CFAH

Preliminary August labor force data counts for San Francisco, Marin and San Mateo counties puts the unemployment rate at 10.1%, 8.3% and 9.2% respectively, up 0.2 percentage points in San Francisco and San Mateo and up 0.1 percentage points in Marin from June.
The 10.1% unemployment rate for San Francisco represents a new 25 year high.
The number of unemployed in San Francisco increased by 800 from 44,800 to 45,600 in August while the number of employed decreased by 3,000 (from 409,300 to 406,300) as the labor force decreased by 2,100 (from 454,100 to 452,000).
Overall California unemployment held steady at 12.1% percent in July.
Monthly Labor Force Data for Counties: August 2009 (Preliminary) [EDD]
San Francisco County Unemployment Up To 9.9 Percent In July [SocketSite]

Comments from Plugged-In Readers

  1. Posted by scurvy

    Green shoots my ass. When will people stop confusing “we’ve stopped going down for a little while” with a recovery?
    Without the consumer and housing engines revving, please oh smart ones, tell me what’s going to lead us out of this? Business spending? LOL! Good one!

  2. Posted by sobroke

    gov. spending ^_^

  3. Posted by scurvy

    sobroke, government spending only moves forward purchases slated for another time. Hence, my “we’ve stopped going down for a little while” comment. Once the government interference is done, we’ll just keep going down again.
    Take one look at the Fed and you’ll see that all the liquidity in the world isn’t bringing banks back to lend because people aren’t borrowing money.

  4. Posted by Mole Man

    What does the Fed have to do with any of this? People are not borrowing because the economy is so far down that business creation has stalled. The history of recovery from the Great Depression shows this bad attitude about government spending to be completely irrational. This Great Recession is not fundamentally different. If government spending were really an issue then massive subsidies going to big banks, our government sponsored agriculture collectivization, and monopolist defense contractors would be the biggest issue, not ACORN.

  5. Posted by rabbits

    J – I was shocked (SHOCKED!) not to see that Chron story at the top of SS this morning. Maybe they’re aiming for some editorial balance by featuring a $14,000,000 home?

  6. Posted by scurvy

    sobroke, government spending only moves forward purchases slated for another time. Hence, my “we’ve stopped going down for a little while” comment. Once the government interference is done, we’ll just keep going down again.
    Take one look at the Fed and you’ll see that all the liquidity in the world isn’t bringing banks back to lend because people aren’t borrowing money.

  7. Posted by OneEyedMan

    Those were some scary graphs. Headlines indicated that interest re-sets(ARM) were what was bad, what was the bad part was “option” – $624K loan with an option to only pay $1,800 P&I? Crazy.
    Also interesting was this article:
    http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2009/09/20/RE6B19MV4O.DTL
    last paragraph was the best:
    800 Credit Score Homeowner: My wife lost her job and we’re having problems making our payments. Can we qualify for a mortgage adjustment?
    Banker: Sorry, your excellent credit score indicates that you’re too smart to make any more payments on this loan no matter what adjustments we make.

  8. Posted by scurvy

    Mole Man, are you for real? The Fed tried to get things going by cutting rates to 0, but failed miserably. Guess what, consumers don’t care how cheap money is right now. Consumers as a whole just got burned big time and are undergoing an attitude shift. People won’t start spending until they feel comfortable about their income and their jobs. It’s very clear that neither of these conditions are about to turn around anytime soon on the horizon.
    So once again, I don’t see why people are claiming green shoots from some trumped up auto sales and mediocre inventory depletion.

  9. Posted by anonnn

    scurvy, get your undies out of a bundle. Anyone who knows anything about economics knows that when a recession ends it is often followed by quarters where unemployment continues to grow. I have no idea if we’ve hit bottom, but if we have, there will be a few more quarters (at least) of continued job losses and growing unemployment.

  10. Posted by scurvy

    anonnn, unemployment does usually lag yes. However, what are the two things that turn first in almost every recovery? Housing and consumer spending. Yeah, good luck saying those are on the rebound.
    We’re at a pit-stop here people, still going down. You don’t unwind the greatest liquidity bubble in history in merely a year and half with only a 20-30% asset haircut.

  11. Posted by rabbits

    Jim Grant is making the point that the worse the recession, the more robust the recovery. It is an oversimplification to look at the recessions since the 1970’s and make this case. They were all induced by inflation and interest rate shocks, which dramatically cut consumption. Once inflation was tamed and rates lowered, the party resumed. Much different scenario this time – rates can’t go any lower than they are now. This is debt deflation, and the only comps are the GD and Japan since 1989.

  12. Posted by eddy

    The editor rarely posts links to the SFGate for some reason? Regardless, it is a great article and has 354 comments.

  13. Posted by Anil

    If the labor force is now at 452,000
    and the number of employed is 406,300
    shouldn’t the number of unemployed be 45,700 (instead of 45,600)?
    It sounds like an increase of 900 people to me.

  14. Posted by wet feet

    I am two weeks away from escrow on a property and this article has me wonder if I should (or could still) wait for another 6-12 months. What to do?

