May 31, 2005
Curb Appeal: 3132 Laguna
Posted by socketadmin at 8:30 AM
Great Advice For Buyers
James Stewart at SmartMoney hits the nail on the head. If you’re a first-time buyer looking to purchase a primary residence and you can easily afford the down payment, ongoing mortgage, taxes, and upkeep – just do it. Don’t try to time the market, just do it. Current mortgage rates are fantastic and even if a “bubble” does burst, over the long-term home values will rise.
Now if you’re anyone else, think twice. And if you’re stretching to afford the payments on an interest-only ARM, are banking on appreciation over the next couple of years, or are considering a property in which you really don’t want to live, think three times. In Stewart’s own words:
It's true that the real estate market isn't like the stock market: It moves in longer cycles, and it is less prone to sudden price shifts, let alone collapses. But once a negative market psychology sets in, the decline in real estate can be long and painful, as the 1991 recession made clear for many home owners. I believe that over time, real estate returns, like those of other asset classes, will revert to their historical norm, which is a markedly lower rate of return than stocks. That means the longer the current boom keeps going, the longer, and harder, the fall.
Now before you do anything crazy, or start spouting off to you bubble-thumping friends, please read the whole article.
· House Poor [SmartMoney]
Posted by socketadmin at 8:00 AM
May 29, 2005
San Francisco’s Housing P/E
As sales prices have risen, and rents have dropped, San Francisco’s residential “rent ratio” has climbed to a nation-wide high of 34.1 (according to The New York Times). We’re higher than New York City (25.4) and San Diego (28.9), and up from a rent ratio of 12.5 in 2000.
In other words, on average, properties in San Francisco are selling for 34.1 times the rental incomes they could generate in a typical year. Think of it as a property's “P/E” ratio. And from an investment perspective, the higher the P/E, the higher the expectation of future returns. And the higher the risk.
In the stock market, a high P/E usually signals that investors are betting on a significant growth in future earnings (think Google). And from an income property perspective, a high P/E usually carries expectations of increasing rental income. If not, investors are speculating on market appreciation, rather than investing in a growing income stream, to provide a return on their investment.
Of course psychological factors play a role in housing purchases. A cultural emphasis on owning rather than renting, pride in ownership, and not wanting to ‘get left behind’ all affect our decision making processes. But from a purely analytic perspective, the increasing P/E ratio is cause for concern amongst investors (yes, even factoring in the mortgage deduction).
On the other hand, renters celebrate. It’s a great time to sign a new lease.
· Is Your House Overvalued? [NYT]
Posted by socketadmin at 10:49 AM
May 27, 2005
Bet On A Bubble (Or Not)
We don’t know whether to be extremely terrified or slightly intrigued. Quite honestly, we’re a little bit of both.
Promoted as an opportunity to “Hedge, Speculate, and Invest” in specific real estate markets without actually buying property, HedgeStreet’s "Hedgelets" allow just about anyone to take a position on the median sales price of existing single-family homes in San Francisco. In other words, bet on its rise and fall.
Have a friend that swears the housing bubble is either about to burst or really doesn’t exist? Perhaps (s)he would be willing to "Speculate" with a bit of their hard earned money. Or better yet, see if you can find an agent that would be willing to “invest” their entire sales commission alongside your purchase or sale of a home (feel free to share their responses).
· A life hedged about [Economist]
May 26, 2005
Real Estate Investment Clubs On The Rise
Since the end of 2002 the number of real estate clubs affiliated with the National Real Estate Investors Association has grown 300%. And since 1999, the number of stock market clubs has dropped nearly 50%.
Remember back when all water cooler, coffee house, and cocktail chatter revolved around stock picks, options, and un-realized capital gains? These days? Houses, appreciation, and un-realized capital gains. Or as one Yale economist notes, "The explosion of real estate groups is symptomatic of the shift of our exuberance from the stock market to the housing market.”
The good news, it’s easier than ever to find a Bay Area real estate investors club. The bad news, it’s easier than ever to find...
· Real estate investment clubs build up [USA Today]
Posted by socketadmin at 12:47 PM
May 25, 2005
QuickLinks: TICs And SF Subdivision Code Section 1386
· Owners’ groups vow to fight back in eviction battle [Examiner]
Posted by socketadmin at 1:58 PM
Condo Conversion, TIC, and Ellis Act Overviews
Goldstein, Gellman, Melbostad, Gibson & Harris, LLP provides a trio of articles on Condominium Conversion, Tenancy in Common, and Owner-Occupancy/Ellis Act Evictions in San Francisco. Some spin, but generally well written and great overviews.
Keep in mind that recent developments (such as the Board of Supervisors recent application of Section 1386 of the City’s Subdivision Code) might not be reflected in the articles. So stay plugged in to SocketSite...
Posted by socketadmin at 1:27 PM
May 24, 2005
Top Five San Francisco Trophy Homes
Looking for new digs? Have an extra twenty million in Google stock burning a hole in your pocket? Match the recent Mega number? If so, then perhaps you’ll want to check out the five most expensive homes currently listed in San Francisco...
