September 28, 2005
It’s doom and gloom Wednesday. Not only are the economists at UCLA’s Anderson school calling the peak of the California real estate market, they’re putting 50/50 odds on a statewide recession by the end of 2007.
California's housing boom appears to be peaking, and the resultant slowdown is expected to produce "weak growth" in the state's economy during the next two years and a possible recession by the end of 2007.
“There are some signs that the housing party is ending," said Christopher Thornberg, senior economist at the UCLA group and author of its California forecast.
Thornberg points to an almost doubling of homes on the market in the last six months, a flattening of sales activity and the increasing reliance on high-risk mortgages by buyers to acquire today's expensive homes. Property in California, he said, is now overvalued between 40% and 45%.
Although UCLA forecasters have consistently been more pessimistic about the housing boom and California's economy than many other analysts, their views are notable because they were among the first economists to predict the 2001 recession and to identify the current housing boom as a bubble.
Just remember, please don’t hate the player (or blame the messenger).
∙ Peak for Housing Said to Be Near [LA Times]
Posted by socketadmin at 11:30 AM
September 27, 2005
Three Months Of Stagnating Prices In San Francisco
According to the California Association of Realtors (CAR), the median sales price of a SF Bay Area home was $730,360 this past August (and sales volume dropped 3.7% compared to August ’04). While this does represent a $6k increase in the median sales price from July ‘05, it is still $4k below the June '05 mark of $734k.
The CAR spin is “Sales in the San Francisco Bay Area continued to fall below last year’s pace, but remain at elevated levels that approximate the market in 2003…(and) the median price continued its trend of year-to-year percentage increases in the low teens.” True, but this is effectively the third month of no movement. Or taking a lesson from CAR, “a three month trend representing a zero percent annualized gain”...
Posted by socketadmin at 4:10 PM
September 26, 2005
Renting Is The New New Thing
After 15 years as a homeowner in the Bay Area, I've cashed out and taken advantage of a bizarre situation: Homes that sell for a fortune are available to rent for as little as $1,500 a month, less than half the cost of ownership, even after factoring in the tax benefits from the federal mortgage-interest deduction.
(We missed this piece when it originally ran, but luckily we keep tabs on The Houising Bubble 2)
• Why own when you can rent? [Chronicle]
Posted by socketadmin at 1:58 PM
Feeling blue or left behind because you’re a lowly renter in the Bay Area? Don’t. The New York Times echoes our insight, debunks a number of home-owning myths, and reaches the following conclusion: In the Bay Area, renting might be more financially savvy than buying. Yes, even accounting for the over-hyped “mortgage tax decuction”...
To determine the cost of renting, the Times analysis added monthly rent and renters' insurance. For owning, the analysis included typical costs for home insurance, major repairs, property taxes and mortgage payments, as well as the tax deductions they create.
Renters were given credit for a small return - about 4 percent, after taxes - on the money they could have invested in bonds or stocks instead of spending it on a down payment and closing costs. Buyers received credit for the portion of the mortgage they were paying off, as opposed to the interest costs.
Add it all up - which The New York Times did, in an analysis of the major costs and benefits of owning and renting, including tax breaks - and owning a home today is more expensive than renting in much of the Northeast, Florida and California. Only if prices rise well above their already lofty levels will home ownership turn out to be the good deal that it is widely assumed to be.
So renters rejoice and celebrate your financial wherewithal. Hell, make it blow-out by tapping into that extra $2k a month you’re saving in insurance, property taxes, and maintenance. Just be sure to send us an invite.
∙ Is It Better to Buy or Rent? [NYT]
Posted by socketadmin at 9:00 AM
September 22, 2005
Calling All Tips
We’re taking the rest of the week off. And encourage you to do the same. And while you’re at it, grab the camera and a notepad and stroll around your neighborhood. Take some pictures, scribble some notes, uncover a scoop; and then drop us a line. Then do the same this weekend while you’re making the open house rounds.
We’d definitely be interested if anyone else noticed that this past weekend’s open house traffic was (very) slow. No double parked cars, parades of brokers, or frenzy of activity. Eerily slow in fact. So get to it. You'll thank us later. And we'll thank you now.
Posted by socketadmin at 12:01 AM
September 20, 2005
A new study by researchers at Columbia University and the University of Pennsylvania's Wharton School suggests that housing prices in San Francisco are NOT overvalued. The study, titled “Assessing High Housing Prices: Bubbles, Fundamentals and Misperceptions”, points to “basic economic factors, including low interest rates, strong income growth and abnormally low prices in the mid-1990s”, rather than a “speculative frenzy”, to explain the recent run-up in prices.
The report did not include data on condos or second homes and the researchers “acknowledged that higher interest rates could squeeze prices, particularly in expensive, volatile markets.”
