S&P/Case-Shiller Index Change: June 2009 (www.SocketSite.com)
According to the July 2009 S&P/Case-Shiller Home Price Index (pdf), single-family home prices in the San Francisco MSA gained 3.3% from June ’09 to July ’09, down 17.9% year-over-year and down 41.0% from a peak in May 2006, but up from a 46.1% fall from peak as recorded in March 2009.
For the broader 10-City composite (CSXR), home values gained 1.7% from June to July but remain down 31.1% from a peak in June 2006 (down 12.7% year-over-year).

These figures continue to support an indication of stabilization in national real estate values, but we do need to be cautious in coming months to assess whether the housing market will weather the expiration of the Federal First-Time Buyer’s Tax Credit in November, anticipated higher unemployment rates and a possible increase in foreclosures.

On a month-over-month basis San Francisco MSA single-family home prices rose across all three price tiers for the second time since May 2006.
S&P/Case-Shiller Index San Francisco Price Tiers: July 2009 (www.SocketSite.com)
The bottom third (under $287,849 at the time of acquisition) gained 1.9% from June to July (down 26.4% YOY); the middle third gained 1.3% from June to July (down 14.3% YOY); and the top third (over $533,113 at the time of acquisition) gained 1.8% from June to July (down 14.5% YOY).
According to the Index, single-family home values for the bottom third of the market in the San Francisco MSA remain at April 2000 levels having fallen 61% from a peak in August 2006, the middle third is hovering around April 2002 levels having fallen 39% from a peak in May 2006, and the top third is back to February 2004 levels having fallen 25% from a peak in August 2007.
Condo values in the San Francisco MSA gained 2.1% from June ’09 to July ’09, down 17.7% on a year-over-year basis and down 27.5% from an October 2005 high.
S&P/Case-Shiller Condo Price Changes: July 2009 (www.SocketSite.com)
The standard SocketSite S&P/Case-Shiller footnote: The S&P/Case-Shiller home price indices include San Francisco, San Mateo, Marin, Contra Costa, and Alameda in the “San Francisco” index (i.e., greater MSA) and are imperfect in factoring out changes in property values due to improvements versus appreciation (although they try their best).
Broad Improvement in Home Prices According to S&P/Case-Shiller Index [S&P]
June S&P/Case-Shiller: San Francisco MSA Up MOM Across All Tiers [SocketSite]
March S&P/Case-Shiller: San Francisco Slide Slows But Continues Fall [SocketSite]
San Francisco County Unemployment Up To 10.1 Percent In August [SocketSite]

69 thoughts on “July S&P/Case-Shiller: San Francisco MSA Continues MOM Uptick”
  1. “The bottom third (under $287,849 at the time of acquisition”
    Seriously, how many single family homes in SF are under $287K – none!

  2. The index suggests that prices have risen 9.5% in the San Francisco MSA in the last 4 months. (or I guess 6 months as each value, is I believe, made up of 3 months figures?)
    Either way, that’s quite some bounce.
    Condos also up 7.7% in same time period.

  3. Had the CS index shown another decline, this comment would be the 40th appended to this thread. Instead, it is the fourth. Doomsday cheerleaders must be off sharpening their teeth for the next iteration.
    File under “non-surprising”.

  4. Please remember that the tier prices are the price at time of acquisition. Could it be said that we aren’t seeing as many recent purchases being re-sold (flipped) compared to 2007s market?
    I’ll re-post the running stats for the MSA thirds.
    Month…Upper 1/3….Lower 1/3

  5. thank you @HappyRenter for the illuminating numerical recap. What that shows is that the high-end properties have simply stopped moving altogether, only low- and mid-priced units are moving at all, and that most of SF real estate on the market is mostly just sitting, unless someone living in fantasia wants to convince us that $533K really represents the threshold for “upper tier” properties in SF. More like lower-mid tier.

  6. Up or down, the San Francisco MSA has very little to do with San Francisco city. It reflects single family home sales in the Bay Area, and therefore is a reflection of what is happening in the suburbs, and the East Bay especially. Only a small percentage of the single family home sales in the San Francisco MSA take place in the city itself.
    Obviously, there were few if any single family homes in San Francisco proper bought during the 2004-2006 peak for $288k and then sold in 2009.
    The C-S index reflects that home prices cratered in the East Bay, and are now starting to come back there. Up or down, it does not reflect prices in San Francisco itself.

