CFAH

4251-4253 23rd Street
From the MLS listing for 4251-4253 23rd Street:

Gorgeous new remodel of large Edwardian in the heart of Noe! This stunning home features 4BR and 3.5BA, with 3BR/ 2BA on the top floor and add’l BR/ BA plus media/ play room on ground floor.

4251-4253 23rd Street: Dining

Includes a fully equipped, vacant, legal studio cottage with sep. entrance (built in 2002) at the rear of the property. No expense was spared in the home’s thoughtful design and execution.

4251-4253 23rd Street: Kitchen

Huge open plan chef’s kitchen overlooks a big rear yard. Only 3 blocks to 24th Street shopping – this home has it all!

Purchased pre-renovation for $1,450,000 in February of 2007; listed post-renovation for $2,450,000 in October of 2008; reduced to $2,275,000 in January of 2009.
From a plugged-in tipster yesterday:

[4251-4253 23rd Street] went to foreclosure sale today on the steps of City Hall. With an outstanding debt of $2,220,821.39, the bank reduced the opening bid to $1,742,500. The only party to bid did so at a penny over the opening bid. The property sold to a fellow who got a $532,500 discount from the last listing price and appeared to be an end user.

Call it 22% under what was owed, 29% under original list, and congratulations to the bidder. No word on why the MLS listing shows as “contingent” (or whether as such the $1,742,500.01 sale price will be reported as an auction “comp”).
∙ Listing: 4251-4253 23rd Street (5/4.5) – $2,450,000 [4251-23rdstreet.com]

Comments from Plugged-In Readers

  1. Posted by tipster

    What’s that sound?
    The sound of the renovation boom in Noe coming to a screeching halt.
    Congratulations to the original seller of the dilapidated property: did NONE of the work and collected nearly all the cash!

  2. Posted by steve

    is this actually sold? aren’t auctions usually subject to further bank approval regardless of opening bids? if you are the bank, why not MLS this at $2M or so?

  3. Posted by LMRiM

    That’s fantastic news that some flipper got washed out.
    Hmmmm… maybe he wasn’t so dumb and pocketed some of the contruction loan? I like to look at the potential silver lining in these stories.
    I second the congrats to the 2007 seller. What a wonderful time and place (NV) to find a sucker!

  4. Posted by Michael

    Q: “aren’t auctions usually subject to further bank approval regardless of opening bids?”
    A: No. “California foreclosure law states that on the day that was established for sale of the property, and only after all publication period requirements have been met, the property is sold to the highest bidder for cash for the full amount of the debt plus foreclosure fee and expenses. If no one bids at the Trustee’s Sale, the property automatically reverts back to the beneficiary for the debt. A Trustee’s Deed Upon Sale is recorded in the county in which the property is located transferring title to the foreclosing beneficiary allowing the marketing of the property to recover their debt.
    All sales under a power of sale in a deed of trust will be made between the hours of 9:00 a.m. and 5:00 p.m. on any business day, Monday through Friday, at the time specified in the notice of trustee sale. The sale must be made a public auction to the highest bidder. The trustee has the right to require every bidder to show evidence of ability to pay the full bid in cash, cashier’s check or certain bank checks. Each bid is by law an irrevocable offer to purchase. However, a higher bid cancels an earlier bid. It is unlawful and a criminal offense (a fine of $10,000 or up to one year in jail) to offer anyone consideration not to bid, or to fix or restrain the bidding process in any manner. Debtors may reinstate up to five days before non-judicial foreclosure sale.
    Junior lien holders may no longer redeem, so they may try to protect themselves by (1) advancing funds to bring the senior loan payments current, then foreclosing for the sums advanced; (2) bidding at the foreclosure sale so the price will be sufficient to pay off the senior and the junior liens; or (3) acquire the property by bidding at the foreclosure. If the debtor has a right to redeem and does so, the junior who purchased the home must be reimbursed. Junior liens do not reattach the property if a borrower redeems a senior lien whose foreclosure extinguished the junior. This helps borrowers by encouraging the junior to bid up to the property to fair market value at the foreclosure sale, or else lose out, giving borrowers closer to fair value at sale.”

  5. Posted by nottimhawko

    The all too common blood lust attitude many people express here is just as disgusting as the greed seen during the late stages of the bubble.

  6. Posted by DataDude

    Beautiful kitchen and good location.
    How many square feet on main house, does anyone know?

  7. Posted by San FronziScheme

    The all too common blood lust attitude many people express here is just as disgusting as the greed seen during the late stages of the bubble.
    Markets and psychology work in lockstep.
    A personal experience on that: I was in my buying frenzy between 1994 and 2002. When I started buying, most of my friends and co-workers would tell me RE was a sucker’s game and that investors deserved to be cleaned out. Everyone was in stocks. In 2000-2001 during the Dot-Com crash suddenly the same people started changing their tune, asking me how I was getting such ROIs on very basic rentals. Most of my friends bought in 2003-2007 when prices started to really pick up and ROIs were becoming ridiculously minuscule.
    The pendulum swings both ways and we need RE investment to be ridiculed, shamed on a public square and be perceived as fool’s game, an unpopular activity. When it does the market will be packed with opportunities again.
    Right now, I do not see that. I see a lot of specuvestors jumping on the bandwaggon of a train they saw pass them by 7 years ago. The mindset is still of the get-rich-quick scheme as everyone is still reading from the same book. ROIs are still very low except in a few regions that saw a massive over-correction. I do think there will be much more blood and hurt pride before we see any bottom.

  8. Posted by sometech

    Yeah I don’t understand the hate. The “flipper” put a lot of work into the place. We are not talking money for free. We are talking about someone trying to make money by working hard, taking serious risk, and losing hard. I’m just praying that I’m not slated for the same bad bill down the line at some point, whatever the business / investment.

  9. Posted by kthnxybe

    Except for a few little too-trendy details that other people probably like, it looks very nicely done all around and in a super location, nothing glaringly wrong with it.
    And I love the floors.
    I look forward to reading more commentary on the story of this lovely home as the morning wears on. 😀

  10. Posted by sardonic

    For those who know, what are the actual mechanics of payment at the trustee sale “on the courthouse steps” of these residential properties — my understanding was cash only or cashier checks.
    So, in this case, did someone show up with cashiers checks in the amount of $1.7M (and a copper penny), or can you prequalify your funding availability with the trustee/lender?

  11. Posted by OneEyedMan

    I agree that the ’07 seller was the big winner here. Purchased for $325K in 9/95.

  12. Posted by eddy

    Wow. Buyer got a great deal. That is Prime Noe.

  13. Posted by Tracy

    The assessor has this at 1800+ square feet. Even if you assume an extra few hundred square feet in additions, on a ppsf basis, this is hardly cheap in the $900 psf range.

  14. Posted by LMRiM

    The “flipper” put a lot of work into the place. We are not talking money for free. We are talking about someone trying to make money by working hard, taking serious risk, and losing hard.
    Really? This place had $2.22M of loans on it (including accrued fees I bet) on a $1.45M purchase. That’s more than $750K that was extracted from the system. If you want to feel bad, feel bad for the bank/taxpayers, which just ate over $500K in losses. Or, feel bad for the real demand from families that had to be deferred (or forced to pay way over reasonable value) by the presence of optimistic flippers like this one.
    Now, don’t get me wrong – I’m very much an “anything goes” kind of character – and I don’t begrudge people for making money in the least. I also don’t get weepy eyed over “losses” to people who couldn’t figure out that trees don’t grow to the sky either.
    Like I said, if the flipper was smart, he would have put some of that extra $750K extracted into his pocket.

  15. Posted by sparky-b

    The permits were for a 3 story addition. So, if it was a 15’x12′ room on all three then it’s an additional 540, or $744. But that rear addition, with a cottage, means there is hardly a yard.

  16. Posted by tipster

    This is a truly horrific outlook for Noe: If a place like this cost $770K to rehab and hold and took a year and a half, so add a very conservative $180K for the developer, you’re looking at about $950K needed after you purchase it to make it pencil out.
    Now subtract that from the ultimate sale price of 1.7425M, and the value of the unrehabbed property falls to $792.5K from $1450K. That means the prices will fall at least 46% from the peak before the developers stop losing money.
    And that assumes prices hold flat and don’t fall any more, a preposterous assumption in an economy that continues to shed over a million jobs every two months.
    This is a complete, unmitigated disaster for Noe.

  17. Posted by sparky-b

    “That’s fantastic news that some flipper got washed out.”
    Not cool dude.

  18. Posted by eddy

    I have to think that if this listed on MLS for the auction sale price that the ‘market’ price would have been higher. I bet a sale like this will bring a lot more attention to the foreclosure auctions held at City Hall each week. Not good for Noe but this is a wholesale price and it’s a leap to say that this is a new low comp. How many buyers in the $2M range are actively trolling the auctions? Again, I think there will be a few more after this story. There are a few nice homes in Presidio/Pacific Heights coming to auction this month.

  19. Posted by San FronziScheme

    Tipster,
    This proves that the 2008 “magic” formula 1.4M + 400K/700K = 2.4M/2.9M flip is now broken in Noe.

  20. Posted by ex SF-er

    I think this house looks great for the most part. I don’t absolutely love it, but I really like it, and I like it more than most of the Noe housing that I’ve seen.
    although I feel no pleasure in the fact that someone lost big $$$ on this renovation, I also feel it is a necessary step.
    we need the bubble mentality to leave housing. Shelter is one of the basic human needs, and it is NOT a good thing to have it subjected to bubble mentality.
    the bubble raised prices so high that people now have significant strain trying to purchase or even rent a home. That’s “not cool”. worse, the bubble misallocated needed resources to housing, wasting them. also “not cool”.
    we need housing to go back to how it was… a means of lodging and not much more. Then we can put our energy, time, and resources into other more productive measures.
    Unfortunately, we will need many more investors/owners to lose money in order to firmly implant this message into the populace.
    will we have another housing bubble? of course. but hopefully we can push it off as far as possible.

  21. Posted by hangemhi

    the guy pays $1.45 million for a 1850 SqFt fixer. that was at least $300k over any rational developers penciled out math. looking more closely at who it was shows this guy ain’t the brightest bulb in the room:
    the buy-side firm was Blue Rock Builders out of San Bruno – they have only one other purchase (and no listings) in the MLS and that was 538 Valley. after it wouldn’t sell for $997k in late ’06 this master of the universe swoops in with an over asking purchase of $1,030,000 as soon as it hits the market in early 2007 just 3 weeks after paying $1.45 for the 23rd St fixer.
    Their website (a freebie from godaddy with a godaddy ad on every page) says “Our specific expertise in our two target markets (Boston & SF) allows us to understand and mitigate risks faster than our competition. The evaluation of a property typically covers an extensive review of all forms of legal, political, and construction risks to ensure the greatest protection possible for invested capital and projected returns.”
    Legal and political????? What about running comps and pencilling a job out?
    By the way, 538 Valley just hit the market for $849k and got snapped up immediately – a great buy I assure you.
    And $1.7 for 23rd is a screaming deal. I bet this would have sold for $2 million had it properly hit the MLS and he’d have at least broke even had he purchased it right. Again, $1.45 for a 1850 SqFt fixer was stupid even for 2007.

  22. Posted by San FronziScheme

    Sparky,
    SF is not solely a city of 400K/Y overachievers with multi-million dollar windfalls. Median family income still hovers in the 60-70K/Y!
    I can understand the anger at speculators.
    Some people want to have a simple life in SF. Nothing fancy, no 3000sf empty jewel box, no marble everywhere, no Dwell ice-cold interior. What flippers are doing is making these dreams further and further away for them by making these “beauties” using bubble money. Any specuvestor losing his shirt is good news to any normal person in this city.

  23. Posted by LMRiM

    Maybe this is a naive question, but how in the world do you get to a loan value that is 153% of the original purchase price?? ($2.22M loan balance versus $1.45M 2007 purchase price) We’re not even talking about an owner occupied primary residence here, either!
    I’ll tell you how. The loan is probably around $1.75M, and the flipper stopped making all payments (including tax payments) a looooong time ago. Right about the time he realized that he played the sucker in this game. And plenty of people feel “bad” for him!
    Once again, suckers like this do a lot of damage to an economy. This isn’t someone putting “sweat equity” in to make a fair return on his expertise and labor. This was an outright speculator, and the sad thing is that he probably is only going to suffer a little reputational damage, and perhaps a credit boo-boo. Does it really cost $750K to renovate a place to this standard?

  24. Posted by dub dub

    I think the “blood lust” accusations are preposterous, unless you are speaking on behalf of taxpayers — but they’ve got more punishment coming, so save your strength.

  25. Posted by asiagoSF

    let me explain where some of all this glee for the flipper’s hard fall comes from: housing as an investment drives up prices across the board, for investors and residents alike. There’s nothing wrong, illegal, or even immoral about it, and God bless capitalism, but from a would-be buyer on the sideline, you’ll get zero/zip/nada sympathy for the guy who thought “let’s take a human basic need and run it through the make-a-quick-$ machinery”
    You want to invest and speculate? go play your game on Wall Street, buy tulips futures, open another nail salon, whatever.
    Second ex-SFer: the bubble mentality must leave housing
    capish?

  26. Posted by ExAgent

    “Does it really cost $750K to renovate a place to this standard?”
    Not out of the question when structural improvements/additions are involved. A super high end renovation- which this is not – could run $1K a square by itself, this pencils to $325 including the addition.

  27. Posted by peanut gallery

    Every dog has its day…but I would hold tight on dancing on the graves of your fellow SFers just yet. As hangemhi points out, there are some pretty basic calculations that you can do to see this was a tall order for the remodeler. Seems like we are due for a lazy goog indicator post…I am pleasantly surprised that AAPL and GOOG have had a great run over the past few months. I don’t own either outside of mutual funds but is there something to this move?

  28. Posted by tipster

    Quite the contrary, Sparky, this is more than cool. Now that the losses have finally hit SF, the amateur flippers will depart en masse, which is what will allow the prices to fall 46% (another 25% from TODAY, I might add, at the very least). That will allow the pros like you to make money because there will be fewer amateurs overbidding. Furthermore, the banks will absolutely refuse to make loans to anyone who doesn’t know exactly what they are doing, which pretty much leaves you and a handful of others. That will allow prices to fall further than 25% from today. And so guys like you will be saved. We’ve got six months, before the games begin in earnest.
    And eddy, you are one of the best posters on the forum, but your “this is wholesale” argument falls flat: in other markets with larger numbers of foreclosures, the wholesale price is the market. That’s what’s going to happen here. The loans are all starting to fail and the option arm loans are nearly impossible to modify. You’re looking at the future of the market, not an anomaly. The market is on the cusp of change.
    That’s why anyone who buys right now is a complete idiot, who will shortly regret that decision. Anyone who can get out now, should. It’s about to get a whole lot worse.

  29. Posted by anon

    ^^equities in general have had a great run over the past month. Goes to show nothing makes a dope addict happier than more dope.

  30. Posted by anonn

    $744 a foot — on the courthouse steps — after an ill-advised 2007 1.45M purchase, cue “This spells disaster for Noe Valley” hellhounds? Naaah. Not buying it. This particular house can be found all over Noe Valley. Depending upon its state, people usually paid around 950 – 1.15M for it at peak times. You can look that up if you like.
    And Fronzi,
    Find another example of this formula for us, would you?
    This proves that the 2008 “magic” formula 1.4M + 400K/700K = 2.4M/2.9M flip is now broken in Noe.
    Otherwise I’m pretty sure everybody who actually knows about these things is convinced you made it up out of thin air.
    Last, there were numerous design/flow issues that aren’t visible from the photos. Some of the upstairs rooms are not proper head height. The property was Ellis’d, so the cottage is not rentable. I forget what the other issues are, but I remember talking to the listing agent about them. He was very relieved it got into contract when it briefly did. Take that with a grain of salt, and do remember that I said take that with a grain of salt if you like, anonn bashers. Because I admit I have forgotten, and it does seem like the courthouse buyer got a decent deal.

  31. Posted by Chad

    Hey, anyone know if this was an ALL CA$H deal ?
    Lot of people sitting on Ca$h waiting for the right “sale” / deal nowadays in SF… especially in the 1 mil+ range… I kid you not.

  32. Posted by jonj

    This is “Edwardian”? Iowa is full of these. Hopefully, the bidder got a deal.
    I went thru Iowa once. Marvelled at……the “Edwardian homes”.

  33. Posted by San FronziScheme

    fluj,
    Find another bone to gnaw on. These were pretty common and you know it. Don’t waste our time, please.

  34. Posted by sparky-b

    SFScheme,
    I agree with you in this case where a buy of $1.4M makes you think it was a decent place. So, they took away a (somewhat)affordable home and made it (mostly)unaffordable one with the addition/remodel. But, lots of times the buy is a very run down piece that the “simple life” home buyer doesn’t want. Most people don’t want to deal with the permitting, and the time not living in it, and the cost of construction and fees (possibly out of pocket) while renting/owning some other place. They would rather simply buy a nice finished house.
    Here is an example using the builder in question (and hangemi’s info.) They bought 538 Valley to flip (a decent little place that a family could have wanted), when they could have bought a place like 469 Valley (a total fixer that you cannot just move into and do your own cosmetics). There is a service that “flippers” can provide, these guys did not do that.