On the flip side, and a bit closer to home, “Ken Rosen, an economist at UC Berkeley, estimates that speculation accounts for 10 to 20 percent of the market activity nationwide.” And “[w]hen mortgage interest rates increase -- as he expects them to do within 18 months or so -- as credit standards tighten and investors flee prices in the Bay Area could decline by as much as 15 percent in the market”.
Either way, perhaps our nohousingbubble.com domain name just became a bit more valuable...
· Bubble won't burst [Chronicle]
Posted by socketadmin at 9:27 AM
September 19, 2005
Movies In The Marina
Closed since October 2001, the Cinema 21 on Chestnut Street will rise like a phoenix from the flames (and in an entirely new light).
The model — hashed out by the property owner, the Marina Merchants Association and the Neighborhood Theater Foundation — uses ground-floor retail as an engine to partially finance the upper-level theaters. In this case a 9,200-square-foot Walgreens will bring in enough rent that the two theaters are not under as much financial pressure, according to Miller.
Two thumbs up. Way up.
Posted by socketadmin at 11:45 AM
Icer Air Seriously Deflated
Icer Air Organizers announced their tentative date/time for the rescheduled event: September 29 at noon. And no, that’s not a typo, September 29th is a Thursday. That’s one way to cut down on the crowds (and picket waving NIMBYs.)
· Sponsors modify plans for ski jump [Chronicle]
· Organizers defend plan for Pacific Heights ski jump [Examiner]
Posted by socketadmin at 8:58 AM
Buy A BMW 325i For Only $80k!
The Mortgage Bankers Association reported that 44.8% of all mortgage applications last week were for refinancing activities (versus new home purchases). Implications? Considering mortgage rates have been at historic lows for the past couple of years, it suggests that homeowners, “aren't cutting their interest rates at all; rather, they're just increasing their debt.”
Borrowing against your home looks, to many people, like a no-brainer.
But whether it really is depends on how that freed-up cash is used. So here's a rule of thumb: Long-term borrowing should be used only for long-term needs.
For example, it can make sense to refinance to get cash to put an addition on your home that you'll enjoy for decades.
It's not OK to pay interest for 30 years to fund this evening's dinner out, this winter's ski trip or a fancy car that will immediately start losing value. With the interest included, that $40,000 car financed with mortgage debt could cost more than $80,000.
listening reading Doug?
Posted by socketadmin at 8:13 AM
September 16, 2005
Sticks And Stones...
Nothing like being labeled a housing “Danger Zone” (as if earthquakes weren’t enough). CNN/Money confirms that the majority of buyers in San Francisco (and 49% of buyers in Oakland) are resorting to “non-traditional” loans. Not new news to our readers (other than the moniker), but the quote from the chief economist with the National Association of Realtors surprised us a bit. Looks like he’s starting to hedge his “we’re not in a bubble” bets:
At greatest risk, says David Lereah, chief economist with the National Association of Realtors, are markets where a majority of buyers are opting for nontraditional loans.
"There will be cases where lenders and borrowers will be caught with their financial pants down," he says.
· Crazy loans: Is this how the boom ends? [CNN/Money]
Posted by socketadmin at 12:34 PM
September 14, 2005
QuickLinks: Grab-bag Wednesday
· Dwell moves from publishing to pimping (prefab homes that is) [website]
· Davis firm pushes into 'green' frontier (houses) [Business Journal]
· Are you prepared? (for a Bay Area catastrophe) [website]
· Laugh at London (but we might be next...) [animation]
Posted by socketadmin at 1:41 PM
DataQuick Reports Record Bay Area Prices
According to DataQuick, the median price for a Bay Area single-family home hit $651,000 last month (versus $643,000 in July, and up ~19% from last August). At the same time, however, the number of sales fell 4.1% from 2004 and “...insiders say the number of homes for sale has surged in recent months, as sellers try to capitalize on still-rising prices.”
Look for C.A.R.’s August sales numbers before jumping to conclusions about the strength of the market. Believe it or not, we actually don't think this is a "bullish" report.
· Home sale prices still scorching, but volume tails off [Chronicle]
Posted by socketadmin at 1:31 PM
September 9, 2005
Not Such Trivial Knowledge
Know the difference between a Benjamin Moore Mulberry, Behr Plum Jam, and Glidden Valhalla? What about the difference between a Queen Anne Victorian, Gothic Revival, and a San Francisco Stick? Neither did we until readers tipped us to these two sites:
Colorcharts - billed as the “online library of manufacturer’s standard [paint] colors,” this site is ridiculously useful, informative, and addictive (perhaps even more so than Google Earth...).
Architectural Styles – San Francisco real estate agent Sharon Kramlich provides a fantastic guide to San Francisco’s numerous architectural styles (and some history).