  7. Very true Dan.
    But as we were constantly reminded on the way down, SF is not an island (although it does have water on three sides..) and there is very much a chain/domino effect that means price rises elsewhere in the region will find their way through to SF. Unless you are claiming that SF is different?
    Also, for condos, I am guessing SF itself is a reasonable % of the MSA market here – but don’t have any numbers on this.

  8. Looks like the bears are gone now that the bounce-back is confirmed and the free-fall is officially dead.
    I’ll try to fill their place.
    1. The improvement is being caused by the government’s silly tampering. This is not sustainable. Once the government stops giving people $8,000 when they purchase their $1.4 million home, we’ll see how long this superficial rebound lasts. Bwahahaha!
    2. The domino effect that we predicted is basically still gonna happen. Sure, prices in cheaper parts of the East Bay are way up, preventing people from fleeing the city and Silicon Valley, but what you guys don’t know is that the Reverse Domino Inverse Effect Paradox is now firmly in place. The RDIEP is very complicated, only we economists understand it. But it’s basically the opposite of the Domino Effect, and twice as devastating to home prices!
    3. While the Case-Shiller Index was up for 17 of the 20 metro areas, that is still 85%. We all know from college that an 85% is a “B”, and on a hard curve, a “B-“. Clearly, this means that real estate is a “Grade B” investment.
    4. My neighbor’s friend sold his house in Pacific Heights at a 19% year-over-year loss. That’s what happened. I swear. Anecdotal evidence is only allowed when it confirms a drop in home prices. For those of you who used it over the last three years to explain why your sub-million 2BR in Russian Hill had held its value… that was wrong. You can’t use anecdotal evidence to support price stabilization.

  9. I was getting frustrated down here in the South Bay that prices on nice (ie entirely livable) condos that were $325K in late 2001 are still over $400K now, but you simply can’t forget to factor in the interest rate difference . . . the carrying cost of a $325K condo at 7.5% interest is just under $1800, while a $400K condo at 5.5% costs just over $1800/mo.
    Even though Bernanke has pulled in the margin of mortgage rates over the 10 year by a full percentage point (to try to keep the housing market from imploding completely), should the ten year drift up to 5%+, mortgage rates will go to 7% and we’ll see another brutal, sticky, leg down in the market.

  10. 5. Seasonality (which only occurs between March-September each year..).
    6. The gain is statistically insignificant under a 90% confidence interval i.e it’s ‘noise’

  11. I wonder how well one could time the real estate market using a divergence of MSA tiers based on a re-indexing at, say, 3 or 5 years prior. (i.e. for any current period, fix all tiers at 100 for 5 years ago and see how different they are today).
    It’s almost like the high tier is equivalent to the 40 MA and the lower tier the 200 MA. I know people have made jokes before about ‘when the lines cross…’ but looking at the periods 90-96, 96-01, and 01-07 a rising or undervalued market seems to indicate a top tier index over lower tier, whereas the reverse is true in a declining or overvalued market. If you had used the divergence in the lines, you might have gotten out in 03, though it would have taken great patience not to jump back in during the 6 year intervening period.

  12. It does not surprise me that repeat sales analyses at the very low end that CSI now tracks show an uptick from the depths of March — still down 18% YOY and 41% from peak. Just about all of California outside of SF and a couple other high-priced areas have seen significant sales volume increases. Probably about half of that uptick is seasonality and half is the $8000 free govt handout, which, combined with record-low mortgage rates, is quite a deal at the low end. All the foreclosure moratoria have also helped goose the market a bit.
    I’ve been saying for months that if this were divided into 10 tiers, the 9th and 10th tiers where most of SF’s homes lie would show a very different picture since, as thinker notes, the market is moribund at the higher end. I agree the $8000 has no impact there, which is one of many reasons why sales have stagnated.

  13. “The improvement is being caused by the government’s silly tampering. This is not sustainable. Once the government stops giving people $8,000 when they purchase their $1.4 million home, we’ll see how long this superficial rebound lasts. Bwahahaha!”
    This is the kind of ignorance makes SS great! If you think that ANY lender is granting a loan on a $1.4M home to couples that are making less than $150k or individuals making $75k, you’re flippin’ nuts. Additionally, if you think that an 8k tax credit is any motivation for buying in SFC during this market you are obviously out of your league. In most cases 8k barely covers the SF transfer taxes let alone providing any incentive for taking on a 650k+ mortgage.
    As far as I’m concerned the 8k credit hardly applies to the majority of available homes in SF (exceptions are maybe outlying homes in Bayview or BMR properties). That 8k tax credit is, however, propping up a lot of middle America and probably half of Stockton.

