CFAH

San Francisco Sales Volume And Median Price: October 2011 (www.SocketSite.com)
Recorded home sales volume in San Francisco was up 2.8% on a year-over-year basis last month (448 recorded sales in October 2011 versus 436 sales in October 2010), up 12.3% as compared to the month prior and versus an average September to October increase of 0.1% over the past seven years. An average of 543 San Francisco homes have sold in October since 2004 when recorded sales volume hit at 720.
San Francisco’s median sales price in October was $635,000, down 2.6% on a year-over-year basis, up 3.5% as compared to September in which the median was down 1.0% YoY.
For the greater Bay Area, recorded sales volume in October was up 5.3% on a year-over-year basis, down 4.5% from the month prior (6,444 recorded sales in October ’11 versus 6,122 in October ’10 and 6,749 in September ’11) as the recorded median sales price was down 8.6% year-over-year, down 4.1% month-over-month.
At the extremes, Sonoma County recorded a 26.9% increase in sales volume (a gain of 104 transactions) on a 8.3% decline in median sales price, while Contra Costa County recorded a 0.3% decrease in sales (a loss of 4 transactions) on a 3.6% decline in median price. Napa was the only Bay Area county to record an increase in median sales price (up 1.0%) while the median dropped 10.4% in Santa Clara.
As always, keep in mind that DataQuick reports recorded sales which not only includes activity in new developments, but contracts that were signed (“sold”) many months or even years prior and are just now closing escrow (or being recorded).
Bay Area Home Sales Up From 2010, Prices Down [DQNews]
Recorded San Francisco Sales Activity Drops 9.7% In September [SocketSite]

Comments from Plugged-In Readers

  1. Posted by A.T.

    Here is the stunning part of this report:
    “The typical monthly mortgage payment that Bay Area buyers committed themselves to paying last month was $1,348, . . . It was 64.0 percent below the current cycle’s peak in July 2007.”
    And yet prices continue to fall.

  2. Posted by [anon.ed]

    “And yet prices continue to fall.”
    Why did you have to go and troll? You made a decent point. Because that statement doesn’t belong in a thread that’s displaying a nominal YOY decrease and a nominal month to month increase.
    So weird.

  3. Posted by dontgetit

    Would it be too much to ask that a new topic not begin with such predictable negativity?
    Sigh.

  4. Posted by tipster

    Maybe he said prices continue to fall because the Year Over Year prices are continuing to fall. Month Over Month is not a very good indicator.
    And “negativity” is in the eye of the beholder. For many people prices falling is not negative, but very very positive.

  5. Posted by A.T.

    Boy, fluj, did you really not catch that prices (as measured by median — imperfect, as are all other measures) are down YOY? Down 2.6% in SF and down 8.6% (nominal – seriously?) throughout the bay area. I guess you can consider the observation that monthly mortgage payments for new buyers are 64% lower than 4 years ago yet prices continue to fall to be “weird,” but I thought it was rather remarkable. I’ll explain it to you because it appears you are having difficulty understanding. You see, once purchasing costs have fallen by such a stunning amount, one might reasonably conclude that, surely, prices would stabilize. Yet they continue to fall. Weird, indeed.

  6. Posted by sparky-b

    Mortgage payments are down because of the Alt-Awesome Not-tsunami loans. Prime rate in 2007 8.25%, now 3.25%.

  7. Posted by A.T.

    aparky-b, I read the report to be talking only about mortgage payments for new purchasers, not all owners — maybe I misread it. And it says that only 12.7% of bay area purchasers used ARMs (compared to 51% over the last decade), so I don’t think that is driving it. Low rates generally, of course, are driving it.

  8. Posted by [anon.ed]

    “month over month isn’t a very good indicator” from Tipster. As if he hasn’t drilled down with that very indicator. “Didn’t you catch that MEDIAN” is falling YOY, from AT. As if median isn’t something he’s railed against.
    ohhhhhhhhhhhkaaaaaaaaaay.
    The point is that they’re small numbers, I said “nominal,” and that monthly and yearly differ. So going “Prices continue to fall” is what it is. And that’s a troll having his particular type of trollish fun on the internet.

