September 19, 2007
JustQuotes: Predicting, Pontificating And Forecasting From New York
"Earlier this year, Robert J. Barbera, who’s been a Wall Street economist for 25 years, was predicting a soft landing for housing — that is, stagnation rather than substantial declines. So were most forecasters. “But now it appears that’s not the way we’re going to do it,” says Mr. Barbera, the chief economist at ITG Hoenig, who correctly predicted yesterday’s Fed move.
What has changed in recent weeks are the spike in mortgage rates, the drying up of subprime lending and the ever-growing number of houses on the market. A research firm called RealtyTrac reported yesterday that mortgage lenders had filed 244,000 foreclosure notices last month, up from only 113,000 a year earlier. Amazingly, more than a third of the filings were in just two states, California and Florida, the sites of some of the largest prices increases and the most ridiculous mortgage lending.
It’s also worth looking at what happened to home sales last month in California, where counties release property transaction records earlier than they do in most of the rest of the country. With mortgages harder to come by, home sales dropped even more rapidly than they had earlier in the year. In the Los Angeles area, 35 percent fewer homes sold this August than in August 2006, according to an analysis by DataQuick Information Systems. Around San Francisco, the decline was 31 percent.
The exact path that housing prices will take over the next few years is, obviously, unknowable. But there is a good deal of evidence to suggest that the typical home last year was overvalued by something like 20 percent. I wouldn’t necessarily argue with anyone who insisted on 15 or 25 percent."
∙ Will the Fed Reverse the Housing Slump? [New York Times]
∙ Bay Area Up But San Francisco Down (And That’s A Good Thing) [SocketSite]
∙ San Francisco Sales Activity: Reported Sales Volume Takes A Little Hit [SocketSite]
First Published: September 19, 2007 9:00 AM
Comments from "Plugged In" Readers
Great to see California getting the attention we finally deserve. We're #1! We're #1! Leading the nation in both foreclosures and risky jumbos!
Posted by: Dude at September 19, 2007 10:04 AM
Yeah, and out of 100 metro areas in the US, SF is #91 on the Moody's list of forecasted price declines (meaning it's in the top 10 most price-stable cities), with a bottom forecast in 2Q08. That is sure not much time before prices start going up again.
Posted by: anon at September 19, 2007 11:41 AM
Pardon me if I keep waiting until they start going up again before I consider buying. Just in case the recovery is a few days late. Or the "containment" continues to spread.
Posted by: Dude at September 19, 2007 11:49 AM
"Pardon me if I keep waiting until they start going up again before I consider buying. Just in case the recovery is a few days late. Or the "containment" continues to spread."
The problem is, a lot of people are still waiting for the price to GO DOWN in SF.
Posted by: John at September 19, 2007 12:44 PM
Anon 11:41 -- you did not read that Moody's report quite right. the SF MSA was number 91 of the WORST 100 (out of 290) areas. It is not in the "top 10 most price-stable cities" but is much closer to the bottom than to the top. The prices in the 190 areas that are not on the list were expected to do better in terms of retaining value.
So the Moody's poll of economists shows a prediction of SF MSA prices declining by 2.7% just between now and Q2 '08. Not really good news if you're a seller. But hey, in yet one more aspect of life, at least we can say "we're better than Stockton (but not quite as good as Schenectady)!"
Posted by: Trip at September 19, 2007 1:06 PM
Seems folks are missing the punchline here. This Moody's "forecast," much like the UCLA forecast, is essentially garbage. Why? Take Modesto for example. Forecast says Modesto may decline 22.3% from its peak. However, when I look at the local Modesto paper, prices are ALREADY down more than 20% there:
What about prices in Sacramento and Fresno? Ditto, just check the SacBee. So this is like me predicting that the Fed will likely cut rates at it's September 18th meeting. You heard it here first! Easy to be right when you predict stuff that's already happened.
Posted by: Dude at September 19, 2007 1:46 PM
This is simply emblematic of the continued expansion of inequality in America. Cities populated by middle- and lower-class workers are showing enormous declines in house prices (Sacramento and Modesto for example) as economic fundamentals such as low wage growth and reduced availablity of mortgages have their effect.
But citites such as San Francisco which have long since priced the middle class out of existence, continue to appreciate unabated as wealthy families trade one like asset (e.g. a $2M suburban home) for another (e.g. a $2M loft) as it suits their situation.