  14. It’s funny to see all the “Case Shiller is totally irrelevant” bulls suddenly find CS religion. If CS is relevant for SF that means the market is recovering from a 25-61% fall in the real SF, right?

  15. “Doomsday cheerleaders must be off sharpening their teeth for the next iteration.”
    No point in swimming against the tide. There will be plenty of time for schadenfreude once the next leg down starts.
    All I have to say is: Dead … Cat … Bounce.

  16. So in the spirit of accountability, who’s in the camp that this is a genuine inflection point, and the worst is behind us? So far seems like just amused, REpornaddict, and NewBuyer. Anyone else willing to call bottom in SF?
    Not trying to bait or start some blog feud – I don’t even plug in often enough to keep up with that nonsense. But I am genuinely curious if people really believe prices have stopped falling in San Francisco.
    I’ll go on record with a prediction this is not the bottom for most of San Francisco (although it may be in cheaper parts of the city and east bay), and SF prices will keep coming down over the next year or two. Will freely admit I’m wrong if it doesn’t happen.

  17. assuming the fed can hold mortgage rates close to the current level, I’ll say prices will be higher next year than this year.

  18. Sorry guys, this is just the result of yet another foreclosure moratorium known as HAMP. There is no such thing as a genuine real estate upturn in a state with over 10% unemployment.
    HAMP is the loan modification that congress essentially made everyone go through. Anyone who was about to be foreclosed after numerous federal and state moratoria got another 6 month delay while the bankers tried to see if they qualified for a modification. It took awhile just to get that program up and running, and so meanwhile, potential foreclosures just sat.
    The next phase will be the foreclosures of the people who did not qualify. Then the people who qualified, but who will redefault, at least 50% if the past is a guide (past rates are over 70%), will begin the foreclosure process.
    You’ll start to see it fall noticeably again by February, as I’ve been saying for awhile. Until then, a little bounce. As I’ve been saying, all that government money was bound to have an effect, and what has amounted to nearly a year of continuous running foreclosure moratoria was also going to have an effect.
    Call me in February and we’ll talk.

  19. In all honesty, too early to tell – I think winter will be more telling.
    It’s a bottom, clearly. (at least as far as the MSA as a whole is concerned)
    The bottom..not sure about that.
    Although, not sure how much, if any, prices in SF itself have fallen this year (by year I mean calendar year 2009, not the past 12 months.)
    I think, after the shock of last autumn they have remained pretty steady – but thats just a hunch, although its kind of all we have (not really any apples etc..)

  20. Having looked at the Case-Schiller graph I can say without hesitation that the little tiny bump on the right hand side of the curve is NOT a dead-cat bounce.

  21. Bravo, housing is back.
    The government chose homeowners as winners and renters as losers. That’s fine, but please end the bailouts! Don’t screw renters/savers even more. We have bailed enough dead beat homeowners out.
    “assuming the fed can hold mortgage rates close to the current level, I’ll say prices will be higher next year than this year. Posted by: steve at September 29, 2009 11:20 AM”
    Technically, if the Fed and Washington work together to go a few steps further to reflate the bubble, I think housing could double again in the next 2 years. They have the power to set “prices” effectively, so they can make the median price in Oakland 800k if they REALLY wanted to, but of course to do that, milk would be 10$ and our deficits would be 3 trillion/yr. I think they won’t go that far, but they can do whatever they want.
    Because the government is picking winners and losers I don’t know how to be “prudent” anymore. I need to react based on government price setting actions.

  22. I think that this is it, as far as nominal declines. We got the 10-20% leg down that I predicted a long time ago, now it is going to be up to inflation to do the long hard work of bringing home prices in line with incomes.
    Just like all the other housing cycles in California history.
    We will probably see a normal seasonal cyclical dip in prices this winter, but it they will be up YoY.

  23. “I wonder how well one could time the real estate market ”
    The government is carrying out an effective price fixing campaign, so you can’t time anything. Bernanke and Obama can make housing prices go up more, or go down, based on their decisions.

