July 17, 2008
San Francisco Recorded Sales Activity In June: Down 9.8% YOY
According to DataQuick, home sales volume in San Francisco fell 9.8% on a year-over-year basis last month (571 recorded sales in June ’08 versus 633 sales in June ‘07) and fell 3.7% compared to the month prior (See UPDATE below).
Keep in mind that DataQuick reports recorded sales which not only includes activity in new developments, but contracts that were signed ("sold") many months or even years prior and are just now closing escrow (or being recorded).
San Francisco's median sales price in June was $726,750, down 11.9% compared to June ’07 ($825,000), 8.0% compared to the month prior, and the lowest recorded median since March 2005. And yes, we're doing some digging on the effect of mix.
For the greater Bay Area, recorded sales volume in June was down 9.9% on a year-over-year basis but increased 15.5% from the month prior (7,178 recorded sales in June '08 versus 7,964 in June ’07 and 6,216 in May '08). And the recorded median sales price fell 27.1% on a year-over-year basis (down 6.2% compared to the month prior and "the first time in more than four years that it was below the half-million mark").
At the extremes, Marin recorded a 35.4% year-over-year reduction in sales volume (a loss of 124 transactions) and a 12.0% decrease in median sales price, while Contra Costa recorded a 14.6% drop in sales volume (a loss of 207 transactions) and a 36.7% drop in median sales price.
UPDATE: In our words this morning, it "seems a little strange" that sales volume would have been absolutely flat from May to June. And lo and behold, DataQuick has since adjusted the number down from 593 to 571 sales in June.
First Published: July 17, 2008 10:51 AM
Comments from "Plugged In" Readers
On the face of it, not looking good.
Definitely interested to see anything people have on mix.
I know people do post sales and prices per district for SFHs sometimes.
That for say, June08, May08 and ideally June07 would help showif things are better or worse than what these figures are showing.
Posted by: REpornaddict at July 17, 2008 11:04 AM
Almost 100K was shaved off the median price in one year.
Posted by: San fronziScheme at July 17, 2008 11:06 AM
Getting tougher and tougher to ignore the elephant in the room, isn't it?
Well, can anyone answer REpornaddict's question? Where are the contrary numbers showing prices up in prime SF?
Posted by: Dude at July 17, 2008 11:32 AM
The price curve is very wiggly. The overal trend is down, but in a gentle way. If you compare recent highs to lows near this time last year the market would appear almost totally flat. It looks like inflation is going to have to do the heavy squeezing this time again.
Posted by: Mole Man at July 17, 2008 11:42 AM
for those trying to time the market (i'm not one of them)
watch sales volue, not median price
median price is a red herring, and a generally useless stat
sales volume, while imperfect, is a reasonably decent leading indicator
if the spread between year over year reduction in sales volume starts shrinking and does so for 4+ months in a row, then that is likely a trend worth paying attention to...
Posted by: enonymous at July 17, 2008 11:45 AM
The most interest thing here is that the median price is down $122,000 since yesterday. All the charts from yesterday and all the discussion was based on the $849,000 number.
Median is a pointless stat.
Posted by: sparky at July 17, 2008 12:04 PM
Sparky, I think $849 must be a number for SFHs. This dataquick number combines the two.
I dont remember the 849, but Trip did post some figure which showed the median June SFH to be 828.
I guess this shows why mix is so important, and why it would be useful to see 9say) SFHs by district as I said above.
Its interesting that usually these dataquick stats are reported by SS with an instant 'And yes, we continue to see the mix support the median' but they havent this month -just that they are still digging into the effect of it.
Posted by: REpornaddict at July 17, 2008 12:11 PM
Correct, single family is the number I used. It was in a link yesterday from sfnewsletter. Still, median is pointless. Especially if you don't throw out the top and bottom.
Posted by: sparky at July 17, 2008 12:22 PM
I don't consider myself a bear, but it's damn funny to see bulls suddenly disavow median and even funnier to see them crying out to mix!
If median is such a pointless stat then why have all the realtors been using it to evidence a rising market? Pointless now that it tells a story they don't want to hear?
Posted by: Michael at July 17, 2008 12:25 PM
My first thought was that this was ORH and Infinity closings dragging the numbers lower. As they move into the higher floors, they will get more and more people with first day prices, so the effect on the medians will be to drive them lower.
But it looks like the median ORH and infinity first day prices are higher than this median (I'm thinking around $750-775K), so that shoots that theory. Maybe the foreclosures in district 10 are moving faster, and that is further distorting? A single month median drop of 8% looks a little high (96% on an annual basis: woohoo!!), so I'm thinking there are other influences.
However, a March, 2005 median matches what's going on in SoMa (with the exception of a very suspect single sale at ORH), so maybe there is nothing other than falling prices that's doing it.
I'm also surprised to see the sales numbers stay constant - I was expecting them to bump *up* until those closings are done. Sort of like watching a snake swallow a mouse, those two big developments should be distorting the numbers for awhile.
Posted by: tipster at July 17, 2008 12:41 PM
I'm not a realtor. And am not currently invested in anything other than my home. Which I will raise my kids in and walk them to school, so I don't care if the value goes down. It's not based on the 3 places that just sold on my street for much more than I bought for but that's a different topic.
So I'm not a bull (or bear), I'm just saying median is pointless. Think about what it is saying, 1/2 the houses are more 1/2 are less. The median is at $849,000 single family. The bulls would be ecstatic to hear that there were no longer any $1M (let alone $11M etc.) 1/2 of the houses dropped there sale price to $850,000, and the lower have gave them away for free, except on guy who stayed at $849,000. Well, this would then not change the median home price.
Posted by: sparky at July 17, 2008 12:42 PM
Spring is definitely behind us.
Did anyone else notice the bell shape forming on the prices?
Posted by: San FronziScheme at July 17, 2008 12:51 PM
Bulls disavow median. ha. Bears seize on whatever's clever too.
I won't be doing any neighborhood by neighborhood research for yall on this site for the foreseeable future. Too many snakes in the grass dissing the hell out of me after I spend an hour trying to provide information. It got old.
Posted by: fluj at July 17, 2008 1:07 PM
Please continue to provide this neighborhood information. Otherwise, the only assumption will be that it is going badly.
Posted by: kel at July 17, 2008 1:12 PM
"Did anyone else notice the bell shape forming on the prices?"
I saw that as well...nearly parabolic, with what appears to be an inflection point in spring of '06. Too early to tell if it's a pattern, but if it is, maybe we're back at '04 prices in late '09 or early '10.
Posted by: Dude at July 17, 2008 1:13 PM
I do hope you reconsider, maybe just post and then ignore any following comments (i.e. not get overly emotionally invested). I find your comments and the data you provide very useful.
Posted by: Enthano at July 17, 2008 1:14 PM
if it will save time feel free to leave out any median price data.
Posted by: sparky at July 17, 2008 1:25 PM
That's what I see too, but if you look at last month's curve it looked almost as if it were gonna pop to the sky again. In retrospect, this appears now to be a seasonal adjustment.
Only time will tell where this crazy market is going.
Posted by: San fronziScheme at July 17, 2008 1:28 PM
fluj, I also like your comments and neighborhood based data and tend to agree with what I think has been your general position: that as the center of the region, good homes in good areas in SF are unlikely to suffer the declines seen elsewhere. I suppose you could say the same, but perhaps to a lesser extent, about other places in the Bay Area such as Rockridge - my inlaws have been searching for a small house there and keep getting outbid as recently as a month ago. Real estate ain't the same everywhere.
Posted by: Jake at July 17, 2008 1:32 PM
"Bay Area median price dives below $500K"
"The median price paid for a Bay Area home plunged to $485,000 in June. . . "
Not "declined," not "was down," not "was off," not "retreated," but dives and plunged.
Posted by: Anonymous at July 17, 2008 1:33 PM
This does at least illustrate the wisdom in just holding off on a purchase for the last year or so. Assuming the median trend line reflects the market (a big assumption, I know), a typical SF place purchased last year would have lost over $8000 a month in value, and those putting 10% down are now under water on the mortgage. That is a very significant hit (and even if you can afford it, imagine what else you could have done with that extra $8000 in your monthly budget).
If you are in the market and find a place you just love for a price you can afford, and you won't be bothered by a further decline, then go for it and buy. But from a financial standpoint, I really see no reason at all to buy in this market. You're quite likely to come out better a year from now, and with this trend line, it is nearly certain that you at least won't be worse off. I'm not saying you need to time the bottom, which is extremely difficult, but it makes little sense to buy in the face of a pretty clear downward trend when these things take a long time to reverse themselves.
Posted by: Trip at July 17, 2008 1:44 PM
Dataquick posted an incorrect chart earlier today. The corrected one is now on their website.
Units sold was NOT exactly the same as last month. In fact, their first chart accidentally showed exactly the same number or sales for each county as the previous month . . . although the Bay Area figure seems to have been correct.
Posted by: Erin at July 17, 2008 1:52 PM
can someone comment on DOM vs. last year? assuming sellers are holding out for a better market keeping inventory artificially low.
Posted by: chuck at July 17, 2008 1:59 PM
Erin is right -- DQ has changed the table. Now shows volume is down 9.8% YOY (571 sales in June 2008). The median number is the same, down 11.9%.