  9. Posted by [anon.ed]

    Yes, “nominal.” 2.6% down is nominal. 3.5% up is nominal. You’ve never even seen me talk about “The Bay Area” on here once.
    monthly mortgage payments for new buyers are 64% lower than 4 years ago yet prices continue to fall to be “weird,” but I thought it was rather remarkable
    No, I thought that was a good point. Forcing “prices continue to fall” in was what I thought was weird.

  10. Posted by sparky-b

    Wow so since only a small percentage of bay area homes had ARMs we must never have had any option-ARM tsunami discussions then.

  11. Posted by A.T.

    A small percentage in October 2011. A large percentage (51%) in the prior decade.

  12. Posted by kg

    Almost back in sync with rate of inflation over the 7 year period. I wouldn’t expect to see prices to drop much more. Not that I’m arguing they’ll start to go up.

  13. Posted by tc_sf

    This doesn’t seem to have anything to do with ARMs and certainly not option ARMs given that the measures are for current sales.
    Also, while the median is not a good indicator of the change in market value of existing homes, it does tell you what people are buying right now (current sales).
    Cutting through the above, the conclusion that seems to jump out is that people are not using the lower rates to buy more house, instead going for less house and cheeper payments.

  14. Posted by lol

    I don’t think 2.6% can be qualified as a clear direction. With government intervention, sub-4% fixed rates and various other exterior elements, it’s very hard to pinpoint seasonality in these numbers. Just look at the seesawing of the past year. Add the mix and change of said mix that can occur, and the degree of uncertainty is too big at this juncture.
    One thing is for sure, things are not as bad as other areas where prices are often lower than the early 2009 trough.
    Oakland is still dropping
    So is Daly City and many other locales.
    All in all, I think we’re in very decent shape. Low prices are always a good thing for buyers, but they are all too often a symptom of a systemic malaise. We should feel very lucky to have high housing cost. It means we are well off and we still have stuff to produce and sell.

  15. Posted by Big V

    I looked at redfin recently (last week?) and was stunned when almost every other house I looked at was “pending”. This was in the mission area. I’ve not seen this many pending sales in the last couple years. i went ahead and actually ran the numbers (total MLS listed for my search region, vs pending/incontract) and found that just under half of the houses in the area were pending, confirming my initial experience.
    should be interesting to see what happens when the numbers for Nov/Dec start hitting the street.
    (yes, I know, not all contracts result in sales, etc, but this is a noticeably different market behavior from the last few years….)

  16. Posted by FormerAptBroker

    A.T. wrote:
    > Here is the stunning part of this report:
    > “The typical monthly mortgage payment
    > that Bay Area buyers committed themselves
    > to paying last month was $1,348, . . .
    > It was 64.0 percent below the current
    > cycle’s peak in July 2007.”
    The big question is how long can mortgage rates stay this low and what will happen to real estate values when mortgage rates go back up?

  17. Posted by BayAreaBum

    So SF YoY median nominal prices down 2.6%.

    This is combined with YoY CPI of 3.5%. (http://www.bls.gov/news.release/cpi.nr0.htm)

    So overall SF YoY real decline of 6.1%

    Maybe I’ll hold off on buying that condo for now…

  18. Posted by lol

    Sure CPI is at 3.5%, but it might last very long if this inflation is not followed by income adjustments. In short, they could be temporary and our deflation cycle could perfectly pick up where it left off 2 years ago.
    Also, you seem to forget that inflation is more often than not the friend of real estate purchasers. Your debt burden decreases relative to inflation (if you have the chance of having your income adjusted to CPI, that is). This is what Krugman and Co have been crying for a long time: create some healthy dose of growth combined with inflation. The 2 combined can pull us out of this hole by reducing the relative size of debt, savers be damned.

