“Conventional wisdom has it that premium manufacturers do better in a downturn because people with more money can weather the storm,” said Michael Tyndall, an automotive specialist with Nomura in London. “This time it’s different.”
UPDATE: A plugged-in reader reports:
I saw a report from BMW North America that shows 7-series sales at 23 cars for Jan 09 versus 710 for Jan 08 (a 97% decline). The Z4 sold 45 in Jan 09 v 363 in Jan 08. Overall, BMW was off “only” 21% for Jan 09 v Jan 08 – however, the overall Feb sales are reported down by 32%.
Then again, who drives a BMW in San Francisco…
∙ Rolls-Royce, Ferrari Suffer as Slump Reaches New Rich [Bloomberg]
old news. off topic. wrong link.
with all due respect, NEXT………
[Editor’s Note: Link fixed (cheers). And you’re right, what could the conventional wisdom of the wealthy being relatively immune to an economic downturn possibly have to do with San Francisco real estate.]
“with all due respect”, I have a friend who owns a Lexus dealership in Southern California and who told me that his business was “different”, because his customers would not be hurt by the downturn. (His business is off 40%) Sort of reminds me of certain people who for years went on and on about how “different” and wealthy San Francisco was, and how it would not be hurt by the downturn.
I know a lot of people that can afford to buy a new car (I wish my grandfather bought a lot of Bay Area real estate in the 1930’s) but are putting it off since so many people they know are hurting and it just wouldn’t seem right to show up in a new AMG MBZ or Supercharged Range Rover…
Economist magazine had this amazing statistic last month:
Rolls-Royce US/Canada sales December 2007 = 29
Rolls-Royce US/Canada sales December 2008 = 0
>Rolls-Royce US/Canada sales December 2007 = 29
>Rolls-Royce US/Canada sales December 2008 = 0
ah but
Friends with Hurt Feelings December 2008 = 0
Didn’t someone else say there was not a single Rolls sale all of last year? Or was it Bentley?
who friggin buys a rolls royce anyway? 29 total sales in all of North America? apparently no one now, but hardly anyone ever. Lexus sales down 40%. from what? when the blond with the new boobs and unlimited credit line was buying everything she could get her hands on because she didn’t know she actually had to pay it back?
you can make statistics say anything, or mean anything to you, and for me 40% off on lexus sales is bad for Mr dealer, but shouldn’t be a surprise in the LA area where there were a lot more idiots buying real estate they shouldn’t have then there were in SF. the land of the fake (SoCal and Miami) vs. the land of real jobs and smart people (SF) went up a lot more in RE prices, and will come down a lot more.
ever notice where all of the flip this house shows by people who had never done it before were located? SD and LA. how many of your friends got into the fix and flip game in SF in the last 4 years? probably none. in LA, probably 1 in 10
we’ve got the brains here, but not the looks, so we actually have to work for a living, and know the difference btwn smart use of money and dumb and that will provide far more support to the local RE market than SoCal.
High end vehicles were a noticable element of this boom. The really strange thing is that American muscle cars got included among the list of desirables during this boom.
Look how many fresh off lease E / S class and 7 series available on craigslist, many at firesale prices. Rational people would buy out their lease instead of upgrading in a down market. MB and BMW sales are down, meaning those people who leased are now driving lesser cars. The Rolls Royce angle is important to the RE market, as most high roller brokers prefer Bentleys & RR’s compared to “lesser” bmw and merc’s.
I saw a report from BMW North America that shows 7-series sales at 23 cars for Jan 09 versus 710 for Jan 08 (a 97% decline). The Z4 sold 45 in Jan 09 v 363 in Jan 08. Overall, BMW was off “only” 21% for Jan 09 v Jan 08 – however, the overall Feb sales are reported down by 32%.
FSBO-
All the $299/month 328i / C300 leases are keeping bmw and merc floating
u guys should see the results from the BMW lease return auction in Hayward and Riverside (held once a month). Wholesale prices are ridiculously low — I am almost tempted to upgrade my ’96 Camry (was going to wait unti it hit 200k miles but maybe not).
the land of the fake (SoCal and Miami) vs. the land of real jobs and smart people (SF)
ROFL. You’re classic.