Posted by: Trip at July 17, 2008 2:02 PM
$8000 a month loss in value in SF? over 12 months $96,000 over the last year. How do you get that number?
Let me guess you are assuming that the median price drop is valuing the same house. I.e. $825,000 last year $727,000. That's not the same house. That's a different house.
Posted by: sparky at July 17, 2008 2:03 PM
Sure it's a different house, and the mix has probably changed since last year.
But because we have no access to all the data (dissymetric monopolistic environment, where one side has all the info, and the other side has what the other side wants them to see), we will just look at the numbers that are out there.
Now, if the NAR wanted to give free access for all professional data to the public, we could talk on an even ground. But until this happens we will have to assume there is a reason all the data is kept off the commonners' eyes...
Posted by: San FronziScheme at July 17, 2008 2:14 PM
Agreed SFS, but to take median data and say that SF houses dropped in value $96,000 since this time last year is not accurate. That is exactly what Trip is saying above, and I am commenting on.
Posted by: sparky at July 17, 2008 2:19 PM
No, sparky, I'm not saying that at all. I premised this discussion with an assumption which I expressly noted could be challenged. My point was simply to illustrate in concrete dollar terms the real financial hit one takes in a declining market like this. Leverage is great when values are rising but can sock you hard when they are falling. As San FronziScheme states, more complete data is out there and the NAR is always free to present something that indicates the falling median is based on a change of mix rather than falling market values, if they exist.
Posted by: Trip at July 17, 2008 2:25 PM
Therefore I will have to assume that ANY median number is irrelevant, because if 501 houses sell for exactly $1M and 499 sell for $1K, then the median is $1M.
Of course, we could take the average, but that's slanted as well because the market could have shifted to smaller or larger units.
Which brings us to the average $/sf info, which is what the Case-Shiller index is doing. In my opinion Cash Shiller is the best market indicator out there. Now, if this info could be drilled down starting from the national level all the way down to the single unit, this would be great.
Maybe there's a business opportunity out there?
Posted by: San fronziScheme at July 17, 2008 2:32 PM
Trip what you said is, "assuming the median represents the market, a typical SF place purchased last year would have lost over $8000 a month in value."
That is not what median says at all. It says that there are 47 more single family homes for sale under $727,000 than there were last year (using today's MLS for close proximity hear). So the median came down.
It has nothing to do with the value of any one house or anyone's house. But, you claim that the value of a purchase last year is down by $8000 a month. No it's not. That would be a chart of average house value; perhaps $/sq ft. sold last year vs. this, throwing out say the top and bottom 50 homes ( of the of the 634 total). What is that difference? Closer, but not too accurate to your claim.
Posted by: sparky at July 17, 2008 2:40 PM
sparky, let me disagree slightly when you say "there are 47 more single family homes for sale under $727,000 than there were last year / It has nothing to do with the value of any one house or anyone's house"
Actually, I think it does. Supply and demand and ripple effects will have one side of the market changing the other side in some way. With a chain like "BV->Excelsior->Bad Glen Park->Good Glen Park->Bernal->Valencia corridor->Noe->PH. Just like the high prices in primo markets pulled the whole city up all the way to the Bayview, the chain reaction can work the other around.
It takes time and I am the first to recognize that prices are sticky in markets that are pure cash, but this link does exist, imho.
Just as foreclosures in Modesto are affecting every community, deppressed nabes in SF will end up affecting everyone.
Posted by: San fronziScheme at July 17, 2008 2:53 PM
Sparky, please. This is what I meant by "represents the market." You're just misreading it. Here, let me re-phrase my statement so it says the same thing but is unambiguous. "Assuming the median represents the market value of a typical SF place, a typical SF place purchased last year would have lost over $8000 a month in value."
Has every single home in SF declined in value by exactly 11.9% in the last year? Of course not. But listen to how the NAR described median prices in an early 2006 press release during the boom: "The median is a typical market price where half of the homes sold for more and half sold for less." Pretty close to how I phrased my assumption in the section you quote, only I put in the proper caveat.
But you don't even need to assume anything. Let's take a concrete example (yes, just a single example -- I'm making no representation about whether it represents the market value of any other place, although it does fairly closely align with the DQ trend line). 402 Sanchez Street, a cute SFR in a nice neighborhood, near where I live in fact, sold for $1.2M in October 2006. It then was re-sold in late May 2008 for $1,060,000. That is a loss of $140,000 (not even including transaction costs) in 19 months, or $7368 a month. A 10% down payment ($120,000) would be completely wiped out and then some. That is a big deal.
Posted by: Trip at July 17, 2008 2:59 PM
Fronz you're acting like it isn't pretty much one thing that we've been seeing since last August, tho. Right now the 606 SFRs for sale in SF, 280 are in Districts 3 and 10 (3 has 55 and 10 has 225!)
But if you take 10 and 3 out of the mix and look at YoY sales and average price per foot, it looks like sales are down about 9-10%, avg price (up about 40K) and $psqft (down about 3%) are about the same as last year.
It's like, hey, sure it would make sense if there was a domino effect. But it has been a year already.
Posted by: fluj at July 17, 2008 3:16 PM
District 9 condo sales (soma/s. beach) are up 44% from the low in March. Medians are at an all-time high.
Posted by: anon at July 17, 2008 3:24 PM
I think you are saying the same thing and it's still wrong. The typical sfh did not lose $100k in value because the mean went down.
The mean singularly descibes the 1/2 point.
You make the point about the house near you, but that didn't effect the mean except that it was for sale. It could have sold for $850,000 and that would have been a big hello to RE value but still wouldn't have changed the mean.
You say that "assuming the median represents the market value of a typical SF place", it doesn't. It represents one place; today that place is 116 Marietta street ($728,000). Was that home worth $825,000 last year. I don't know. But that is all it's saying. You can't say that it has brought the value down. If houses above $725,000 sell and below don't sell then the median keeps falling.
Posted by: sparky at July 17, 2008 3:24 PM
So how's district 7 doing? Anyone have data?
Posted by: lolcat_94123 at July 17, 2008 3:24 PM
I agree that the median sucks as a measure in both directions.
The only thing the median actually tracks is how much buyers SPENDING, it has nothing to do with the VALUE they get for their dollars.
As a "bear" my only interest is to watch the press spin the median as "prices" as the bubble inflated and now as the bubble deflates.
You would think after all this time the press would have figured out ...
"medians are not prices".
Posted by: badlydrawnbear at July 17, 2008 3:27 PM
One last time on Median. If you take the median of the SF median; that is of the 23 SF zip codes the median median home value is 94105 at $802,000 up 21.5% from last year (from DQ link).
What does that say? Nothing! Just like all the other median date says nothing.
Also, in my last post I used "mean" once instead of median. That was a mistake, "mean" would actually have meant something.
Posted by: sparky at July 17, 2008 3:33 PM
And it's like, plug in slightly more than the median value (730K) in as a cap for SFRs, citywide. You get 255 listings. Subtract District 10, and the number goes down to 74! That's less than a third left.
Posted by: fluj at July 17, 2008 3:33 PM
$/sf down 3% for (hum) SF excluding 3 and 10 (sure, why not), with an inflation starting to hit 6+%. The market correction for now appears to be a combo of inflation and slight price decrease.
I'll refer to the bell shape of the curve. Maybe it will plateau or it will shoot right back up. Or maybe it will keep accelerating downhill. It all depends on how much cash people will want to put into RE or what kind of risk banks are ready to take.
Posted by: San FronziScheme at July 17, 2008 3:37 PM
This just in...today's median on MLS $755,000 (including condos, TIC,etc.) up from $726,750 at the end of June. A huge 4% jump in property value for all SF residents in just 2 weeks. That will be a 104% annual appreciation, so everyone should buy another one of those $750,000 houses.
Posted by: sparky at July 17, 2008 3:42 PM
decrease of 3%/psf would sound about right to me
inflation adjusted that is a drop of 7-10% which again sounds about right
Posted by: enonymous at July 17, 2008 3:42 PM
Sparky, you're confusing mean and median. But as to your point, that's why I said "assuming" the median reflects the market value of a typical place. You're just saying you reject my assumption. Fine -- I said in my original post you're free to do so.
But you are not correct when you say the median "represents one place." The median is the number separating the higher half of a sample of values from the lower half. With a large enough sample size and a standard deviation that is not too large, the median quite accurately represents the "typical" value. So while I agree that median real estate sales figures are not that significant, it is only because the sample size here is too small and the mix can change too much to make comparisons meaningful. But it is not so insignificant as to just "represent one place" in a vacuum and be utterly meaningless.
I've said elsewhere, from other available data (specifically data indicating that $/sf in listings have declined by about 20% in the last year and median home sizes in the listings have increased), it would appear that the decline in median sales prices understates the real price decline in SF. But again, the NAR has all the data available to tell us how the mix impacts things, if at all.
Posted by: Trip at July 17, 2008 3:46 PM
"(specifically data indicating that $/sf in listings have declined by about 20% in the last year and median home sizes in the listings have increased), "
Whatever data says that is bunk. Toss it.
Posted by: fluj at July 17, 2008 3:48 PM
Where is that info. from. $/sf drops are good info.