The trend will never abate as long as restrictive building codes prevent any meaningful expansion of the housing stock in "The Fortress" (SF & San Mateo counties).
We can all officially give up hope now.
Posted by: Jimbob at September 19, 2007 2:33 PM
Great comment Jimbob, sadly true.
Posted by: Observer at September 19, 2007 2:39 PM
I certainly wish I knew what was going to happen!
It would seem however that the Fed and Govt are attempting to keep NOMINAL housing prices level, but depreciate our dollar. This would mask the real decline in house prices.
as for that Moody's article: it's pure rediculous at best. I looked at the "peak" and "bottom" time scales, and they predict a 6-9 month downturn? (Q32007 to Q2008) SF's last one took 6-8 years depending on how you count. it would seem optimistic at best to put the bottom of SF housing at 1/2 a year away.
Posted by: ex SF-er at September 19, 2007 2:51 PM
Great theory: Bifurcated market. SF is immune from price declines because people merely trade a house in the burbs for a house in the city.
The only problem is that it isn't a trade, it's a purchase. And to do the purchase, they have to sell their house in the burbs. And as that price of their $2M suburban house drops 20% to $1.6M, it makes it $400,000 harder to buy the SF home that's anywhere near comparable.
So there is no need to give up hope. There may be a need to wait. That's an awful lot of cranes in the sky I see, an awful lot of infill condos being built and former rentals being converted, and a huge question mark as to the ability of people to qualify for mortgages on the towers being completed, without even considering the new ones in progress.
Posted by: Tipster at September 19, 2007 3:21 PM
You just have to look at the recent history to see that the middle-class vs. upper-class distinction does not answer anything. Modesto and Stockton saw much, much higher housing appreciation in the last few years than SF did -- but one certainly could not conclude that Modesto and Stockton must therefore be upper-class enclaves. It's just that the bubble in those cities was bigger. So while the bubble is bursting in SF, it is bursting bigger in those other places. It has nothing to do with middle-class places getting unfairly hit while upper-class enclaves continue to appreciate unabated. Both of those assumptions are false.
Posted by: Trip at September 19, 2007 4:06 PM
I'm surprised that people still don't think prices are coming down in the city. I wanted to post a few properties I recently spotted. Not the $3MM drool-inducing RE porn usually on SocketSite, but datapoints nonetheless:
No, they're not Marina mansions with whale leather couches and helicopter pads on the roof. They're places where regular San Franciscans live. And they're getting cheaper. It starts in the outer areas, and seeps in.
Posted by: Dude at September 19, 2007 4:31 PM
If doom and gloom posts were money, you'd own a 5bd in Pacific Heights.
[Editor’s Note: Attack the arguments, not the people.]
Posted by: amused at September 19, 2007 4:38 PM
amused - the way the market is going, I will in a few years!
BTW, that first link is wrong. According to pacunion.com, that first short sale was reduced another $25K to $550.
Here's another nice one in Noe Valley. $100K off.
This one in Twin Peaks, although goofy outside, looks very nice inside.
Seems prices are approaching $400/sq.ft. for nice properties again.
Posted by: Dude at September 19, 2007 4:46 PM
I wonder what the deal is with the place in Noe Valley that Dude @4:46 sent the link for. It has been available at least since early summer (along with other units at the same address). Seems like a decent unit, location and price. Any scoop on that?
Posted by: Rahul at September 19, 2007 6:41 PM
We saw the Noe Valley place about 45 days ago.
- It's a nice renovation, but not astonishing.
- It's right on the corner of Cesar Chavez and Guerrero, so loud car/bus noise seemed to be omnipresent.
- It's a 4-unit TIC.
- No parking. The owner would pay for a year of parking at the medical office around the corner, but it was night and weekend parking only (ugh). That said, St. Luke's has parking nearby and is only a 3 month waiting list, or so I was told.
When we saw the place, it had just hit two hundred (200) days on market (!!), and the price cut on both units had just happened a week or two earlier. I asked the showing agent about the history, and the story was that for the prior two hundred days, they were only accepting a group loan (!! for a 4-unit TIC!), but now they were accepting individual financing and had dropped the price, so they expected it to sell quickly.
