The relatively good news for California:

Across the state, sales rose for three consecutive months starting in April after 30 straight months of declines, the California Association of Realtors said. About 40 percent of those transactions were foreclosure sales, DataQuick Information Systems reported.
“California is having a wrenching decline in wealth, but this is a cathartic event that will lay the foundation for a recovery,” said Mark Zandi, chief economist at Moody’s Economy.com in West Chester, Pennsylvania, in an interview. “This signals the beginning of the end.”

The not so great news:

Almost $1.3 trillion of homeowner equity was lost in California since home prices peaked in December 2005, Zandi said. Discounts of as much as 50 percent will extend into 2010, helping clear a glut of foreclosures and leading to a more balanced housing market, said Ryan Ratcliff, an economist at the Anderson Forecast at the University of California in Los Angeles, and Christopher Thornberg, principal of Beacon Economics LLC in Los Angeles.

And the question: considering sales volume in San Francisco has actually declined over the past two months, and the number of foreclosures within the city remains rather nominal (but is growing), have we had our “cathartic event” or are we going to be late bloomers?
California’s Discount Foreclosure Sales Point to Housing Bottom [Bloomberg]
San Francisco Recorded Sales Activity In June: Down 9.8% YOY [SocketSite]
One Antithetical Quote To The “Foreclosures Aren’t Comps” Argument [SocketSite]

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Comments from “Plugged-In” Readers

  1. Posted by Foolio

    A catharsis? This is San Francisco. Try passive aggressiveness.

  2. Posted by Recent ORH buyer

    For what it’s worth, these are the first remotely positive comments that I have head from Mark Zandi in almost three years. He joins the legendary fund manager Ken Heebner in believing that the worst of the housing woes may be over, even though an absolute bottom may not yet have arrived. Of course, most Socketsite posters are sure to perceive such commentary as blasphemy, because they all clearly know far more than the aforementioned quacks :-)

  3. Posted by Apothecary

    Quacks? Didnt know the medical profession was now in the economic forecasting business.
    They must be a bunch of ducks. Or hacks. One or the other.

  4. Posted by Recent ORH buyer

    “Didnt know the medical profession was now in the economic forecasting business.”
    Apothecary
    I say give them [the medics] a go – they can’t be any worse than some of the multi-year predictions that are often posted here.
    Fair point about ‘quacks’ though – let’s go with hacks :-)

  5. Posted by Animo

    Appears Bloomberg.com was in a bit of rush. From the CAR report, “Homes” = SFH in the Y-O-Y sales volume numbers; condo volume fell 20% Y-O-Y. Also, sales volume has not increased for three consecutive months — it’s three consecutive months of increases over Y-O-Y numbers.

  6. Posted by "Dave"

    I rail on fellow posters all the time for the weak “late bloomer” theories. (e.g. “SF hasn’t yet crashed therefor it will crash soon and harder than everywhere else…”)
    However, there are two scenarios that could unfold. One is that the outlying perimeter becomes so badly damaged that REASONABLE alternatives are too cheap to pass up. (No, Daly City is not a reasonable alternative to Pac Heights.) But if Rockridge and Palo Alto and Walnut Creek fell by 50%, then that would definitely impact “prime” SF. Problem is, those areas have not been impacted yet to any great degree.
    The second scenario is we have a major, global recession/depression. Then, all bets are off. But if we hit 25% unemployment and the sale of shotguns rises dramatically, nobody will really give two sh*ts about home values…