Posted by: sparky at July 17, 2008 3:52 PM
He got it from me. But truth be told I'd dig down further and look at neighborhood by neighborhood, not district by distict. Inner Richmond being different than Outer Richmond, etc.
Posted by: fluj at July 17, 2008 3:56 PM
"It represents one place; today that place is 116 Marietta street ($728,000). Was that home worth $825,000 last year."
Great example, sparky. That place last sold in August of '04 for $620K. No idea if they remodeled, but if it goes for $728K today, that represents annual apprecation of 4.0%/year for 4 years. Now, we all know that home prices in SF between '04 and '06 went up a lot more than 4%, didn't they? See the chart above.
Now they're coming down. So was that place worth $825K last year? I also don't know. But I bet it was worth more than $728K given it likely appreciated by more than 4% in '05 and '06.
Posted by: Dude at July 17, 2008 4:00 PM
I am not confusing mean and median. I did mis-type it once. But, standard deviation is not used in this calc., so the number represents one house or the average of 2 houses depending on odd or even number of listings. Median does not represent typically anything.
I think that $/sq ft drops matter, I hear you there. However, I don't think that $/sq ft. drop in the median home means anything, as it describes a different home.
As my somewhat snarky post about value shows this number could be easily manipulated. Today it's much higher than when the chart came out.
Posted by: sparky at July 17, 2008 4:01 PM
In our words this morning, it "seems a little strange" that sales volume would have been absolutely flat from May to June. And lo and behold, and as a plugged-in Erin notes above, DataQuick has since adjusted the number down from 593 to 571 sales in June (down 9.8% YOY and 3.7% MOM).
Posted by: SocketSite at July 17, 2008 4:11 PM
Standard deviation is not used in the calculation, but it is significant when determining how reliable the median is because the more widely dispersed the data the less "typical" is the median.
I think we've exhausted this. We're in agreement that median sales price data are not very relevant. I just think it's not quite as irrelevant as you do. Thanks for putting up with me.
Posted by: Trip at July 17, 2008 4:16 PM
To the person who asked about 7, it's doing great YoY.
Condos/TICs '08 151 sales 1.264M sp 854 $psqft
'07 215 sales 1.178M sp 795 $psqft
For SFRs in that area it looks about the same too. Enormous prices will mess with numbers, tho. (There was a 19M sale in 2007).
Posted by: fluj at July 17, 2008 4:18 PM
"District 9 condo sales (soma/s. beach) are up 44% from the low in March. Medians are at an all-time high."
Can you tell us the source of this data?
As an aside, I'm sure Tipster and Trip will say this is all due to the 'questionable' $1.3m mark at ORH. However once Property Shark shows it was an above board transaction, they will be back to their other conspiracy theory, about how the Apollo Lunar landing was staged ... of course, all perpetrated by the ORH developer.
Posted by: Conspiracy checker at July 17, 2008 4:19 PM
If anyone followed the past few threads, this is a typical example of information dissimetry.
Unless I do not have access to the full scope of data like a Realtor, I cannot make a properly informed opinion.
This is happening here at SS, but this is happening as well in the field.
I say a Realtor gets a dump of all the raw data, copies it and pastes in a Google Docs spreadsheet and we'll all dig into it. I'm good at data analysis (doing a living out of it). Bring on the raw data so that everyone can be on a level field...
Posted by: San FronziScheme at July 17, 2008 4:25 PM
The lunar landing was staged I think we can all agree on that. Have you ever seen that thing? I once went to the Smithsonian with my mom and she said "That thing landed on the moon, no way, I wouldn't take that thing across the street, it's made of tin foil." Which it is.
Posted by: sparky at July 17, 2008 4:25 PM
I hear you on being done with this, but once more. Standard deviation is very important and not used here. The least expensive 40 houses in SF are within $300,000 of the median. The most expensive 40 houses are $2,000,000 more than the median (over$2.7M).
That's what I'm talking about
Posted by: sparky at July 17, 2008 4:33 PM
If you want to do statistics with wide-ranging data (200K to 66M), you need to rethink your scale. Either you you use a logarithmic scale or you can split your data between stratas or deciles or something of the sort. But a $1 at the bottom is not the same as a $1 at the top.
Posted by: San fronzischeme at July 17, 2008 4:39 PM
DataQuick's numbers show the real estate market is declining. If there's anything you should take away from their news item today, it's that. After up comes down, no matter what your real estate agent says. Get used to it.
Posted by: Anonymous at July 17, 2008 4:42 PM
"After up comes down, no matter what your real estate agent says. Get used to it"
Excellent analysis. This would be the gravitational model.
Posted by: fluj at July 17, 2008 4:47 PM
How long before that median comes down to the $541K seen in January 04?
Can we have a socketsite gentelman's bet?
I put my dime on June 2010 being at or around the same median as Jan 04... anyone else?
Posted by: Spencer at July 17, 2008 4:50 PM
I am a novice in this field. I just want to watch the SF market to see what is happening. Reading all this back and forth just makes me worry and not want to invest in real estate at all. Frankly, I am a little confused. I think the median is a weird gauge too, but since that is what the media uses, I think the purpose it serves is to slam the market which makes people not want to buy and causes more downward pressure in the market. Remember, most people won't even look beyond the headline. Instead, they will just have the impression that the market is tanking and this will cause people to step back or panic (if they own and can't really afford what they paid). I don't think it helps the market whether or not it is the true measure of its up or down movement.
Posted by: majr at July 17, 2008 4:50 PM
I hear you, and I agree and would love to see that info on a chart and not median to discuss.
Every house in Pac heights goes on sale for $900K. SF real estate is in the sh*tter for sure. Median up!
The "gravitational model" also works for the lunar lander. That thing wouldn't work. Whole landing was bogus.
Posted by: sparky at July 17, 2008 4:54 PM
"I think the median is a weird gauge too, but since that is what the media uses, I think the purpose it serves is to slam the market which makes people not want to buy and causes more downward pressure in the market. Remember, most people won't even look beyond the headline."
Agree, but this also explains the buying frenzy that happened in the past 10 yrs. the same buying frenze which spun fundamentals on its head. How many irrational headlines did you see glaoting rising housprices, and article stating that if you don't buy now that you will never get in.
at least now, a crash makes sense from a fundamentals standpoint. but i agree on the fact that most peopl only read headlines.
Posted by: Spencer at July 17, 2008 4:56 PM
Yes, that's right. The gravitational model supplants the "buy now or be priced out forever" model, and completely terminates the "any real estate agent with a pulse and a car is entitled to a 6% commission for selling some wildly overpriced creaky Victorian crapbox in a certain marginal tourist city for doing next to nothing" model.
Posted by: Anonymous at July 17, 2008 4:58 PM
"Yes, that's right. The gravitational model supplants the "buy now or be priced out forever" model, and completely terminates the "any real estate agent with a pulse and a car is entitled to a 6% commission for selling some wildly overpriced creaky Victorian crapbox in a certain marginal tourist city for doing next to nothing" model."
Yes, and welcome to summer 2007.
Posted by: fluj at July 17, 2008 5:03 PM
fluj, I have to admit that a gravitational approach is pretty weak.
But he is right in some way. On a national level, the 2002-2006 years have been like a canonball shot. And the price reached an apex and are now in full blown free fall in many markets.
I believe (and this is just my opinion) that RE prices have to go up on a very large scale (decades) as long as demographics are supporting it. By demographics, I am talking about population and who is in this population. If you have 50% fruit pickers in a population, this is not the same than having 50% professionals.
This means that there is a basic median line (historicaly a low-single-digit % accrual) that can be used as a basis for helping predict future prices.
Every shot over that line (again, I am talking generally, on the scale of a country) is bound to be pulled down to the median and then often overshoot the median, otherwise a median wouldn't be a median...
This is why RE is not a very good investment except for localized oddities. You make inflation + 1-2% a year and then you have to maintain the place and pay taxes. Of course, if you buy after a shot down, you're likely to do well.
But if you want to safely beat inflation without risks, just buy TIPs.
Posted by: San FronziScheme at July 17, 2008 5:06 PM
It's 2008, Fluj. No wonder your sales are down--you're trying to sell last year's fantasies.
Posted by: Anonymous at July 17, 2008 5:06 PM
Oh, I know what summer it is. Your comment made me a little nostalgic for last year's bear refrains, that's all.
My sales are down? How would you know? There's a chance that after today my sales are rather up up up! I got two offers out there. Both looking decent.
Anyway. You don't like Victorians, and you don't even particularly like the city it seems, yet you're posting on a SF r.e. blog with comments straight outta naught seven. So "Why am I talking to this guy?" I ask myself. I think it's because I'm drinking coffee at a quarter after five.
Posted by: fluj at July 17, 2008 5:15 PM
I wanted to say that I like fluj and the stuff he posts is really informative. So, thanks. From what I read here, it is easy to get into kinda ugly arguments. I am not interested in that. Friendly debate sounds better. I was posting merely as a novice in real estate. I don't claim to know what is right here. I just plain think news like this makes people scared to jump into the market.
Posted by: majr at July 17, 2008 5:32 PM
Spencer, I'm always up for a bet. Although I'd just as soon put some money on it to "make it interesting". But I would need some clarity the $541 is the $/sq.ft. of the median house, or the median $/sq.ft. of houses?