  24. “it is going to be up to inflation to do the long hard work of bringing home prices in line with incomes.”
    Huh? Home prices are still way too high vis a vis income in San Francisco unless you think either 1) the City is populated entirely by lawyers making 200K; 2) people should be paying 50%+ of their gross income on housing; or 3) homeownership should carry 1000k per month premium over the cost of renting a comparable property.
    I think the property I am looking at is still overvalued by 20-30%. I am definitely holding off on buying until the next wave of Alt-A and option ARM foreclosures kicks in and drives prices down to rental parity.

  25. “Just like all the other housing cycles in California history.”
    NVJ, look at the second chart — there was a 6-year decline in prices before the trend reversed in the early to mid-90s. Do you really think that this time, with a far more severe recession and far higher — and growing — unemployment that the downturn will be just half as long this time? Based on what? Just history (ignoring the history that goes the other way)?
    We’ve already blown past your prediction of 10-20% down and we have a long way to go. The govt plan to slow the leak has worked at the lower end (or at all price levels in most of the country). But all that debt pumped into the housing system to slow the decline is prolonging the declining trend, not shortening it.

  26. Just got off the phone from a buddy at Wells Fargo. I asked him if he thinks this data means we may have finally hit the bottom. He laughed and said no – “years to go – a lot more sh!t to hit the fan”

  27. You guys are confused about the difference between nominal and real prices. From the early 90’s to the mid 90’s, nominal prices were flat, the decline was only in real prices. That is what will probably happen this time, that is what I mean by inflation having to do the work. I expect nominal home prices to remain flat and real prices to decline at the inflation rate.
    Home prices in San Francisco proper are down 10-20%, what makes you think otherwise Trip?

  28. The C-S index for SF metro area was 70 in 1991, in 1995 at the bottom, it was 66. In 1997, it was back up to 70. So if you mean that kind of drop over the next five to ten years (1% a year), then we are in agreement Trip. This is the non-inflation adjusted Case-Shiller index here.
    So I am not predicting an exact 0% change in either direction, it is impossible to measure with this exact kind of precision anyway, I am predicting a generally unchanging nominal median home price for SF proper. Just like in the 70’s after the housing bust and in the 80s after the housing bust and in the 90s after the housing bust.
    We will see if “it is different this time” but I kind of doubt it.

  29. If this is the bottom then SF has come out unscathed from the greatest real estate bust of all time. It still feels as unaffordable as ever.

  30. In a deflationary environment, nominal prices will have to decline. NVJ, what do you make of the deflationary concerns?

  31. NVJ, you are correct there was not a plummeting fall for 6 straight years in the 90s. But it was a fairly steady decline from CSI 75 to 65 between mid-’90 and ’94, and then it trudged along the bottom for two more years. And these numbers do not even include the further inflation-adjusted fall.
    On the chart, I see the big bubble from ’97-’01 then the monster bubble from ’03-’07. Followed by the epic plunge that we are in right now. So it does look “different” to me this time, and my money is that with the worst recession and unemployment since the 1930s, banks in tatters, foreclosure numbers continuing to rise to post-Depression records, and government debt providing the only significant source of funding right now, it will be different this time. I think we still have 2-3 more years of 10%+ annual declines before we get to the trudging along the bottom phase — although I think the low end will get there sooner, just as the low end started the decline sooner. I do agree with you that “we will see” . . . all just anonymous internet speculation at this point!

  32. deflationary environment is over?
    OER has not declines, and as the biggest consituent of CPI, it has an outsized effect. If you honestly believe rents are rising, or will rise in the near future, I want some of that stuff to smoke.
    We are far far away from an inflationary environment. Frank price deflation is tough to come by in a fiat currency world, but this deflationary environment story has a long time (years) until it is over.

  33. “Bravo, housing is back.”
    If you can define a return of housing prices to 2002-2003 levels as housing being “back,” then more power to you. By itself, this upward tick is encouraging. Taken with the plethora of broader economic issues noted elsewhere in this thread, I wouldn’t hold my breath.
    “I think housing could double again in the next 2 years.”

  34. So going back to my original question above, it seems like only one person is brave enough to state that they think San Francisco real estate has seen THE bottom. And even his comment was made with the caveat that mortgage rates don’t increase.
    BTW, anyone else see that the FDIC is now borderline insolvent? Our bailout needs a bailout.