  7. Posted by Rudolf Lightcap

    Dave –
    I agree that no buyers are looking at Pac Hts vs. Daly City, but that doesn’t mean the two neighborhoods can’t be weak substitutes for each other. You have to remember that there are people of every income level between the Pac Hts demographic and the Daly City demographic. Very few people will only choose to live in one neighborhood and one neighborhood only. Example:
    Daly City is a substitute for Outer Sunset for some buyers; which is a substitute for Inner Sunset for some buyers; which is a substitute for Outer Richmond for some buyers; which is a substitute for Inner Richmond for some buyers; which is a substitute for the Mission for some buyers; which is a substitute for Noe Valley for some buyers; which is a substitute for the Marina for some buyers; which is a substitute for Pacific Heights for some buyers.
    There are countless ways you can make a plausible chain between two areas with greater or fewer degrees of separation. I believe that weakness in one area (say Daly City) will cause buyers to move there instead of somewhere else (Sunset) because they are mostly indifferent between the two. This will slowly reverberate throughout the chain, causing small to large fluctuations in prices as people choose between their substitutes. IF this occured in a vacuum, I think we would already start to see some serious changes, but since there are so many other variables (take your pick: rich getting richer, Google options, changes in loan availability, cutbacks in blue collar jobs, etc.) the effects along the chain may not be as obvious. Severe weakness in one area will absolutely affect all other parts of the Bay Area given enough time, but it will be hard to see due to all the other noisy variables in the data.

  8. Posted by "Dave"

    I don’t disagree with your position, Rudolf. But there’s a pervasive view around here that SF is overdue for a tanking (a “late bloomer” tanking) simply because Antioch has tanked or Stockton has tanked, which is misguided.

  9. Posted by BernalDweller

    I’ve been tracking and trending Case/Shiller for many years, and am ready to come out of the closet with a (not so) bold prediction. YOY decreases will continue to worsen through September of this year, troughing at 26 or 27% negatives (when we start to anniversary last years credit seizure). YOY negatives will lessen gradually but persistently, and will continue at above or near negative double digits through all of 2009, and the last YOY negative will be March of 2010, where C/S will be at about 150 for the bay area index. The first YOY positive gain will be in April of 2010. We will then move sideways for another year or two.
    My original forecast, made in late 2006, was that we would trough at about 180, but that was well before the credit markets seized.
    Just wanted to put this here as a bookmark to refer to later :{).

  10. Posted by Outer Sunset

    Bernal,
    The C/S SF Bay area index is already around 160 (don’t have the exact number). See:
    http://www.socketsite.com/archives/2008/07/may_spcaseshiller_san_francisco_msa_declines_as_does_th.html#comments
    How can you predict that many more months of declines, and then only have the index reach 150 for the Bay Area index?

  11. Posted by ex SF-er

    Dave. I disagree that most bears are saying this:
    “SF hasn’t yet crashed therefor it will crash soon and harder than everywhere else…”
    Instead they/we are saying this:
    “SF hasn’t crashed yet. But most everywhere else is crashing or has crashed, and thus SF will also crash in the future”
    (I personally don’t use the word crash although a lot of bears do… I think SF will experience signifcant real price drops and small to moderate sized nominal price drops over a prolonged period of time)
    it’s a big difference. I can’t think of anybody that thinks that SF will crash harder than everywhere else, but I’m sure there’s the rare bird who has stated so

  12. Posted by spencer

    bernal dweller, you and i are on the same track. My prediction was that YoY declines would stop in June 2010 and go sideways for 3 yrs.

  13. Posted by REpornaddict

    It’s a big difference, yes.
    although people have stated that SF will crash the hardest. Someone did a day or two ago on this site (Treeman maybe?)

  14. Posted by BernalDweller

    @Outer Sunset: C/S is at 162.70 right now. The rate of decline was accelerating through February, but since then the rate of deterioration has been declining (rather than 6 or 8 points a month, it’s been 2-4 points), so the acceleration has been slowing since February of this year. I think by fall you will see the drops in C/S closer to 1 point per month or less, a much more normal magnitude of monthly change for the index. Drops of 6-8 points per month are unsustainable for very long in this index. Additionally, if you track back to January 1999 (perhaps the last time bay area prices were in any state of reasonable equilibrium) and measure what the index would be given a normal increase of 4% or so, you wind up back very close to equilibrium around the 150 level, early in 2010. Again, YMMV, and it’s just a forecast…a deep job loss in the bay area and all bets are off.

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