Posted by: sparky at July 17, 2008 5:32 PM
$541,000 is the Median house.
Posted by: sparky at July 17, 2008 5:34 PM
I think we're all forgetting that YOY figures are the difference between two numbers : today and a year ago. Change in either can affect the YOY trend. If the recent trend is going down then the YOY number might go down.
But the counterintuitive case is that if a year ago the trend was rising towards a peak, that can force today's YOY number down even if the recent 6 month trend is flat.
Take a look at the graph : both effects are in play. June 07 was right at the run up to a peak. June 08 is on a downward trend. Those two effects compound to produce an astounding $100K YOY downward "trend".
Let me predict the future : there will be another shocking downward YOY trend at about October 08 :-)
My guess is that there really is a downward YOY trend, but its magnitude is more like $30K if you smooth out all of the bumps.
Posted by: The Milkshake of Despair at July 17, 2008 5:40 PM
Wow, some argument for what everyone understands is a pretty meaningless number.
I think Majr at 5:32pm has it exactly right. Whether the median is a meaningful number or not, the fact is when this hits the papers tomorrow, the damage is going to be done.
Everyone saw medians fall in lots of other markets, and prices very quickly followed. The fact is that SF has been telling itself that, "Sure everyone else has the flu, but I never get sick." Guess what? We just sneezed, everyone heard us (as much as the real estate salespeople will be out in force tomorrow calling it a "hiccup" not a sneeze), and that's GOING to have an effect.
I think if I'm 64 years old and I was planning on sticking around for a few more years, but I need the money from my home to retire, when I see the papers, I'm at least probably going to start cleaning out the garage.
Buyers will certainly pull back, at least a bit. They'll get more aggressive on reducing offers, or bail out of the market entirely for awhile.
You can argue 'til the cows come home what the numbers mean, but the average Joe or Jane isn't going to care. When medians were shooting up, so were prices, and now medians are headed down. It's that simple. 8% in one month is VERY scary to buyers and sellers alike.
Posted by: tipster at July 17, 2008 7:07 PM
Here's some good news.
Google just missed their numbers, so maybe "Home Prices Fall 8%" won't be the headline tomorrow!
Posted by: tipster at July 17, 2008 7:32 PM
just curious, tipster,
where does a highly paid person (like yourself) put their excess cash?
and is the answer different for that person if they really prefer to live/stay in sf?
with all the drumbeats of woe (in the stock/bond/real estate markets) is it conceivable that we're getting a contrarian's buy signal?
personally i think its a very good time to wait on buying anything and a nice time to sell into rallies. unless...we start to take (early) advantage of others' panic selling.
Posted by: paco at July 17, 2008 9:13 PM
It's 2008, Fluj. No wonder your sales are down--you're trying to sell last year's fantasies.
Anonymous, what are u referring to? STFU or offer some real insight and comments and stop hiding behind the moniker of "Anonymous" if all you can do is make empty snipey remarks. Never have I gotten the impression that fluj is saying that everything is all hunky dory in the RE market overall as you imply ... he ultimately just states the OBVIOUS regarding the strong local neighborhood markets most of us are aware of AND backs it up with data that you woefully fail to provide. I'm no bull or bear, but I'm sick of unwarranted character assassinations on this blog from the likes of you. Stick to the specific facts that are raised or, again, STFU (i.e. don't give me BS about how freakin outer Sac is doing and expect me take it as SF gospel, jeesh!)
Posted by: Jake at July 17, 2008 11:11 PM
Anonymous, I've got to say that if there's no point to a post other than attacking another poster like fluj, I totally agree with Jake. Respond to the post or go have your nappy time.
Posted by: Rebarkah at July 17, 2008 11:21 PM
regardless of the possibly meaningless graph, I still maintain the future of SF RE is not pretty.
We are facing recession as a nation, tech profits are down (i.e. Google and Yahoo!, although Apple not doing so horribly), Venture Capital profits are down (no IPOs last quarter from VC sources), Private equity profits are way down, Banking is getting slaughtered. Tourism is hurting due to high oil prices. And there is no sign this is turning around any time soon.
There is also a credit crunch that shows no sign of abating anytime soon, so lending for mortgages is way down.
the above are most of the reasons given for why SF RE flies so high.
the only sector that is doing ok right now is the Biomedical Field. And even Genentech missed it's numbers, although it gave encouraging guidance.
I see no reason why any RE market would do well right now given macroeconomic trends.
Posted by: ex SF-er at July 18, 2008 5:42 AM
oops, before I get grilled... Google's earnings and profits were up, but they missed expectations.
If you are a growth company then it's not good enough just to grow as your stock has growth priced in.
Yahoo! had earnings growth but lower profits. a big no no.
the problem is that neither report was good for stock price, and you don't become rich at Google or Yahoo from your salary... you do it by getting in early and getting stock options.
Posted by: ex SF-er at July 18, 2008 5:47 AM
Wow, there are some thin skins out there. What you heard from me is called gentle criticism, (except in San Francisco, apparently).
By the way, it's not my job to post data to help real estate agents justify current asking prices--but good luck with that. If you want impartial data, that's what DataQuick is for.
Posted by: Anonymous at July 18, 2008 6:33 AM
SF Chron headline: Bay Area Home Prices Plunge 27%.
Damn. The damage is done.
Posted by: tipster at July 18, 2008 7:05 AM
Does anyone know how to get the raw data Dataquick is using? Is there any free access?
Posted by: San FronziScheme at July 18, 2008 7:51 AM
Can you tell us the source of this data?"
Sure. Be sure to look at district trends which are linked on the left side, e.g. Central East is District Nine (what I referenced). Then you can see home prices and condo prices.
Posted by: anon at July 18, 2008 7:57 AM
"Damn. The damage is done."
We'll see. Carol Lloyd has been casting stones for a year and a half, albeit not on the front page.
Posted by: fluj at July 18, 2008 8:52 AM
Interesting numbers for District 9. While the overall condo sales volume is significantly down over the past two years (this is troubling) the 3 month moving average of AVERAGE price (not median) at $871K in May is as high as it's been since $828k in October 2006, although June's level was down somewhat. This is very surprizing to me - perhaps higher dollar properties at ORH and the Infinity are having an impact on the average? So, while mix may have played a role, average prices appear to have been steady to higher despite sizable volume declines.
Or there's always Drip and Skipster argument that the ORH Developer just manipulated the data once more.
Posted by: Conspiracy checker at July 18, 2008 9:13 AM
Why is it necessary to attack Carol Lloyd? It would seem to me the same deference that gets paid to you on this blog when you report data is due to her when she reports it. And of course, she doesn't have a vested interest in how the public interprets the data either, unlike yourself. And it's that vested interest that must propel someone like yourself to spend so much time on this blog, or perhaps there is something I am missing, some motive on your part that finally explains why someone would linger here with such determination?
Posted by: Christopher Carrington at July 18, 2008 9:26 AM
Sorry, Conspiracy checker. You got it all wrong. The numbers you're looking at only apply to resales from MLS data. There's no impact from ORH and Infinity.
How are those ORH sales going anyway? Must be selling and closing like hotcakes with the SOMA condo market on fire.
Posted by: anon at July 18, 2008 9:27 AM
I have routinely made the same points about Carol Lloyd. Her columns took a sensationalist and manipulative turn some time ago, IMO. Time and time again I saw big scary headline, big scary lead, the first two or three stanzas speaking to areas outside of San Francisco, and then digging down to nearly the bottom to find out that oh gee things aren't as bad as all that.
I know how newspapers work. It isn't all her fault. It's the way editors work, because of executive decisions. They are less interested in good reporting than they are in selling papers. But I saw a trend and I am not alone in thinking Ms. Lloyd had to be at fault.
Posted by: fluj at July 18, 2008 9:38 AM
Hey conspiracy checker - just curious which floor of ORH you bought on?
Posted by: Dude at July 18, 2008 9:40 AM
I don't think saying "casting stones" is an attack on anyone.
But I also think Anonymous was just riffing on Fluj's it's 2007 line with his "no it's 2008" not a big deal either.
Also, anyone spending anytime on this site (see: me) does have better things to do, so let's not get into that. We could all be hard at work, and helping out the local ecomony/company stock/clients and therefore bouying SF real estate. So get to work you lazy bastagess.
Posted by: sparky at July 18, 2008 9:42 AM
sorry to repost. i'm just really curious about where people think the safe haven for cash is right now.
where do highly paid people (like yourselves) put their excess cash?
and is the answer different for that person if they really prefer to live/stay in sf?
with all the drumbeats of woe (in the stock/bond/real estate markets) is it conceivable that we're getting a contrarian's buy signal?
personally i think its a very good time to wait on buying anything and a nice time to sell into rallies. unless...we start to take (early) advantage of others' panic selling.
Posted by: paco at July 18, 2008 9:49 AM
Yeah, right. I meant casting stones at the market, anyway.
But that was rather a lack of deference questioning a lack of deference, wasn't it?