  35. a few thoughts:
    despite the snarkorific comments above, the governmental support of housing goes far far beyond the $8k tax credit. it also includes the Fed buying craptastic securities back during the crash and holding those securities, the Fed doing outright Mortgage-Backed-Securities purchases (which keeps mortgage rates down), near zero-interest-rate-policy (ZIRP) and also the quantitative easing (Fed buying Treasuries). All of this has lowered Mortgage rates considerably compared to where they would be without Fed/Govt support.
    Add to that the overt government guarantees of many of the financial firms including Fannie Mae and Freddie Mac and Ginnie Mae and FHA, and the “modernization” of some of these programs to help ensure that the next wave of losses is paid by the taxpayers.
    I believe this level of intervention in one market to be unprecedented.
    So one can mock the $8k tax credit, but I’d think hard about the TRILLIONS of dollars of support the US Govt/Fed is pouring into the other programs above.
    Given all that support, it is not surprising that housing is improved. I have said for quite some time (over a year now) that one cannot predict the future of the various markets because there is too much central government interference. and that central interference is not dictated by economic concerns, but rather political concerns.
    The Fed and our President and Congress have put us at risk for a currency crisis in order to bail out the political connected and to zombify our banking system.
    at some point they will need to withdraw the support. I’m not sure when that will be. 1 year? 2 years? who knows? but clearly they are willing to risk a currency crisis in order to take out their plan. I hope for all our sakes they are successful.
    But alas, I still see little data that points to economic recovery. I only see data that shows that government (i.e. taxpayer/debt) supported industries have ceased their freefall so long as hordes of money is thrown their way. what is the exit strategy? what will happen to housing during that time? and what about after the exit strategy?
    I find it interesting that the same people who didn’t even see the problem until it was well into catastrophe have now declared victory. and ironically the “cure” for our problem was the exact same practices that brought us to the edge of destruction. (increased debt and loose lending)
    I guess I’ll have to think on that for a while.
    My short term housing outlook:
    housing will likely continue to improve on a year over year basis over the winter, because it will be in comparison to last year’s horrific numbers. at least I think this as long as all the govt support goes housing’s way.
    if Fed/govt decide to slow ZIRP (not a chance anytime soon), or stop outright purchases of MBS in the market, or slow quantitative easing purchases of Treasuries, or decrease support of Fannie/Freddie/FHA/Ginnie/etc, then bets are all off.
    There is also the “black swan” considerations: how will swine flu affect the bear market rally/new bull market? what about the emerging crisis in the FDIC that is just about out of money? what about the next big banks to fail? what about protectionist issues between US and China?
    “W” shaped recession anyone?

  36. For SFBuyer, HappyRenter, and anyone else puzzling over how low the home price tiers are, know that the tiers are based on on properties’ *cost bases*, not market values.
    You can read up on what a cost basis is at wikipedia: http://en.wikipedia.org/wiki/Cost_basis
    It’s basically the price that the previous owner bought the property at, minus depreciation. For properties in San Francisco that were bought before the boom, the cost basis will be much lower than the market price.

  37. Really, if that was the biggest financial crisis since the great depression, and the worst we will see in our lifetime, things are in as good shape as can be.
    Bring it on! I am feeling pretty unfazed at this point.

  38. The Fed’s intervention and the government’s stimulus spending kept us from falling into the black hole of a deflationary spiral and I am convinced they will print as many dollars as they need to keep us out of one. This will almost certainly trash the dollar, but if you look at who wins and who loses compared to the deflationary scenario, it is clear who has more clout with The Fed.
    The banks would hate deflation and so would big business. Inflation isn’t great either, but it is clearly preferable, savers be damned. Maintaining the status quo is not possible.
    This stimulus has been a good call both economically and politically, since we would be at a much lower level of economic activity without it. Imagine how hard it would be to get things going if unemployment was 20% instead of 10%. It is true that we will need to replace this government propping up of the economy eventually, since we can’t run these kinds of deficits forever, but with the rest of the world already out of recession and the East Asian economies booming, export led growth should do the trick. The only way out of this kind of economic problem is export led and it will take a dollar devaluation to make this happen. It will be interesting to see how this impacts the American economy at home. I would not be surprised to see American manufacturing start growing again. If Germany can compete on the world stage in the manufacturing arena, we can do it too. Their labor costs are higher than ours.
    The only potential fly in the ointment is getting China to go along, since a weak dollar would hurt their economy, but it is already overheating from all the stimulus they gave it, so I think this is a slam dunk.