  35. Posted by eddy

    Thanks for the compliment and I agree that now is still a sub-optimal time to buy. But I think the wholesale comment is accurate insofar as this home most likely sells for more if properly sold / marketed on the open “market”, which it couldn’t since the speculator had a $2.2M floor.
    Don’t get me wrong, I wholeheartedly agree with your sentiment that this sale is a clear indication of where the “market” is heading. But we’re not seeing this trend hit today’s real market.
    The real pain IS happening significantly faster than I have personally anticipated, but every now and again some sale out there just totally confounds me. 110 Hoffman closed today for $2M @ 700psf in 22 days from hitting the MLS. Crazy. I really would like to know the sqft of 4251 for a better comparison of psf.
    Auctions tend to be efficient indicators of reality, but I’ve long argued that reality in real estate is a painful process. The market will increasingly be defined by foreclosures and owners with +6 years of equity that are largely indifferent with their final sale price. I am amazed at how many 2005-2008 owners are actually bailing on their properties. Yes, it’s due in many cases to job loss and mortgage resets, but there is a large portion of homes hitting the market who’s owners have simply awaken to reality and are ‘getting out’ while they still can get out. Smart move IMO.
    Lot’s more pain to come, but one thing you can’t rule out in SF is the large number of people on the sidelines that will keep prices higher than they should. The second half of the year is going to be very interesting with more and more stories such as this one making the rounds.

  36. Posted by anonn

    No Fronzi. It doesn’t work that way. You find one and show it to the BBS. You went there, and in doing so you showed a lack of knowledge. Noe fixers didn’t typically go that high for spec.

  37. Posted by The Milkshake of Despair

    Perhaps it is just semantics, but I would not consider developing a total fixer as “flipping”. That’s converting an unlivable unit into something livable. Sure, in Noe those projects ultimately get the gold plated touches, but it is not flipping.
    Flipping is taking a habitable but perhaps worn looking and/or dated unit and upgrading it for large profits.
    Developing a total fixer provides real tangible value. Flipping may or may not provide real value. But flipping certainly delivers the impression of value otherwise it would not have worked.

  38. Posted by San FronziScheme

    Sparky,
    I can tell you a lot of people would live in these houses. Just not for 1.4M. More like 700K where they belong.
    My former landlord bought his home 1 block away from there sub-500s 10 years ago. He’s had his 2 kids there. The place is not huge: around 1500sf really inhabitable and took a little TLC. He’s been very happy there. Had specuvestors had snatched it from under his feet at that time, his life would have been different. Less space, or less money to enjoy life.
    Sure the places are bigger and nicer. But that’s not for everyone.

  39. Posted by anon

    “typically” = weasel word. Caught.

  40. Posted by anonn

    Groan. Please. You, Chuckie, and Joe can all do I think everyone on this BBS a favor and actually say a meaningful thing or two once in a while.
    Fronzi presented it like it was a commonly used formula. It was not. There might be another example out there, but I doubt it. (We did see another example of the same group making the same mistake in a different price range.) But the 1.4M Noe Valley fixer, A FORMULA? no. So read up and save the vitriol for something that deserves vitriol, buddy.

  41. Posted by sparky-b

    tipster,
    I was just kidding around with my “not cool” comment and I agree with you 100%.
    Milshake,
    I agree with you as well and always put “flipper” in quotes. Developing and Flipping are very different.
    Fronzi,
    There are plenty of places you can’t move right into, another example would be that earthquake shack in Glen Park. The home owner who wants the simple life and buys that will find the simply life ain’t that simple.

  42. Posted by LMRiM

    Well, I’m glad we got that settled.
    The seller overpaid in 2007, and the buyer underpaid in 2009.
    Therefore, prices in NV have hardly moved at all, a sure sign of strength.

  43. Posted by San FronziScheme

    That was a formula that was tried many times and worked sometimes.
    1.4M bought you a pretty decent house last year, even in Noe. Not really fixers in the MLS sense (where fixers are almost teardowns).
    What was done was removing something perfectly livable to many and replacing it with something affordable to almost none. Glad to see that over at last.

  44. Posted by anonn

    Sez you man. I got it up on my screen right now. The only “fixers” in that range are the hulking ones that really are “total fixers.” What you described as “magic formula,” (and indeed the house in this thread is quite a common one in NV) went for more like 1.1M. Maybe 1.2. As I said.
    Think about the margins for a second. A 600K build? Plus a 1.4M purchase? Plus two years holding costs? Consider the relative dearth of 2.5M Noe sales, ever. That’s a “magic formula” somehow? No, people bought 1.35M to 1.45M Noe Valley houses to occupy. Not for spec.

  45. Posted by nottimhawko

    @San Fronzi
    “Right now, I do not see that. I see a lot of specuvestors jumping on the bandwaggon of a train they saw pass them by 7 years ago.”
    Really? Is it really fair generalize the market in that way? Haven’t we seen overwhelming evidence that the first time buyer is propping up a significant amount of home sales? What about the people who were diligently saving to keep up with increasing prices and can now take advantage of significant reductions to get into their own homes? Where do they fit into your justification for hatred?
    Unpredictable economics aside, this is freaking San Francisco, a world class city. If someone is actually thinking about moving here for a “simple life”, then are they not the ones who are delusional? Living in a desirable metropolis traditionally means you deal with a busy, competitive and comparatively expensive lifestyle. I don’t see any changes pointing to this changing soon.
    My rant is totally off topic now. I can agree that a dumb developer who didn’t plan well in a renovation needs to be called dumb. But I can never get behind rejoicing when anyone looses their shirt on an investment. That’s just bad karma, and right now we have a surplus of that in San Francisco.

  46. Posted by anonn

    Well, I’m glad we got that settled.
    The seller overpaid in 2007, and the buyer underpaid in 2009.

    Therefore, prices in NV have hardly moved at all, a sure sign of strength
    How many times would you guess that you have written a variation on that particular derisive comment in this space? 500?

  47. Posted by tipster

    ^^And I get a chuckle out of it every time he does.

  48. Posted by anon

    ^^^Agreed. Like many jokes, it gets funnier the more often that it is correctly used.

  49. Posted by anonn

    You think jokes get funnier the more times you hear them, do you? I not surprised to understand that. But most people prefer new jokes they haven’t heard before.

  50. Posted by anonm

    How many times would you guess that you have written a variation on that particular derisive comment in this space?
    Maybe if someone stopped giving him so many obvious opportunities to use it, you wouldn’t hear it so often…

  51. Posted by dentures

    “110 Hoffman closed today for $2M @ 700psf in 22 days from hitting the MLS.”
    664 Duncan closes on June 9, 2009 at listing price, $1.295, or $825/sqft after 17 days on the market.
    Yet, no mention of these two properties as a representation of the market in NV (besides the comments section).
    Love the value-laden, unbiased musings of the editor on this blog.

  52. Posted by outsidelookingin

    That will allow prices to fall further than 25% from today. And so guys like you will be saved. We’ve got six months, before the games begin in earnest.
    That’s why anyone who buys right now is a complete idiot, who will shortly regret that decision. Anyone who can get out now, should. It’s about to get a whole lot worse.
    Don’t get me wrong, I wholeheartedly agree with your sentiment that this sale is a clear indication of where the “market” is heading. But we’re not seeing this trend hit today’s real market.
    Lot’s more pain to come
    @Tipster/Eddy
    Maybe I’m missing something, but sales over the past three months in Noe appear to be fairly strong for good properties. This was one foreclosure/auction sale that not many people probably were aware of. I’m not quite sure why this one random case substantiates the above comments. Not arguing with you, but it just seems like Noe took the economy’s best punch, was staggered, and appears to be stable/ticking back up except for distressed properties(which are not common there).

  53. Posted by FormerAptBroker

    anonn write:
    > How many times would you guess that you have written a variation
    > on that particular derisive comment in this space? 500?
    Since anonn is always right (and wins every argument) we now know that not a single home in Noe sold for around $1.5mm and was renovated and sold for over $2mm and we know that LMRiM has talked about people overpaying for property at least 500 times. I know not to argue since anonn will respond that I know nothing about real estate and am not even worthy to respond since only a Realtors® have in depth knowledge of the market and are the only ones qualified to even talk about real estate.

  54. Posted by LMRiM

    About Fronzi’s formula, this doesn’t match the #s exactly but close enough. Here’s a place (that was featured on SS) that sold for $1.3M pre-renovation and was flipped for $1.945M:
    http://www.redfin.com/CA/San-Francisco/1420-Douglass-St-94131/home/842728
    That’s not even prime Noe – it’s basically Diamond Heights – and that’s a tiny, no view house. Recent sales right around there featured or mentioned on SS show large declines: 714 Duncan (down 23% since 08 sale) and 826 Duncan (down 10% from 2005 sale). I think the “smart” buyers in 07 paid about $1200 psf. Man, think about how far down that one is by now!! Totally trapped (and they subsequently did try to sell, so we know that to be the case).

  55. Posted by San FronziScheme

    Really? Is it really fair generalize the market in that way? Haven’t we seen overwhelming evidence that the first time buyer is propping up a significant amount of home sales?
    Sure it’s generalization. But anyone rushing for a place right now is speculating we have reached bottom and that we will have a V-shaped market. In some areas we can understand that. Prices have been battered down to cheap levels in the EB. But SF?
    First time buyer does not contradict “specuvestor”. I know a few families who bought into their first house in the past 2 years and the clear goal was to cash out and move up, expecting an increase in value. Speculation again and a distorted view of the market where rewards are a given at almost no risk.
    Families who do this and forget to look at fundamentals are keeping prudent responsible families to have their say in the market. Too bad if they get burned.
    Unpredictable economics aside, this is freaking San Francisco, a world class city.
    That’s debatable. Great city, yes. World class? If you limit the list to 12, nope. 50? Probably.
    If someone is actually thinking about moving here for a “simple life”, then are they not the ones who are delusional?
    Again, my landlord who moved into SF, bought his place in 98 for less than 500K in Noe. SF was no less “world class” at the time. The difference: RE speculation and the biggest credit bubble in history.
    Living in a desirable metropolis traditionally means you deal with a busy, competitive and comparatively expensive lifestyle. I don’t see any changes pointing to this changing soon.
    Then (again) why could a normal family move in 10 years ago, and not now? The speculators are still very active. And now the market is tearing away their claws. I won’t shed one tear.
    My rant is totally off topic now. I can agree that a dumb developer who didn’t plan well in a renovation needs to be called dumb. But I can never get behind rejoicing when anyone looses their shirt on an investment.
    It’s the psychology of the market. Get used to it. You win, you get cheered. You lose, well that’s another story.
    That’s just bad karma, and right now we have a surplus of that in San Francisco.
    And specuvestors have their share of bad karma filling up their balance sheet already. Don’t forget most of the flips were done on the back of other people that had their lives altered negatively as a consequence.
    Bad karma of their own making, sorry.
    Didn’t these past 3 years teach us anything?

  56. Posted by anonn

    Since anonn is always right (and wins every argument) we now know that not a single home in Noe sold for around $1.5mm and was renovated and sold for over $2mm and we know that LMRiM has talked about people overpaying for property at least 500 times
    Well, the second part is true. (And anonm, the hole in your argument is that it is not always I who prompt said tired derisive “joke.”) As to the first part, FAB old buddy, you can pretend that we weren’t talking about something specific if you like. The hypothetical “flips” you’re talking about are more to do with timing than anything. The case in point was a pretty big build. Thanks for your two cents. I greatly prefer the armed assassin home invasion tales you used to regale us with, tho.

  57. Posted by anonn

    LMRIM, they didn’t even add square footage there, did they? I’m not saying people didn’t make some savvy moves. But 1.4M purchase, 2.2M sale, ~600K build (whatta formula I tells ya!) that ain’t. Apples and oranges.

  58. Posted by LMRiM

    it is not always I who prompt said tired derisive “joke.”
    That’s true. Sometimes it’s hangemhi. Fortunately, in this thread, we don’t have to wonder – both of you made the same comment. I don’t think I’ve ever used a variant of the “overpaid” comment unless either anonn or hangemhi first made the point (there used to be another realtor – whose name escapes me right now – who would also reliably go to the overpayment argument).
    The funny thing is – I don’t really disagree with you guys. If you are going to find a sucker to overpay for a property, SF is the place! Sure they overpaid in 2007. That’s what suckers do!!

  59. Posted by LMRiM

    Ah, I remember now – the other realtor who would always go to “they overpaid” was sfrob. For instance, in this thread about another NV house, in which the owners got trapped (they tried to sell at a loss as well, but got stuccoed):
    https://socketsite.com/archives/2009/03/4214_26th_street_a_remodeled_noe_valley_apple_on_the_tr.html
    (See post at March 19, 2009 9:50 PM for a perfect example of this well-honed technique, skillfully executed imo.)

  60. Posted by anonn

    Well, that’s two who don’t like it to ~three who seem to enjoy it. You’re definitely slaying.

  61. Posted by ex SF-er

    Living in a desirable metropolis traditionally means you deal with a busy, competitive and comparatively expensive lifestyle. I don’t see any changes pointing to this changing soon.
    Fronzi already answered this, but I’ll chime in with my specific rationale again.
    SF was competitive, and world class, and in the midst of a major bubble that was focused on the Bay area itself… in the year 2000.
    thus I still see no reason why RE valuations shouldn’t be at 2000 levels which were already nosebleed at the time. (except for the credit bubble which is deflating).
    Economically, SF was in much better shape in 2000 than it is today. hence, 2000 valuations seem reasonable, no?
    (FWIW: this is why we need to un-bubble housing… it is NOT healthy for a populace or an economy).

  62. Posted by astonished

    Why do San Franciscans keep having to tell eachother how “world class” the city is? You don’t hear New Yorkers or Chicagoans lecturing people about their “world class” urban credentials. Someone in L.A. would not waste their time debating whether San Francisco is more “world class” than Boston.
    Is all of this “world class” talk simply the last resort of those who feel overpriced real estate here is justified?

  63. Posted by anonn

    You don’t hear New Yorkers or Chicagoans lecturing people about their “world class” urban credentials
    You don’t? I do. Especially Chicagoans, every chance they get, mostly when it comes to architecture.
    Someone in L.A. would not waste their time debating whether San Francisco is more “world class” than Boston
    That’s a whole ‘nother kettle of fish.
    But in this thread you have one person, maybe two, calling SF “world class.” And you have three or four who scoffed at that. Most of them are San Franciscans. Yet you say, “Why do San Franciscans …” ?
    I had a friend from Boston stay with me for about five days last week. We trekked way up north for camping during most of that, actually. But we agreed SF and Boston have something in common. You can drive for an hour or two and be in god’s country. That is not true of Chicago, New York, or LA. That’s world class, and maybe the only world class thing we have, other than the views and some of the food.

  64. Posted by anon

    You don’t hear New Yorkers or Chicagoans lecturing people about their “world class” urban credentials.
    This is one of the more hilarious quotes that I’ve ever seen on Socketsite, considering the massive amount of Chicago boosterism that goes on here.

  65. Posted by Robert

    Why do San Franciscans keep having to tell eachother how “world class” the city is?
    Why do so many buy a house only to resell it 2 years later? Why do so many people fear being “priced out”?
    There is a myth that this city is a rocketship of wealth, taking off to the sky, and so these would be homesteaders stretch and groan to spend half their income on an IO loan, repeating “We are special! We are special!” like Walmart employees every morning.
    It helps keep their spirits up while they wait for the rich palestinian businessmen to arrive and relieve them of their debt burden.

  66. Posted by astonished

    “This is one of the more hilarious quotes that I’ve ever seen on Socketsite, considering the massive amount of Chicago boosterism that goes on here.”
    ^^^True, and point taken. I must be confused, are these Chicago people or people in S.F. with Chicago envy posting? There seems to be a lot of comments about Chicago that are from S.F. designers and planners who post on this site. What I was really talking about is that when you travel to NYC or Chicago, you don’t have locals lecturing you about how “world class” their city is. Usually they complain about their cities instead.
    But let us not bring up Chicago anymore, because I remember Anonn saying before that he would not post in a thread if the word “Chicago” was in it:)
    San Francisco is world class, but it does not have to keep telling itself that it is.

  67. Posted by anonn

    I just watched an episode of “No Reservations” set in Chicago and I heard a whole lot of local folks saying “world class” or similar. Again, mostly talking about architecture. Also again, an old prof of mine is one of the definitive current Chicago scholars out right now. That guy was all “world class” this “world class” that. Chicagoans love themselves some Chicago.

  68. Posted by San FronziScheme

    There is a myth that this city is a rocketship of wealth
    Not true. 100s of 1000s flocked here during the gold rush and many found wealth and the good life here… I am part of another wave (12 years ago) that found CA as a way to a better life and success and found it after hard work and dedication. I know I am not the only one. Some of my friends found virtual gold in SF and its region.