We considered putting in an offer, but after reading comments here and elsewhere and playing with the NYT calculator, decided that it was a ludicrous time to try and buy (we ended up renting here: http://rentalsinsf.com/rental.php?id=769). I expected the place to go moderately quickly, and I've been watching it via redfin since then, and to my surprise, none of the units had sold. I just went and looked on redfin after seeing the link, and all four units are current listed as off the market. Maybe they finally blinked and are going to rent.
As for why they didn't sell, it's hard to say. It certainly was a contender, and if I thought the market was going to pick up in a few years, sub-875K for a 4/3 near to BART and MUNI seems like a good bet to appreciate, lack of parking or no. Maybe people got scared by the huge time on market, and figured there was something massively wrong with it that everyone else had figured out already. I certainly wouldn't have paid 875 for the top units -- 700-750 might have seemed reasonable if the market was still cooking upwards constantly. The lower units are (were?) nice and approaching reasonably priced, if you're single or you don't have a lot of stuff. Nice back deck, too, though you had to share it. :)
Posted by: illspoken at September 19, 2007 6:59 PM
Rahul and illspoken, that place is not in Noe Valley. It is at the intersection of two highway-like thoroughfares, but yes technically quite close to Noe Valley. Beautiful Vic, but bldg seems to have at least one For Sale sign up more often than not. For years and years. I mean years and years and years.
Before the rise of real estate websites, one could gauge an up market by the proliferation of for sale signs on such properties. It is a great looking bldg, but could be harder to sell in a down market. Wait a couple years, and you will see some deals without hair on them.
Dude, the twin peaks place looks like a reverse plan, probably on the downslope side of the street. Garage and entryway are on the top (third) floor at street level. That and the 70s combined to produce its curb appeal. Thx for posting these listings for those of us south of California st.
Posted by: Emmett_Brown at September 19, 2007 7:58 PM
"That said, St. Luke's has parking nearby and is only a 3 month waiting list, or so I was told"
Good luck walking home from St. Luke's parking along Cesar Chavez at night. Might want to get a concealed weapons permit.
Posted by: anon at September 19, 2007 8:04 PM
I'd concur if you were talking SF General side of the Mission. But, have you seen the Tiffany St. side of St. Lukes lately?
Posted by: Emmett_Brown at September 19, 2007 8:59 PM
Emmett_Brown, I meant to comment on that but forgot. I'm a newcomer to the Bay Area (two years), and a new resident of the city (~35 days), but even I know that's not Noe Valley. :) I suspect that might have contributed to it sitting on the market for as long as it did -- if they'd legitimately listed as being in the Mission, they might have gotten a lot more interest, rather than wishing and hoping that it was JUUUUST a block or two over and inside Noe.
The pharmacy around the corner is a dump, but the little market at the corner of 26th & Guerrero is adorable, if pricy.
Posted by: illspoken at September 19, 2007 9:57 PM
Re: "So there is no need to give up hope. There may be a need to wait. That's an awful lot of cranes in the sky I see, an awful lot of infill condos being built and former rentals being converted, and a huge question mark as to the ability of people to qualify for mortgages on the towers being completed, without even considering the new ones in progress."
We moved from Chicago two years ago with the goal of retiring in the Bay Area. We own a vacant lot in which we intended to build our dream home.
We've now decided to relocate to Fort Lauderdale, Florida. The reason? Construction costs are between 25-50% higher in the Bay Area compared to Chicago or Florida. Existing homes are at least 50% higher in the Bay Area compared to Chicago and ~25% compared to Florida.
There are currently 10 times the number of listed homes in Fort Lauderdale compared to San Francisco and Fort Lauderdale's population is 1/5th San Francisco. I read that as fifty times the inventory per family in Florida!
You are free to use our decision as a contrary indicator. I only hope San Francisco prices decline.
Posted by: cary at September 20, 2007 9:32 AM
This neighborhood is vastly improved over the last few years. I live near there and the changes have been pretty remarkable. It is completely safe to walk from St. Lukes on Ceasar Chavez at night and comments to the contrary must come from people who don't live in this area. Guerrero and Ceasar Chavez is a very noisey and somewhat dreary corner however. Even with individual financing, an 875K TIC at that corner seems too expensive. A SFR on Tiffany listed at 930K just closed escrow within 30 days of being listed. I don't know the sale price.
Posted by: anono at September 20, 2007 9:33 AM
No properly priced nice houses in A or B level neighborhoods are going down in price, yet. Quite the opposite.