Christopher, I know I spend too much time on this blog. But the thing is I sit around with four screens open every other day or so. Making calls, looking at tax records, lot sizes, property histories, things in foreclosure pipelines -- it's all on the Internet. Zipping over to post on a blog is easy. (But yeah, a waste of time.) I don't have a boss standing over my shoulder telling me to get back to it or else. Thank you for your interest in how and why I spend my days the way I do.
[Editor’s Note: Wow. Please don’t “waste” your time on our behalf.]
Posted by: fluj at July 18, 2008 9:54 AM
Carol Lloyd is getting a very bad rap from Realtors.
I remember Carol Lloyd had a few bearish pieces late 2006/early 2007.
Here is one example:
And the very same day, this was printed right across from Carol Lloyd's piece:
I haven't seen many very negative pieces from Carol Lloyd for a while. I mean, she speaks about the entire Bay Area and you'll have to admit that the situation is not that rosy overall.
Again, don't shoot the messenger. Carol Lloyd is partly paid by Realtors and her pieces are a proof that editorial independance is still alive in this land.
Posted by: San Fronzischeme at July 18, 2008 10:08 AM
I am not interested in how you spend your days; I am more concerned about the influence of this blog on public perceptions of markets. Socketsite has become central to the dispersal of real estate knowledge in this city, and as such, readers need to remind themselves of the vested interests of those who post here. Those interests are often unacknowledged.
Hence, any criticism of the Chronicle as "needing to sell newspapers" should be balanced with a healthy reminder of that real estate agents "need to sell houses." And we should question motives/methods of both parties. Moreover, I suspect that the Chronicle is as interested in selling ad space to real estate concerns as it is to securing readers.
Posted by: Christopher Carrington at July 18, 2008 10:12 AM
yo chris c
"Socketsite has become central to the dispersal of real estate knowledge in this city"
i think you need to get out more..
Posted by: paco at July 18, 2008 10:15 AM
"Socketsite has become central to the dispersal of real estate knowledge in this city"
i think you need to get out more..
Chris is right. More and more RE data searches happen on the web. Just Google "san francisco real estate tips" and see who comes up first. Industry-sponsored sites just don't cut it.
Posted by: San FronziScheme at July 18, 2008 10:21 AM
I need to sell houses, true. But I need to sell them high, or low. For me the difference between a $1M deal or a 750K deal is only 5K. If the market were to truly tank I could potentially even stand to benefit. (If you actually believed for example the scores of fence sitters on this particular site who say they'll buy when the time is right -- there's buyers galore at the bottoming out.) The idea that individuals can talk markets up or down on blogs is silly, though I agree a few try.
Posted by: fluj at July 18, 2008 10:25 AM
"Sorry, Conspiracy checker. You got it all wrong. The numbers you're looking at only apply to resales from MLS data. There's no impact from ORH and Infinity."
I never said anything about any market being "on fire", but it seems everyone on SS gets labeled as such for noting any non-bear trend. I thought I made an objective point - I recognize that sales volumes are down significantly, but average condo prices (according to the link) are flat to higher over the last two years. You are saying that ORH and Infinity have had no impact on these numbers, and they tend to be higher dollar units for SOMA. So, the numbers indicate that the average price of condo resales in District 9 are steady to higher, even without the impact of newer buildings, despite much lower volumes. Is that an unfair observation from the data link that you provided?
Posted by: Conspiracy checker at July 18, 2008 10:26 AM
The implication that Carol Lloyd at the San Francisco Chronicle is publicizing the bear market in San Francisco real estate to "sell newspapers" is laughable! Circulation at the Chronicle has been plunging (there's that word again!) along with real estate values, and, in fact, was plunging during the wacky 3-or-4-year spike upward in prices before that, too.
If anything, the average newspaper will bend over backwards to ignore bad news in the real estate market, because so much advertising revenue comes from real estate ads. But even that's disappearing, and, along with it, so will many newspapers.
Besides, the editorial staff at the San Francisco Chronicle would revolt if asked to run puff pieces about any particular business, at the request of the "business side."
Posted by: Anonymous at July 18, 2008 10:32 AM
I disagree. Bad news sells is one of the oldest maxims in publishing. Sports sells papers is like number two. Papers are dying, yeah, because of the Internet. That doesn't mean they have stopped trying to sell papers.
Posted by: fluj at July 18, 2008 10:39 AM
"I see no reason why any RE market would do well right now given macroeconomic trends."
Ex-sfer, I strongly agree with you. In fact, I think a large majority of the people who read this blog would agree. The real question though is how poorly the SF RE market perform given macroecomonic conditions, and that's where people on this site disagree. I know you’ve said before that in real terms, RE will likely decline. But in real terms, I think that most investments will decline given the current economic environment. As an example, the S&P is down around 20% in real terms and 15% nominally. Ouch…that’s worse than any numbers I’ve been seeing on the SF real estate market. I’ve often said that prices will not drop much more than 10% nominally, and I still believe that.
My question is the same as Paco’s though (which still hasn’t been answered) – where should an average person invest their money given the poor economy? I can think of a few places where you can get a positive return, but I’m not sure they will net you much either in real (inflation adjusted terms). Thoughts?
Posted by: Lance at July 18, 2008 10:47 AM
Lance, that's the million $ question, isn't it?
Actually, if we go back to the boom time, you would make good money whether to put in RE, or stock market. The only ones missing out are the ones who hold it in savings or CD's.
Now it is a different story. If you held RE, or stocks over the last six months, you lose. Even if you had it in savings or CD, you probably barely beat the inflation.
However, in long term, the chicken money always loses out. If you look at the historical trend, you win with stocks, and you win with RE.
It is just funny some people would compare the absolute top of the RE market to the valley, and say "hey, you lost 8K per month". Why not compare the previous valley (for example, 1/07 or 1/08)?
If I pick the absolute top of the stock market to the current level with the same logic as some people on SS, the only conclusion is that I will be homeless in two years.
Posted by: John at July 18, 2008 11:08 AM
Good question. Too many people think that long real estate or long stocks are the only 2 asset classes out there. Not so. Just to throw out some ideas (and I neither recommend nor oppose any of these, not talking my book here, just brainstorming):
-shorting, either directly or through ETFs;
-preferreds with guaranteed dividends;
-ETFs on the BRIC economies (I'd stick to the B or R at this point);
-foreign currencies (you can buy FX CDs that are FDIC insured as well);
-commodities (ditto on commodity CDs).
Just some thoughts, since people asked.
Posted by: Dude at July 18, 2008 11:16 AM
You kind of have to have a pretty good idea of what you are doing [market timing is a dangerous game] to short either indiviual equities, or do so via ETFs. If it were easy, we would all just be long inverse ETFs in our portfolios. In terms of the BRIC countries, I agree with the B and R, although EWZ is up 1% YTD [that about on par with a CD] and the R is heavily tied to commodity prices. If there is indeed a 30% 'premium' built into oil prices and/or we continue to see signs of a global slowdown, the R could see some pain. And yes, while commodities have risen sizably this year, perhaps largely as a dollar hedge, one wonders if this isn't an overbought sector, particularly if economies around the world continue to slip. There are certain carry trade type currency strategies that may be a decent place to 'hide', and CDs will most likely not keep up with inflation. So, while I don't think you have any horrible suggestions, the point Paco made about there not being a ton of other asset classes to park your money right now is fairly on point. Money managers that are close to flat on the year are among the top decile.
Personally I don't believe we will see significant upside in the U.S. equity markets until housing stabilizes ... and that could be months away ... hopefully not years. Accordingly, as housing continues to fall, one will likely see deterioration in most other investible asset classes, including global equities, as the almighty U.S. consumer tightens up. So, to all the bears hoping for [much] more bloodletting in S.F. real estate, with real inflation possibly as high as 6%, and most other types of asset classes falling in step, you may want to be careful what you wish for.
Posted by: Recent ORH buyer at July 18, 2008 12:16 PM
I put $200K into the stock market and it drops 20% - I'm left with $160K.
I put $200K down on a $1M condo and it only drops 10% - it's now worth $900K and my $200K is worth $100K.
Leverage is really dangerous on the way down.
Posted by: anon2 at July 18, 2008 12:37 PM
@ Recent ORH buyer-
Totally agreed with you. There are countless ways for people to lose money out there, real estate and stocks among them. As I said, I'm not "talking my book" nor do I recommend these options for anyone. Paco and Lance asked what other options were, and I listed a few. Doesn't mean they're better options or that folks should consider them. Hyundai and Saturn are two types of cars. Doesn't mean they're better or safer than a Volvo. Your mileage may vary.
Posted by: Dude at July 18, 2008 12:48 PM
You have to account for the taxes and other fees on the buy side, and the Realtor commissions on the sell side.
Which means your 200K down will loose a few 10Ks when you buy and your 900K will become close to 850K when you sell.
And then there's the cost of the loan and other considerations (1 year of taxes, maintenance, the 6K that you lost by not buying CDs with the 200K). To be honnest, you'll have pluses like rent you didn't pay and tax credits.
In the scenario you gave, you'll be lucky if your original 200K might leave you enough to buy a BART ticket to your next rental...
Posted by: San FronziScheme at July 18, 2008 1:15 PM
Calculation is never that easy.
For one, other than the flippers, few buy RE for investment. It is almost forcing you to be long term. People who think short term will lose money no matter where he invest in, unless he is a terrific market timer.