  69. Posted by steve

    it just seems like Noe took the economy’s best punch, was staggered, and appears to be stable/ticking back up
    I think outsidelookingin has one of the most important comments in the thread. Let’s say you want to buy (lifestyle reasons), can afford it (and possible losses to come), and are looking to drop $1.5 to $1.75. It’s not like you have a huge variety of amazing properties to choose from in Noe.

  70. Posted by Fishchum

    “You can drive for an hour or two and be in god’s country. That is not true of Chicago, New York, or LA.”
    I’ll have to disagree with you about New York on that one, anonn. Two hours north of Manhattan can put you into the Catskills or the Hudson River valley area. Both can be quite splendid, particularly in October. LA I’m not so sure about, but I would imagine 2 hours north gets you some fantastic coastline.

  71. Posted by priced_out_with_envy

    Fishchum: 2 hours from LA you get Santa Barbara, 3-4 hours more you get beautiful Cambria 🙂

  72. Posted by anon

    What I was really talking about is that when you travel to NYC or Chicago, you don’t have locals lecturing you about how “world class” their city is. Usually they complain about their cities instead.
    I must run in different circles than you, because pretty much everyone that I’m around in SF (and the majority – vast majority – of Socketsite posters) constantly complain about problems in SF. Outside of a few realtor types on this site, I don’t know anyone (on the internet or personally) that lectures anyone on how world class SF is. I definitely have run into that in NYC, though not Chicago. I know many New Yorkers who will scoff at anyone who suggests that anything about NYC is not the best in the world.

  73. Posted by anonn

    The Catskills are nice but I’ll take the Golden Gate National Recreation Area any day of the week. Santa Barbara is a nice place. It isn’t god’s country tho. Cambria is prettier. OK, maybe Cambria and surrounding is that good.
    Now, you want to go 3-4 hours away from SF? Come on now. Tahoe. Big Sur. Mendo Coast. The list goes on and on.

  74. Posted by Fishchum

    anonn – point taken. I often tell people who ask me for a comparison between SF and NYC (born and raised there) is that on a city by city basis, it’s no contest – NYC is vastly superior (although I would want to be very, very well off to enjoy it) but it’s the outlying area around SF that gives it the edge over anything surrounding the tri-state area.

  75. Posted by Robert

    So are you saying that the “rocketship of wealth” is not true, or that it really is a rocketship of wealth?
    In any case, some people become wealthy and many also become poor, all for various reasons, but most drift along with the average growth.
    The subtle confusion of “wealth” with “better life” in your post is indicative of this mindset. In normal times, most people work hard, are dedicated, and get a decent life. They do not get “wealth” or “virtual gold”. Most people just as hardworking and dedicated as you, but living in less of a free-for-all period — got a middle-class life and nothing more. Go talk to some of the doctors or dentists — or even engineers and bankers — who made their money before the 1980s hit. They were upper middle class, but nothing more. Many of them were just middle class, too. I haven’t met any that complained about this, or confused “a better life” with “virtual gold” and thought themselves entitled to the same.
    If you start talking to one of the new fish, though, and I often do, they start out all reasonable about hard work and whatnot. But that is just a cover, and soon enough you see expectations for top quantile incomes in exchange for what is not a lot of exceptionalism. What would be rewarded with basically a middle-class existence in most of history and in most parts of the world. I certainly don’t view the bulk of my wealth as anything other than asset windfalls. I don’t work harder and am not more dedicated than someone who lived 30 years earlier than me, but they didn’t live during a time when everything was being carved up and sold off, with many windfalls to be had, and many decades of paying for it going forward.
    It’s true that San Francisco incomes have outperformed in this 2 decade bubble (by 0.72% annualized versus the nation as a whole). And it has faired less well during the 1960-1980 period, when wage growth was more of a driver (and productivity was higher).
    However, people do believe in the gold mine theory — as it seems you do — which is why house prices have rocketed upwards, even though incomes have not. They view purchasing the house as home-steading on that supposed rocketship, as opposed to the up-front purchase of housing consumption. That’s why now, as always, the main beneficiaries of the gold mine theory are the banks. They just need enough rags-to-riches stories to keep people believing and buying raffle tickets while they end up with the loot.
    As long as people still believe that “hard work” and dedication translates into “wealth” — rather than something that is just expected of a person in order to allow them to live a normal life — then they will continue stretch and groan to overpay for anything that promises a free lunch.

  76. Posted by still astonished

    Anonn, you promised in the past that you would not participate in such OT boosterisms. What happened? Cambria, Catskills, Santa Barbara, Palm Springs, Laguna Beach, Napa, Tahoe, they are all nice quick getaways, but does that make Noe worthy of world class prices? If I can drive two hours to play golf in Pebble Beach, does that make a SOMA shoebox condo worth more?

  77. Posted by Robert

    ^^My rant-post was a response to Fronzi, not the endowment-measuring contest of SF vs. NYC.

  78. Posted by curmudgeon

    I’m with anonn on this particular thread hijack. I would augment it by saying within twenty minutes you can be in the GGNRA (Marin Headland), and within an hour you can be in Point Reyes or Wine Country or along a quiet section of San Mateo Coast. Then there’s Tahoe, Mendocino, Big Sur etc not all that far away. Our immediate access to the outdoors is truly “world class” and sets us apart from most cities I can think of, in the US or abroad.

  79. Posted by anonn

    No. You’re right. Sorry for the OT “city to city” backsliding. Boosterism it was not.
    But I didn’t make the point that these relatively near destinations make SF world class, or worth X amount for a smallish condo. I realize SF is not world class, in many ways. Particularly public transportatino. Nope. All I said was that a friend of mine from Boston and I thought that quick beautiful getaways were one actual world class factor both cities share.

  80. Posted by San FronziScheme

    Robert. I meant that this “rocketship of wealth” was not always a myth. The Gold Rush, the EQ reconstruction and many subsequent booms prove the opposite. Some very talented people are coming here today from everywhere and find a very motivating environment and lifestyle. Some make a great career and lead a happy life. Some come out wealthy in the process.
    Of course money and happiness are neither synonymous nor antonymous. They often do not relate. Though in our times money helps you go through problems in properly educating your kids, making it through disease, unemployment or old age. Money is also often a factor in the choice of a mate (pretty immoral when you think about it) because money means safety.
    That’s the reality of a society that has burned most of its safety nets for the sake of a quick tax break. But voters keep asking for even less taxes, WTF? They also haven’t yet reformed this ridiculously inefficient private healthcare system and are getting less for more! Therefore it’s their mess, their choice.
    Your original sentence was wealth-oriented and so was my comment.

  81. Posted by DD

    I’m with you, LMRiM. So happy that flipper got washed out. How dare he try to profit in this industry! They should have put his head on a stick right out front of city hall during the auction.

  82. Posted by LMRiM

    That would have been cool, DD – sucker on a stick!
    Actually, I keep pointing this out, but no one takes it up or adds any info – the unpaid loan balance was $2.22M at the time of foreclosure! $1.45M purchase + maybe $400K reno cost – did this guy put even a dollar of his own money into this? Where did the money go? Maybe he wasn’t so dumb after all….

  83. Posted by nottimhawko

    RAAWR Bears!
    Y2K home prices! I hope for the sake of a lot of people we see better than 0% appreciation over a 10 year period. Will our GNP be at Y2K levels by then too? Hopefully the taxes you cubs pay after my investments get whacked will bail me out!
    @still astonished: the answer to the shoebox condo question is yes.

  84. Posted by REpornaddict

    SF does incredibly well in the “world class” city stakes given it’s size. (less than 1m people).
    It has many world class elements without the overwhelming size of London or NY – have never visited NY but would never consider living in london.
    This
    http://en.wikipedia.org/wiki/Global_city
    contains a few good indexes, one puts it 15th, ahead of many, much bigger cities..Berlin, Moscow, Amsterdam, Rome just for a start.
    I’d say, pound for pound, considering its small size which,. for me, is a huge plus point, it’s one of the best cities in the World.

  85. Posted by nottimhawko

    ^^ what he said

  86. Posted by Robert

    Fronzi, I was talking about wealth, too. In other words, throughout most of history and pre-1980s, if you worked hard and were dedicated, your reward was a middle-class life. Nothing more.
    Doctors, bankers, engineers, are not harder working now, more dedicated, or more exceptional than when they earned salaries comparable to those of gardeners or school teachers. E.g., In the 70s in Sunnyvale, aero-space engineers used to live and work alongside landscape gardeners in the same community. With similar house values.
    In Noe, public school teachers and construction workers bought houses alongside dentists and veterinarians, because both were earning comparable wages. Not exactly the same wages, but comparable enough so that they could all afford to live in the same neighborhood.
    In this period of time, we were more productive than we were now. And we were all getting richer: in the 30 years from 1947 to 1977, real median incomes for males grew from 17K to 30K, in real terms. However for the next 30 years, those incomes grew from 30K to 32K. But real GDP continued to grow, and actually accelerated its growth in the second period.
    So what happened? One of the things that happened is a carving up (and selling off) of the middle class. For example, physicians earned about 3 times the median wage in 1950, but 7 times the median wage in 2006. In the OECD, median physician salaries were 70K in 2006, below the the U.S. 1950s value, in real terms. So there was a dramatic break between productivity and compensation.
    One consequence of this break is that people became windfall-seeking. They gave up on being compensated for their efforts, and seek to be compensated well beyond their efforts. Hence the asset-based economy and rent-seeking generally. And it is silly to go on about dedication and whatnot, when the purpose of the whole exercise is to be one of the few who earn more than they are worth, given that the earnings of everyone else are stagnant. In other words — to use your dedication to “find gold” or seek a windfall, as opposed to the hard slog of adding value commensurate with your specific productivity advantage. Deep down, people suspect that that is a fool’s game.
    And just as in 1849, this gold-rush mentality primarily benefits the bankers, as people turn over their incomes to buy the equivalent of raffle tickets. Now, real-estate is a peculiar beast, because you are really purchasing the (up front) the consumption of housing over time. Therefore the specific form of raffle-ticket bet here is that incomes will shoot up much faster than the interest payments and carry costs. You must, on some level, believe that incomes will double in the next 10 years, otherwise it makes no sense to buy at these multiples. Yet, at the same time, there is the “priced out” meme, which means that your own income will remain stagnant. So people hold these two inconsistent beliefs in their head. Why? Because they suspect that while most incomes will stagnate, there is going to be a wealthy minority of gold-rush winners who will continue to pull ahead. And these gold-rush winners will happily turn over their wealth to the ones struggling with IO loans today.
    Hence the “We are special! World Class!” cries. It is absolutely necessary for people to believe that their Noe shacks are exceptional prizes that some gold-rush winner of the future will pay handsomely for. So the “We are special!” meme is required to prevent cognitive dissonance between “priced out forever” and “real estate is a good investment”. And the key to understanding that is to know what has happened to the middle class.
    This also explains why you get viciously attacked if you suggest that there are fewer gold-rush winners than the supply of houses, or that perhaps the 20 year asset bubble has come to an end, and that the next round of gold-rush winners wont have so much money to spend.

  87. Posted by REpornaddict

    This also explains why you get viciously attacked if you suggest that there are fewer gold-rush winners than the supply of houses
    I hope the viciously attacked part of that statement was meant to be hyperbole..!

  88. Posted by kthnxybe

    Oh no, not the “world class city” discussion again. This town has a HUGE inferiority complex underneath it all. It’s a nice beta city close to nature and that’s how I like it.
    And also, yes, every city has people living the simple life, perhaps this seems odd to those who think the “real SF” is only Pacific Heights, but it’s true. City living isn’t necessarily out of reach of the middle class, especially when you add up the cost of commuting, caring for a large suburban home, extra day care because it’s taking so long to get home after work, etc. Or at least it shouldn’t be.

  89. Posted by REpornaddict

    This town has a HUGE inferiority complex underneath it all.
    I agree – all one person has to do is suggest the city is world class – (which many independent sources, including my link above, agree with) and 20 or 30 people jump on the comment!

  90. Posted by Robert

    Oops, I mispoke. I meant “viscerally attacked”. Not viciously. I was thinking of some incidents when, talking to friends, they became quite agitated when I pointed out what the expected income growth rate was for them to break even. Maybe that’s not something I should be doing 🙂
    Also, I don’t mean to suggest that doctors made the same amount of money as gardeners. They made 3 times the median wage in the 1950s, as I said elsewhere — which is quite enough, if you ask me.

  91. Posted by diemos

    “Deep down, people suspect that that is a fool’s game.”
    The correct term is chump. As LMRiM will tell you, if you’re not out there looting everything you can get your hands on you’re a chump. People who are content to do something productive and be commensurately compensated are the plankton on which the rentiers feed.

  92. Posted by pacheights

    Dear Noe:
    In an effort to maintain our dilusional views of the value of our homes, and given this most disturbing “comp”,we have officially decided that you are no longer part of the “real SF.”
    Have a nice day.
    Pac Heights, Marina, & Presidio Heights (aka “The Real SF”)

  93. Posted by LMRiM

    Doctors, bankers, engineers, are not harder working now, more dedicated, or more exceptional than when they earned salaries comparable to those of gardeners or school teachers. (Emphasis added.)
    I respectfully disagree with that, Robert, although I agree with most of the rest of what you wrote.
    Appropos of the turn this thread has taken, it’s useful to review Government Sachs’ recent trading results: on a record 71% of the days out of the latest quarter, their (relatively) small prop and principal trading group generated more than $100 million each day. Take it from me, that’s just not possible in a real market – unless of course you’re the dealer and you can see everybody’s cards before they’re dealt.
    Absolutely genius to have installed Obama – there’s no way the financial sector could have gotten away with the scale of looting that is going on now had there been a Republican in office. 10%+ unemployment, and these guys are minting money (and it’s not just them, my buddies at Blackrock tell me).
    You’re just not going to tell me that these guys aren’t smarter than your grandpa’s bankers. You really have to take your hat off- they really saw the big picture; after all you’re paying for it!
    http://www.bloomberg.com/apps/news?pid=newsarchive&sid=am7Ds.JhNxvw

  94. Posted by diemos

    “there’s no way the financial sector could have gotten away with the scale of looting that is going on now had there been a Republican in office.”
    Slight correction.
    there’s no way the financial sector could have gotten away with the scale of looting that is going on now had there been a Republican in office without cutting him in for a hefty percentage.

  95. Posted by Robert

    Well, the bankers are just trading amongst themselves, so I’m not sure what the 100 million figure means, since it’s balanced by 100 million in trading losses elsewhere. There is big imbalance within FIRE, of course.
    I do think that the goldrush era is drawing to a close, though. Moreover, much of that money will be recycled back to the treasury via higher marginal rates, or will shrink in the next round of asset deflation — the one that we can’t control so well. But in the meantime I do expect the price of coke and hookers to go up in Manhattan.

  96. Posted by world class

    “In an effort to maintain our dilusional views of the value of our homes, and given this most disturbing “comp”,we have officially decided that you are no longer part of the “real SF.””
    Thanks for the laugh, also, this may be hard to believe, but I have heard Marina dwellers refer to homes near Chestnut and Lombard as not part of the “real Marina” or “Deep Marina” which is closer to the Marina Green.
    For all of the World Class Boosters, here are some statistics to put our little town in a proper perspective.
    http://en.wikipedia.org/wiki/Global_city
    Does this all mean that someday Noe will go back to being a neighborhood of teachers, doctors and buyers who purchase homes to live in for more than 2 years? A neighborhood of families instead of flippers?

  97. Posted by LMRiM

    since it’s balanced by 100 million in trading losses elsewhere
    Not necessarily. Sure, at some metaphysical level, value is only growing at some relatively slow trend rate, presumably correlated with something like productivity growth.
    But we’re talking about redistributing the pie against the backdrop of that slowly growing value, and reallocating the funny accounting units that we use to keep score. Looked at like this, the banksters are primarily skimming money/value from pension funds, governments and investors (primarily through principal transactions in the opaque bond and currency markets), and grabbing shares of notional gambling games that are backed up by the USG (prop trading).
    Periodically, the game blows up and then the new game becomes how to get someone else to pay for your losses (the asset deflation you refer to). It was intellectually a little challenging in 1998 (em crises and LTCM) – after all, the banksters hadn’t really been bailed out huge since the early 1980s – but the aftermath of the 2000 techwreck wasn’t too bad, and this latest round was like taking candy from a baby – or more correctly 300 million babies.
    Maybe the treasury will get some of this back through taxation (higher marginal rates) but I doubt it. That money is gone, and what does go to the treasury will be stolen by interest groups.
    Of course you’re right that it will come to an end at some point; but the power that government has is unprecedented, and I fully expect that power to be deployed 100% in the service of the banksters. At some point they will lose control of the asset deflation, as you posit. I’m 100% certain of that. Until then, though, the only real question is whether we can get tradable asset moves and the challenge will be to stay on the right side of them. 🙂

  98. Posted by anonn

    “In an effort to maintain our dilusional views of the value of our homes, and given this most disturbing “comp”,we have officially decided that you are no longer part of the “real SF.””
    LOL. The Real SF. It means somethign. It’s all a big conspiracy now, right? This foreclosed house is the truth! Another OK Noe house went for ~2M, today. But it doesn’t count! You, and only you, know what’s up!

