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November 29, 2005

Funny How That Happens

525 Gough Redux.jpg

After nine months, the “sale pending” signs that have been so prominently displayed in the windows of two units in the 21 unit development at 525 Gough have suddenly morphed into “for sale” signs. Not too soon considering, as far as we can tell, they were never actually “pending”.

These two units, along with a third in the back of the building, were marked as “Model - Not For Sale” on the original building statements. We now learn, however, that these three units were actually designated to be “Below Market Rate” (BMR) units and will be offered for sale at $357k through the Mayor's Office of housing program. Yes, just a bit cheaper than comparable units which were priced between $859k and $875k.

We’re all in favor of Below Market Rate units. Really. We’re not, however, in favor of what we might consider to be deceptive marketing practices. And for the sake of all parties involved, we can only hope that the developer’s original disclosure packages specifically mentioned these BMR units (unlike their marketing materials).

525 Gough: Below Market Rate Statement [Brown & Co.]
525 Gough: Overview [Brown & Co.]
525 Gough: No Sell Out [SocketSite]

Posted by socketadmin at 2:50 PM

The “Rogue” Sales Report

According to the Commerce Department, US new homes (as opposed to existing homes) sold at an annual rate of 1.42 million in October, up from a revised 1.26 million pace in September; a 13 percent increase and the biggest jump since April 1993 (and sales in the West showed more than a 40 percent jump).

At the same time, “the average price fell from September, suggesting that new homes at the upper end of the market had shown more softness than middle- and lower-priced homes.” A point that led economist Robert Brusca to comment, "All other housing signs are in the other direction. For now consider this a reversible, rogue report."

We offer two words to consider: Builder Incentives (i.e. discounting).

New home sales soar [CNN/Money]
US Existing Homes Sales Down, Inventory Up [SocketSite]

Posted by socketadmin at 9:19 AM

November 28, 2005

California Median Home Prices And Sales Fall

Today’s California Association of Realtors press release carries the bold headline: “Median price of a home in California at $538,770 in October, up 17.2 percent from year ago; sales decrease 2.8 percent”. And while prices are indeed up from a year ago, they are DOWN from the previous month (“The October 2005 median price decreased 1 percent compared with September’s $543,980 median price.”).

In addition, “C.A.R.’s Unsold Inventory Index for existing, single-family detached homes in October 2005 was 4 months, compared with 3 months (revised) for the same period a year ago.” The press release also included the following:

“Note: Large changes in local median home prices typically indicate both local home price appreciation, and often, large shifts in the composition of housing market activity. Some of the variations in median home prices may be exaggerated due to compositional changes in housing demand.”

In other words, even if “median sales prices” are increasing, it could be due to a changing sales mix (i.e. wealthy owners/investors getting while the getting is good) rather than any real home value appreciation. Keep that in mind while we report that the median sales price in the San Francisco Bay Area ticked up 1.4% from September to October, while sales activity fell nearly 10% during the same period (and over 10% year-over-year).

California Association of Realtors Press Release (11/28/05) [CAR]
October 2005 Median Home Prices Chart [CAR]

Posted by socketadmin at 1:45 PM

US Existing Homes Sales Down, Inventory Up

We’re not too surprised by a winter sales slowdown, but the nationwide inventory numbers caught us by surprise. According to Reuters:

Sales of existing U.S. homes slowed in October and the inventory of unsold houses rose to the highest level in nearly 20 years, a trade group said on Monday in a report confirming the end of the nation's housing boom.

Sales of previously owned homes fell 2.7 percent from September's upwardly revised 7.29 million unit annual pace, and the drop would have been even larger if not for a surge in home-buying linked to Hurricane Katrina, the National Association of Realtors said.

"The housing sector has likely passed its peak ... and the boom is winding down to an expansion," NAR chief economist David Lereah said. "Many of our hot housing markets are transitioning from a sellers' market to a buyers' market."

Welcome to transition.