  39. the market I follow most closely is on the peninsula. for 18 months now I have been looking so I would be ready as the bubble unwound. my primary areas of interest are old palo alto, central menlo park and portala valley — so think Noe and the heights (laurel, presidio, pacific).
    inventory is up and sales volume is down, but this has translated to (at most) a 15% haircut off of prices that increased sharply through Aug 2008. making matters worse, agents are all aflutter now about the return of multiple offers. I don’t know if it can continue, but here is why there is strength:
    1) the average house there is sold once every 30 years. (thanks prop 13)
    2) the supply of good properties (quiet street, etc) is nonexistent. people buy and hold forever. if the only have 1 child, their children then hold. if they have several, the siblings fight, the house gets listed and the money split.
    3) tech stocks are back. in fact, the google option reprice alone created $1.5B in new employee wealth in the last 6 months.
    4) buyers are extremely picky about locations and don’t see lesser areas (los altos, redwood city, …) or even lesser streets in the same neighborhoods as acceptable substitutes.
    5) schools drive the market. perhaps if good private schools didn’t cost >20K per year per child we would’t see this.
    6) it has never been cheaper, or, if you have a job, easier to borrow 729K.
    7) buyers don’t think like socket site posters. they have life reasons to buy, they look at their monthly payments and their stock portfolios and they sign contracts.

  40. steve
    I agree with everything that you just said.
    Again, buying a house and living in it for 30 years, and thinking of it as CONSUMPTION is just fine – even at the very top of the bubble it wasn’t going to be financially fatal.
    The problem has been and alwyas will be the liquidation risk. If you have to sell (for whatever reason) and especially if your financing method is unsustainable, then you can get slaughtered.
    If someone buys a house in Menlo Park, can afford the (fixed) payments, and will live in it with their family for a few decades, they may or may not lose a little (opporunity cost of the down payment etc) money. But they do not care, nor should they necessarily.
    Some people just want to buy the Ferrari. Hopefully they can afford the price and enjoy the ride.

  41. polip, I just wish you could buy a ferrari house for $2M (or, dreaming now, 1.5M). sadly, that kind of entry level cash doesn’t even come close.
    I guess I should have added an 8, no one bought with option ARMs. who knows if they re-financed, but, except for a few los altos properties, I haven’t even seen any cash-out refi’s in all the listing I have looked up on property shark and the LTVs are all solid.

  42. I think housing could double again in the next 2 years. They have the power to set “prices” effectively, so they can make the median price in Oakland 800k if they REALLY wanted to, but of course to do that, milk would be 10$ and our deficits would be 3 trillion/yr.
    They can set all the prices they want, but it is area incomes that pay the bills. Granted, if they gave everyone a 1.9% million-dollar credit line prices on absolutely everything would shoot the moon for a while, but I don’t see that happening.
    Non-increasing population & Declining incomes = declining rents & declining home prices. Decades-long deflation, just like Tokyo.

  43. @AccountantAtHeart
    That is what I was trying to point out. It seems like the “hold period” is getting longer.
    This is not surprising, however it does indicate that short sales and foreclosures of recently bought properties are not manifesting themselves in the CS as much as I had expected.
    I’ll go on the record to say that I don’t think this is the end of the housing bear market. If we had a log version of the chart it would be easier to see that the morket had several ups and downs in the early 90s, eventhough the general trend was down until the HUD acted to implement “The National Homeownership Strategy: Partners in the American Dream” in 1994 with the goal of raising national homeownership to 67.5% through more “creative” financing.
    The document was recently removed from HUD’s website, but you can see a great quote from it by clicking on the name link.

  44. Or more of them leave than move in from other states, which is what’s happened for 4 years straight now:
    This has been offset by new births and undocumented immigration, so the overall number is tough to predict. But it’s not out of the question that population declines state-wide. Ironically, it seems the real estate bust is keeping more people here:
    “For years, Americans have been fleeing the Golden State. The population kept growing only because of foreign immigration and births. All through the 2000s there has been a net loss in domestic migration, with 800,000 more Americans leaving than moving in during the three years ended in 2007. As it became more difficult to sell homes, that out-flow eased. That, combined with the newcomers, meant the population fell by only 144,000 in 2008.”