  99. Posted by Someone

    So much rubbish on one thread
    I’ve seen it couple of times during open house. It was easily 3300 sqft and in that regard the buyer got an excellent deal.
    I’m betting he is going to flip it when the market stabilizes and people forgets
    there was only one serious issue with this house. The tenant in the back unit didn’t want to leave and she is somehow “protected”

  100. Posted by REpornaddict

    For all of the World Class Boosters, here are some statistics to put our little town in a proper perspective.
    funny but I used the same link to demonstrate sone of its strengths..why does 15th on that list classify it as a ‘little town’?

  101. Posted by NoeValleyJim

    Does this all mean that someday Noe will go back to being a neighborhood of teachers, doctors and buyers who purchase homes to live in for more than 2 years? A neighborhood of families instead of flippers?
    What do you mean go back? It has always been that way and remains that way today. I don’t know every block of Noe, but I know mine and there have been no flips in over a decade. Just a slow but steady group of elderly either dying or moving out and being replaced by younger professionals with children.

  102. Posted by Robert

    What do you mean go back? It has always been that way and remains that way today.
    Oh, the delusion! Why do so many houses go back on the market after 2 years? Why so many IO ARMs? Indeed, this won’t end well. Noe has gentrified and some of that is lasting, but let’s wait until 2013, when the bulk of the IO ARMs have recast. Then we will see what the actual purchasing power of the neighborhood is. This is now a 100-150K neighborhood, but the house prices are 6-7 times this amount. Those betting on this becoming a 300K neighborhood will be surprised — at least, that is my prediction, and I’m sticking to it 🙂

  103. Posted by ex SF-er

    Well, the bankers are just trading amongst themselves, so I’m not sure what the 100 million trading losses elsewhere
    Not really.
    1) those 100 million trading losses are often then backed up by the government. for example: Goldman Sachs lost $12 Billion, but was “insured” by AIG. the govt ponied up those losses. in full
    (admittedly this was before the newest shenanigans… but remember AIG STILL insures a lot of Goldman’s trades, it’s just not in the news anymore. so the big boys are still getting the back door bailouts that they get to bill as “profit”)
    2) also, much of Primary Dealer’s profits are coming directly from the government. For instance, various governments have to float bonds. Who is the dealer? Goldman Sachs.
    3) also: there is a relatively interesting story right now about how the most recent 7 year Treasuries were bought from the Government 5 DAYS after they were issued. The primary dealers thus bid on Treasuries, and then were able to sell HALF of them back to the government 5 days later. Admittedly for a loss, but it seems highly likely there was some version of “make whole” agreement. The Fed is thus funneling tons of money into the Banks using “fee” methods. (the Fed or the govt pays the primary dealers a “fee” so that they will bid on our Treasuries, or a “fee” for other “services”). this is record amounts of money
    (as you may or may not know, the Fed is in Quantitative Easing mode… they are buying MBS directly, they are buying Treasuries directly, etc. without the Fed’s most recent Treasury buying we would have had 2 failures in a row in the Treasury market. it’s getting choppy out there)
    4) and of course, we mustn’t forget that Goldman and the other big boys are front running with their HFT programs. (why do you think we had to arrest that rogue Russian who had Goldman’s program?)
    they are stealing right from the taxpayer and grandma’s pension. And it’s all being covered up by the Fed.

  104. Posted by dub dub

    I wouldn’t worry too much about QE shenanigans — as I mentioned awhile ago, the fed could slurp up all foreign-owned debt at an affordable percentage of GDP. They’re not even getting warmed up yet.
    Plus we got -247k, just like goldman thought (-250k). I don’t see any obvious fudging in the data either (others want to chime in?).
    If they can get the deficits stable, and continue to stabilize employment we can live with a zombified financial system indefinitely.
    Sit back and enjoy life, and pay your solvency taxes, because the fix is in. Let’s see if it works 🙂

  105. Posted by diemos

    “I wouldn’t worry too much about QE shenanigans”
    That’s a relief. Yesterday I was getting an itchy feeling that it was about time to convert some of my FRNs into a cheap dwelling in Livermore. But I guess I’ll wait a little longer.
    I’m not concerned with prices going up anytime soon but when the dollar collapse starts I worry about an Argentine scenario where they’ll shut down the banks and limit withdrawals.
    It would be useful to have my shelter pre-paid at that point.

  106. Posted by polip

    nice post editor
    posts like this one keep me coming back.
    would have been a bit nicer if we had some advance warning though 🙂

  107. Posted by anonm

    I agree – all one person has to do is suggest the city is world class – (which many independent sources, including my link above, agree with) and 20 or 30 people jump on the comment!
    The reason people disagree with you is that, for most of us, the phrase “world class city” implies cities like New York, London, Paris, or Tokyo. No one in their right mind would put SF anywhere near those cities. I can believe that you might prefer to live in SF over NYC or London, but that doesn’t make SF into a “world class city” anymore than the fact that someone might prefer to live in Tiburon over SF makes Tiburon more “world class” than SF.
    Of the lists you linked to, the first claims that SF is a “beta city”. That seems right to me. Other beta cities with the same ranking as SF include Atlanta, Washington DC, Manila, and Helsinki. Beta cities with slightly lower rankings as SF include Dallas, Houston, Guangzhou, and Nicosia. I admit I had not even heard of the last one until now (apparently it’s the capital of Cyprus).
    The other list you linked to suggests that SF is the 5th highest ranking city in the US and the 6th highest ranking city in North America. This sounds about reasonable to me, though I could see cases to be made for Vancouver, Miami, Boston, Seattle, or San Diego to be of roughly similar rank.
    Note also that the city proper (let alone the “real SF”!) would be nothing more than a blip on the map without the surrounding greater Bay Area. You know, the same greater Bay Area that we’re always told is headed on a totally different trend line than SF? Without the surrounding counties, there would be no tech industry and all of its associated human capital, no world class universities (note the correct usage of the term world class in this case), fewer dining options…we’d basically just be a tourist destination with modest FIRE employment and a disproportion number of homeless, hipsters, homosexuals, and hippies.

  108. Posted by Willow

    “Then we will see what the actual purchasing power of the neighborhood is. This is now a 100-150K neighborhood, but the house prices are 6-7 times this amount. Those betting on this becoming a 300K neighborhood will be surprised — at least, that is my prediction, and I’m sticking to it :)”
    Wow, why all the negativity for Noe. So it has moved up a few tiers in the desirability rankings in San Francisco. Big deal; cities are supposed to evolve. I’ve lived in SF for almost 15 years and it’s always been demand. It’s just much more so now. I think those that are expecting an implosion are going to be sorely disappointed.

  109. Posted by Rillion

    “You’re just not going to tell me that these guys aren’t smarter than your grandpa’s bankers. You really have to take your hat off- they really saw the big picture; after all you’re paying for it!”
    Our grandpa’s bankers would have had to pay up to a 90% tax rate on these huge bonuses. Perhaps they were just as “smart” but the tax structure at the time discouraged excess.

  110. Posted by anonn

    “This is now a 100-150K neighborhood”
    Prove that statement.

  111. Posted by Robert

    Wow, why all the negativity for Noe.
    Noe is nifty. I was describing my assessment of the demographics, and it would be pretty strange to think that a neighborhood has to have homeowners with incomes of 300K before it is considered to be nice. 150K is already middle class for SF, and fully takes into account all the south bay professionals. No need to exaggerate that and demand 1-2 million dollar homes.
    At some point, prices will reflect the Noe owners’ actual incomes, rather than embedded assumptions of those incomes doubling. That’s a fairly obvious statement at most times, except now I guess.
    those that are expecting an implosion are going to be sorely disappointed.
    Who’s predicting an implosion? Houses are not stocks. There are all sorts of ways of stretching things out, and lots of rallies with knife-catchers can happen before the adjustment is complete. Besides, the actual neighborhood will still be here, and the sun will be as bright. Just some numbers changed on the price tags, that’s all.

  112. Posted by anonn

    Yeah, well, working backward from home neighborhood home prices + citywide median net income = not conclusive enough to speak as definitively as you are speaking. It would be nice if many of you threw in an “I think” or “looks like” or an occasional shade of grey every now and then.

  113. Posted by anonn

    Yeah, well, working backward from neighborhood home prices + citywide median net income = not conclusive enough to speak as definitively as you are speaking. It would be nice if many of you threw in an “I think” or “looks like” or an occasional shade of grey every now and then.

  114. Posted by REpornaddict

    Yes, 5th in US, 6th in North America, but stilll 15th in the World. I guess thatif you want to include only 4 cities as world class (London, Paris, NY, Tokyo)then SF would be no where near, but tha’s a very short list.
    The first list I don’t pay much attention to. The prime criteria (and until recently the only criteria)was
    “their provision of “advanced producer services” such as accountancy, advertising, finance, and law”
    and
    “The roster generally denotes cities in which there are offices of certain multinational corporations providing financial and consulting services rather than denoting other cultural, political, and economic centres.”
    I know people may disagree, but when I think of a city I want to visit, or even live in, the number of accountants and lawyers isn’t exactly the first thing I consider. In fact, quite the opposite 😉
    That’s why that list does have, as you pointed out, some weird oddities – I mean, Warsaw an an Alpha City.I have been to Warsaw..alpha it ai’t, but as, I say, I wasn’t counting accountants or lawyers.
    The second list looks alot more balanced in terms on criteria in my opinion – certainly less driven by where multi national companies have their HQs..

  115. Posted by REpornaddict

    actually, that list IS the 1998 list, based solely on numbers of accountains, lawyers etc.
    I found the 2004 list with wider criteria.
    here’s the results..
    http://www.lboro.ac.uk/gawc/world2004m.html
    SF = Alpha.

  116. Posted by San FronziScheme

    Robert,
    Catching up with all the posts. That thread has dragged longer than I thought…
    I’ll comment on your last post for now. I used to live 1 block from this house and have seen a typical rotation on my block and the one next to it: 2 old ladies passed, one went into a home, 2 ladies moved out of SF to live in the EB and sold. A wealthy retiree moving in. A couple with 2 kids buying a condo. Another couple with 2 kids leaving the BA for professional reasons. And 1/2 the block is over 60. It’s a pretty mixed bag but newcomers are pretty upper-middle class. True that almost none of the long-timers could afford to buy today, even my former landlord who bought in the late 90s. That’s gentrification, but everything moves in cycles and let’s hope this doesn’t accelerate.
    The bulk of the retirees on that block are 60-70. I don’t know if it’s typical of these Noe blocks, but it seems this is the generation that came in a wave late-60s/early-70s. They’ll move out or pass their houses to their kids eventually. There’s a bit more turnover to come if that happens, imho. And lack of turnover is a big part of the increases in prices.

  117. Posted by anonfedup

    This house has created a firestorm of controversy I have not seen since the days when One Rincon was being built and articles about that project would cause hundreds of comments. How simple and nostalgic those threads now seem when people argued over ventless dryers and valet parking vs. deeded at Infinity. Now, it is all about calculating how much money was lost, or how much more will be lost in the future despite our world class status.
    What is interesting is why this particular renovation project that went bad has created such venom. What is it about showing falling values in Noe, especially “real Noe”, that causes people to go bonkers?

  118. Posted by Chad

    So it has moved up a few tiers in the desirability rankings in San Francisco.
    …..NOT
    Noe has turned into a wanna-be “Suburban families with screaming kids in San Francisco” neighborhood. Ugggh. That diaper smell in some of the restaurant in Noe… disgusting !
    If I had my way, I would ban all new families that have kids from buying in that neighborhood and slowly restore it to mainstream SF, which is almost 90% kid/baby free…

  119. Posted by anonn

    What is it about showing falling values in Noe, especially “real Noe”, that causes people to go bonkers?
    What set this off is precisely your and others’ misinterpretation of what happened, versus what others know to be true. I put it down to the framing and the first 15 comments. Look at Tipster’s blood in the streets propaganda, post number one. A foreclosure sale still gets 744 a foot, and everybody goes ballistic? It bears repeating. A foreclosure sale still gets 744 a foot, and everybody goes ballistic? Please.
    Yesterday while we were all posting on this thread, an OK house totally devoid of curb appeal sold for 1.995M at 110 Hoffman. And despite conventional wisdom, there have only been 89 2M or higher sales ever in Noe, no less than four in the past two months.
    Guess what those 89 have averaged? 738 dollars a foot. Guess what the four in the past two months have averaged? 720 a foot. This foreclosure sale was nothing that should have warranted the sort of rampant “the sky is falling,” grasp at straws, back of the napkin economics it engendered.

  120. Posted by LMRiM

    A foreclosure sale still gets 744 a foot, and everybody goes ballistic? It bears repeating. A foreclosure sale still gets 744 a foot, and everybody goes ballistic? Please.
    A poster who says he has been in it says that the house is “easily” 3300 sq ft., which would putthe sales price at no more than $528 psf, or 30% under anonn’s figure (see Posted by: Someone at August 6, 2009 9:32 PM above).
    That’s the funny thing about real estate – it’s hard to get basic info accurately. Hmmm… I wonder why that is?
    What’s not debatable is that some specuvestor lost it to foreclosure – a good development imho. Oh, and some very stupid bank was carrying in excess of $2.2M of debt against it.

  121. Posted by Willow

    Chad: NV may not be personally desirable to you but from a pure price perspective it has no doubt been one of the star performers in the city.
    As for the 100-150K incomes…LOL. That ship has sailed!

  122. Posted by EBGuy

    Just a slow but steady group of elderly either dying or moving out aka. The Coalition of the Willing. Robert, great post on windfall seeking — I don’t think I even knew what a stock option was when I got my first job (pre-Netscape IPO so option fever hadn’t yet permeated the culture).
    FWIW, a couple more world class foreclosures culled from the Chronicle.
    The Marina:
    2621 Lombard St. (3 beds, 1.0 baths, 1,479 sq ft ) bought for $1,120,000 in Feb. 2007. Taken back by the bank for $685,162.
    Outer Sunset:
    1969 48th Ave. (1701 sq.ft. 5/3) Bought for $775k 4/2006, taken back by the bank for $711,681.

  123. Posted by anonn

    A poster who says he has been in it says that the house is “easily” 3300 sq ft
    I’ve been in it too, guy. That’s wrong. Whatever tho, ’cause you haven’t and you’re talking about that. Then you go into your little shpiel about “Wonder why r.e. is so inaccurate?” YOu know what’s inaccurate? People like you using stuff you read on the internet as a jumpoff to say even more inane things.

  124. Posted by LMRiM

    Ah, who knows, anonn. Someone has been posting here for a while, and has been involved in renovation projects before. The house has 4 bedrooms and 3-1/2 baths, and it has a legal studio out back. To cram all that into 2300 square feet (which is what your $744 psf selling price implies) seems unlikely.
    As I said, what’s not debatable is that some sucker badly miscalculated what the market would be. I’m still waiting for some insight from the “professionals” out there how you get $2.22M of loans loaded onto this thing, when the purchase price was $1.45M?

  125. Posted by anonm

    @REporn
    You’re getting confused. The Wikipedia list I cited from is based off the 2008 rankings (the 1998 date refers to when the ranking system was first developed). Those are more recent than the 2004 rankings. SF has actually slipped by that measure.
    Obviously you have a less selective definition of “world class” than many of us. Fine. But I have no idea what you’re even trying to argue anymore.
    Someone earlier said that SF would make the top 50 but not the top 10. You gave us two lists, one of which puts SF in the top 60 and the other of which puts SF in the top 15. So top 50 sounds like a good summary to me. Certainly neither list suggests top 10.
    You purport to like the second list better, but the only reason appears to be because it ranks SF higher. Big surprise. Come on, the second list notes that SF gets its 15 ranking from its strength in Human Capital. Do you understand what they’re referring to there? The Silicon Valley…computer programmers. How is that any better or worse than measuring a city’s strength in “advanced producer services” such accountancy, advertising, finance, and law? At least salaries in those fields might be high enough to support super-high real estate prices.

  126. Posted by anon

    anonn, if you’ve actually ever been in this place, then you cannot seriously contend that it is only 2300 sf. You know it is much larger than that. Is it 3300? Maybe, maybe not. But it is a lot bigger than 2300. Are you going to at least agree with that?