5. 34 Presidio Terrace ($11m) - Cheapest of the five. The six bedrooms initially had us thinking potential "Google Flophouse", but with only three parking spaces, probably not enough room for all those Cayennes.
4. 1 Cherry Street ($12.5m) - Over one million more than Presidio Terrace and yet one less parking space (only two total). Parking in San Francisco isn’t easy even if you’re loaded.
3. 2518 Pacific Avenue ($15.5m) – Actually listed at $15,570,000, but we’re willing to bet that you can get them to drop the extra $70,000.
2. 2700 Broadway ($16m) - Let’s just say it’s not likely this property will ever make our list of “Fantastic Facades” of San Francisco.
1. 300 Sea Cliff Avenue ($23.5m) - On the market since 1/13/03. We’d suggest waiting another year or two to see if they'll knock a little something off the asking.
Regardless of which one you choose, please be sure to tell your agent that the folks at SockeSite sent you. And please don't forget to send us an invite for the housewarming. Just seems fair.
Posted by socketadmin at 2:25 PM
Economic And Real Estate Trends Report
Considering the purchase of an investment (rental) property in San Francisco? Thinking of leveraging an interest-only loan to finance a short-term speculative buy? Do yourself a favor and read The PMI Group’s latest Economic and Real Estate Trends report. The PMI Group is publicly traded residential mortgage insurer and is in the business of accurately measuring market risk.
Even if you don’t agree with their assumptions or conclusions, it’s worth understanding the underlying analytics PMI employs to evaluate future market risk and home-price appreciation (or depreciation). And based on their analytics, they believe that the San Francisco home market has 39.5% likelihood of decline over the next two years, and a ten-year price appreciation of 2.3%.
· Economic and Real Estate Trends: Spring 2005 - pdf [PMI Group]
Posted by socketadmin at 12:29 PM
May 23, 2005
Anti-Bubble Theory And The Seven Deadly Sins
In a self-described rant on Inman News, columnist Lou Barnes shares his perspective on the recent explosion of financial press coverage regarding a real estate “bubble”. In Lou’s own words:
There is no evidence whatever that home prices are unsustainable, nor any evidence of widespread default. The bubble is in commentary coming from the financial markets, and the gas inside is envy.
Theories based on lust, greed, pride, gluttony, and anger are sure to follow. But we’re not so sure about sloth...
· 'Envy' fuels real estate bubble talk [Inman]
Curb Appeal: 104 Collins
Posted by socketadmin at 11:05 AM
Design & Architecture: About
Bill Cosby once said, “I don’t know the key to success, but the key to failure is trying to please everybody.” We couldn’t agree more.
“Great” design is subjective, and so are we. We can’t help it, and honestly, we wouldn’t want too. We believe that a distinct voice and perspective is important. And we’re really not interested in trying to please everybody.
“Fantastic Facades” of San Francisco "Curb Appeal": simple (i.e. one line) profiles of great exteriors that grace our city. Sometimes drawing attention and notoriety, but just as often hidden in plain sight. Regardless, each is an example of the next generation of great San Francisco design and aesthetic.
May 20, 2005
Greenspan Sees Local Housing Bubbles
While dismissing a national bubble, Alan Greenspan acknowledged signs of market “froth” and local housing bubbles during his address to the Economic Club of New York this evening. A couple of choice quotes:
"We don't perceive that there is a national bubble but it's hard not to see ... that there are a lot of local bubbles."
"Even if there are declines in prices, the significant run-up to date has so increased equity in homes that only those who have purchased very recently, purchased just before prices actually literally go down, are going to have problems"
Two questions: does the Bay Area represents one of those “local bubbles”, and if so, what will constitute “very recently”?
TIC Owners/Buyers Beware
Tenancy-in-common (TIC) units created through an Ellis Act eviction of previous building tenants may be denied eligibility for condo conversion in San Francisco.
On Tuesday the San Francisco Board of Supervisors rejected the condo conversion application for the six-unit building at 400-410 Vallejo based on Section 1386 of the city’s Subdivision Code. Section 1386 prohibits the use of evictions “for the purpose of preparing the building for [condo] conversion”.
The once overlooked section of the city's Subdivision Code is no longer flying under the radar of the Board of Supervisors and could have a serious impact on the liquidity and value of existing TIC units in San Francisco that were created by means of an Ellis Act eviction.
· Supes use obscure law to reject condo conversion [Examiner]
Interest-only loans meteoric rise in the Bay Area
Financial savvy for some, financial folly for others. According to The Chronicle and LoanPerformance, in 2002 less than 20% of property purchases in San Francisco utilized interest-only mortgages. In 2005? Nearly 70%.
And according the Federal Reserve, owners' equity in household real estate has grown 46 percent over the past four years while mortgage debt has grown 56 percent. People are consuming, not investing, in real estate.
Red flags abound.
· High interest in interest-only home loans - POPULAR BUT DANGEROUS [Chronicle]
· High interest in interest-only home loans - RISK [Chronicle]
Posted by socketadmin at 11:45 AM
Okay, so our "one week quiet period" actually lasted three months. Our bad.
But now we're back with a vengeance, more knowledge, and more insight. So without further ado...
Posted by socketadmin at 10:00 AM