  45. Amazing what best efforts at propping up the housing market can do. These undue efforts by the Fed and 4% mortgage rates can’t last forever. In addition, there’s the various foreclosure moratoria, plus the banksters’ general unwillingness to get aggressive about foreclosure, since they would have to then recognize more losses. I think we’ll see a slow drop from here on out, but it’ll be for an extended period. Note that prior real estate busts have also shown seasonal increases (look at the humps from 1990 to 1996).
    NoeValleyJim is probably close to right. I still think housing prices will show a nominal drop going forward, but it won’t be too far off from his prediction of flat nominal prices vs. dropping real prices. Note that nominal seasonally adjusted SF Case-Shiller went from a peak of 75.07 in April 1990 to 66.69 in April 1996, which is an 11.1% nominal drop (C-S is normalized to 100 in 2000). The real drop must have been pretty significant.
    The one thing I’m having trouble with still is the mix of houses. The normal mix is still off — both in terms of low-mid-high tier + foreclosure vs. organic sales. I don’t know the effect of this stuff though, but I know there is one.

  46. I still think housing prices will show a nominal drop going forward, but it won’t be too far off from his prediction of flat nominal prices
    What’s holding salaries up? Land is funny — it has a cost of production of $0, so the price we pay for land is entirely relative to our after-tax income and borrowing power.
    So if salaries keep going down, home prices keep going down. Even with inflation, say energy goes up, home prices will (overall) go down, especially further from employment centers.
    Oh yeah; taxes go up, home prices go down — one of the environmental differences between 1997-2001 and now is the 2001-2003 tax cuts — that extra $300 in monthly income can and did carry another $50 to 75K in interest expense.

  47. Your source is bunk Legacy, the population of California has been increasing, not falling. And it is not primarily due to “undocumented” immigration, it is due to legal immigration.
    Florida’s population is falling, but California is still a strong draw for foreign immigrants. Our relatively young population still has more births than deaths as well.

  48. As an urban planner working in CA and the nation at large for years, I can say that every research article, analysis, and demographic projections show CA population absolutely exploding over the next several decades. In part, this is what fueled the push for high speed rail in the state as the 99 corridor in the central valley is expected to undergo mass urbanization in the next 30 years.

  49. absolutely exploding over the next several decades
    I’ve seen these predictions too; I just wonder where the wealth-producing j-o-b-s will come from.

  50. “So if salaries keep going down, home prices keep going down”
    Troy, that’s why I think nominal prices will show a drop — salaries don’t sustain current prices. I’m sure there is some weird effect of only 35% of SF (City/County) residents being homeowners, but ultimately salaries should dictate prices.
    The extraordinary action by the Fed and Treasury to keep interest rates so low is also propping prices up, and as soon as rates go back up, real and probably nominal prices will drop. And to that point, people are better off with $500K houses at 8% than $800K houses at 5%, even if both carry the same yearly interest payment, so the government action here is misguided and serves as a huge (and probably temporary) bailout for the banks.
    Even given all that, the reason I said it wouldn’t be “too far off” NVJ’s prediction is that I think if we look at the Case-Shiller index in 10-15 years, it’ll probably look a little like NoeValleyJim is saying — somewhat flat nominally from here on out.

  51. “Your source is bunk Legacy, the population of California has been increasing, not falling.”
    Umm…did you even bother to read what I posted? I specificly wrote that the population has been growing because of immigration and births, but more Americans continue to leave California vs. move in. Similar pattern for years now, and the outflow would be even greater if more folks could actually sell their homes to move out (as per second article).
    So when, exactly, is that “exploding” population of infants and FOB immigrants going to start buying up those $1MM Bay Area starter homes en masse? Are they waiting for HSR to be finished, or until their Google options are more in the money? Just want to keep my urban legends straight here.

  52. Yeah I read it, the quote:
    That, combined with the newcomers, meant the population fell by only 144,000 in 2008.
    This an extraordinarily poorly written closing statement, since the population of California did not fall in 2008, it increased. I assume what they must have meant is that California’s internal migration was negative 144k, but it is not clear, give the earlier paragraph. California’s population grew by over 400k, which is what it has done almost every year since 1950.
    Somehow the housing bust caused Florida to lose population as people fled the carnage and caused California to gain population, because people couldn’t afford to move? Both of these explanations can’t be right.