  127. Posted by Robert

    Yeah, well, working backward from home neighborhood home prices + citywide median net income
    Anonn, as a real estate professional, you should know that there a number of tools to access data down to the census tract and beyond (GIS), as well as microdata. Most of these are free, and you can use them to support your case, whatever that may be.
    I’ve been promoting iPUMS and related tools such as postGIS for some time now, but in this specific case, just use the free online aggregators, which are also available in most real estate websites.
    So for example, you can look at 94114 and 94131. The former has 40% owners, so from the income histogram I took the owner’s median to be about 150K. The latter has 55% owners, so from the income histogram I took the owner’s median to be about 100K. Not an exact science, since you need to integrate the histogram, but a decent estimate. This is 2007 data, and be aware that owners don’t contain the top incomes entirely.
    Fronzi,
    You are absolutely right about most of the current owners not being able to afford their own homes at current prices — I like to think of it as “in over their heads” which is the opposite of “under-water”. Both are unstable.
    The only way this can continue is if the city fills up with very wealthy people — i.e. assumptions about incomes doubling in the next 10 years. I don’t believe that this is likely, and actually expect very mild to stagnant income growth, so these imbalances will unwind over time. The reason for the unwind is that even though there are some squatters that will never move, still tenure for owners stands at 10 years. So, over a decade, half the houses will get new owners. With 70% of the loan pool being IO, there is reason to believe that this process may accelerate.
    I actually believe that this unwind started in 2006. In 2005, newcomer owners were making a lot more money than current owners. That was the year that the differential peaked. In 2006-7, newcomers were making about the same existing owners. So, I don’t think there is enough wealthy new people to bail out the existing owners that are “in over their heads”. No specific predictions about timing this, except to say that the process is underway.

  128. Posted by anonn

    OK. Maybe it’s 2300 + the (ellis acted) cottage. I’ll concede that. So technically I would be wrong. I’ll ignore your petulant use of quotes around the word professional, (since you’re a professional what, again? day trader? Socketsite poster?) and answer that it probably went: construction loan, refi, then equity line.

  129. Posted by NoeValleyJim

    So let me get this straight, a two-unit Noe Valley building sells for what appears to be about $600/sq ft and all the bears use this as proof that the sky is falling?
    LOL.

  130. Posted by LMRiM

    Thanks for the financing info, anonn. I hope the specuvestor put some of that filthy lucre into his own pocket!
    About square footage, I’ll bet almost anything that the main house is larger than 2300 sq ft and is closer to Someone’s 3300 estimate than 2300. I may not be a real estate pro, but I know you don’t build a 3-story addition to a house to turn it into a 2300 sq ft house! Here are the permit details:
    ********************************
    Application Number: 200705030346
    Form Number: 3
    Address(es):
    2805 / 040 / 0 4251 23RD ST
    Description: 3 STORY HORIZONTAL ADDITION. REMODEL KITCHEN. REBUILD (E) FRONT FACADE.
    Cost: $450,000.00
    Occupancy Code: R-3
    Building Use: 27 – 1 FAMILY DWELLING
    ******************************
    $450K declared improvement value?! Very nice of the specuvestor to improve the asset for the next owner! No need to feel very bad – just a credit boo boo, with that much debt I’m sure no real cash was harmed.

  131. Posted by REpornaddict

    what I meant to say was, the 2008 appears to be based on the same criteria as the 1998 list.
    which is, and I quote again,
    on their provision of “advanced producer services” such as accountancy, advertising, finance, and law.[4] The GaWC inventory identifies three levels of global cities and several sub-ranks. This roster generally denotes cities in which there are offices of certain multinational corporations providing financial and consulting services rather than denoting other cultural, political, and economic centres.
    also checked their website quikcly, and could find no mention of other criteria.
    that to me, sounds like an incredibly narrow definition of what a world class city is.
    The other comment was not that it would make the top 50 butnot the top 10,
    it was
    “If you limit the list to 12, nope. 50? Probably.”
    where the use of the word probably incicates some doubt.
    based on the second list with more rounded criteria than just counting multinational offices, it flies into the top 50 and comes very close to the top 12.
    and clearly you only like the 1st list better because it ranks SF lower.
    Fine, but I can;t see how you can argue the criteria is better. The lawyer/accountant count is certainly the prime factor, and from what I can see the only factor.
    The second list has 5 factors, and from what I can see, weights them equaly. Much more balanced in my opinion. But if you prefer the first list, then we will have to disagree, but I haven;t seen a good argument why someone woulld, other than “it ranks SF lower”

  132. Posted by anonn

    Sparky-b already shed light on that. Three X (15 by 12) = 540. He saw the place too. But again, think what you want. Good point NVJ. It’s really a two unit, innit?

  133. Posted by NoeValleyJim

    Why do so many houses go back on the market after 2 years?
    Indeed, how many do go back on the market after 2 years? One or two a month? That is what it looks like to me, from years of watching the MLS. If you have better data, please share it.
    One or two homes a month is a tiny blip on the entire housing stock, less than 1/10th of one percent a month.
    With 70% of the loan pool being IO, there is reason to believe that this process may accelerate.
    This statement is absurd. You are claiming that 70% of current homeowners in Noe Valley hold IO loans? Show me the evidence.

  134. Posted by San FronziScheme

    I’ll take LMRiR’s profession whatever it is over real estate salesmanship. I did it on a small scale and found it very boring and time consuming. A lot of waiting, a lot of smiling and not much intellectually exciting stuff in between. I am happy I went back to my original carreer and didn’t switch to it as everyone around me advised to. The truth after 2 years of active RE selling: the brain is a muscle and if you don’t use it it goes to waste. Doing RE made my brain lazy. Glad I reverted that process otherwise I would have lost all critical judgement and replaced it with a lot of junk.

  135. Posted by EBGuy

    I can’t resist this other world class foreclosure as its proximity is closer to Noe and it had 100% financing (shocking!). 169 Grand View Avenue was bought for $750k ($500k variable first, $150k fixed second) in 2005. Taken back by the bank on July 1 for $473,875.

  136. Posted by EBGuy

    100% financing — the first was for $600k. Math is hard.

  137. Posted by anonn

    I’ll take LMRiR’s profession whatever it is over real estate salesmanship
    Dude, who cares? You are so inaccurate, so frequently, you’re Tipster Jr. on here.

  138. Posted by Trip

    a two-unit Noe Valley building sells for what appears to be about $600/sq ft and all the bears use this as proof that the sky is falling? LOL.
    I agree with NVJ’s sentiment. I’m quite confident that in two years this purchase will not seem like such a bargain! And that’s even assuming that the place really went for more like $550/sf.
    A very nice, good-sized, renovated Noe home like this — with a guest cottage — for $1.75M or $550-600/sf? Yeah, that is a big tumble in prevailing market prices from the last few years. Heck, the pre-renovation price 2 1/2 years ago was only $300k less. The bottom? No, but a long fall from the top nevertheless.

  139. Posted by NoeValleyJim

    I don’t think that multi-unit buildings in Noe have ever averaged more than $600/sq ft, even two unit buildings. I am on a snail mailing list for 2-4 unit property owners and the guy who runs it reports sales prices by quarter.
    Granted, this one is renovated so perhaps commands a slight premium, but if the second unit has either a protected tenant or has been Ellis’ed, that would definitely count against the property.

  140. Posted by san FronziScheme

    fluj,
    Glad I didn’t take your way then (from tech to RE). I had a few good years of RE, but I know I have a lot of good years in tech ahead of me. RE is boring as a day-to-day job for people who have had an intellectual job. Groundhog Day is the best way I can describe it. But sometimes you have no choice. It pains me to see older educated folks who had a great carreer go work in salesmanship at Macy’s or Nordstrom or wherever. Anyone with a high school diploma and the character could do that. What a waste.

  141. Posted by anonn

    I don’t find real estate boring. I think it’s challenging to try to find the anomalies and the excellent deals that fall through the cracks, and to try to see things that others don’t. I also think that doing deals with people who often have so much riding on things, on either side, is challenging. I used to manage writers and edit content in my tech days, and in my pre-tech days, so I came from an intellectual job of sorts. To each his own. Your opinion was not pertinent in the first place, tho. And by the way, I went back and tried to find a 1.4M buy in Noe that was flipped for profit and I only found that one hulking mansion on Church street. Like I said.

  142. Posted by Chad

    @ EBGuy
    How did you find out it is 100% financed ? It is hard to believe, especially in this day and age…
    Or maybe you can tell us what it is that you are smoking ?

  143. Posted by anonm

    @REPorn
    I see what you are saying now (re: 1998 vs 2004 vs 2008). Unfortunately it’s still incorrect because the Wiki article is misleading. The methodology is actually the same in all years (and SF has technically slipped, but only from from A- to B+). GaWC states that “[The 2008 study is] a larger and more consistent data collection than in 2000 and 2004 but the methodology and analysis are exactly the same and therefore the results can be considered broadly comparable over all three years.” (http://www.lboro.ac.uk/gawc/world2008.html) There is even a link at the bottom that goes right to the 2004 page you described.
    The second list has 5 factors, and from what I can see, weights them equaly.
    They’re definitely not equally weighted, because Mexico City has a higher total index than Shanghai or Moscow ( http://www.foreignpolicy.com/story/cms.php?story_id=4509&page=4 ) yet still ranks below them. If you equally weight the factors, then SF falls 3 or 4 slots to 18 or 19.
    clearly you only like the 1st list better because it ranks SF lower
    When did I say I liked either of them better? Based on the merits, I mildly prefer the second list to the first. But that doesn’t mean that I’d put zero weight on the first and blindly follow the second one. My main problem with the second list is that it only looks at 60 cities. That will artificially inflate the ranking of most included cities outside the top 10. For example, SF ranks #27 in “Business Activity,” which should measure similar things to the GaWC index. But GaWC only ranks SF around #50, in part because it ranks a ton of cities that FP doesn’t even consider. For instance, the FP list doesn’t rank cities like Barcelona, Melbourne, Athens, Budapest, Prague, Auckland, Helsinki, Geneva, Riyadh, Houston, Vancouver, Lima, etc. along any dimension. You’re telling me that not one of these cities is top 60 in any dimension, let alone overall? I doubt that.
    At the end of the day, I’d probably give an evenly weighted FP list double the weight of the the GaWC list. That would result in an overall ranking of around 28 for SF (18*.67 + 50*.33). Seems reasonable to me.
    But the biggest difference between the two lists is that GaWC considers the SF and SJ metro areas separately, whereas FP lumps SJ into the SF area (and calls the whole thing SF). If you consider SF to be the Greater SF Bay Area, then I agree that it could well rank in the top 20 to 25 metro regions when evaluated across a broad range of factors. But doing this creates two problems:
    1) The Greater SF Bay Area is then the “twin” cities of SF and SJ, and very few of the other top 25 metro regions are combining two cities into one. Is that fair? I don’t know.
    2) If we’re going to consider the world ranking of the SF Bay Area and relate it back to real estate prices, then we have to talk about broader SF MSA real estate prices (e.g., what CSI measures). And that is not generally what people are interested in on this board.
    If you want to consider the world ranking of just the city of SF or just the SF/Oakland region, then I don’t think there’s any way you can credibly put it in the top 20. Top 50, sure. But not 20. It’s just too small and too limited in scope. I don’t think “San Francisco” would even rank in the top 10 North American cities in most metrics if you chopped off everything below San Mateo and Fremont.

  144. Posted by EBGuy

    How did you find out it is 100% financed ?
    To be clear, the 100% financed relates to the comment directly above it for the property at 169 Grand View Avenue. I was correcting the information about the primary mortgage (which should have read $600k instead of $500k). The information was from PropertyShark.

  145. Posted by curmudgeon

    I find myself between the bulls and bears on this one…I really think this is more a story of a mistaken flip than evidence that the market in Noe is falling into the bay.
    I haven’t seen the place, unlike some on the board, so take my comments with a grain of salt. But it seems bizarre to me to do an expensive remodel of a house with an unrenovated cottage with a protected tenant out back. If you could flip the whole property and develop a compound, that’s one thing, but the main house has to have significantly less value in the current condition than if it had a full lot without the tenant. When you’re spending a couple mill you’re not looking for that.
    I also think that it is clear that a foreclosure sale, in the current Noe market is paying “wholesale” and could not be strictly compared to “retail”. Yes, I take the point that in markets where much/most of the action is in foreclosures then that defines “market”. But in the current situation this is still an outlier, and I think (as do several other folks on here) that if it had been marketed on the MLS it would have gone for more than its foreclosure price.

  146. Posted by sidelined

    Wow, this has really become kind of an omnibus thread–with a world class here, a Chicago there, here a flipper, there a Noe Valley, everywhere a … something or other.
    I don’t even know if it’s worth giving my two cents, but anyways, regarding the whole “world-class” thing, here it goes. I’ve lived in plenty of places, and most are pretty difficult to compare, kind of like apples and oranges. Chicago’s outstanding cultural scene versus SF’s great outdoorsy stuff? Really? I don’t purtend to be no durn expert or nuthin’, but seems to me that some are gonna like the apple, others are gonna like the orange.
    (Need a standard Noe Valley jab though–when I moved from Chicago, I lived in NV. So very happy that I was able to flee to the Inner Sunset. NV is grateful, too.)

  147. Posted by REpornaddict

    Fair enough – but I wouldn’t use aweighting of zero for the GAWC.
    Probably around 4%, as from what I can see it only really covers one of the 24 criteria the FP survey does, listed here (the first one)
    http://www.atkearney.com/index.php/Publications/global-cities-index.html
    so I’d still have it in the top 20 at number 16 or so
    (.04*50 + .96*15).
    But it does just show how subjective these things are, which was kind of my original point.

  148. Posted by kthnxybe

    Sidelined -lol, that is exactly what I was thinking on both counts, epic, definitive socketsite thread and “apples and oranges” on the world class thing.
    My feeling that yes, it’s city that is on the “global map” so to speak, so therefore world class – but it’s not New York, Tokyo or London. Again with the civic insecurity, I mean honestly little San Francisco, it’s perfectly *okay* to not be NY or LDN! Beta Plus status is fine! If I could pat a town on the head and tell it it was a good city, I would. 😀
    Chad – “restore” Noe to being 90% non parents like the “rest of the city?” You’re not from around here, are you? I mean, where do you think natives come from? Trust me, there are parents, in the city, not just in Noe, and there have been for, oh, forever.
    But I agree the stroller brigade can be a little annoying, heck they annoyed me even when my kids were stroller age. 😉

  149. Posted by anonm

    Actually, I don’t see how you can cite the FP index for support at all. You already claimed in your initial post that you think SF County is world class (remember, less than 1 million people?). The FP index is clearly ranking the entire metro area. Just look at the variables. Top universities? SF County has zero of those. International students? What, they’re all studying at USF? SF State? City College? Come on. Sporting events? We only have two professional sports teams located in the city, and one of them only plays 8 home games per year. There’s no way we’d get anywhere in the rankings if we limited ourselves to SF County.
    So which is it? Do you want to consider just San Francisco County or the entire metro area? I think we both know it has to be the latter to merit any consideration at all.

  150. Posted by anonm

    So to recap:
    1) Everyone agrees that no version of SF is in the top 12 cities.
    2) The version of SF defined as the greater SF-SJ metro area could plausibly rank in the top 20 cities. The version of SF defined as just SF county or even SF + Alameda counties has no hope of cracking the top 25.
    3) “Pound for pound,” SF (the top-20 version) does quite poorly. It is larger (in two cases, much larger) than three of the four cities that REporn cites as larger (Amsterdam, Rome, and Berlin…Moscow is the only one that is actually larger).
    4) The bulls have a less restrictive definition of “world class” than the bears. Most bulls seem comfortable with the fact that SF is not world class under their definition.
    5) There is no evidence that SF is any more world class than it was five or ten years ago. In fact, the one index that collects longitudinal data suggests that SF is less world class than it was five years ago.

  151. Posted by OneEyedMan

    Classic thread indeed. Let’s look at some other posts:
    Union square retail building sells for less than 1/2 of’08 sf prices – 0 posts
    We’re tearin’ down a library – 1 post
    A goofy house in NV sells on the courthouse steps – 148 posts and counting

  152. Posted by anonm

    Oops, that should read “Most bears seem comfortable with the fact that SF is not world class under their definition.” The bulls may also be comfortable that SF is not world class under the bears’ definition, but they seem uncomfortable with restricting the definition to truly elite cities.

  153. Posted by REpornaddict

    Under no circumstances would I restrict the criteria to what is in San Francisco county, no.
    Much of the things I like best about living here – Marin, wine country, Point Reyes etc are outside of the county.
    But I can still easily enjoy them by living in the City of San Francisco.
    Under that criteria, natural beauty, SF would clearly be top 5. None of the surveys capture that. That’s a limitation of the surveys, and to the detriment of SF’s ranking.
    Ask someone from outside US (say, Europe) what they think the best cities in the US are. I would guess SF would quite possibly be second, despite being right on the other coast away from Europe. Certainly would be ahead of Washington and Chicago.
    But, as I say, the only reason I got involved was because someone said that SF was :”world class” and got jumped on by multiple people for it.
    That was his opinion, and clearly he’s not alone. Not everyone thinks that, and that’s fine. I didn’t see anyone really jumping on the person who said SF was a “little town” for example.
    Well, except for me maybe 😉
    I do think theres room for 20 or 30 world class cities, rather than just 4 or 5. It’s a big world after all.
    And I think that SF for all it offers, including its surrounding natural beauty would easily make that list. But others may disagree, as they are entitled to – its subjective!