US Existing Home Sales Fall 2.7 Percent in October [Reuters]
Top O’ The Market To You! [SocketSite]

Posted by socketadmin at 10:30 AM

November 26, 2005

Hayes Valley Holiday Block Party 2005

Find yourself missing NYC’s NoLita or SoHo? Then head down to Hayes Valley, especially this Friday, December 2nd, from 6-9pm for the Hayes Valley Holiday Block Party.

It’s full tilt people watching and boutique shopping (with none of the typical street fair schlock). We love it. And we'll be there.


Posted by socketadmin at 12:30 PM

November 22, 2005

Over Half Of San Francisco Loans Interest-Only

According to LoanPerformance, San Francisco had the second highest percentage of interest-only loans originated during the first half of 2005. At 53.4%, it was second only to Santa Cruz/Watsonville (54.8%), and almost double the national average of 28.5%. Oakland wasn’t that far behind at 48.8%.

Guess they believe Bob. The good news? 53.4% might be significantly less than previous estimates of nearly 70%.

Boast Busters In The Making [SocketSite]
Interest-only loans meteoric rise in the Bay Area [SocketSite]

Posted by socketadmin at 2:43 PM

November 18, 2005

Top O’ The Market To You!

Inventories and interest rates are up, sales are down, and prices are either flat or falling. So we’re calling it: welcome to the top of the San Francisco housing market!

For sale signs are popping up left and right, and as one seasoned agent recently commented, “we’re going to wake up one morning and it’s going to be like it snowed ‘For Sale’ signs the night before.” In addition, thousands of new condominium units are either coming on the market, currently under construction, or have recently been funded.

Long-term rates continue to climb, but more importantly, short-term rates have climbed even more: one-year ARMs are at a three year high and are closing in on the 30-year fixed rate. This is extremely significant in a market where buyers have turned to short-term ARMs for affordability reasons rather than financial wherewithal.

The difference in monthly payments between a one-year ARM at 4% versus a one-year ARM at 5% is over 14% (that’s an extra $400 per month on a $600k loan). In other words, and from a cash flow perspective, prices would need to fall at least 14% in order to maintain the same level of affordability in the marketplace.

Year-over-year sales have declined for the seventh month in a row, and the median sales price has flattened over the past quarter. And while many agents are still quick to point out the year-over-year positive appreciation in prices, that number is meaningless if you purchased a home during the past couple of months over which the median sales price has actually fallen.

We’re not predicting, we’re just observing and calling a spade a spade (or a duck a duck). Welcome to the top of the market.

Bay Area prices slow as mortgage rates rise [Chronicle]
San Francisco Housing Inventory: Up, Up, And Away! [SocketSite]
Bay Area Inventories Up, Agent’s Spirits Down [SocketSite]
Median San Francisco Bay Area Home Prices Down $20k [SocketSite]

Posted by socketadmin at 8:43 AM

November 17, 2005

San Francisco's Home Sales Slump

Via Inman News: “San Francisco Bay Area home sales declined on a year-over-year basis for the seventh month in a row in October, according to DataQuick Information Systems, a real estate information company. The median home price in October was up 17.2 percent since October 2004 but slipped 0.3 percent from September 2005.”

Catch where we’re going with this?

Posted by socketadmin at 4:08 PM

The Tide Has Turned In Sacramento

We missed it, but luckily The Housing Bubble 2 didn’t. According to Sacramento’s News 10.Net, “A report from the California Building Industry Association shows new home sales in Northern California fell 40 percent during the past three months, compared to the same period last year. It's the sharpest such drop in the last 15 years.”

Anyone else spotting any trends here?

New Home Sales Drop Sharply [News10]

Posted by socketadmin at 7:34 AM

Look At All That Pretty Green

Sacramento County Housing Inventory

According to Lyon Real Estate, Sacramento County housing inventory has tripled since March of this year, while total sales have declined.

Once again, it's not the Bay Area, but we’re still building up to that...

Sacramento County Homes for Sale vs. Sold vs. Pending [Lyon RE]

Posted by socketadmin at 7:15 AM

Writing On The Wall

U.S. housing starts fell 5.6 percent in October as construction of both single-family and multifamily homes slid, while a drop in permits for future groundbreaking was the largest in more than six years, the government said on Thursday.”