However, good market timer won't try that in RE, because of the high realtor fee. He would use his timing skill in the stock market instead.
@Dude, ETF are usually a collection of stocks, so I consider trading ETF the same as trading stocks, so the general rule applies.
Foreign currency trading relies more on market timing, because nobody knows, in long term, whether one currency will be higher or lower. Same applies to commodities.
Posted by: John at July 18, 2008 2:15 PM
anybody out there think that bay area employment is set to plunge? well paying professional/tech jobs in particular?
and if so how long before sf rents will really be under pressure?
to my mind these are the keys to sf real estate. if the local job economy is resilient then i believe the sales/rental market will present opportunity. more so than any other asset classes.
that does not mean i'm bullish on million dollar condos; as the credit crunch affects local real estate financing i believe we'll see prices fall across the board-but not rents.
this scenario is easier to understand, trust & exploit than speculating in other commodities, the BRICs, currencies or just about anything else i can think of.
that's pretty much why i hang out on a real estate blog...
Posted by: paco at July 18, 2008 2:39 PM
You aren't the only one wondering. For a Friday afternoon laugh, go here
Posted by: michiko at July 18, 2008 3:21 PM
I thought the bay area tech jobs would plunge from 2000.... after so many years, I wouldn't bet on it anymore.
Posted by: John at July 18, 2008 3:41 PM
Multifamily real estate is not doing too bad, some would say it's still going through a boom. My vacancy decontrolled units have easily increased my net income by 15% this year. And GRMs have never been higher. Higher rents, higher GRMs, prop 13 makes it win/win/win. (higher net worth). I'm not saying you can't lose, but those who have skin in the game basically have it made.
Oh, rent control only means I still have plenty of upside!
Posted by: decontro at July 18, 2008 4:00 PM
Rents have indeed gone up and are fairly high now, although still very attractive vs. buying. I won't bother trying to predict tech jobs, but rents are predicted to taper off and start falling by the end of this year. From a recent Chronicle article:
"While rents rose significantly in the second quarter, experts say that the growth is likely to taper off over the rest of the year. Marcus & Millichap is predicting that the average asking rent will end the year at $1,967 a month, a gain of just 5.7 percent from 2007. The firm expects little change in vacancies.
Some rental agents say a shift may already be beginning. Inventory is rising as homeowners who are unable to get the sale prices they are seeking have started to rent their homes instead and wait for the market to improve, said Clara Laines-Welch, a leasing specialist at McGuire Real Estate, who has been renting units in San Francisco since 1984.
"This market right now is going to level out as more comes on market," Laines-Welch said. "The market will start to adjust and correct itself."
Implying both home prices and rents will be coming down. Win-win scenario.
Posted by: Dude at July 18, 2008 4:42 PM
For who, couch surfers who neither rent nor own right now?
Posted by: sparky at July 18, 2008 4:52 PM
The article speaks about a divergence that occurred as the bubble was inflating. No money down schemes and option ARMS made owning appear cheaper than renting. Millions of people who by their own economic merits should have been renters were diverted towards ownership. This is in the process of correcting itself. The demand nowadays is in renters renting. We are moving towards equilibrium. However, in no way does this mean that "rents will be coming down.” It means that rents are approaching where they should have and should be, always approaching an equilibrium.
There's a possiblity that this will overshoot, but not likely, especially with a policy like rent-control in place, which causes prices to be extremely sticky on the downside.
Posted by: decontro at July 18, 2008 5:08 PM
"For who, couch surfers who neither rent nor own right now? "
Majority of professionals in SF
Posted by: Spencer at July 18, 2008 5:10 PM
The majority of SF professionals are couch surfers? I don't think so.
Posted by: sparky at July 18, 2008 5:23 PM
are in the win win.
rents down. house prices down
Posted by: Spencer at July 18, 2008 5:25 PM
So, that's win win for someone who is up for renting or buying; doesn't own now, doesn't own rental property, and willing move to a slightly better rental property for the $70/month projected drop.
Posted by: sparky at July 18, 2008 5:29 PM
Exactly. Which is 70% of the city. As Spencer said.
Posted by: Dude at July 18, 2008 5:33 PM
"Over the past year, the average rent for a San Francisco apartment climbed 9.6 percent to $1,926 month, according to Marcus & Millichap"
rent control really works to keep prices going up...
Posted by: paco at July 18, 2008 5:40 PM
Win-win describes being good for both sides of a deal, as I'm sure you all know. So good for this part (70%) and bad for the other (owner's 30%) is not win-win. It's just a win for one. That all. Not a win-win. Plus, this assumes the renters who are happy with where they are going to see cheaper rent, they won't, they don't win.
Posted by: sparky at July 18, 2008 5:41 PM
yo spence and dude,
""For who, couch surfers who neither rent nor own right now? "
Majority of professionals in SF"
"Exactly. Which is 70% of the city. As Spencer said."
Posted by: paco at July 18, 2008 5:44 PM
"For now, though, people who track San Francisco's rental industry, from economists to landlords to tenant advocates, say the market is undeniably strong."
"Studios in the Marina are renting for more than $2,000 a month, with two-bedroom apartments in the neighborhood going for more than $4,000 a month. The cost of renting a one-bedroom unit in the Mission has climbed to about $1,400 a month, while two-bedroom apartments are going for close to $3,000, according to Gullicksen, whose group tracks rents but doesn't keep formal statistics."
so spence, you must be talking about all those 'older' professionals who've been here awhile. what about the ones who arrived or moved in the last year?
and tell us again how your 2bd/2ba/1parking in pac hgts for $2,200 is market rate...
Posted by: paco at July 18, 2008 5:53 PM
rents are strong. vacancy is down. this is great for landlords.
and, as ever, more opportunity exists for converting rentals to tics the longer rent control distorts the market.
Posted by: paco at July 18, 2008 6:02 PM
"Majority of professionals in SF" are renters?
sorry spence, your lack of credibility is showing again...
and if you are a "professional" why do you take advantage of rent control? are you on fixed income? are you a socialist? are you needy? (or just greedy?)
Posted by: paco at July 18, 2008 6:10 PM
That's true paco, but Dude was saying-- rent comes down, houses come down; that's win-win.
I agree with you the article isn't saying that rent is coming down.
Posted by: sparky at July 18, 2008 6:11 PM
Nobody complained about DQ using MEDIAN when the MEDIAN was upward bound a few years ago.
I agree with the poster who mentioned Case-Shiller using $ per SQ FT as being the best measurement.
But, to replace it with average (or mean) is completely ridiculous. I received an email from a realtor who is giving a picture of the market using AVERAGES. I had to laugh. It sounds better to her but it is laughable to me.
Posted by: chuck at July 18, 2008 6:40 PM
I wasn't posting on this site a few years ago but I would have complained about it then. It is as meaningless going up as down. And if some agent talked to me about median price and not average $/sq.ft. for the area, I wouldn't laugh at them but I would fire them.
Posted by: sparky at July 18, 2008 6:45 PM
where do highly paid people (like yourselves) put their excess cash?"
Well. first, don't lump me in woth the high dollar earners like tipster and ex-SFer. I haven't been paid a salary by anyone since 1999. Not one cent! (I'm really proud of that from my limited government point of view. The idea of having one's wealth - ie, productive labor - siphoned off through FICA, medicare tax, CA income tax, etc. and then thrown away on foolish buraecratic priorities would dirve me crazy! Capital gains taxation is bad enough already....)
Anyway, though, my first idea is that one needs at this juncture in financial markets to accept psychologically the fact that returns to broad asset classes are likely to be paltry going forward. The time to have gotten rich easily was 1982 through 2000 (and for those in real estate, maybe through 2005-07 depending on your region). that was the period of the great credit inflation, the greatest, most sustained, and least volatile credit inflation the world has probably ever seen. Going forward, much of this will need to be unwound.
That being said, I'm a trader, so I tend to allocate about 30% of risk capital to strategies like short strangles on broad equity indexes, and depending on volatility, I will either be skewed long or short depending on whether vol is very high (say, VIX over 25, then long skew) or low (then short skew). I maintain a core equity position in broad US and FX-unhedged European indices (large unrealized gains mean selling and trading these positions are tricky). Taking all the options positions with the core underlying, right now I am slightly long, after having been massively short early in the year, long in April/May, and neutral again until recently. (The only reason I am going into this detail is because I recall that you were an options trader yourself, although as you can probably guess I was alwalys an upstairs guy).
I am not worried about inflation. We are set for deflation (we already had the inflation 1982-2005 or so). People tend to think of inflation as price changes in the most visible, repeat purchase goods (like gas, food, rent, etc.). I think that's a mistake, and it is better to think in terms of the money supply. Although people argue what is the best series to look at, I submit that looking at the narrow measures like M1 and the adjusted monetary base, is the best strategy, because these are what the Fed controls (or influences most).
Because I am not afraid of "inflation" at the present time, I have a large position in US treasuries. Basically an equal weighted duration ladder, but with a lump additional position in the 20+ year part of the curve. I expect that the ride may be a bit bumpy, but there is a very good chance that we see long rates below 3% within a few years. I also have a large position in I-bonds that I accumulated 2000-2003 (technically, the USG limited annual purchases to $30K per person per year, but there was a ophole regarding paper and electronic holdings that allowed married couples to sock away as much as $120K per year. Anyone who has these from that period should thank the investment gods! they are yielding about 7-8% now, all tax deferred and state tax free. I don't think they are good deal now, though.