  154. Posted by whatever

    “I got involved was because someone said that SF was :”world class” and got jumped on by multiple people for it.”
    I got involved too, but my reason was because though San Francisco may be “world class”, it is NO justification for continuation of real estate bubble prices. You have to remember, that two years ago, many were posting that prices could only go up Up UP in S.F. because “tourists love it here”, and we have “great restaurants” and are rated “world class”. There are other world class American cities that are on various posted lists on this thread that have housing costs 1/3 of San Francisco.
    Being listed “world class” does not make your house still worth 2006 bubble prices!
    Most of the reasons listed for why it is better here and justifiably more expensive seem to be also reasons to live up in Marin instead, since that is closer to Point Reyes, Napa and GGNR area.

  155. Posted by San FronziScheme

    fluj,
    One that comes to mind is 4226 25th street. Bought in 2006 for 1.125M. I don’t know the sale price though, but this was a massive redo (was around when the crane was lifting the darn thing, always very impressive) and it sold after 2 weeks when asking was at 2.95M.

  156. Posted by LMRiM

    Don’t forget, “the Chinese are buying”, whatever.
    I never get into this whole ‘world class’ fracas that periodically erupts. I will say that what I like about SF and the Bay Area is access to lots of nice outdoorsy places to bike ride and take little trips. SF is no New York, or London (both of which places I’ve lived – in NYC for more than 20 years), not by a looooong shot, but those places don’t have the access to surrounding areas that SF does. That’s one of the reasons I couldn’t imagine living in this area without a few vehicles.
    I don’t see the car culture changing here (much to the consternation of some) – it really is all a big suburb compared to more dense cities/living environments imo. (Even 80% of the geographic area of SF proper seems more suburban to me than ANYTHING even in the Bronx or Brooklyn, to say nothing of Manhattan.)

  157. Posted by anonm

    Under no circumstances would I restrict the criteria to what is in San Francisco county, no.
    Fair enough. Then we agree that SF’s strength is not going to be on a “pound for pound” basis.
    Under that criteria, natural beauty, SF would clearly be top 5.
    Really? Just on the West Coast alone I’d personally put San Diego, Portland, Seattle, and Vancouver as at least tied (and possibly ahead) of San Francisco in terms of the “natural beauty” of the city and the surrounding region. I think strong cases can be made for any of those cities on the grounds of “natural beauty.”
    I can understand that you personally may prefer the Central California topography over other topographies. But how is it “clearly” top 5 worldwide?? A reasonable person would only put it “clearly” in the top 5 on the West Coast. Why would you assume everyone else the world over has the exact same aesthetic preferences as you? The Bay Area is one of my preferred locations, but I can accept that other people have different opinions and that many would not rank SF as the “second best city in the US” or whatever just because I happen to like it.
    “World class” cities are elite on objective grounds. It’s not all subjective. New York, London, Paris, Tokyo, Seoul, Moscow, etc. – they’re all huge and dense. They have transport systems that carry millions of people every day (and we have….MUNI!). They have a breadth and scope that is not matched by a place like San Francisco. Which again is fine by me. I’ve lived in NYC before. It’s not my cup of tea. But I’ll give it credit where it’s due – it is a global city by any objective standard.
    In contrast, all of this subjective “I like the outdoors” stuff doesn’t make much sense to me. Yes, the Bay Area/NorCal has a lot of nice recreational opportunities. Many of them are even “special.” But just looking at the Western US alone, the same is true of San Diego, Seattle, Vancouver, Salt Lake City, and Denver. They are all “special” in their own ways.
    Suppose I told you that I love the Pacific Northwest and that Seattle is the ideal city for me? It has the evergreen rain forests, snow capped mountains, lakefront views, clean air, a dense downtown area, great food, all the entertainment and cultural options you’d expect from a city of its (or SF’s) size, world class employers like Microsoft and Boeing, etc. How would my argument for Seattle’s “world class” status be any different than your argument for San Francisco’s? And if Seattle is world class, what does the term even mean? (Don’t get me wrong, I like Seattle, but if we admit them to world class status, then there must be over 100 world class cities.)

  158. Posted by anonm

    In retrospect, I think that the types of factors that the “world class” proponents are focusing on have less to do with whether SF is a “world class” or “global” city (by an restrictive definition, clearly it is not) and more to do with what is the “best” or “most livable” city across a broad range of criteria. This list puts SF at #30, which seems reasonable to me:
    http://www.mercer.com/referencecontent.htm?idContent=1173105#Top_50_cities:_Quality_of_living
    We do not rank in the top 50 in terms of city infrastructure, which seems even more reasonable to me.

  159. Posted by whatever

    who is this “whatever” posting above
    did my handle get hacked?
    “whatever at August 7, 2009 4:52 PM”

  160. Posted by anonn

    One that comes to mind is 4226 25th street. Bought in 2006 for 1.125M.
    Right, that’s 275K less than your “magic formula.” Also exactly within the price range houses like the one at the top of this uberthread were purchased for, by people who knew what they were doing. And man, I gotta say. You begged the question. Sorry, but if r.e. is so non stimulating to you, why are you on here so much? You can definitely take your made up s##t elsewhere.

  161. Posted by Robert

    Good one OneEyedMan. It’s just that this post is a more useful launching pad than the others, which are more clearcut.
    As to the issue of whether there are really shorter holding periods — I do suspect that a disproportionate number of houses are sold after brief hold times.
    A quick look at Redfin SFRs says that there are 473 for sale in their db. We all know how good “DOM” is, but I added DOM to the last sale date and then counted the SFRs which had a modified last sale date later than 8/7/2007. The goal is to count the number of houses currently on the market that were held for less than 2 years prior to being put back on the market.
    About 1/3 of the houses had no information about the last sale date — and they had sales going back to the 1960s.
    So if we define the universe to be SFRs for which a last sale is known — then 21% of that universe was put on the market after a hold of 2 years or less. Of course, DOMs are reset each time a price adjustment is made, so the true figure is higher. This could be a database/statisical fluke, but it does give the impression of “heavy rotation” at least within a sub-population of homeowners — but this cohort has a disproportionate effect on price.
    It’s interesting to think of the dynamics. In general, owners should be able to buy their houses at the current prices (on average). If not, then the situation is unstable and the process of people moving out will eventually bring things back into equilibrium:
    assume that 11% of the people move out each year, and that all the newcomers purchase houses at 4x income. Assume income growth of 3% a year for everyone, and an initial price to income of 6.5
    In that case, within year 10, you will be close to the steady state ratio of 4. However — due to income growth — prices will have bottomed in year 8. If you are correcting from a multiple of 6, then prices will have bottomed in year 6, at which point the multiple will be at 4.6, en route to 4.
    Hopefully this way of looking at things will be more helpful than monitoring stock prices and the like — and will help explain how slow moving everything is.

  162. Posted by REpornaddict

    under that criteria, natural beauty, SF would clearly be top 5.
    Really? Just on the West Coast alone I’d personally put San Diego, Portland, Seattle, and Vancouver .
    I did mean as opposed to the others on the FP list – sorry for not making that clear. Obviously across the world there will be many (generally smaller scale) cities that have great natural beauty without being a contender as world class. SF is both in my opinion. actually, I don’t rate at least half of your list as even coming close to SF for natural beauty, but it’s personal taste. The fact is that of those on the FP list, SF would kick some serious ass against most if that criteria is included – which is important, as it’s in many ways SFs strongest suit.
    World class” cities are elite on objective grounds. It’s not all subjective. New York, London, Paris, Tokyo, Seoul, Moscow, etc. – they’re all huge and dense. They have transport systems that carry millions of people every day (and we have….MUNI!). They have a breadth and scope that is not matched by a place like San Francisco
    Is clearly is subective, as Moscow is down in 19th overall on the FP list – behind Vienna and “San Francisco”.

  163. Posted by NotWhatever

    Did not mean to hijack your handle Whatever. The name was chosen more as a comment.
    I have to say the regional chauvinism of Bay Areans is annoying and bizarre. Bizarre in that the biggest boosters are recent residents, many less than 15 years, and they wear their San Francisco superiority as a badge of honor and an excuse for over-priced real estate. Annoying in that somehow they believe because something is expensive, it makes it better.
    I lived for two years in Honolulu, which was beautiful, high density, had great restaurants, amazing natural landscapes and ocean sports, and yet I never thought of checking to see whether that city was “world class” as a justification for what I priced my condo at.

  164. Posted by anonn

    you should know that there a number of tools to access data down to the census tract and beyond (GIS), as well as microdata. Most of these are free, and you can use them to support your case, whatever that may be. I’ve been promoting iPUMS and related tools such as postGIS for some time now, but in this specific case, just use the free online aggregators, which are also available in most real estate websites. So for example, you can look at 94114 and 94131. The former has 40% owners, so from the income histogram I took the owner’s median to be about 150K. The latter has 55% owners, so from the income histogram I took the owner’s median to be about 100K. Not an exact science, since you need to integrate the histogram, but a decent estimate. This is 2007 data, and be aware that owners don’t contain the top incomes entirely”
    You cannot be serious with that stuff. 94131 earns 100K, yet 94114 earns 150? You realize that an estimate times another estimate = potential for wild (100%?) inaccuracy, right? Here’s how it goes, especially in Northern California where people like their privacy a whole lot. “Ding dong.” “Hello sir, would you mind filling out this questionairre about ..” “Slam” (door in face.) And the census? That is from 2000. If individuals had access to IRS data, then we would be talking about charting this sort of thing. But people don’t.
    So you’re taking these wild figures and you’re tacking on a 7 X income affordability index? And talking about what things should cost in Noe Valley? I really, truly wish that you and others could see what we see all the time. I know you don’t want to hear it, but folks have subtle money around here. I don’t always know where they get it, but a lot of them got it. They might be big earners, they might not. But they can certainly do enough math to figure out what each month is going to cost after the big sum — which none of you believe exists, yet we see constantly — is deposited into a down payment. Still. 350K down on a 799K Bernal house, but 40K under asking? I saw three such offers last month from journalists and schoolteachers. Go ahead and doubt. That’s SF real estate, tho.

  165. Posted by diemos

    “Go ahead and doubt.”
    Ok. Don’t mind if I do. But I sure hope you’re right. Large cash down payments brighten my day.

  166. Posted by Robert

    Anonn,
    First you say I used city-wide data. I didn’t.
    Second, you suggest I made a math error in adding averages — in reality, I presented two medians for two zip codes (one poorer than another).
    Third, you say that you saw large downpayments. Well, downpayments can come from many sources — e.g. asset sales or other loans. So, arguing that people made large downpayments doesn’t contradict income data. In fact, the whole point is that there has been a disconnect between asset prices and underlying cash flows, and that is true of households as well.
    Fourth, you talk about your own experiences, but don’t seem to realize that I was not talking about recent purchasers — I was talking about all owners. Including owners from 1987, 1997, and 2007. And in fact I repeatedly said that most could not afford to buy their own houses at today’s prices, and then I discussed some of the ramifications of that.
    Now, if you disbelieve the data — then fine, but I have to say that that’s a pretty naive view of how the census works. And it would take some convincing on your part that your own anecdotal experiences over a relatively short time frame is more accurate than the data we have on these zip codes.
    Finally, I have noticed this sense that “only a real estate pro like me” knows what is really going on, and this is not a convincing argument. To the degree that you provide good information and analysis you will be believed. Just present that knowledge and let the other people come to their own conclusions.
    Specifically, what do you think that median owner incomes are in those zip codes? Of all owners? Of new owners? And what are your data sources? What do you think the average price to income multiple is?

  167. Posted by San FronziScheme

    I came up with a sample even wilder than what I planned and anonn/fluj went bezerk and insulting. Again.
    Anyways. Fun stuff about running around justifying numbers, questioning census bureau data and whatnot.
    Always entertaining. Love this day.

  168. Posted by ex SF-er

    Ask someone from outside US (say, Europe) what they think the best cities in the US are. I would guess SF would quite possibly be second, despite being right on the other coast away from Europe
    Not sure about that. Possibly but unlikely IMO. NYC would be #1 and LA would be 2.
    I could easily be convinced that SF is third, but there are several good choices for third IMO. I personally would pick Miami/Orlando as the European #3 choice, and SF #4.
    In my experience, far more Europeans go to FLORIDA (Miami/Orlando) than would go to SF. Due to the Beaches.
    There are also many “odd” places you wouldn’t think about. Many Europeans are fascinated with the “old west” and Native Americans because they don’t have Native Americans, and many grew up watching cowboy and indian films. So many Europeans love to come and see our “old west”. They also want to see our National Parks, because they have nothing like our Grand Canyon as example.
    I perused several French sites asking “what is the best American City” and “top destinations in the US”. By far NYC and LA were 1 and 2.
    in a non scientific way SF, Miami, Boston, DC, Las Vegas, Chicago, New Orleans and Nashville/Memphis (surprising, I think because of Elvis?) were the other top vote getters.
    **of interest:
    most of the French on the sites I looked at today were more interested in going to the National Parks (Yellowstone, Grand Canyon) than they were the various cities. This put SF higher on their list because it had nature somewhat nearby.
    **also of interest (to me)
    most of the French wanted to go to LA (especially since it is near SD, Mojave desert, and Las Vegas), but then discussed about how it was overrated and too difficult. it often rated as 2nd most desired destination, and then it often rated as one of the WORST cities to visit!
    **SF fared well, especially since it is near Yosemite.
    **Remember that the French don’t understand how big it is here. Thus, most of the time they had ideas like this: They will come here for 2 weeks and then visit Yosemite, SF, LA, Mojave Desert, Las Vegas, Grand Canyon. Or go to Orlando and Miami. Or do NYC, Boston, DC, and Baltimore. Sort of like how we might fly there and do London, Paris and Amsterdam all in one trip.
    SF suffers (only very slightly) from the European perspective due to a few factors:
    1) SF is similar (in a very American sort of way)to the second tier European cities like Amsterdam. LA and NYC are major world metros, so “different”. places like LA and Miami are totally different (due to the sprawl). There are no cities like those 2 in Europe. think about it, when you go on vacation do you want to see cities exactly like San Francisco (same weather, same density, etc?) or do you want to do something different?
    SF does rate highly though due to it’s ethnic diversity.
    2) the weather. Much of Eurozone has cool temperate climate. Thus they often want to “get away” from that. Hence LA, Miami, and Orlando.
    3) the homeless issue. It makes many Europeans uncomfortable. the issue came up several times, but most of the French left it at “well that’s how it is in the US”.
    here was a site that rated SF #2: (it’s in French but you’ll get the gist)
    http://www.e-voyageur.com/forum/voyage-8907-highlight.php
    ======
    I think SF is definitely world class, but I think that people who use “world class” often try to put SF with places like LA, NYC, London, Tokyo, Paris, etc. It’s not in that league.
    I put SF with other world class cities like Boston, Amsterdam, Barcelona, Washington DC, Buenos Aires instead.
    and ALL of these cities are absolutely marvelous.
    there is no reason to be upset with joining that “second tier” world class city ranking.
    and yes, my tiers are different than the “global city” designations. I just go by how the cities “feel” to me. just one guy.

  169. Posted by Indeed!

    Brilliant ex SF-er! You understand Europeans VERY well. Nothing would pain my Euro-guests (or Asian guests as well) more than the reality that San Francisco was not the California, or America, they were expecting. A place that is old, dirty, crowded, and cold is not what they travel thousands of miles for. They want space, sunshine, cars and modernity. While I rarely go to Los Angeles, they always DEMAND to see Los Angeles which was often the highlight of their trip along with NYC, Miami and Chicago. Santa Monica, Beverly Hills, Malibu, Palm Springs, the deserts, Disneyland, Newport Beach shopping, Laguna Beach, Hollywood, all to them was much more interesting than having coffee on Russian Hill or shopping in Hayes Valley.
    This may be hard for many San Franciscan’s to believe, but I noticed more interested reactions from guests on day trips to Stanford-Palo Alto than a trip to Union Square or our waterfront.
    While we try ever so hard in San Francisco to be European with our hatred of cars, shopping malls and modernity, they crave wide freeways, space and the Stanford Shopping Center. I was even asked “Why don’t you live down here in Palo Alto, it is so much nicer, cleaner, and warmer”.
    What does this have to do with Noe, well, one family I am close to from London have purchased a vacation-income property in Laguna Beach as a second home when the dollar was low. The idea of wanting to buy a property in San Francisco was NEVER attractive to them since they live in London, which is truly a world class city.
    We really have to stop pretending that the entire world is dreaming of owning Victorian cottages in Noe Valley.

  170. Posted by LMRiM

    I had a good friend from France (grew up in Paris) who had been working on his finance Ph.D for a while in the Bay Area, and he never really “got” America until our familes went on vacation together in Utah. He’s in Geneva now at a hedge fund, but I still remember how happy he was when we were travelling around between SLC and canyon country, eating at Red Lobsters, giant SUVs barreling down endless empty highways, tall blonde waitresses a full head higher than him, etc. – “Zeeeees is what I come to America for!” (sorry for the bad attempt at the heavy French accent)

  171. Posted by anon

    Most Europeans that I know to have visited LA and SF enjoyed visiting LA more, but they would never live there, while they might consider living in SF. That pretty much describes me too. I like visiting places like Stanford Shopping Center, but to have to deal with driving everywhere? Maybe if Palo Alto were cheaper than SF, but that isn’t even remotely the case.
    There is no doubt that LA is a bigger city on the mind of more people in the world – it’s five times the size of SF. When talking about real estate prices though, per capita talk is what matters. Is LA five times more “world class” or “well known globally” than SF? There’s just a LOT more LA real estate to go around, especially desirable real estate, since most of the SF is not all that desirable.