Granted, not Bay Area specific, but perhaps even more telling. And a perfect setup for our announcement tomorrow...

Housing starts and jobless claims fall [Yahoo!]

Posted by socketadmin at 6:55 AM

November 9, 2005

Can’t We All Just Get Along?

Home Depot received official approval to build a store on Bayshore Boulevard, after a narrow vote by the Board of Supervisors ended years of frustrated attempts by the big-box retailer.” That being said, Supervisor Ammiano vowed “It’s not over yet.”

Come on Tom, at least employ a good catch phrase like “I’ll be back” or “If it doesn’t fit, you must acquit.” As far as we’re concerned, “It’s not over yet” is kind of a dud (as is the threat).

Home Depot gets nod to build in The City [Examiner]
Potential Home (Depot) Wreckers [SocketSite]

Posted by socketadmin at 9:26 AM

November 8, 2005

Wall Street Journal Condo Buying Tips

Okay, so if you still insist on buying a condo, at least do it right. “Five Tips for Edgy [condo] Buyers” from the Wall Street Journal Guide to Property:

The following five tips may help buyers concerned about resale values when buying in a market where prices have risen sharply.

1. Location is still the key factor.
2. Avoid the 'white vanilla box.'
3. Look for name recognition.
4. Weigh old versus new.
5. Buy in a building with a good condo association.

Yes, for the most part, common sense. And yet we’re constantly surprised by the bad decisions people make when they’re in a panic (e.g. “Oh my god, if we don’t buy this subterranean TIC in-law unit right now we’ll be priced out forever!”).

Will Your Condo Retain Its Value? [RealEstateJournal]

Posted by socketadmin at 12:06 PM

Boast Busters In The Making

To be fair, this isn’t nearly as much of a boast as the original, but it still needs some busting. Under the Inman headline “Realtor questions value of interest-only real estate loans”, columnist Robert Bruss downplays the potential of a “financial foreclosure debacle”. According to Bob:

“...after the first 10 years, most of these [interest-only] mortgages are "recast" and become fully amortizing for 20 years. More likely, the borrower will sell the home and pay off the mortgage.”

“Interest-only mortgages allow first-time home buyers to get started building home equity. They are also ideal for home buyers who expect to stay in their homes less than 10 years.”

“I hope today's versions of interest-only mortgages won't have the same sad result that occurred during the Great Depression...Frankly, I'm not worried.”

Bob might not be worried, but we sure are. San Francisco inventories are already on the rise, and over the past couple of years, the majority of new Bay Area mortgages have either been interest only or adjustable rate. Now guess what happens when, as Bob points out is most “likely”, they all try to sell at the same time?

And understand that the only way holders of interest-only mortgages “build equity” is through speculation (i.e. increasing property values). Over the past quarter, median sales prices in the Bay Area have started to retreat. And never mind a down market, even a flat market can be disastrous for those who have banked on speculation to “build equity” due to transaction, maintenance, and carrying costs.

The fact that numerous buyers turned to interest-only or short-term adjustable rate loans for affordability reasons, rather than investment prowess (i.e. maximizing cash flow/tax deduction), is going to have a huge impact on the market. And not in a good way for those who have only recently entered the market.

Posted by socketadmin at 9:49 AM

November 7, 2005

QuickLinks: Grapes Of Wrath (In Reverse)

Saying Goodbye California Sun, Hello Midwest [NYT]
Time to Move On? [Kiplinger]

Posted by socketadmin at 3:59 PM

San Francisco Housing Inventory: Up, Up, And Away!

HousingTracker: San Francisco

According to the HousingTracker, San Francisco housing inventory is up over 36% over the past two months (based on active MLS listings). That’s a good statistic, but don’t pay too much attention to the HousingTracker “Median Price” number which represents median list/asking prices (as opposed to actual sales prices).

Posted by socketadmin at 3:32 PM