Noe Renovation Goes For A Penny Over Foreclosure Auction Minimum

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!

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!

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.

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.

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. 😀

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

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.

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.

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

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

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.

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?

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?

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?

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

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.

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

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.

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.

“typically” = weasel word. Caught.

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.

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.

@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.

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

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.

“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.

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.

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?

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.

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.)

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).

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.

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.

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.

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.

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

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.

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.

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

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.

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.

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.

^^ what he said

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..!

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!

“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.

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

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.

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. 🙂

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”

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.

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.

“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.

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.

“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.

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.

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.

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.

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?

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.

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!

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.

@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.

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.

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.

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”

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.

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.

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.

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.

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.

@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.

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.

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.

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.

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

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!

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.

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.)

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

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.

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.

“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.

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.

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.

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.

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.

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.

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!

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.

“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!

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.

“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?

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.

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 🙂

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?

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.

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).

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.

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.

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.

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.

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

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.

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.

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.

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!