  19. Posted by kg

    @BayAreaBum, use that same logic and go back all the way to 2007. You’ll see we’re approximately where we should be assuming homes appreciate consistently with inflation over long periods. If you would have said, “Based on an average CPI of 2-3%, my $541,000 home will be worth somewhere between $621,438 and $665,361 in 7 years”, you would have been right.

  20. Posted by eddy

    These DQ and CS measures are the best we have as a normalized view of the market. Imperfect as they may be, they are pretty good and I think most everyone here believes they have some validity. My eye doesn’t see YoY declines beyond the ‘bottom’. I see up and down within a specific band. Not to say there aren’t external forces at work; but that has always been the case.

  21. Posted by A.T.

    “inflation is more often than not the friend of real estate purchasers”
    That has been the case in the past, mostly because inflation has been accompanied by wage inflation. Not so certain that is going to be the case going forward, and without wage inflation we’re unlikely to see real estate appreciation. If we have even just a few % of inflation each year but real estate stays “flat” then we see a real few % decline every year — BayAreaBum’s point.

  22. Posted by curmudgeon

    echoing Eddy, it’s quite remarkable how SF median prices have been bouncing within a fairly narrow band since mid 2009. For whatever reason, it feels like a bottom was reached.
    (of course mix and all plays a role, and yes inflation takes its toll as well).

  23. Posted by TIPSTER

    What you mean is it’s quite remarkable how the fed has engineered slowly declining home prices via interest rates, don’t you curmudgeon. Do you really think prices would have remained even this flat if interest rates hadn’t declined by 25% or so between 2009 and now?

  24. Posted by eddy

    The fed / gov played an equal part in the bubble run up. The market has been fairly efficient and it has adjusted. Some might say that the bottom fell out. Other than the difference between what some people perceive a SFH in SF “should cost” as a reason to be extremely bearish on the market, there is little to explain the general stability of the housing market. Interest rates have been low for quite some time now and they were low when housing dropped 15-30% from peak nationwide. Jumbo limits have dropped. Yet housing prices have largely stabilized. Napa increased! I’ve been saying for a while now that so long as transaction volume remain healthy / stable things will be OK. The volume and velocity of sales during the peak years was astonishing. Seems the levels were seeing now are quite stable and consistent. All that said, I do agree that there are more factors that could hinder housing in the short run. In the long run, I tend to think we’re OK. Although I’m not sure I would be paying any premiums for condos/tic at this point.

  25. Posted by tc_sf

    ” Other than the difference between what some people perceive a SFH in SF “should cost” as a reason to be extremely bearish on the market, there is little to explain the general stability of the housing market.”
    Rather then Alt-A look to the FHA. From the report, a year ago 25% of the purchases were FHA. CS is down 5% YoY so on average even purchasers with the higher 10% down payment no longer have skin in the game after selling costs. Combine this with the ever lengthening timeline between default and foreclosure and you have a great number of zombie’s in the market which I don’t see contributing much to market stability.
    Government intervention and locally tech are bullish factors, but it won’t be a stable market until all the zombies are flushed out or fixed up and we stop adding more.
    Also remember that median’s aren’t prices.

  26. Posted by [anon.ed]

    Speaking of FHA, its limit is once again going to be @ $729,750 for the next two years (Fannie and Freddie will not, though):
    http://www.ajc.com/news/nation-world/bargainers-agree-to-raise-1227381.html

  27. Posted by hangemhi

    42% of CPI is housing costs…. but it is owner equivalent RENT. So we can dispense with claiming nominal losses due to inflation for homeowners.
    In fact, many homeowners are either refinancing for lower payments, or have ARM’s that have already or are about to adjust FAR lower.

  28. Posted by around1905

    Really great point, A.T., about wage inflation.
    Wages aren’t tracking inflation — at least in skilled tech, where I am more familiar with what is going on. Companies get away with this b/c of stock options and also because so many of the staf are recent immigrants who don’t have a long enough timeline to see what is happening.
    Prices are staying flat because we are on the very, very long arm of an interest rate lever.

