Inventory of Active listed single-family homes, condos, and TICs in San Francisco declined 6.4% over the past two weeks (versus an average drop of 1.3% for the same two week period over the previous three years) and is now running just 1.3% higher on a year-over-year basis (down 12.6% for single-family homes, up 11.7% for condos/TICs) and 5.3% higher than at the same point in 2006.
Roughly 37% of active listings in San Francisco having undergone at least once price reduction with the percentage of active listings that are currently either already bank owned or seeking a short sale hovering around 12%. Expect listed inventory to continue to decline through the rest of summer and then spike in late September.
The standard SocketSite Listed Inventory footnote: Keep in mind that our listed inventory count does not include listings in any stage of contract (even those which are simply contingent) nor does it include listings for multi-family properties (unless the units are individually listed).
∙ SocketSite’s San Francisco Listed Housing Inventory Update: 7/13/09 [SocketSite]
Comments from Plugged-In Readers
So — inventories are at their usual level for this time of year (2007 being the exception as we’ve noted previously).
Does anyone have an estimate of when, if ever, the effect of 9-10%+ unemployment within the city of SF will be felt in the real estate market?
Many i-bankers that I know personally are still out of work and looking (some going on 16 months without a job).
Conversely I put in an offer on a short-sale (a long shot, I know) down on the Peninsula — $80k over “asking” (but enough to make the lender whole on the 1st mortgage) and we are 1 of 13 bidders on that property so far.
Hard to reconcile the facts that a lot of (formerly) high-income people are unemployed, and yet very average properties that are only slightly underpriced (maybe by 10%) still command dozens of offers, while unemployment is headed for 10% and up.
2007 was not an aberration. People were holding their cards tightly. If memory serves me correctly, prices were dropping nationally around this time. And, in SF, many properties were selling off the MLS grid (before listing). We had close friends who sold their condo before listing and we had friends who bought a home before list.
2006, people placed their bets on the MLS with bidding wars.
2008-now, things aren’t moving off the MLS grid, are they?
There are only so many homes that are sold each year…
I wouldn’t turn to the i-banking community as an indicator for San Francisco real estate. Maybe NYC, but not SF.
I’d like to see the unemployment rates segmented for the industries in the bay area. Sure, we are at 10%, but if that 10% is primarily banking, construction, laborers and mortgage brokers (yes that’s a jab), then it’s very likely that the high income end of our job market has been somewhat spared because of the area’s concentration towards tech, bio, energy, health, etc.
No factual basis here, just a hypothesis. But when you read 10%, you may be able to make a case that the majority of that 10% are not in the market to by a home regardless of their employment status.
there is no “usual” level. the number is highly seasonal and the fact that for 3 out of the last 4 years the levels were all around this one point is pure coincidence. in fact, given the high levels of inventory at the beginning of this year, i think this is a pretty good indication that things are unusual right now.
perhaps obro is correct in calling the bottom?
“Housing is fast dividing into two markets: Sales of low- and moderately priced homes are picking up and values have stopped falling in some parts of the nation. But on the upper end, sales remain mired in a deep slump and price declines are expected to accelerate.”
@obro makes a good observation about the demographic breakdown of unemployment. Someday (maybe 5 years from now) this kind of data will be easy to get ..
That said, weakness is weakness, and if unemployment rises among renters, that affects market rents which affects market sale prices.
Of course, these effects operate over a longer time frame and so provide opportunity to change course, but with unemployment still trending up things 6-12 months down the road are still looking soft to me ..
It isn’t a scientific observation, but it seems to me that a larger than normal number of properties discussed here have been withdrawn without a sale in the last six weeks. This property for example.
There’s also a much larger number of sales with confidential* prices this year. Is this a sudden societal shift towards temporary semi-privacy ? Or an attempt to keep MLS comps artificially higher ?
The market is being jump-started (with your tax dollars, thank you very much) to initiate a “virtuous circle” still lacking real improvements on fundamentals. Wishful thinking triggered with the same elements that brought us where we are. Debt contracted is way to high compared to incomes. Rent is less than 1/2 cost of owning for instance. But some need a lesson in basic economics and this needs to hurt to be committed to memory.
I think that the slaughtering of knife catchers is a necessary process of getting to the real bottom. There is still too much bubble cash hanging around that needs a proper resting place. In 2011/2012 there will be less hare-brained money to compete with!
Re: unemployment by industry – Sitting here in the center of Silicon Valley I can tell you that tech has definitely not been spared. Jobs from engineering to management are being slashed and won’t be coming back soon.