FWIW: there are many “real” jobs in SoCal. Many of the richest people on Earth live in LA (mostly the Western parts) like Beverly Hills, Bel Air, West Hollywood, Brentwood, Malibu, Santa Monica, etc etc etc
ever notice where all of the flip this house shows by people who had never done it before were located? SD and LA
Did you ever stop to think that so many flipping shows happened in SoCal because THAT’S WHERE THE TV/FILM COMPANIES ARE?
perhaps not all San Franciscans are so smart?
regardless, I see little difference between the overspending wannabe’s of WeHo and the overspending wannabe’s of the Marina.
“The Rolls Royce angle is important to the RE market, as most high roller brokers prefer Bentleys & RR’s compared to “lesser” bmw and merc’s.”
No chance. It’s pretty rare that I see a Rolls in SF, let alone a Bentley.
To prefer and to have are two different things. Just saying that the psychology behind of high end purchases is changing.
anonn – come on out to Tiburon if you want to see some Bentleys and Ferraris. But they are outnumbered by Priuses (or Prii or Priora or whatever the plural is).
Yeah. Marin’s got some cars. I’ll grant you that. But it’s got nothing on LA.
I rarely see a Rolls in San Francisco but I see a Bentley almost every day.
Low 7 Series sales are a result of 2 things, 1
the economy, 2 the new (F01) 7 is about to go on sale. so they weren’t selling too many older models (e65).
why would you drive a ferrari in SF.
there’s a stop light/sign every five seconds, and there are ten potholes on every block.
Here in ‘the land of real jobs and smart people” I have always been surprised when viewing broker tours double parking in my neighborhood that the realtor cars are FAR more expensive and flashy than the owners of the home on the market, or most probably what the future buyers vehicle(s) will be.
ex-SFer – you must have lived here last in the dot-com days. The Marina buyers vs. WeHo? Seriously, you need to call up 10 recent homeowners from both, and then compare the two again. Sanity returned to SF, and it’s never been a SoCal strong suit
Besides, add the difference of the blond bimbo crowd over-bidding properties vs. the blond brainiac in the marina (who were fewer and more careful) and you get a SoCal real estate problem that SF doesn’t have.
as for the wealthy in LA – you select a far larger population and you get more wealthy. Percentage wise, let’s talk because I’d be interested.
and ex-SFer – did you stop to read my following comment “how many” of your local friends got into flipping in SF vs SoCal friends? Yeah, TV crap concentrates in SoCal so the flipping shows were there, but if SF folks were flipping like crazy like they were in LA and SD, then the cameras would have come here too. But alas, no cameras, little flipping, and just poll your friends in both places – that is if you’re ex-SFer status has left you out of touch with what’s going on
you must have lived here last in the dot-com days
close enough. you forget (or didnt know) of course that I’m from SF and my friends/family are there, and that I’m in SF all the time. I’m quite “Plugged in” to the local scene.
Sanity returned to SF, and it’s never been a SoCal strong suit
Says who? you? SF RE is not even close to sane. Many/most recent SF homebuyers I know are extremely overextended on their house payments. They are insane to have even signed the papers. Only you could call spending $1M or more on a home when you make $200k/year “sane”. and of the 10 most recent SF homebuyers that I know, 8 paid more than 5x income for their homes (off the top of my head, 2 buying in ORH as example, I’ve discussed them before)
SFers are and have been delusional about their real estate since the late 1990s, and have only become slightly less delusional these last few months. Even when presented with facts about their real estate, they scoff and tell me imbecilic things like “SFers pay cash for their homes” and “everybody wants to live here” and “the downturn occuring elsewhere can’t happen here” and so on. some recently have told me that tech won’t be affected by the slowdown! ROFL.
sure, the vibes in SF and West LA are somewhat different. but there is more that is the same between those two areas than is different IMO.
as for the wealthy in LA – you select a far larger population and you get more wealthy. Percentage wise, let’s talk because I’d be interested.
which is it hangehmi? your first claim was that SoCal only had “fake” jobs. I clearly showed you that is FALSE. A sizeable portion of it “the real LA” has considerable wealth, far far more than the Bay Area, partly due to the fact that the LA metro is so big.
Percentages don’t matter when you live in Bel Air. Everybody is rich there. Everybody around you is rich too (Beverly Hills, Brentwood, Santa Monica, Malibu, etc). who cares if the percentage of wealth decreases because people are poorer way over in Compton. Compton and Bel Air are 2 different worlds. Kind of like SF and San Bruno.