  29. Posted by tc_sf

    “42% of CPI is housing costs…. but it is owner equivalent RENT.”
    The BLS releases a ‘CPI less shelter’ index useful for exactly this purpose. It’s been slightly high then headline CPI recently, but nothing dramatic. Many inflation adjusted housing measures use it.
    Generally unexpected inflation would benefit those with fixed rate loans, but not those with ARMs

  30. Posted by Eddy

    Keep in mind that the cs average has no specific relavance to any individual property and it’s specific value. It’s a reflection of the market as a whole as defined by blended avg sales. Assuming that every home, or any home purchased over the past year is down 5% because the cs is down 5%, and then adding selling costs as negative equity is fairly misleading on many accounts.

  31. Posted by A.T.

    Eddy, that is true, of course. OTOH, arguably, no individual sale really says much about the market generally because it could be an outlier. But market-wide stats (like CS) certainly are a good indicator of the market. It’s not like we just have to throw our hands in the air and say we can’t know anything about anything from these various measures because none captures perfectly every single home in the market. When market stats indicate a 5% price decline (or a 5% increase for that matter), it is not completely out of bounds to assume that any property in that market followed suit, although it is true that one cannot say this is the case with absolute certainty.

  32. Posted by [anon.ed]

    “no individual sale really says much about the market generally because it could be an outlier.”
    Does that include Redin links displaying condo sales information from other areas?

  33. Posted by eddy

    I actually think the CS and the DQ measures are very good at trending. I think we all agree on that for the most part. Using it for much of anything else is fuzzy logic.

  34. Posted by tc_sf

    “Keep in mind that the cs average has no specific relavance to any individual property and it’s specific value. ”
    In fact, unlike the median which just measures current sales, these indices are exactly designed to represent the average change in existing home values. Some homes may be above or below the average but unless you live in Lake Wobegon, not all of the homes can be above average.
    Most stats showing the % of homeowners with negative equity or near negative equity (negative with selling costs) use these indices.
    Not to say it’s the best, but the Zillow index actually tracks and publishes stats on differences between prediction and actual for individual sales. For SF the median error for an individual sale is 8%. This is not the same as the index’s estimation error of the population.
    You want to give people the benefit of the doubt, but it’s rather odd to call bottom based on a 2.8% YoY drop in median then try to dismiss CS entirely.

  35. Posted by hangemhi

    A $500k loan adjusted from 5.5% down to 3% is over a $700 monthly savings (roughly in line with the first comment from AT). Tell me exactly how a homeowner with an ARM that adjusted is losing more due to inflation?
    Faulty logic and presumptions like BayAreaBun’s comment about a 6.1% nominal loss makes me want to pull my hair out. And I’d bet anyone who can afford to own/buy in SF is in a field with wage inflation…. we don’t have an unemployment problem for highly skilled, highly educated people. Most of it is in the bottom part of the economy with exceptionally high unemployment for the young and under-educated. Finally, inflation on something like gas and food is going to effect people on lower incomes far more than those with higher incomes. Add it all up and I think the “nominal loss” stuff is largely BS.

  36. Posted by tc_sf

    “A $500k loan adjusted from 5.5% down to 3% is over a $700 monthly savings (roughly in line with the first comment from AT). Tell me exactly how a homeowner with an ARM that adjusted is losing more due to inflation?”
    But did inflation expectations rise or fall during that period? Falling inflation is good for ARMs due to the free re-fi’s on the way down.
    If you knew that inflation would hit 6% and had the choice of an ARM or a fixed loan at 3% what would you pick?
    ” Add it all up and I think the “nominal loss” stuff is largely BS.”
    Do you think a dollar had the same purchasing power 40-years ago as today? Will a dollar today have the same purchasing power in 40-years?
    If you talk to retirees or others on a fixed income it’s pretty common to hear complaints about how expensive things have gotten. While inflation may be small year to year, one reason for looking at it is to avoid being the frog boiled to death in the pot of slowly heating water. Even if food and energy aren’t large parts of someone’s budget today, increases in those areas can impact consumption during retirement

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