Posted by: fluj at September 20, 2007 9:56 AM
^ Pardon my ignorance, but could someone tell me what neighborhoods in SF are considered A or B level?
I'm assuming Pac Heights, Marina, Nob Hill, North Beach, Russian Hill?
Are there others? Thx in advance.
Posted by: Dave at September 20, 2007 11:28 AM
"No properly priced nice houses in A or B level neighborhoods are going down in price, yet. Quite the opposite."
I agree that properly priced homes continue to move fast but that "properly pricing" is also code for lowering expectations in terms of what a home is worth compared to a year ago.
Posted by: Michael at September 20, 2007 11:48 AM
A = 94123 north of Union
B = 94123 south of Union
Posted by: Dude at September 20, 2007 11:59 AM
My reaction as well, Michael. "Properly priced" = "embracing reality".
More realtor ad terms:
(Lwr) Pacific Heights = north of but not actually on Geary
Noe Valley = west of but not actually on Mission
illspoken, I don't think the true neighborhood affects the value of the bldg, it is simply a bad location. Do you actually live above Martha's? That's a cool looking place but you must have some morning 'traffic' as well.
Posted by: Emmett_Brown at September 20, 2007 1:01 PM
I'd call areas north of california A. Noe Valley, Cole Valley Ashbury terrace A-. Potrero Hill North B. Bernal, Glen Park B-. All these areas will see quick sales tomorrow and likely for the foreseeable future, and yes overbids, if properties are priced around the median in $/sq ft
Posted by: fluj at September 20, 2007 1:42 PM
noe valley is west of dolores. the mls shows same. or are you talking about craigslist aads?
Posted by: fluj at September 20, 2007 1:48 PM
anything past san jose/guerrero is noe valley, though many people on the west side of San Jose/Guerrero try to claim Noe. I would add Diamond Heights to the A list based on the views alone. Assigning all of Glen Park a B- is also not accurate, as parts of GP are borderline A/A- and others are C (near the BART).
Posted by: anono at September 20, 2007 3:23 PM
We have a very strange and wealthy market climate in San Francisco. Although it is not totally detached from the national real estate market, financial ups and downs of mortgage backed securities, and trends in supply vs. demand, we do live in a unique place. Just a day ago a new benchmark was set for house prices in the Mission district. Although very very trendy now, you would not call the Mission an A neighborhood, but probably a "B" or B-
Property: 95 Tiffany. A small one block long street in the southwestern corner of the Mission adjacent to Noe Valley and Bernal Heights. Right over by Mitchell's Ice Cream. Cut little but fairly unimpressive barrel front marina style bungalow. 2br, 1 original bath, remodeled kitchen with no window but 4 skylights, bonus rooms down of average utility, standard size lot, no views, about 1200 square feet, nothing spectacular but the kind of place in constant demand by SF buyers. Listed for $929,000 and sold in one week for $1,136,000.
As much as people poo poo the eminent crash of housing values in San Francisco, and I personally believe that the current price range is a bit "wacky" given interest rates, economy, and national housing market, people are more than motivated to buy homes in the city. As long as people are wanting to live here, prices will hold strong.
Although cliche, no more land is being added to our 7x7 city by the bay!
Posted by: realtor at September 20, 2007 3:27 PM
It gets messy after a minute to try to encompass everything.It's like, OK, if Glen Park north (Fairmount Heights) is A-, then pretty much all of Noe west of Dolores is A. But if Noe is A, then you have to call Presidio Heights (think Jackson street) A++. Should Presidio Heights and Glen Park fall into the same category? That doesn't make sense, does it? Regardless, my point is that properties in central, desirable neighborhoods, if priced at or near the median in ppsqft, continue to fly. That's happening right now. We can guesstimate that trend will continue for the rest of this quarter, too, because the market has already absorbed a lot of big hits.
Posted by: fluj at September 20, 2007 3:33 PM
I wouldn't call Glen Park an A neighborhood and I live here (and love it!). It will never be as expensive as PacHeights - partly because no one seems to know where the hell it is and partly because of history. PacHeights, Presidio Heights, Nob Hill, etc. have always been the neighborhoods of the wealthy and the homes reflect that. Glen Park was the workingman's neighborhood and the houses reflect that too. Most of my long term neighbors are/were longshoremen, carpenters, teachers, cops, etc. It's changing (just look at what my family does fora living) but I seriously doubt it will ever be like the posh north end of town. But it's fabulous neighborhood (new library, a sweet litle market, some decent restaurants starting to appear) with a real sense of community and some sweet single family homes - part of what makes it a great place to put down roots.