  172. Posted by Indeed!

    Oh please “anon”, what in the world are you trying to say? L.A. is not 5 times as great, so it does not count? Can’t you do better than that?
    Look, this whole nonsense started because like many times before, someone claims the hope that prices will not fall further since we are world class and a major urban player on the world stage.
    Then negheads come out to talk about the problems of S.F., and the boosters respond with income statistics and tourism counts.
    Wishing that some rich foreign buyer is going to fall in love with S.F. and save you is nice, but they are not nearly as important in our market as they are in NYC, Southern California or Miami.
    Why is it so hard to admit that prices are falling, and everyone does not want to live here?

  173. Posted by Dan

    It’s silly to generalize about Europeans. There are those who come to America for nature, those who come to shop, those who like to walk through urban neighborhoods, those who like to barrel down highways in Chevy Suburbans, those who like San Francisco because it is the most European of American cities, those who like Las Vegas because it is unlike anything in Europe, etc., etc.
    When in Europe recently, I saw hipsters on fixies in big cities, and hikers communing with nature in places as sparsely populated as Utah. There are all kinds of people everywhere.

  174. Posted by Dan

    (The population density of Utah– 27 people/sq mile– is about the same as that of Norway– 31 people/ sq mile. Utah’s population is growing faster than Norway’s, and so Utah will soon be more dense. In both places, vast parts are very sparsely populated.)

  175. Posted by Indeed!

    You are right Dan, Utah’s similar population density to Norway will drive rich foreign buyers to choose Noe Valley. All of that driving and endless empty space is no match for our world class density.
    In the past someone commented that at one open house they heard french spoken by guests. I guess this just is more proof of how important and desirable we are.

  176. Posted by Dan

    I’m not claiming Norwegians will save Noe Valley!
    Just countering the many preceding posts about Europeans preferring one part of America over another. There are many different kinds of people in Europe, and many different densities– Europe and Europeans are at least as diverse in many ways as Americans, and different Europeans prefer different aspects of the U.S. It’s silly to lump Europeans and their preferences together.

  177. Posted by REpornaddict

    Fair enough ex-SFer, you have done more research than me, at least on the French view.
    But I am prepared to downgrade my estimate from “possibly second” to “probably third” – but no lower 🙂
    Although, as you suggest, LA might be one of those cities that scores really highly with people ……until they actually go there!

  178. Posted by Dan

    There is one Norwegian homeowner in Bernal Heights, though! He has “Oslo” on his personalized license plate, and flies the Norwegian flag on Norwegian holidays.

  179. Posted by anonn

    What do you think the average price to income multiple is
    I don’t subscribe to the idea that a particular standard metric is relevant to the average home buyer, Robert. Like I said, I knew I would garner some disbelief. I’m cool with it. But none of you are buying jack.

  180. Posted by REpornaddict

    Socketsite..what’s the record for numbers of comments on a thread??

  181. Posted by anon2

    “Socketsite..what’s the record for numbers of comments on a thread??”
    Can you imagine the confusion of a first time reader who clicks on this link only to discover a huge battle over not only the latest real estate trends for this hood, but tourism and density statistics, Wiki and Financial Times urban rankings, as well as Norwegian flags and Red Lobster waitress hairdoos?
    The Noe Valley housing crash has set in motion a complete mass hysteria!

  182. Posted by NoeValleyJim

    So not one person on this thread put San Francisco in the same league as New York, London, Paris and Tokyo, yet you all feel compelled to post arguments against this Straw Man. I find this odd, but perhaps you have friends who make this claim or something.
    Civic pride in general is a good thing, not a bad thing, but I guess in the all-kvetch all-the-time world of SocketSite any positivity is viewed in a negative light. It is really a topsy-turvy way to approach the world, you know. All the world’s great metropolises have considerable civic pride, and even plenty of those that aren’t so great. When I lived in San Diego I was pretty amused to discover that it considered itself “America’s Finest City” and both New York and Paris’s navel gazing is legendary. It is possible to carry anything to a logical extreme of course. A place like Jerusalem, where you have three religions each fighting over the place, might actually have too much civic pride, but we are no where near that level of absurdity.
    “Why don’t you live down here in Palo Alto, it is so much nicer, cleaner, and warmer”.
    So what was your answer?

  183. Posted by NoeValleyJim

    someone claims the hope that prices will not fall further since we are world class and a major urban player on the world stage.
    Man, I must have some kind of reading comprehension problem or something, but as far as I can tell not one person in this thread actually said that.
    Can you point specifically to what you are talking about? Sorry to be so obtuse.

  184. Posted by Topher

    @ Indeed! who was asked “Why don’t you live down here in Palo Alto, it is so much nicer, cleaner, and warmer”
    What was your answer ?
    Did you say “Too much of the arrogant Steve Jobs and his stupid zombie “Fan Boys” everywhere, and that’s why !” ?

  185. Posted by anon2

    “This is a complete, unmitigated disaster for Noe”
    Comments like THAT caused comments like this..
    “Unpredictable economics aside, this is freaking San Francisco, a world class city.”
    And THAT is how this went off the cliff from talking about how prices are dropping to how “economics aside”, this IS San Francisco, a “world class city”, and …..then…
    “Living in a desirable metropolis traditionally means you deal with a busy, competitive and comparatively expensive lifestyle. (TRUE) I don’t see any changes pointing to this changing soon.”
    (FALSE)
    PLEASE note the “I don’t see any changes pointing to this changing soon”.
    Well guess what NVJ, I see changes pointing to this city not being nearly as expensive as it was already. We will not be priced like Turlock or Stockton, but dumpy little wood houses overlooking freeways near housing projects dozens of blocks away from the “real San Francisco” have taken a major hit and should not STILL be charging psf costs equal to some of the best urban neighborhoods in the country. Now, neighborhoods like Noe, that were psf pricing similar to parts of Pacific Heights are coming back to earth as well. Sure Noe will be desirable, but we are about to see what the new entry price is for sfh’s in your neighborhood.
    I think ex-SFer responded to this best;
    “Living in a desirable metropolis traditionally means you deal with a busy, competitive and comparatively expensive lifestyle. I don’t see any changes pointing to this changing soon.”
    Fronzi already answered this, but I’ll chime in with my specific rationale again.
    SF was competitive, and world class, and in the midst of a major bubble that was focused on the Bay area itself… in the year 2000.
    thus I still see no reason why RE valuations shouldn’t be at 2000 levels which were already nosebleed at the time. (except for the credit bubble which is deflating).
    Economically, SF was in much better shape in 2000 than it is today. hence, 2000 valuations seem reasonable, no?
    (FWIW: this is why we need to un-bubble housing… it is NOT healthy for a populace or an economy).”
    Why do people bring up “world class” if they are not thinking that we are to “special” to keep dropping?

  186. Posted by NoeValleyJimn

    we are about to see what the new entry price is for sfh’s in your neighborhood
    How many years have you been saying this now? Three, four, five years? It is a tautology in any case, because you are 100% guaranteed to be correct that we will soon know what the future will bring.
    Can you be more specific perhaps on your definition of what that new entry price will be and when exactly we can expect to see it, instead of just making vague ominous sounding pronouncements?
    Then (again) why could a normal family move in 10 years ago, and not now?
    It is called a business cycle. 1998 was the end of the bottom of the last housing cycle. Your landlord timed it perfectly, probably by accident. At the bottom of this cycle, homes will probably be similarly priced, plus inflation, plus some adjustment for desirability. NV is certainly a better neighborhood now than it was in 1998, it is hard to say exactly how much better. 25%? I would guess about that, but that is purely a WAG. SF in general should command a premium over pricing at the bottom of the last cycle.
    How long will this be? Last time it took about 7 years from top to bottom, I see no reason why it should be any faster this time.

  187. Posted by NoeValleyJim

    What the heck, let’s put some real numbers out there so people can see what this looks like.
    Assume a $500k house purchased in 1998, increasing in price at 3% a year inflation. I think when all is said and done we are going to be seeing more like 4-6%, but I have to admit that there is no inflationary pressure in the economy right now.
    If the market peaked in 2007, seven years from there is 2014, this is 16 years from 1998.
    16 years of 3% compounded growth equals 60%, so that means that $500k home would sell for $800k. If my 25% premium is correct that means $1M.
    At 4% you get $1.16M, 5% is $1.36M and 6% gives you $1.59M.

  188. Posted by NoeValleyJim

    Oh and “normal families” are still moving in all the time. Two years ago a family that consists of two SF school teachers and their 16 year old daughter bought a place on my block. It wasn’t a SFH though, it was a TIC, about 1000 sq feet and they paid $600k for it.
    That is what “normal families” are doing these days in NV.
    As metropolises grow in population, land in the center becomes more valuable, so this is probably in all of our future eventually, if the region grows large enough.

  189. Posted by anon2

    Believe it or not, we mostly now agree NVJ, though I am not ready to call “bottom!”. My rant was directed more towards neighborhoods south and east of Noe. It is also nice to have this back on topic, ket’s keep our fingers crossed that it will continue. You will never get me to give up my car however 🙂

  190. Posted by Robert

    That is a good data point, NVJ. Two school teachers — that should be about 100K combined income, so we are talking about a multiple of 6 right?
    I had a friend buy a fixer SFR in 2005. Got some money from parents for a downpayment and a Countrywide IO-arm. The price/income multiple was about 7 for him.
    Not sure that I would put Noe Valley in the “center” of the bay area, though. But why argue about that — this is a de-centralized area, with SF, Oakland/Berkeley, and San Jose all playing their roles and interacting with each other. I prefer this configuration, personally, than a hub-and-spoke type model.
    And don’t forget about Palo Alto/Stanford, which views itself as the “center” of silicon valley. The nice thing about living on a bubble is that we are all in the center 🙂

  191. Posted by ex SF-er

    So not one person on this thread put San Francisco in the same league as New York, London, Paris and Tokyo, yet you all feel compelled to post arguments against this Straw Man.
    this is mainly just a problem with the semantics of “world class”.
    To many people, world class means the big boys (NY, L, P, T).
    I think this straw man won’t happen once/if people accept a liberalized definition of world class.
    That said, in general my experience on socketsite has been that people tend to compare SF against NYC, LA, Paris and London; and rarely against comparable metros like Boston, DC, Amsterdam, Barcelona, Sydney, Berlin.
    I remember when people on SS were trying to convince me that SF was as dense as Paris!!!! (which is 4x more dense than SF). Or that the inner core of Chicago isn’t as dense as SF (again, untrue).
    This is clearly not all the posters, it is the most blind of boosters.
    Likewise, there is the other group of people who try to call SF a quaint little city (it is not. it is a major urban center). SF’s population may only be about 750k or something, but its population draw is more in the 6-8M people range. In general non-SFers don’t love SF proper alone, they love the greater Bay Area. (Marin, Wine country, Monterey, etc.
    and it’s not SF alone that is “world class” anything, it is the greater Bay Area that is world class.
    the same doesn’t really apply to the big boys. NYC stands alone. Heck even Manhattan stands alone. Paris stands alone. Tokyo surely stands alone (its 23 special wards). London stands alone, with a caveat-that what we think of as “London” is really 31 boroughs and 2 miniscule sized cities (The cities of London and Westminster) so London may be best thought of as an MSA?

  192. Posted by justin

    “As metropolises grow in population, land in the center becomes more valuable, so this is probably in all of our future eventually, if the region grows large enough.”
    As was mentioned above, what will be interesting in the coming decades is to see where the “center” of this region is. If anyone has ever lived in the south bay or peninsula near Palo Alto, they know how invisible San Francisco becomes. The funny thing about the Bay Area is that it has as much sprawl as Los Angeles, but with the water of the bay and mountains craeting some areas of density out of geographic necessity.

  193. Posted by anonm

    Look, this whole nonsense started because like many times before, someone claims the hope that prices will not fall further since we are world class and a major urban player on the world stage.
    I agree that’s how it starts most of the time, but oddly, that is actually not how this discussion started. It actually started when nottimhawko wrote, “…this is freaking San Francisco, a world class city. If someone is actually thinking about moving here for a ‘simple life’, then are they not the ones who are delusional? Living in a desirable metropolis traditionally means you deal with a busy, competitive and comparatively expensive lifestyle.”
    Under that definition of world class, there is little doubt that SF would rank relatively low. I find it to be more laid back and less “busy” and hectic than most Northeast cities…not just NYC, but even smaller ones like Boston or DC.

  194. Posted by NoeValleyJim

    two school teachers — that should be about 100K combined income
    Teachers get paid $50k for 9 months of work. If you work summer school, you get another 1/3. If you have a Master’s Degree and more than 20+ yrs of experience, your 9 month pay is more like $70k or about $95 for a full year. These two are pretty senior, so I am going to guess that HH income is more like $150k.

  195. Posted by Robert

    What the heck, let’s put some real numbers out there so people can see what this looks like.
    Ok, I’ll bite! First, you should look at income growth rates, not inflation, when looking at housing appreciation. Income determines the rental value as well as purchasing power.
    Let’s first clear up the confusion over the “desirability” premium, by looking at what people are paying, proportionate to their incomes, in various parts of CA:
    Ownership costs for mortgage holders as a proportion of incomes:
    Fresno: 28%
    Burbank: 32%
    Costa Mesa: 30%
    Glendale: 33%
    Los Angeles: 34%
    Berkeley: 31%
    Oakland: 35%
    Walnut Creek: 28%
    San Francisco: 31%
    So, there is no basis in reality for believing that people are willing to pay more — as a proportion of their incomes — to live in desirable areas. I.e. a desirability premium is pure fiction — I don’t care how nice the Noe nuns are. However, desirabilty, re-interpreted as gentrification is very real: what actually happens is that more desirable areas attract wealthier people, who pay the about same, proportionally, as people in all other areas. In actuality, they pay slightly less (as the above table suggests).
    So if desirability were to lead to gentrification, then this should be reflected in income data, although the transition can give false signals. Let’s analyze this dynamic:
    In 1989 Noe was an “average” hood with average house values of 300K and median mortgage-holder incomes of 58K. Note the 1990 nose-bleed multiple of 5.2, and indeed 1990 was a market top, from which city-wide house prices declined until 1997, at which point they were about 290K and owner’s income was about 81K, for a multiple of 3.6.
    However, something special happened in Noe — gentrification. The gentrification caused prices in 1998 to be about 500K — 66% higher than the 1990 prices!
    How? We can think of gentrification as the arrival of a second cohort. The first cohort is the original populace, which is earning 75K in 1995 and growing with the standard growth rates. Along comes cohort #2, which we’ll call “tech”, and they are earning say 101K (in 1995). Because prices are set at the margin, this means that tech can start to control the prices, so that by 1998, when tech is earning 125K, prices in Noe are around 500K (or 4x tech). None of this requires “most” people to be in the second cohort. In fact, the gentrification is still not yet complete, since by 2007, tech should be earning 200K, and the old cohort should be earning 120K. The actual Noe medians are in between the two cohorts. As long as enough tech’s arrive to replace the ones that cash out, tech-prices can be sustained, and that will eventually lead to the median income becoming the tech-median income.
    Lessons learned:
    1. There is no reason to believe that you can continue to add a WAG for desirability on-top of the 66% gentrification premium already reflected in 1998 Noe prices. Not unless you expect a second round of gentrification, which would launch Noe into the Pac Heights crowd. At least wait for the first round to complete — that is for median Noe owner incomes to be equal to the median incomes of the second cohort.
    2. If the bay area can keep minting enough tech cohort members to replace the old crowd as they cash out, then prices can settle at 4x times the tech crowd’s earnings. This means that our 500K house can sustain a price of 800K today, and grow with the future tech income growth.
    3. If the bay are cannot keep minting enough tech cohorts to replace the old crowd, then prices will adjust downward somewhat. This is why the IO and funny loan phenomenon is very dangerous, since non-tech people (even schoolteachers!) got caught up with buying way above their means. This means that more techs need to be minted faster to sustain even current prices.
    4. At the end of the day, this gentrification process will complete, and prices will again reflect the “median” income for the hood. The median income data will show a spike in growth, to reflect the gentrification, and prices will be a reasonable (3-4) multiple of this median owner income.
    Now, let’s look at the income data, and compare SF with the nation.
    Per capita nominal Income data:
    Period___SF_real_CAGR_vs. US_CAGR
    1969-1979 +2.5%___+2.2%
    1979-1989 +1.1%___+1.3%
    1989-1999 +2.4%___+1.1%
    1999-2007 +2.3%___+1.4%
    Clearly there was a huge period of outperformance for SF in the period 1989-2007, whereas the period 1969-1989 was basically a wash.
    Now, if you assume that 1) the tech gentrification of Noe is sustainable, and that 2) SF will continue the historical real CAGR of 2%, and 3) Inflation will be 2%, then our Noe house, which appreciated to 800K by today, will be worth 1.05 million by 2014. Given that the average houses in Noe are about 1.25 million today, you are looking at a nominal decline of 16% over the next 7 years, and a real decline of 27% over 7 years.
    The real questions for Noe are whether the tech gentrification can be sustained — i.e. forced sales may outpace newly minted tech workers, particularly as tech employment is shrinking — and whether we can expect the income outperformance to continue, as much of SFs income outperformance is due to the secular boom in asset markets. But under no circumstances can we keep fudge the income data by adding 25% to purchase prices whenever we feel like it — there is no evidence that such a distortion is justified, barring additional new gentrification rounds (say by 400K cohorts).