There may/may not have been much flipping in SF proper compared to LA proper, but that isn’t going to save SF. SF’s RE is far too expensive given the incomes of the populace. That’s enough regardless if other areas were “worse”.
the SF flippers are the countless people who paid $800k for a 1Br 1Ba condo. they don’t think of themselves as flippers, but they are speculators, since few of them planned on staying longer than 10 years. the common mantra in SF RE was “I’ll buy this and live here for 3-5 years then sell and move”. That’s basically flipper mentality… or at least the end result will be the same.
for instance, I’ve commented on this before, but look at the recent sales dates of the majority of homes show on SocketSite. A surprising number of them were most recently sold in the prior 5 years… this is speculator activity not home purchasing activity. and it happened across the nation, although seems to be more often in Sf than in the midwest by my unscientific eyes.
I’m not saying that the RE dynamics in SoCal vs SF won’t have slight variatioans (and I mean slight)… they will. Nor am I saying that the flipping % were equal in both areas (they’re not), nor that overall SoCal has a higher income than NorCal (I don’t know).
What I’m saying is that the two metros are more similar than dissimilar, and more importantly your characterization of SoCal as “fake” and Bay Area as “real jobs and smart people” is laughable. The height of SF self-importance.
The “real prime” SF and the “real prime” LA are very very similar and will behave very very similarly. the outlying areas will get hit first and hardest, then the pain will move inwards toward more and more prime areas, and those living in prime areas will refuse to believe values have dropped until the bitter end, and many will hold their houses, and many others will find they’ve overspent and can’t really afford their homes.
As Julius Ceaser said while he was trying to sell his villa on the appian way, “is est diversus hic”
We will know when San Francisco is a grown up city when it no longer feels the need to bash or be jealous of Los Angeles. Do you think anyone in L.A. or NYC, cares what San Franciscans opinions of their urban areas are?
“but they are speculators, since few of them planned on staying longer than 10 years.”
No, they are speculators because they used loan products that they had no hope of ever paying off with their income. Their dependence on appreciation to save their bacon is what makes them speculators.
I think the SF “speculators” fell into both camps. Many certainly had little likelihood of ever keeping up with payments (particularly after recast) and simply used OPM as the ante to bet on appreciation. But many others can afford the payments on, say, an $800k 1BR cookie-cutter condo, but they only reason they paid 3X the rental value was because they bet (wrong) that appreciation would make up the difference and they would move into their “real” house in 5 years. The former will walk away because they have no choice. The latter are stuck and miserable — some will walk away but most probably won’t.
I agree with Trip.
Most of my friends fall into the second category…
they have stretched so far that they have little to no wiggle room.
the problem as always is that SF RE is just so expensive. all but the truly rich can find themselves in trouble quickly.
if you make $350k/year and buy a $2.5M home (financing 80%) then your payments are likely over $14k/month. (buying at 7x income is nowhere near uncommon in the Bay Area IMO)
after taxes etc that is TIGHT TIGHT TIGHT.
and many of those $350k/year types are double incomers… so one job loss can be devastating.
Yeah, the mantra was “Who cares about payment, the refi/resale will take care of it in 2 years”
“Yeah, the mantra was “Who cares about payment, the refi/resale will take care of it in 2 years””
Sure it was.
“Yeah, the mantra was “Who cares about payment, the refi/resale will take care of it in 2 years””
Sure it was.
although I agree with anonn that this mindset wasn’t particularly strong in SF compared to the rest of CA, it was somewhat prevalent (or at least a variant of this idea).
Instead I heard much more of “Well, I’ll just buy this studio/1Br/2Br now, and then cash out and upgrade in 3-5 years if/when I get married or have kids”.
it’s a more insidious version of speculating.
I still had a hard time explaining to my friends who bought in ORH that they may be upside down on their home 5 years from purchase. that was just last summer! they just didn’t see it as a possibility. Even this fall they said “well, we’ll just have to keep it for a few years”
and many socketsiters have scoffed at the idea that RE may not rebound for a decade… clearly a possibility. many many scoffed at my idea that SF RE would be under enormous pressure through Dec 2011 even after I presented data as to why I felt this way.
It seems like an eternity ago, but was actually only about a year and a half ago when common knowledge was that there was no National RE bubble, and that if there was “local froth” it would just deflate like a Souffle. And that RE only goes up in world class cities like San Francisco.
so people used that knowledge to stretch for housing. perhaps not like they did in Tracy or in Inland Empire or in Las Vegas… but clearly they stretched big time. (you can see this using the NAR’s own affordability indices, the LTV ratios, and the explosion of ALT-A products in the city)