Posted by socketadmin at 8:00 AM
September 8, 2005
Start Listening To Those “Academics”
If you don't heed the warnings of the “academics”, at least take a lesson from the history books. Excerpts from a recent article in Knowledge@Wharton:
What's driving this [real estate] market? Most important: Are these [adjustable rate] loans ticking time bombs that could shock the financial markets and economy if rising interest rates or falling home values cause a rash of defaults? A flood of failed real estate loans torpedoed the Japanese economy in the early 1990s, and that country has yet to recover...
"The question is: Are we at that tipping point in the United States? And clearly we are not," says Wharton real estate professor Susan M. Wachter. Nonetheless, she says, these loans are contributing to soaring housing prices, setting the stage for a potentially rough pullback that could make the next recession far more severe than it otherwise would be. "Undoubtedly, these new instruments bring us into uncharted territory. This is unprecedented."
Some experts argue that true home-price bubbles are rare, and usually confined to a few overheated pockets. Owners cannot sell homes with the click of a mouse, as they can stocks, so it's difficult for housing prices to cascade as stock prices do when a bubble bursts. Typically, a home-price run-up is followed by a period of flattening prices rather than a wide-ranging collapse.
But Wachter says some overheated markets in California and the Boston area did see home prices fall by 30 to 40% after the 1980s bubble burst. Prices tend to fall the most where they have previously gone up the most, and many, many markets have seen enormous gains in the past few years. Hence, many parts of the country could experience falling home prices, she argues. "We could have 30 or 40 of those areas instead of one or two." The risk of borrower defaults is clearly higher because of the heavy use of I-O and option loans, she adds.
Posted by socketadmin at 5:08 PM
SF MLS Quietly Removes Listing Dates
It appears that the San Francisco Multiple Listing Service has quietly removed listing dates from the properties on its website. In other words, the public can no longer see how long a property has been sitting on the market. Not only disappointing, but a bit suspicious as well.
For example, without SocketSite having previously recorded it, you might have never known that the house at 300 Sea Cliff Ave has been on the market for over two years (listed on 1/13/03) and that the original asking price of $23.5m has yet to be reduced.
Tip: You can still get a rough idea of how long a property has been sitting on the market by comparing Listings #’s (the higher the number, the more recent the listing).
· Top Five San Francisco Trophy Homes [SocketSite]
Posted by socketadmin at 8:06 AM
September 7, 2005
Octavia Boulevard Rebirth
Rumor has it that this Friday will mark the grand re-opening of Octavia Boulevard in Hayes Valley. If nothing else, it's a great excuse to check out the pagoda.
Update: Friday it is, with an 11am ribbon-cutting ceremony at Octavia and Market (freeway on-ramp will be open to motorists early Friday afternoon; off-ramp will be open Saturday morning).
Posted by socketadmin at 8:30 AM
Ellis Act Blunder
The San Francisco Superior Court recently tossed the Ellis Act eviction notices for all the tenants of 1357 Folsom Street based on a notification technicality.
Andrew M. Zacks, which handles the vast majority of Ellis Act evictions for landlords in San Francisco, failed to provide a crucial piece of information on the notices – the estimated amount of relocation costs.
Landlords are required by the San Francisco Rent Ordinance and state law to offer evicted tenants a relocation payment that would compensate them for moving costs. Every Ellis Act eviction notice issued by Zacks prior to 2005 may not contain such a figure, opening the door for tenants citywide who’ve received such a notice to legally contest it.
If you’ve recently been served with an Ellis Act eviction notice, and you’re looking to buy some extra time, you might want to check your notice for an explicit estimate of relocation costs. Something tells us that it’s Zacks that might be needing a lawyer in the not so distant future.
· Tenants Win Major Ellis Act Eviction Case [Beyond Chron]
Posted by socketadmin at 8:15 AM
We’re Down With Lao
Lao Tzu, a sixth century B.C. philosopher, is quoted as having said, “Those who have knowledge, don't predict. Those who predict, don't have knowledge.” Or said much less eloquently, and applied to the real estate market:
The problem is that no one can predict the precise peaks and valleys of real-estate cycles any more than meteorologists can predict the exact path or intensity of a hurricane. And while most experts agree with Federal Reserve Chairman Alan Greenspan that the housing market will inevitably "simmer down," and that "home-price increases will slow, and prices could even decrease," nobody really knows when or where this will happen.
· Timing the Market For a Condo Purchase [RealEstateJournal]
Posted by socketadmin at 8:00 AM
Looks like Potrero has some “steep” competition as a group of Pacific Heights residents are gathering support to keep the ice on Fillmore.
Posted by socketadmin at 7:39 AM
September 6, 2005
A Somber Reminder
In 2001, and prior to 9/11, the Federal Emergency Management Agency (FEMA) identified the top three “likeliest, most catastrophic disasters facing this country”:
1. A terrorist attack on New York City 2. A hurricane hitting New Orleans, and 3. An earthquake in San FranciscoIt’s time to be prepared rather than ignorant.
Posted by socketadmin at 12:20 AM