I would not want to have a large unhedged (or nontraded) equity position in the US for the next decade or so. Real returns are likeley to be negligible IMO, consistent with other long periods following credit inflations (England after the south seas bubble, US returns 1929-1954, Japan post-1989, etc.).
I like a small amount of gold, but am bearish all other commodities right now.
As the recession deepends and spreads worldwide, I will look to get exposure to Asia. China is a mess, and has been a mess for years (their great monetary and credit inflation has "papered" over the fundamental weaknesses in their economy) but after the adjustment now undre way starts to get a little long in the tooth, I will systematically increase exposure in Asia generally (right now I only have a little Japanese exposure). Much as I hate to admit it because I love the US so much, I think it is passing into the sunset. Socialistic policies begun under FDR, and continued under just about every other administration following, will finally reach its "nadir" under the comrade Obabma. Power is likely to continue to shift east, barring of course a big shooting war....
I have some foreign currency exposure, mainly euro and yen. but I am not overly worried about the dollar. Unless the Fed inflates (which it HAS NOT done...yet :) ), the dolar should strengthen. That's typically what happens in credit deflations (as people scramble for currency to repay debt) - look at the Japanese experience for the most recent example, but you could also think of the real purchasing power increase of the USD in the 1930s.
Anyway, this is too long, but I hope it's helpful, and after all you did ask :)
Posted by: Sachel at July 18, 2008 11:15 PM
i agree that deflation is the real risk.
Posted by: paco at July 19, 2008 12:21 AM
While I agree with your broad thesis I wonder about the potential for foreigners to lose interest in financing us. What do you think about the potential for an argentine style currency crisis?
Posted by: diemos at July 19, 2008 6:21 AM
At least we are on the same page: $ per sq ft. Yeah, average $ per sq ft is the best way to report!
But, average housing price? Ugh! This realtor did mention that an $18m home did skew the numbers she reported...grgergrgerglumf!!!!!! When there is an $18m home in the mix, it is better to report the median. At least you get an idea of the price of a home in the middle of it all.
Posted by: chuck at July 19, 2008 8:58 AM
yep that's why I would only hear about it for the area. That would take out an $18M where most people would be looking. If an $18M sold near by, then it should be in the mix.
But I still don't think an $18M in the mix make median better. Median is alway bunk.
Posted by: sparky at July 19, 2008 9:58 AM
"And if some agent talked to me about median price and not average $/sq.ft. for the area, I wouldn't laugh at them but I would fire them."
Amen! Of course that eliminates 90% of the realtors I've ever met...and fluj!
Posted by: Michael at July 19, 2008 1:47 PM
"Amen! Of course that eliminates 90% of the realtors I've ever met...and fluj!"
You have no idea how funny that was.
[Editor's Note: We do (although we'd say more ironic than funny). Care to share?]
Posted by: fluj at July 19, 2008 2:50 PM
where do highly paid people (like yourselves) put their excess cash?"
Paco: Your question is a very good one, and one that I don't know that I can answer well. Here's my take:
Now is not the time to try to make a killing. Now is the time to try to guard your assets as much as possible. Thus, the biggest "winner" going forward for the near future will likely be the person who loses the least. Inflation eats away at all of our portfolios. The credit destruction that we are seeing can negatively affect us all. Trying to be a cowboy right now is IMO foolish... ALL markets are so volatile now that you can be wiped out.
So here is what I would recommend (I've said this before I think)
1) Keep enough CASH (bills, coins) at home for a weeks worth of spending (gas, groceries, etc). This way you have a way to pay for things in case (god forbid) your bank fails and the FDIC transfer isn't super smooth (FDIC takeovers are almost always smooth, but you never know). I had posted earlier: I had a friend who was without access to his cash for about 4 days after Northern Rock fell... you also hear that although Indymac Federal is working fine, people who took out cashier's checks and tried to deposit them into other institutions are getting "holds" on their new accounts
2) keep enough LIQUID assets (cash, savings account, checking account, Treasurys) for 3-6 months of expenses, in case you lose your job due to the economy.
I have my cash split between 4 different banks, ALL way under the FDIC limit of $100k. (I keep no more than $60k in any bank). I also have CD's and also Treasuries.
-you can buy Treasuries YOURSELF (it is very easy) at Treasurydirect.gov. the website is a bit weird and simplistic, but it works ok
-there are internet banks that tend to have fairly high APRs, such as INGdirect, Emigrantdirect, and HSBC
-you can get CD's. Right now Bank of America has a 7 month CD for 4.11%. it is FDIC insured so your chance of loss is almost 0%. (on a side note, it shows you how bad BAC is hurting if they are offering such a high rate in this envirnoment. they are cash starved).
3) pay down debt. If you have a 6% carloan and pay it down as example, you're getting a 6% gauranteed rate of return. not bad in these days.
4) don't add new debt right now. There is nothing you need right now that you have to go into debt for it, unless it is a productive enterprise (like a business). even then I would watch yourself closely.
In terms of trading the market: I purposefully don't want to say too much because this is HIGH RISK. My trading portfolio is up substantially this year, but I've taken some 10% swings IN A DAY. also, up until last week I was 100% sure of my analysis and my plan, and I felt my investing was a "no brainer". now the market is very volatile and govt is poking its head in here and there distorting the market, and I'm pulling a lot out for a while. my goal has been to be a short term INVESTOR, not a gambler or speculator. I think we're mainly in speculator land now.
BEFORE last week, the no brainers were;
-short all financials, especially WaMu, Wachovia, Indymac, Downey Financial, First Third, Lehman Brothers, Fannie, and Freddie. I did this by shorting Fannie and Freddie, and by using SKF (the Proshares index fund that shorts financials).
I have covered my Fannie/Freddie shorts now, and lightened up on SKF, but still have a position there. I might regret keeping my SKF.
-short Real Estate. I did this using SRS. I still feel this is still a strong play as SRS is more a commercial real estate short as compared to a Residential RE short. So I have a lot of that and I have not lightened up.
-short the Stock Market in general. I have been using SDS and also TWM. I am staying in them until October/November when I'll have owned them for a year, for tax purposes. I am not adding to them. My thought is that we have had rapid market improvement this last week, but that we will have another downturn. This play is NOT as "sure thing" as it was before... before I knew we'd have a killing... now we're down 20-30% so a lot of the easy money has been made... and the govt is interfering ("protected" banks and all that)... so short at your own peril. I think we'll have an intermediate bounce and then another fall in the market. (just like how Jan through March saw declines, then april-June improvement, then July down again... I think up some in August then down in the fall).
-Flipflopping but mainly long Oil and Energy. I was using USO and DIG for oil. when it would it about $140, then I would sell and short oil using DUG. I am currently Long Oil as of last week with USO, but I'm not as confident given the slowing of the economy... I will sell USO if/when it gets to $116 or if it goes to $98. (I bought at 108.50)
I've been trying to keep my "trading money" at about 5-7% of my total net worth/assets (not including the equity in my home). Because my positions did so well, it bumped up to 15% of my assets... so over the last week I sold a lot of stuff and am moving most of that to a Bank of America CD since it's 4.11%. That's REDICULOUS that BofA can offer such a rate... it means their cash position is CRAP right now... but it's FDIC insured so I won't lose the money. I'll take a risk-free 4.11% return on my cash in these times any day.
the fact that BAC is forced to offer this CD rate makes me want to short the heck out of them... but they are a "protected" stock.
of note: Wachovia and Washington Mutual and Downey and First Third are not on the protected list... but again, gotta be careful because they may go down (big profits) or get taken over by another bank. a takeover would wipe out your short.
also of note:
soon (not yet) oil and commodities will be a huge shorting opportunity. we may be close. we need to see more talk of "recession" and maybe even "depression" first.
soon I will short the Euro and/or the Pound Sterling.
I don't know much about bonds... so I don't invest in them. I would avoid municipal bonds though given the turmoil in the municipal bond market, and the fact that a lot of municipalities will see tax receipt pressure due to the downturn in RE/economy
Posted by: ex SF-er at July 19, 2008 3:30 PM
i'm glad that there will always be market-timing, security-selecting traders/investors. they (satch, ex SF) keep markets efficient.
always remember there are two sides to every trade. if you think you can, over the long run, take the correct side of the trade more than 50% of the time, you should 1.) trade not invest 2.) spend your time trading because you will be well compensated (i suspect satchel may fall into this camp given his zero income but likely high cap gains status).
for myself, it is buy and hold. strict asset allocation to passive index investing, mixing uncorrelated asset classes, keeping expenses low, and tax efficiency (including active management in this one realm), these are the key to wealth building. but it only works as long as you have discipline, and as long as those who think they can beat the market continue to attempt to do so.
Over time those failing to beat market returns will vastly outnumber those who succeed. My system is predicated on the belief that each time a failure drops out (survivorship bias anyone?) s/he is replaced by another willing participant. Capitalism is great isn't it?