Well put, SFS. Things are happening right on schedule – the initial leg down has brought out the folks that waited out the blow-off phase of the bubble, and now have itchy trigger fingers when they see a “deal”. This is especially true of low-end stuff (great article in the Chronicle yesterday on investors piling into CoCo foreclosures).
SV jobs: I have 2 H1-B friends who lost their jobs (and VISAa) recently. They had to leave the country.
2 friends of mine had been waiting for lower prices before jumping in. They are moving fast at ~15% under 2008 prices because they feel it’s the right time. There’s no reasoning them, they “have to” buy because raising a kid in a cheapo rental box won’t work for them. They’ve been on the sideline saving all they could for 5 years. Plus they can now silently enjoy the fact that they got a similar house than a bubble-topper couple I know (also with toddler and also on the sideline for a few years) for 150K less. Both first time buyers that got into buying due to “necessity” and delayed purchase. All raked in tech bubble money in the heyday that is now going to die slowly and quietly into RE.
economics? check in with me on how much you still like your cash position when inflation hits us. or is it all precious metals for you?
San Francisco unemployment will continue to tick up beyond 10% but not much beyond that by early next year. Job losses will continue to be in construction-related industries. Local finance has largely been spared the bloodbath in NYC: mortgage industry jobs have generally been retained due to refi’s and although financial and professional service sectors have taken a hit, again, it’s nothing like NYC. A lot of the local job losses have occured at the lower end (renters) which puts downward pressure on sales prices, but there’s a growing interest in buying among those who can, including those who were about to buy before the collapse. And, at most only about 40% of the housing stock is ownership, with some estimates as low as only 1/3. I don’t think we’ve hit bottom yet, but we are getting closer for sure.
Tracy, you are undeniably correct that we are closer to the bottom. We are closer to 2012 than we were six months ago, so I have to agree with you 100%.
Oh, and jobs?
Easy money mortgages?
Sorry, land pirates, your bubble is not re-inflating.
Tracy, do you have evidence to cite for the propositions that (a) job losses have been largely limited to construction-related industries, (b) financial and professional service sectors have been spared a bloodbath, and (c) most (you just said “a lot,” to be fair, but that’s meaningless unless you meant it in relative terms) local job losses have been at the lower end?
I have no good stat set to cite myself, so this is an earnest request. I’m skeptical, however. Nearly all of my friends are either lawyers at large law firms or are in finance at large banks or funds, and there have been massive amounts of layoffs among friends and friends of friends in SF in those industries. I can cite this stat for you: SF’s largest law firms have laid off ~20% of their associate classes this year in addition to slashing pay. That clearly blows the ~10% average unemployment rate out of the water.
Lookging at that inventory line (and rememberign there are two different markets, SFHs and condos – my comments refer more to SFHs) I inetrpret as that many just don’t want to sell now with prices reduced – and they can still afford not to sell.
The more that think like that (and clearly its an increasing number) the sooner they will not have to, as falling inventory inevitably leads to rising prices.
when inflation hits us.
The question is the “when”. Or even the “ever”. It’s all debatable of course. Currently people are throwing good hard earned cash into debt repayment and savings, which is extremely deflationary. We are going from a nation of borrowers to a nation of savers.
OK, bargain hunters are coming out to snatch cheap cars and cheap (enough) houses. But that’s most likely deferred purchase kicking in, just like industry is rebuilding inventory after a very very slow manufacturing year.
If, a big IF we are managing to stop that virtuous “saving” circle with inflation we will be preventing the rebuilding of the nation’s finances for the sake of a premature bottom. That would lead to more pain down the road. Savings are money that can be invested in the long run into infrastructure, technology, etc… Debt-fueled consumption is like empty calories: they help us go through another day but make us unhealthy and lazy in the long run. Then again, 2/3 of the nation is overweight or obese. That pretty much reflects our economical malaise.
How can sale prices be confidential – – isn’t that public information?
The MLS is proprietary. This is where sales prices can be made confidential by the profession.
But sales prices will always end up in the public domain. It takes more time, that’s all.
Shza, it’s EDD data. You can find some summary information from the Association of Bay Area Governments (ABAG) as well. The legal profession has certainly been hit hard, with most of the job losses in San Francisco, but according to year over year EDD data for the MSA for June 09 (including Marin and San Mateo) legal is down roughly 900 jobs whereas construction is down about 9,000.
In terms of total job losses year over year, the MSA is down about 50,600 jobs. In terms of the broad summary categories (of which there are about a dozen), Financial Activities are down 5,900 and Professional and Business Services (legal is part of this) are down 7,900, again for the overall MSA, or 27% of total jobs lost. However, 44% of all jobs lost have been in Trade/Transportation/Utilities and Construction (it’s even more if you add in other industrial sectors like Manufacturing which lost 2,400 for example). Leisure/hotels have also been hit very hard with 5,900 jobs lost. Sorry I don’t have time to provide more info but a lot is available at the EDD and other websites.