  53. What a surprise, just as I said yesterday:
    From the Office of the Comptroller of the Currency and the Office of Thrift Supervision: OCC and OTS Release Mortgage Metrics Report for Second Quarter 2009
    This OCC and OTS Mortgage Metrics Report for the second quarter of 2009 provides performance data on first lien residential mortgages serviced by national banks and federally regulated thrifts. The report covers all types of first lien mortgages serviced by most of the industry’s largest mortgage servicers, whose loans make up approximately 64 percent of all mortgages outstanding in the United States. The report covers nearly 34 million loans totaling almost $6 trillion in principal balances and provides information on their performance through the end of the second quarter of 2009 (June 30, 2009).
    The mortgage data reported for the second quarter of 2009 continued to reflect negative trends influenced by weakness in economic conditions including high unemployment and declining home prices in weak housing markets. As a result, the number of seriously delinquent mortgages and foreclosures in process continued to increase. However, a lull in newly initiated foreclosures occurred as servicers worked to implement the “Making Home Affordable” program during the second quarter.
    Just as I said yesterday. Enjoy the rising numbers for the next few months, they might be the last you’ll see of them for awhile!

  54. “What that shows is that the high-end properties have simply stopped moving altogether, only low- and mid-priced units are moving at all, and that most of SF real estate on the market is mostly just sitting, unless someone living in fantasia wants to convince us that $533K really represents the threshold for “upper tier” properties in SF. More like lower-mid tier.”
    Absolutely! My ex-gf has been trying to move a unit in the 800-900K range since June without a single bite. And while I think that is because it is really only worth about 700K in the current market, her lack of even a realistic^H^H^H^H^H^H^H^H^Hlowball offer and the lack of any real offers on any of her comps totally supports this view IMO.

  55. I’ve been saying for months that if this were divided into 10 tiers, the 9th and 10th tiers where most of SF’s homes lie would show a very different picture
    Trip, I disagree with this.
    Take a look at he top tier vs the middle and bottom over the last four months, since the index started rising.
    The top has done the best.
    The top is basically the 8th, 9th and 10th tier, so unless for some reason the 8th tier is ridiculously on fire the 9th and 10th must have done well also.

  56. Fair enough, ReP. Really, the SF market I’m talking about, where SS seems to be focused, would be in the 20th or 30th tier.
    To illustrate, per redfin, SF had the following sales/month over the last 3 months:
    Under $500k -> 152/mo
    $500k – $1M -> 173/mo (2/3 of that is 28/mo
    $1.5M – $2M -> 8/mo
    Over $2M -> 8/mo
    SF now has 3 months of inventory at the under $500k slice, 5.8 months at the $500k – $1M slice, just over 9 months of inventory at the $1M – $1.5M slice and over 15 months at the $1.5M+ slice. You get the picture. Nearly all the action, and what is reflected in CSI, is at the low end of the SF market — under $750k. I agree it may accurately reflect what is going on there, but it is basically irrelevant to a big slice of SF that most here seem to be interested in, where the supply/demand (and thus price) picture is very different.

  57. Sorry, that post got scrambled in the middle — I guess my arrows screwed it up. Should read:
    Under $500k is 152/mo
    $500k – $1M is 173/mo (2/3 of that is under $750k)
    $1M – $1.5M is 28/mo
    $1.5M – $2M is 8/mo
    Over $2M is 8/mo

  58. Trip — did you meant to say that 2/3 of the $500K-1M slice is under $750K?
    Thanks for the interesting data. Does anyone know how this would compare to sales during the boom?

  59. Trip,
    Not sure about your data. From redfin, I see the following sales over the last 3 months for the different price ranges:
    Under $500k is 383
    $500k – $750k is 384
    $750k – $1M is 221
    $1M – $1.5M is 122
    $1.5 – $2M is 44
    Above $2M is 69
    These are data for 3 months, as opposed to your post which had per month numbers, but there is still a discrepancy. Not dramatically different, but according to my numbers, there seem to be a few more sales at the higher end than your numbers. Wonder why the difference if we are pulling data from the same source?

  60. Anon, I excluded multi-unit listings and sales and included only single-unit listings and sales. I think that is the difference. There are a fair number of big, multi-unit places that have sold for $2M and up. Note that redfin includes past sales even for places that were not on the MLS — so my months-of-inventory numbers are actually a little low across the board since the denominator will be too high (redfin also includes a small number of non-MLS for-sale listings). Some TICs probably get screwed up in there given the way that those are recorded, but one would need to parse through them individually. Note also that I did not limit it only to SFRs, so the comparisons with Case-Shiller (which does use only SFRs) are not spot on.

  61. Trip, thanks for the clarification. I think your exclusions make perfect sense… and I would like to second corntrollio’s question about the break up of sales in the past to get a better context for these numbers.

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