bank” from which the participants could borrow).
Seems like all those conditions were well satisfied in the housing bubble. I think the article dates from mid 90s maybe (appeared in an academic finance journal) – again, if anyone knows the cite, please post!

Lmrim- “residential RE is a non productive assert…dependant on aggregate income to support it’s valuation”.
The distortion with your way of thinking is that it pre-supposes that all housing areas have equal value/income linkage. As a consequence this model works well for areas like the central valley, where alot of new subdivisions popped up to accomudate new buyers, I.e. Classis boom/bust regions.
This model works less well for entrenced areas like SF, marin, pall alto. (the SF is special argument, if you will 🙂 this is why central valley has already fallen 40-50% since summer 06, and why ‘real’ SF only began to decline late summer 08.
I know there is alot of didain for realtors here but their swan song statements cannot be fully discounted. I’m sorry but “location! location! location! and ‘SF is special’ are not without merit. (granted they may be annoying anacronisms, but wise people do not throw out the baby with the bath water!)
If you look at long term trends (since WW II) for SF RE, it has appreciated at about 4.3% per annum while the rest of the country was something like 2.3%. Additionally, in the early 90’s, housing dropped significantly less in SF than SoCal. SF also rose much earlier after the 90’s recession. These characteristics manifest themselves today in the decisions people with means make. Outsider, who just brought a condo is an anedotal example of this. And there are others too. Areas with stronger intrinsic values tend to be the last to go down and the first to rise (not accounting for mix, high end vacation spots, spectacular bubble prices, I.e the hamptons). This will help control the drop/duration of mid to mid-hi SF RE.

That’s a great paper, SFS, but I don’t think that’s it. (That paper brings back a lot of memories. It’s really a pretty profound theoretical treatment of why people make irrational choices like cutting winners and letting losers ride – the meat of the paper is in the “value” function graph on p. 279 in the linked pdf).
The article I am thinking of is purely experimental, trying to identify the conditions for bubbles and then testing them using a game by paid college student lab rats. (I sort of remember that the asset was a stock that pays increasing dividends but with a 50/50 chance of either paying or not paying in any given period. It’s a trivial exercise to value it using rational expectations models, but the subjects “chased the bubble”, modelled after the South Sea Bubble, but I could well be mis-remembering it.)

lol, more like over-employed Democrat.

Buyers in San Francisco would be crazy to make an offer now. All buyers should continue to wait as prices will continue to fall through 2009. The longer they wait, the more the prices will fall.
San Franciscans forget that the economy here is interdependent with the rest of the country and we’re on the tail end of the decline.
Wait, wait, wait.