In terms of anecdotal information, and for what it’s worth, I have six friends in banking and none of them have been affected to date. All report lay offs of some sort but mostly at the bottom or as part of planned restructurings. Two were about to purchase homes before the bottom fell out and are looking again.
So, predictions of drastically rising inventories have yet to come true. SFH inventories in fact are way down YOY. Though bracing for a crash, it looks like the market may in fact be gliding in for a softer landing.
My small house in north Bernal appraised for higher than when I bought it last year right before the financial meltdown. Similar houses have sold quickly this year. The stock market is way up… I don’t see evidence for any big additional property decline around the corner.
So hard to tell who’s even being serious anymore. Does anyone honestly believe that the local real estate market has actually hit bottom? That we’re done with price declines, and appreciation is coming back soon? If so, based on what? I’m not antagonizing or “baiting,” I’m genuinely curious.
I have looked at a number of properties that have been withdrawn in the past 6 weeks. Is there a breakdown of number of new listings vs number of withdrawn listings and number of sales? I think that data would be very useful as I don’t think even the SFR market is supply limited based on anecdotal evidence.
Is the late summer decline in listings typically driven by sales or homes otherwise falling off of the market and how does this year compare?
I had thought inventories would have been higher by this point in the downturn. I don’t think we’ve yet seen the full impact of foreclosure activity in SF prime.
legal is down roughly 900 jobs whereas construction is down about 9,000…Leisure/hotels have also been hit very hard with 5,900 jobs lost…However, 44% of all jobs lost have been in Trade/Transportation/Utilities and Construction..
If you want to look at “how hard” an area is hit, you need to consider the percent decline in employment within that area. So legal has been hit about as hard as leisure in the metropolitan area, as these lost 4.2% and 4.5% of their employment, respectively. Certainly well within the margin of error. Keep in mind that this is all for the period: June 08 – June 09. The recession began in Dec. 07, and the June ’09 data is preliminary and subject to (substantial) revision.
Obviously ground zero is construction, which lost 20% of its employment. The loss in Trade/Transportation was 8.5%. A lot, but not nearly as horrible as the “half of all jobs lost” quote would suggest. So you need to compare apples to apples.
In terms of whether lower paying jobs were the ones targeted,you would look at payroll receipts. Local area wage data will come out in about a year. Actually, the revisions will come out then, too, so we will have a better picture of what happened at that time.
The thread points to 12% bank owned and short-sales. How has this changed over the last year or two?
I think you will have more negotiating leverage in the Fall, but I no longer believe prices will be significantly lower next Spring than now for good listings in the $1-2M range.
Of course, the Down sub-6000 or 8+% interest rates would change that quickly, but this feels a lot like late 2000 / early 2001. Imagine posting on socketsite then, seeing the dot-com and tech collapse and knowing a big price correction in housing had to be right around the corner. Then, imagine your crystall ball told you that 9/11 was going to happen and that the tech IPO market would die, foverever. How could you not think prices would move 40 or even 50% down? Yet, they manange to go up after a brief flat period.
While more wage earners are being laid off, I’ve got news for you: people like partners in law firms or architecture firms still have their jobs, but their incomes are off 30% or more.
Same for small business owners like me. I just looked at my financials: net income off 46.9% YOY. It’s as low as 1999, UNadjusted for inflation. So while more of us may have our jobs, there is less money to go around. Anyone who doesn’t think I am feeling a 47% cut in pay is off their rocker.
So while more of us may have our jobs, there is less money to go around.
Indeed. SP 500 rolling 12 month earnings were $6.82 as of Q1 2009. I’m sure that will head up a bit, but does anyone think we will hit $85 (Q2 ’07) anytime soon? In the next decade?
That’s the flaw in the whole ka-poom argument, which I characterize as the belief that increasing the size of the alphabet will lead to longer novels. You can print trillions and trillions, but if people have less money to spend, then wages and prices will remain under pressure — rent and house prices included.
just a quick reminder, the 1990 RE correction took 5 years to hit bottom before taking off with the rise of the dot com bubble.
So let’s say this bubble began to burst in 2005, which is being very generous, a similar bottom would not occur until 2010 and without some kind of new bubble to re-inflate prices RE is going no where fast.
while the price correction has been pretty rapid during this cycle and the declines are slowing is seems unlikely that the prices will be trending up in any meaningful way anytime soon.
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