While running 9.2% below 2006 levels, listed housing inventory in San Francisco increased 4.2% over the past two weeks as new listings outpaced new sales in San Francisco in a not-so-typical pre-Labor Day bump in new listings. At the same time, listed inventory continues to run at roughly two months of supply which isn’t too atypical for San Francisco, but also continues to represent less than half of all units that are currently competing for buyers in the city.
∙ SocketSite’s Complete Inventory Index (CII): Q3 2007 (SF) [SocketSite]
∙ San Francisco Listed Housing Inventory Update: 7/31/07 [SocketSite]
So the fabled “spring bounce” never materialized this year, agents said wait for summer. Summer selling season fizzled, so people have pulled out of the market to wait until after Labor Day to relist at their wishing prices.
According to the well-known Credit Suisse report, this fall will be heavy with ARM resets (think October is the peak for ’07). And with the mortgage market finally becoming rational again, many owners will have no refi options. Looks like we’ll soon be testing that theory that SF owners are highly affluent and can all afford their homes…
I had a 10 year arm and I refi’d in January anticipating rate increases. Not sure what options are available to us now but my 6.125% fixed, 30 year, doesn’t seem so high anymore.
Dude …
http://www.iht.com/articles/2007/08/01/business/leonhardt.php
When these ARMs reset owners have three options
1. Curtail other spending to cover their rising monthly payment
2. Refi into a new mortgage
3. Get rid of the property either through Selling or Foreclosure
The effects?
1. An over all slowing of the economy as consumer spending, 2/3rds of the economy, declines as income is diverted to pay the higher mortgage rate.
2. Refi will be difficult for most and even those who qualify will be paying more each month due to rising interest rates. These owners will join the owners in group one, reducing spending and contributing to the economic slow down.
3. Additional inventory of ‘motivated’ sellers many will to drop the price to get out from under the monthly payment. Those unable to drop their price will stop making payments and instead save their money as they wait for foreclosure and look for a rental. Once the home is foreclosed on the bank will hold it for a period until they are forced to ‘mark to market’ and sell the home at whatever price they can get for it. Adding additional pressure to other sellers to lower their prices. These foreclosures will draw out the pain past Sept ’08, as it takes several months form the Notice Of Default until the bank takes possession of the home and in able to place it back on the market for sale as an REO.
I think BDB has it right. But there is one additional factor. The pool of available/qualified buyers is now a fraction of what it was a year ago as underwriting/downpayment standards have tightened by a ton. There will be an increasing number of “motivated sellers,” but even if there were not, the same old number of usual sellers (new job in a different city, outgrew house, moving to the ‘burbs for schools, retired, died) now have a much, much smaller number of potential buyers. Lower demand = lower prices. And, of course, given the huge numbers of overextended buyers in 2005 and 2006 with resetting ARMs forcing a sale, the combined impact on prices will be very large. If I were a buyer but not in a hurry, no way would I buy now when you’ll be able to get much more for the money 12-18 months from now. I saw this all in 1991. Nothing new here, except maybe the magnitude of the bubble this time.
I wonder how many people at the medium to higher levels of the market will really be forced to sell. I bet not that many. If I had to leave town and housing prices were low, why would I sell my place for a potential loss especially with rental rates on the rise. Plus anybody (especially couples) who is young and working hard probably earns a lot more now than when they bought their home a year or three years ago.
On the bright side this potential crisis may knock some financial sense into people who need it…basic lessons like don’t erode your credit score, and do all you can do increase net worth / cash.
anon 2:25 … well it looks like in the 90’s lots of people in CA and SF were forced to sell at a loss
http://www.dqnews.com/AA1995OFA06.shtm
BDB, this quote seems to be directed at the Bay Area as a whole, not SF by itself. Perhaps I am wrong, but “Large newly-built homes that were bought during the 1989 to 1991 sales surge have been particularly exposed” makes me think I am right. It would be interesting to see how the percentages stacked up, in this historical example, comparing the impact on SF v. everyone else in the Bay Area.
I am curious why so many people always write as if somehow San Francisco is “different” from the Bay Area, and “special” in its wealth and desirability to buyers. I hear the same thing when visiting Balboa Island (Newport Beach), Carmel, and Kapalau. These areas all have very high incomes and small quantities of homes for sale, and are very attractive to the wealthy, yet even they declined in ’91. The people who keep posting about how “unique” the city’s market is are forgetting about a “certain realtor to the stars and society” who had to crawl out of a back window from the garage of his Nob Hill building to avoid the FBI for tax evasion after the market crashed. HE was the toast of the city, had all the outer Broadway listings, and “came a cropper” when his real estate “investments” went south. Herb Caen was shocked! and went on to lament about the prices in his own building, the Brocklebank.
Craig if you would click the link provided you would see the chart that breaks down the data by county and you would also see …
Resale houses
Sales counts & loss percentages
March-May 1994 and 1995
Mar-May Loss Loss
County All Sales# Pct. 95 Pct. 94
San Francisco 1,026 16.2 pct. 24.0 pct.
1994 and 1995? Pick and choose…..
That is all the data that DQ provided but the press release clearly states that the peak year for homes being sold at a loss was 1993.
So for at least three years, 1993-1995 we have clear proof of double digit percentages of homes being sold at a loss after a price spike.
If you have other independent data that supports whatever point it is you are trying to make, feel free to post it.
I was responding to anon 2:25 by providing a clear example of a period of several years were a sizable number of owners in SF, for whatever reason, sold for a loss.
CA cities fill foreclosurelist.
San Francisco is at # 78 in the country.
http://money.cnn.com/2007/08/14/real_estate/California_cities_lead_foreclosure/index.htm?source=yahoo_quote
Well, #78 on a list of 100 is sure not frightening to me. It means we are in great shape compared to the rest of the US.
#78 doesn’t mean anything other than 77 other cities used more subprime loans than we did. Subprime problems typically happen faster than Alt-A. There were practically no subprime loans in SF. I’m surprised to see SF on the list at all.