  15. Posted by anon

    Unless you really love it and intend to stay the rest of your life, you should wait AT LEAST 12 months. Rent instead, you will almost certainly pay a lot less for similar housing. Purchasing a primary residence does not qualify as anything approaching a good “investment” in the current market.

  16. Posted by eddy

    You cannot make that broad statement that waiting longer is a good strategy. There are good deals in every market but the general consensus on here is that buying in SF now is not the best timing. I’d saying buying a place below recent comps is OK if you plan on a long enough holding period. I’d argue that buying with less than a 5-7 year horizon is never a good strategy despite what first 7 years of 2000 have led many to believe.

  17. Posted by bv neighbor

    Japanese real estate prices have been in decline for 18 years. I guess it all depends on what one thinks of as a long horizon. Personally, i am waiting until at least 2012 if not longer no mater what recent comps are.

  18. Posted by Jo

    “From 2004 to 2008, almost one-fifth of all mortgages, for both home purchases and refinancing, in the San Francisco and San Jose metro areas were option ARMs.”
    Quote from: http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2009/09/20/MNOR19N2B1.DTL&type=business&tsp=1#ixzz0RmbiVpJX
    So….how many SF properties are we talking about here? Does anybody know how many properties were sold between 2004-2008?
    My Calculation is;
    Monthly average sales volume(600) x 12months x 5years = 36,000 properties.
    20% of 36,000 properties is 7,200 properties.
    So, there are 7200 properties sold with Option ARM out of approximately 350,000 properties in SF and that is 2% of all SF residential properties.
    How is this 2% of SF total housing with Option ARM going to affect overall SF RE market in the future?
    Also, please correct me or add more info. if my calculation above is mistaken or wrong….

  19. Posted by corntrollio

    Jo, I have no idea if your facts are right, but your emphasis is very wrong. If there are only 7200 properties sold per year (you said 600/month) in SF, then having 7200 Option ARM properties is significant.
    The housing market is different than the stock market in terms of volume. In both cases, the market price is set when the asset is sold. But in the stock market, an individual stock has many many transactions per day, and the market price is determined essentially continuously because there might be hundreds or thousands or even more transactions per day.
    In the housing market, there are only those 7200 sales per year that set the market. It requires a much smaller number of transactions to influence those 7200.
    That’s why, having 600 foreclosures in one year in SF, to give a hypothetical, would be significant — because that would be 1/12 of the normal market setting events. Similarly, if 5% of the sales in SF this year were distressed sales, those 5% would have a big effect, even though they compose only 360/350,000 or 0.1% of the housing market. Only the houses being sold matter.

  20. Posted by BayAreaBum

    @Jo
    More importantly, assume 600 properties recast/reset each month
    -> with 25% default rate = 150 foreclosed each month
    -> 150 additional “motivated sellers” (i.e. banks) dumping inventory (including in ‘real SF’)
    -> assume 150 additional properties that are ‘priced to sell’ over current sales rate of 600 per month
    = big impact on prices

  21. Posted by Jo

    Corntrollio,
    Thank you for your insight..
    I came up with monthly sales volume 600 based on SF Median sales Price and Volume graph provided by SS. See the link of graph below;
    https://socketsite.com/archives/2009/09/san_francisco_recorded_sales_activity_in_august_down_xx.html
    Since 2004,monthly sales volume has been as high as over 900 and as low as below 400.
    I just eyeballed the graph and came up with number 600.

  22. Posted by briefremarks

    A quick note on the generally accepted opinion that unemployment is a lagging indicator in economic downturns. This is only the case of a traditional recession caused by inventory buildup and overcapacity. What we are in now is not a traditional recession, but a downturn driven by a credit cruch and excessive debt; a kind of downturn last seen in the 30s. Here, unemployment is a coincident indicator and job growth is critical to recovery. For what it’s worth!

  23. Posted by sparky-b

    wet feet,
    what are you (maybe) buying?

  24. Posted by OneEyedMan

    Jo –
    If you can get a paper copy of the paper there are some charts that aren’t in the on-line article. These showed the actual number of re-sets by area for ’09, ’10, ’11, & ’12. Those were the graphs I referenced as scary in my earlier post. I did not look at the link to see if they were included. If you look at these charts you’ll see that the options have just now started to re-set. From my memory the numbers are much higher than what you have extrapolated.