  196. Posted by anonm

    Is clearly is subective, as Moscow is down in 19th overall on the FP list
    Come on, be serious. You’re really going to compare SF against Moscow?? All that does is prove that, whatever the FP list is trying to quantify, it has only a weak relationship with the scale or importance of the city. You might as well try to claim that SF is more of an urban center than NYC.
    Moscow proper contains over 10,000,000 people. If SF were placed next to Moscow, it would be Moscow’s largest suburb, but nothing more. It has the second busiest subway in the entire world (after Tokyo), nine railway terminals, and 44 light rail lines. SF has MUNI and, uh, the Caltrain Depot. Take that Moscow!
    The funniest part is that the reason SF ranks higher on the FP list than Moscow is because, although SF scores much lower on culture (as one would expect), it somehow scores much higher on political importance. Yes, that is right…Moscow, the capital of a major world power, has less relevance in world politics than San Francisco, the 4th largest city in a US state and the capital of nothing more than the County of San Francisco. The major political power brokers in San Francisco include figures like Chris Daly (and all of his ridiculous antics) and Gavin Newsome (and his eight gallons of hair gel). I mean, really, how could SF possibly not set the world political agenda with leaders like that? But watch out, after Daly moves to Fairfield our stature on the world political stage may decline (on the plus side, however, Fairfield may be able to make a play to become a global city).

  197. Posted by REpornaddict

    SF scores higher than Moscow on 3 out of the 5 criteria actually, as does Vienna, the other city I mentioned that is placed above the supposed ‘elite on objective grounds’ Moscow. So political importance is certainly a factor why its higher, but not “the reason”.
    You disagree, as you are entitled to do so, which I think proves my claim that it’s subjective. I actually agree with you that Moscow should be above SF on political importance, and quite possibly overall. But I still don’t think Moscow is objectively an elite city as you claimed. If that is the case, then these experts are wrong as they have it ranked 19th, and obviously didn’t get the memo.

  198. Posted by Justin

    Robert, your last post was outstanding, and one of the reasons I keep returning to Socketsite. Your comments regarding the gentrification of Noe are especially interesting to me as someone who knew the city during the 80’s. In 1988 2br condos in Pacific Heights were selling for more than better single family homes in Noe. I remember looking at Noe in the late 80’s and observing there were a lot of poorly maintained properties which discouraged me. I loved the location and climate of the neighborhood, but at that time, it just was too dull and sleepy compared to what I was looking for. Now, of course, Noe is a different story, but in the late 80’s, it was a very affordable neighborhood with mostly traditional middle class homeowners. I remember that homes I looked at back then were owned by teachers, plumbers and tradesmen, while in Pacific Heights, condos I looked at were owned by attorneys, architects, and medical professionals.

  199. Posted by anonn

    Fresno: 28%
    Burbank: 32%
    Costa Mesa: 30%
    Glendale: 33%
    Los Angeles: 34%
    Berkeley: 31%
    Oakland: 35%
    Walnut Creek: 28%
    San Francisco: 31%
    Hold up a sec. “Fresno” ? Come on now. People from Fresno vacation at Pismo in the summer. BECAUSE IT IS FOGGY. Stop. Folks really, truly need to stop citing Wiki.

  200. Posted by NoeValleyJim

    It is an interesting analysis Robert, but it is too simple for a couple of reasons. For one, it assumes that prices increased once all at the same time, which they clearly did not. Furthermore, you assume that all this increase over trend occurred before 1998, which is also clearly not correct.
    A great strength of it is that it shows how gentrification actually works and how a relatively small group of wealthier buyers can change prices for such a long time.
    The thing that I missed that you did not is that real incomes are likely to increase as well. Adding that in, and backing out gentrification effects, we end up at the same place, a 4% yearly long term increase in prices! I think 2% inflation is too low though. Also, the “Great Urbanization” that I have talked about before (others here call it The Shift, it is basically a reversal of the Great Suburbanization which dominated land use in the post-War period) should continue to gentrify all neighborhoods well-located to jobs and transit.
    A better estimate than my previous WAG would be to see how much District 5 neighborhoods increased over trend in the last 20 years. LMRiM did the analysis and said that it was about 1.1%. So we can basically add another percent to our estimated nominal income growth rates. The easiest and simplest model is to just assume that the future is going to be like the past, but it is perhaps too much to assume both that SF will continue to outpace national incomes by 1%/yr and that D5 will outpace SF home prices by 1%/yr, even though that is what happened in the last two decades.
    This does not require an increase in tech salaries over trend either, it just requires a relatively modest increase in the admittedly already pretty high salaries of first time buyers. The pool does not have to be $400k income though, just a few percent higher than the “tech $200k” (I assume you mean dual-income families here), which can come from any number of other professions, most likely law, medical and business management ranks. My personal observation is that this is what is happening, though if I had more time I could probably track down the employment of almost all the new buyers and give a better analysis.
    So the ultimate questions regarding gentrification are the following:
    1) Can SF continue to create high paying jobs. Most of the people I know who live in D5 have high paying tech jobs in San Francisco proper. I know there is a SocketSite meme that all the NV buyers work at Google, but this clearly is not so, though I do notice that the Yahoo, Google and Genentech buses are full every morning with South Bay commuters, so there is certainly some effect.
    2) Will the “Great Urbanization” continue, or is the effect of higher income earners forgoing the more traditional post-War route of moving to a wealthy suburb during their peak earning years and instead staying in well-located urban neighborhoods complete? As I have said before, I really do not think this process is complete. San Francisco has already changed politically from a “no growth” to a “smart growth” development environment, which should allow us to increase both our office space and our housing supply. Whether is will remain the economic center of the Bay Area is very much an open question, as other posters have pointed out. San Jose is definitely pulling things southward and even Alameda County has outpaced job growth in SF proper for a long time. More likely, we will end up like LA with multiple job centers and the congestion, pollution and commute times that implies.
    Summary here is that we both estimate 4% as a reasonable estimate for long term home price growth and I think it is probably in the 4-7% range, adding in inflation, real income growth and gentrification effects. A point or two actually makes a huge difference over a multi-decade time span.

  201. Posted by steve

    unbelievable thread. I suspect almost everyone has stopped reading at this point, but:
    1) robert, re tech, noe gentrification, exactly
    2) robert, re tech shrinking, not quite. when the dot com bubble burst and english majors straight out of no-name colleges were no longer getting 100K offers, the tech job market shrank but it was healthy. same thing this time around. no IPOs and down M&A activity is disconcerting, but there are still outsized gains to be had which will flow back into tech popular neighborhoods
    3) SF haters, please leave and help some other city become world class
    4) car haters, you make me want to buy another. I’ve been looking for a BMW 507, but, much like the decent SFH market, tight supply means prices remain high even though the classic car market is in the tank.

  202. Posted by sfnative

    beautiful home, great deal!~

  203. Posted by anon2

    A BMW 507!??! Now THAT is a “world class” car. Even NoeValleyJim would turn his head when that would pass by. Steve, are you serious about your search? The last sale I read about was the one Christies had that went for about 900K (USD). I would love to see more cars like this in the city, it would be a nice bookend to the sea of smug Prius drivers poking along in boring uniformity.

  204. Posted by anonn

    I came up with a sample even wilder than what I planned and anonn/fluj went bezerk and insulting. Again
    Oh, really? That’s how it went down? OK. (With your bad self)

  205. Posted by jeff2

    Over 200 comments?! This says a LOT about sensitivity towards information about price drops in Noe Valley.

  206. Posted by anon

    jeff2, BINGO! Noe Valley bubbled like everywhere else but kept it going for about a year longer. And it had pretty solid volume through the peak bubble years, 2004-2007. Maybe even into early 2008 for Noe. So there are a LOT of bubble buyers in Noe who are in for a heap of financial trouble now that prices there, like everywhere, are coming back down to fundamental levels. I think that is why Noe posts get so much attention here.

  207. Posted by San FronziScheme

    I disagree, it’s not 100% bubble. I have spent 2 years very close to this house and really loved it even though it was not as central as I hoped it would be. The greatest feature: the people, especially old-timers are generous in smiles and do not behave like they’re in a “world class city” where people have a stick up their ***. No need to. The rat race is over for them and they came out pretty well.
    I would say 2/3 of NV’s value is on its own merit and 1/3 of it irrational. When everyone is reading from the same book, things get crowded very quickly. If too many over-achievers in SF wanting to have a family sets NV as their end goal then you’ll have mucho mas competicion. With the huge apparent demand you’ll have speculation and prices will just get out of hand with specuvestors entering the party like it’s Modesto.
    Buyers will rationalize it with “we cannot really afford it but it’s such a great value and furthermore 10 people in our salary range were bidding as well”. And here goes the herd getting closer to the cliff, pushed by its own peers.

  208. Posted by Robert

    I would say 2/3 of NV’s value is on its own merit and 1/3 of it irrational.
    That seems to be the consensus, at least by very crude assumptions. However, this *does* assume that richer households will continue to move in at fast enough rates. I am skeptical of this assumption generally speaking, but not enough to make a specific prediction about this hood.
    Each year we get a GDP Pie, and this pie grows with productivity.
    Each year we divide the pie, with some of the incrrease going to median wages, and the rest to the top wages (very little goes to the bottom wages).
    So, if you compare labor productivity growth to real median wage growth, you see a big decline across the last 3 business cycles. I.e. From 82-89, real output per person grew at 1.7%, but median wages grew at 2.3%, or they captured 130% of their own productivity growth. In the next cycle, that shrank to 75%, then 25% in the 2000-2007 cycle. There is just not that much farther to fall.
    What this means is that the share of output that was available to fund high income households has been growing, and this is why top earners have outperformed the nation as a whole. Believe it or not, it doesn’t have much to do with the beauty of hills in Noe Valley.
    But you can’t take much more than 75%. So outperformance by top incomes can’t continue for that reason alone.
    But there is a deeper reason, which is that this type of concentration leads to chronic demand shortages — i.e. if people earn less, your sales fall. Now, consumer debt can tide you over for a while, and we’ve seen a lot of that, but at some point you reach a crisis of too much debt, and the size of the pie shrinks. I actually believe the shrinkage started in 2000.
    So, going forward, either we have some wage compression, which means top incomes will underperform median incomes, or we refuse to have wage compression and choke growth — so that everyone’s income stagnates or even shrinks.
    Either way, I don’t see how we can assume that the recent wage growth we’ve had should continue. Now that doesn’t mean that Noe specifically will be hit, but I believe the city will, and certainly the nation will. How hard it gets hit depends on many factors, primarily political ones. The more we fight the adjustment, the more the pie will stagnate, until the imbalance is cleared.

  209. Posted by San FronziScheme

    Robert,
    Always interesting comments.
    An element that seems to be forgotten in analyzing the widening in the gap for net wealth and wages is the effect of the Bush tax cuts. The higher earners have been pampered by the last administration and therefore could keep more cash out of their incomes.
    The cumulated effect has been staggering. With this extra cash top earners could purchase more assets, second homes, etc…
    In short, a wide scale asset grab that is pretty obvious today (disclaimer: I participated into this asset grab on a small scale, therefore I talk about it without restrain or any “class warfare” bias).
    The rub is that this asset grab at the top would kick out the others out of the market for good. Affordability Index at less than 20 almost all over the coast! What other proof of the big scam was necessary? The confiscation was going to be obvious. The only way this could be resolved is through very lax lending practices. That way, everyone could have its say into the Monopoly, at least until Bush finished his 2 terms. The subprime Ponzi has collapsed. Time for the original Ponzi to byte the dust. Loads of fun for Obama as a result.

  210. Posted by Robert

    Well put, Fronzi — Indeed a land grab of epic proportions!
    One thing that deserves to be pointed out, is why we have been kept afloat for those 7 extra years when (I believe) 2000 should have been the year of reckoning.
    Certainly the housing boom kept us alive — it pumped San Francisco up big time. Now the strange thing about “investing” in housing, is that unlike other types of savings, there is little of that pesky deferred gratification.
    This should have clued people off that they were not really investing, but over-consuming shelter. The “investing” aspect of housing comes down to arbitrage on the present bond rate and expected income growth. Some people win, others lose, but absent this arbitrage opportunity, money spent on housing is consumption.
    Chronic demand imbalances are caused by the marginal propensity to save, i.e. people who earn more invest more, proportionally, and consume less. Therefore the land grab accomplished a neat trick, which was to get the wealthy to consume more and invest less than they otherwise would. It worked out beautifully, pumping up demand, and bought us 7 more years before consumption demand collapsed.
    As you pointed out, the lower income tiers were dragged along and they also over-consumed, but since their consumption growth was already due to borrowing, the result was even more borrowing, which they felt was justified because of balance sheet illusions.
    So those 7 years of growth were quite expensive. And we could have had a mild deflation reset a la 1990, with a gentle 7 year housing correction, and a banking crisis, which large, didn’t lead to 10% unemployment. It is a bit discouraging that people would rather have decades of poor growth rather than fight the redistribution that the market demands. Japan has certainly showed that.
    And you are right, none of this is class-warfare — it’s just the dynamics of growth. One of the great insights of Keynes was to approach economics as a technical problem, looking at the economy as a dynamical beast with feedback loops, and judging the course of action to take based on the consequences of the proposal, rather than its a priori virtue.
    My view of neoclassical economics is that they never understood this. Hence the childish view that good incentives lead to good outcomes — as if by moral necessity. No need to see if those channels are operational, or even plausible. No need to worry about feedbacks or long run effects. No need to worry about culture or psychology. So you see all of these absurdities such as Ricardian equivalence, consumer choice theory, the efficient market hypothesis, or “marginal cost = marginal revenue”, which have never been observed in the real world, but are clung to by our Aristotelian economists.

  211. Posted by i luv ess eff

    the reason SF is considered world class is its proximity, and influence, on silicon valley. especially since the late 90’s and the advent of web/web 2.0. many of the most creative apps and ideas came from engineers and designers residing in SF. it’s the combined package of: legendary tech industrial base, 3 world class uni’s (cal, ucsf, stanford), great climate, natural beauty, proximity to napa, carmel/big sur, mtns, beaches, and urban appeal of the city itself that makes it a top region, and SF is the crown jewel.
    i just find it hilarious that all the SF critics here spend oodles of hours trying to minimize the city and it’s real estate. bears may be happy now, but in general they are over estimating the decline and duration of SF RE. and almost all will not buy SF RE anyways, just blab about how it’s a bad buy, etc. clever fools indeed.

  212. Posted by RenterAgain

    Great posts!
    I don’t think there are many teachers reading SocketSite, so I guess I have to be the one to address NVJim’s post:
    Teachers get paid $50k for 9 months of work. If you work summer school, you get another 1/3. If you have a Master’s Degree and more than 20+ yrs of experience, your 9 month pay is more like $70k or about $95 for a full year. These two are pretty senior, so I am going to guess that HH income is more like $150k.
    Summer isn’t 3 full months, it’s usually about 10 weeks, depending on the district. And teaching summer school, which runs perhaps 6 weeks, does *not* pay another 1/3. Teachers would be scrambling to teach summer school if they could augment their income by that much.
    Many districts include health care benefits in the salary scale, so that salary of $70k may be paying $7k (probably more like $10K these days) in medical/dental. I do agree that for two 20-year veteran teachers, NVJ’s estimate of $150K HH income is probably closer to the mark than Robert’s estimate of $100K.

  213. Posted by San FronziScheme

    i just find it hilarious that all the SF critics here spend oodles of hours trying to minimize the city and it’s real estate. bears may be happy now, but in general they are over estimating the decline and duration of SF RE. and almost all will not buy SF RE anyways, just blab about how it’s a bad buy, etc. clever fools indeed.
    What’s with mixing apples and oranges?
    Only a RE professional can say that a city is its real estate: Looking at how much blood you can extract from those piles of pressure-treated wood instead of the humans that live in it.
    I know you were just venting at what is probably a bad year for a professional and you blame the bears in a typical fashion. Bears are angry, bears will not buy, bears are happy at other people’s misery. But bears didn’t create the tripling of prices in 10 years that created hardship to anyone not willing to sacrifice real life to the leverage gods.
    Market’s tanking from under your feet?
    That’s what happens when your “Chateau de Ponzi” is built with toothpicks! It’s all debt!

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