Anyway - I digress. I have no intention of selling our place and we can afford it easily so the gain or loss is all funny money.
Posted by: nowonderitcostssomuchhere at September 20, 2007 4:46 PM
Fluj, I was half-joking about boundaries, but you are right I was referring to the CL ad. I didn't realize the MLS had strict definitions.
Realtor, another plus for Tiffany is the quasi-cul-de-sac created on the Duncan side. Keeps cars from making it a thoroughfare, but still keeps it open to bicyclists. It will be a mini Fair Oaks, just needs some more sidewalk trees and less - ahem - jailbars on windows.
Nowonder, I remember reading an article on Glen Park when the phrase GU (Geographically Undesirable) was not uncommon. I found the link, with a reference to palace hidden at 47 Chenery.
Posted by: Emmett_Brown at September 20, 2007 5:02 PM
The problem with the way that houses are bought and sold is that there is not enough good data at a more granular level-- it is thus a selling process of anecdote, not data. Instead of being able to pull up a zip code and look at # of properties sold historically, total square footage, average price per sq ft etc (very basic info), houses are sold based on a couple of selected comps like 95 tiffany and stories that houses "continue to fly." I don't mean to pick on the last two posts, because what else is someone supposed to do except look at comps? Does anyone know of better data? Other than the 20 MSA's covered by Case Shiller and dataquick, it seems like there is not much granularity available.
I know that Dataquick releases numbers for Sf and the bay area and by zip code, but the limitations of these numbers have been well-covered. Still it's helpful and says something that the # of home sales is at 15 year lows. Median home prices however are of very limited utility, esp with what's going on now in sub-prime and alt-a. By definition, median home prices should be going up by eliminating the lower credit purchases.
I wish the N.A.R. would put together some regional numbers, but obviously it's in their best interest to keep the market and selling process one of anecdote rather than data and real info. I find it amazing that it is the single largest purchase anyone will make and yet it is the one they do with the least amount of data. I understand housing is a place to live and an emotional decision. But when you look at the boom of this decade, unlike any other r/e boom, it is driven largely by financing and not by job and wage growth. Thus, even if housing is an emotional decision, it is still a financial one-- to take on the leverage that people have and to focus only on monthly payments, implicitly you have to believe that real estate can only go up and you will be bailed out by the market.
I don't claim to know whether housing prices will go up or down-- I have a guess. But it seems certain that there is much efficiency making to be had in terms of data, the sales process, and the fee structure.
Posted by: anon at September 20, 2007 5:02 PM
I live on Tiffany and looked at 95- great little house (listed by one of the many agents who live on the street). The closed end at Duncan is nice and most of the bars on windows have disappeared in the last 2 years and many of the trees are only a few years old also. Many of the houses on that street have been completely remodeled in the past 3 years- perphaps timed with the building of that new condo building at the end of the block. Nice to see our little street get some recognition on a site that spends a lot of time talking about SOMA highrises.
Posted by: anono at September 20, 2007 5:58 PM
anon at 5:02pm: many realtors/neighborhoods put out newsletters that include neighborhood specific sales data. Or at least they used to. I know Noe, Bernal, Russian Hill and Telegraph (and Potrero?) at one time listed all sales in the neighborhood newsletter and it was a great source of info. Many agents that stick to specific parts of the city also have good lists of this information for the neighborhood they work. For S.F., I think this is the type of data a lot of people refer to when they say that prices are continuing to rise in many neighborhoods. But who knows, maybe not.
Posted by: anono at September 20, 2007 6:04 PM
The answer to how to obtain values is ask a good realtor or agent. He/she can use a tool in the SFARMLS that allows agents to actually draw a polygon on an SF map so that it only encompasses relevant blocks. Then they can do a search within only that limited grid, for sales within the last five months or something. It's very exact. Like, you want Mission comps but you want Valencia corridor and know it to have higher values than east of Mission street. They can trace an outline that applies and get, say, all the activity since the second week in August (when the market started getting scarier).
Posted by: fluj at September 20, 2007 7:15 PM
to go back to the reduced TIC's on cesar chavez - they're also ellis acted. no condo conversion!
Posted by: anonlr at September 20, 2007 8:43 PM