  25. Posted by ex SF-er

    Also, please correct me or add more info. if my calculation above is mistaken or wrong….
    go back to your original quote:
    “From 2004 to 2008, almost one-fifth of all mortgages, for both home purchases and refinancing, in the San Francisco and San Jose metro areas were option ARMs.”
    you forgot refinancings in your calculations. I don’t have any idea what that data would be, but it is likely quite sizeable. (refinancings were very common across the country in that time frame).
    thus, you’d have your 7200 homes PLUS the people who are now way underwater because they refinanced and spent their equity (on renovations, cars, boats, etc)
    —-
    but there is another way to look at the data too. From 2004 to 2008, 1/5th of all people took out Option ARMs. the data on the Option ARMs shows that a disproportionate number of them (95% or more I believe?) chose the minimum payment. it is a clear signal that a significant number of those people couldn’t really afford SF housing without using the Option ARM.
    now that the Option ARMs are much more difficult to get, it means that you have up to 1/5th of the prospective homebuyers priced out of the market.
    prices typically adjust significantly when you remove up to 20% of the demand.
    this also of course ignores the other 50% of the SF population (if old data is to be trusted) that used Interest-Only mortgages.
    Now of course many will argue that the lion’s share of SF Option ARM holders use them as cashflow tools and they are really quite affluent, thus the Option ARMs aren’t a big deal. we’ll just have to wait and see if those Option ARMers are people who stretched too far to buy a home (as I surmise) or a cash-management tool of the wealthy (as others surmise). it’ll be obvious if the defaults continue to come in.

  26. Posted by wet feet

    sparky_b,
    I am purchasing in escrow to purchase a loft unit in San Francisco.

  27. Posted by Be Right

    “I am purchasing in escrow to purchase a loft unit in San Francisco.”
    I would bail and wait a year or two…but that’s just my opinion and you asked.

  28. Posted by Mud

    @ wet feet –
    Bail – wait 18 months and save yourself 20%. That’s a lot of rent.

  29. Posted by Bought a condo

    @Wet feet.
    There is an old Asian ancient saying that “Buy a land/house at knee price and sell it at shoulder price.” In today’s economy, same rule applies to buying stock.
    They are considered 20-60-20 players in 21st century western world and we call them “The most successful professional investors”
    Most of those who buy house or stock at a toe price and sell it at top of head price are simply lucky. This can not be calculated.
    Are we at the foot, waist, or top of head in today’s housing market? Nobody knows.
    How long is it going to take until we see the bottom of feet? Nobody knows especially when government is deeply involved in the market.
    I bought a condo a couple of months ago not because I am a professional investor or hope to be purely lucky. I bought it because I needed an extra bed room and my mortgage payment will not be much different from apt. rent. My saving was spent to make down payment and there will be other extra costs such as property tax. But the amount of extra cost justifies owning. (This is my subjective point of view)
    What I find very interesting from this website is that, for the last few years, people have predicted future housing market with an assumption that the market is going to play itself without any government intervention. But government has constantly come up with new policies to keep housing market from crashing. However, until today, people still make future prediction with an assumption that there will be no more government involving in the free market.
    Those people who tell you to wait 12-18months right now may have been the people who said that there would be a huge housing inventory bursting out last summer.
    A lot of prediction made in this site have turned out to be wrong not because they are stupid but because market doesn’t work like it is supposed to.
    Plus, be aware that a lot of people who come to this site are renters with hope that, someday, they want to own a property so some of them tend to overreact to certain news.
    The article about options ARMs and this month unemployment rate are in fact very very alarming and seems to create a good deal of fear among ordinary people and fear is the most effective tool for government to control people and country. I wonder what additional program government will come up with this time which they usually do.
    Do your own math.
    Do you really need a condo right now?
    If you give up owning right now, how easy is it going to be to find similar or better unit in the future?
    If you buy it right now, how much risk can you take in case market tanks or goes up in the future?
    How much extra cost is worthwhile to own versus rent?
    I can imagine what goes through your mind right now.
    It is indeed an emotional roller coaster. Hope you find a peace with searching for a dream home. Good luck!

  30. Posted by mac

    It depends on what loft you are buying. For instance people are still trying to get 750 sq ft in Oriental Warehouse. More than they bought it for in 2007. On the other hand some of the lofts in SOMA are down huge. It might be good to tell people where you are buying and how much per sq ft you are paying?

  31. Posted by sparky-b

    If it’s one of the many new construction lofts built in early 2000’s, there will always be some of these on the market in most locations and prices. They will always have turnover. You should negotiate for a better price (which always makes you feel good about your purchase), or wait.
    If it’s an actual warehouse conversion or something special and more “one of a kind” this may be your only chance to get it and the price is certainly lower than it would have been for last few years. Special and unique places will hold their value better.

  32. Posted by wet feet

    this is an actual warehouse conversion by the Cal train station. it is rather unique. thank you all for sharing your thoughts. we intend to hold this long term and will factor our holding time frame into consideration.

  33. Posted by EBGuy

    SFGate just posted the weekly foreclosure auction data, and we have a definite candidate for “Foreclosure of the Week.” It’s a textbook example of using your condo as an ATM and leaving the banks holding the bag. Unit 601 (662 sq.ft.) at 2999 California St. was purchased for $370k in June of 2004. Near 100% financing (one percent down, what could go wrong?) with a $296k variable first and a $70.3k fixed second (Wells Fargo, for those of you tracking their second lien portfolio). Here’s the best part, in 2007 another $123k was extracted courtesy of Chase. Sold at auction for $316k on September 3.

  34. Posted by EBGuy

    A dishonorable mention goes to 591 Joost, which was a favorite of Satchel’s. This home was bought for $650k in 2005 (100% financing) and taken back by the bank for $518k on August 31. Keep on the Sunnyside, always on the Sunnyside…

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