Posted by: enonymous at July 19, 2008 5:24 PM
this is OT, but since i see both satchel and ex sf are reading this thread, and since they are clearly intelligent economic and market followers, I am curious to hear what they think of the 'deep capture' theory that has been pushed by Overstock's CEO.
i used to think he was just a grumpy conspiracy theorist and a bad CEO.
the events of this past week in the US equities markets have changed my views. i find it a striking coincidence that when the SEC put the clamps down on naked short selling, the US equity markets moved dramatically higher, and the death spiral of Fannie and Freddie, along with Lehman, was abruptly stopped and reversed. all the while the (supposedly co-opted) financial press was stating that naked short selling isn't even an issue, and that it basically never occurs in the first place.
the lesson seems to be it is ok to go after the Bear Sterns and Overstock's of the world, but tread lightly on quasi government agencies, because their leaders have true power.
Posted by: enonymous at July 19, 2008 5:31 PM
I agree with you fully. I have never bothered trading in my life before this year. I have always been buy and hold, with typical hold times of years.
starting in November was the first time that I've jumped in and out. I still don't consider myself a trader, because I make very few trades (I've maybe made 10 trades total this year). but looking at my analysis I was worried about buying and holding US equities any longer (S&P index is only slightly higher than in 1998, 10 years ago)
and I do want to stress again: I trade with maybe 5-10% of my assets, so "play money" if you will. I do not recommend it to anybody as a way to "get ahead". Instead, I recommend simply finding "safe" investments that will not lose too much to inflation, as outlined above.
Posted by: ex SF-er at July 19, 2008 9:03 PM
yes, naked short selling is a travesty. It has always been illegal, but has never been enforced. Patrick Byrne is completely justified in his gripes. His stock has been illegally punished for YEARS (as has Martha Stewart's and a few others).
it is an absolute disgrace that we allow naked short selling, and even worse that now the SEC will SELECTIVELY enforce the rule. Even worse, the SEC will enforce the rule ONLY against "regular people". the investment banks and brokerages have an exemption to this rule.
So it's ok for Goldman Sachs to naked short, but it's not ok for Satchel to naked short. And anybody can naked short WaMu, but god forbid they try to do it to Bank of America.
but what do you think when the Treasury Secretary comes from Goldman Sachs? in fact, a high percentage of people in government financial regulation come from Goldman Sachs... and a lot more come from the other banks/investment houses.
it is capitalist welfare for the rich on an extreme level. The US is rapidly becoming crony capitalism. there is no question that the regulators have been captured by the banks/ibanks.
If you are interested in naked short selling Byrne has a very intriguing powerpoint presentation on the web. it lasts one hour.
I have heard some whispers from people I find to be reliable that one of the big naked short sellers of financials was Goldman Sachs itself. irony indeed. so GS shorts Fannie like crazy and makes a huge profit. This causes the SEC to ban naked short selling which causes a short squeeze making Fannie's stock surge. how much do you want to bet that the SEC ruling was "leaked" to Goldman before it was releassed to the press... allowing GS to get long financials and reap in the profits again. Now the short squeeze is neairng it's end... and only DING DING DING Goldman Sachs can naked short them down again.
crony capitalism. it's the reason I started trading myself. You cannot win this game. it is disgusting.
Posted by: ex SF-er at July 19, 2008 9:14 PM
I'm the wrong guy to ask about financial matters: I make my money building businesses that throw off large amounts of cash. Then I run them. I never sell them.
But by coincidence, I'm doing what Satchel said for the reasons that ex-sfer posited: this isn't the time to be looking at making money (though lots of bears are), it's a time to hang on so that when things shake out, you have it to put to work.
Risking it all to make an extra 1-2% isn't worth it, and the amount of knowledge it would take for me to successfully do things like short at times, and go long at other times (as ex-sfer is doing) would distract me from my businesses, all of which are making money, but unfortunately, are taking up a lot of my time.
So the best thing to do is to park it somewhere safe, until you can spot an opportunity in something you know very well. ex-sfer knows markets well and so he (she?) has an opportunity to do that right now with all the messes unfolding. I don't, because I don't know this stuff as well as others, and that's a recipe for getting clobbered.
In the meantime, it's OK to dabble in something you don't know so as to educate yourself in it for when the time comes.
Satchel, I think we're all just holding our breath and hoping you won't disappear again, so no one is really talking about it, but I for one am very glad you came back. A lot of people are. You don't have to be right in your conclusions (and no one always is): your analysis was always so well thought out that I found them to be intensely valuable. In the same way, I find fluj to be just as valuable. I hope you'll both continue to post here.
Posted by: tipster at July 20, 2008 8:59 AM
"Editor's Note: We do (although we'd say more ironic than funny). Care to share?]"
That isn't completely my call, you know?
Let's just say that I have continued to talk $psqft week in and week out, probably more than anyone else on this blog. Oh yeah ... I have probably done over 10 deals with the individual Michael said "amen" to.
Posted by: fluj at July 20, 2008 9:22 AM
I have avoided posting to this thread, because I know there are so many more knowledgeable who can comment, but the most important thing in passive investing is diversification. Once you have your debt paid down and have an appropriate slush fund - six months expenses is probably about right - in CDs, then allocate some percentage of your cash to stocks, some to bonds, some to MUNIs, some overseas, maybe some in commodities, or at least a stock that tracks a commodity. You should rebalance it periodically as it gets out of whack.
You should also have some real estate: whether your investment calculations should include your personal home is a matter of personal taste, though I would not include it. If you are not ready to buy income property, then you should probably hold a REIT, but I think that income property is the closest thing us private sector slobs have to a pension. Real estate is traditionally a good hedge against inflation. I personally think that we are headed into a period of above average inflation, though opinions on this differ.
Buy and hold passive investment will never make you rich, for all the reasons stated above, but it can fund a comfortable retirement. If you really want to make money, you have to start your own business, or be an early employee in one that offers equity that someone else has started.
Posted by: NoeValleyJim at July 20, 2008 10:16 AM
it's always good go get input from many sources. Nobody needs to be an expert to post expert advice. you certainly just did. and I post economic stuff all the time and I'm not an expert, at least I'm not classically trained in economics... I'm self taught. most of the so-called experts talk drivel anyway.
as a nation, we need more people talking about economics and finances. In the end, it's one of the most important topics around. It determines where to allocate scarce resources.
we can't leave it up to experts. left in the hands of too few you get... well you get the current credit fiasco.
Posted by: ex SF-er at July 20, 2008 11:27 AM
"Majority of professionals in SF" are renters?
sorry spence, your lack of credibility is showing again...
'and if you are a "professional" why do you take advantage of rent control? are you on fixed income? are you a socialist? are you needy? (or just greedy'?)'
I moved in this place in Apr 06 and my landlord has never upped the rent. How am i taking advantage? Should I ask her to raise my rent? i still say there are are tons of 2 bdroom in tier 1 areas under $3000 per month.
paco, why are you so angry?
Posted by: spencer at July 20, 2008 6:04 PM
"Majority of professionals in SF" are renters?"
almost everyone in my circle of friends and aquantances are in the $150k -$400K salary range and only a handful of them own.
Also, it is well known that 65-70% of the residents of SF are renters.
Paco, why do you care what i think. You address to many snide remarks to me personally. are you obssessed or something like that? please leave my name out of your comments.
Posted by: Spencer at July 20, 2008 6:12 PM
actually, "he whose name can not be spoken",
i often reflect on how happy i am. i have a wonderful wife, a young son and, generally, a credit balance in most every aspect of my life. i think that is reflected in my posts, which tend to defend the half full part of the glass.
in other words, i think i focus on the opportunities that exist (such as they are...) rather than taking the conventional armchair bear approach (that you often highlight...).
regardless of who you are personally, i don't care for your message and i am uncertain about your agenda. you make comments about what you see and i offer a counterpoint-that's it.
Posted by: paco at July 20, 2008 8:21 PM
"I wonder about the potential for foreigners to lose interest in financing us. What do you think about the potential for an argentine style currency crisis?"
Good to hear from you again! That's a good question, because on the surface (and even when you dig a little), the US has many of the same relevant problems that afflicted Argentina, Indonesia 1998, UK 1992, Russia 1998, etc., namely, (1) large current account deficit built up on the back of fairly unproductive domestic investment, and (2) governmental fiscal deficit (in the US, particularly bad as to the quality of the deficit - clearly structural in our case - but perhaps not so bad as to size, yet....). There is also a fairly large USG debt, similar to other "pre-crisis" countries, although at 60-70% of GDP, we are nowhere near as bad as many (perhaps most?) other "first world" nations.
Of course, I am not including the unfunded medicare, ss and potential Fannie/Freddie obligations in this figure. Even so, though, places like Japan have run 200% debt ratios, Italy 140%, etc. so USG debt alone will not cause the crisis IMO. And of course, we do not have the externally denominated debt problem that has led to many currency blowouts in the last century (e.g., Weimar, Russia, Thailand, Indonesia, etc.).
If you ask me will the US currency ultimately end in a hyperinflationary blowout, well, yes, absolutely that's true! I can't think of a currency that hasn't, if your time scale is long enough. It will probably happen within our lifetimes (maybe not an end to USD, but a severe depreciation - I mean, it's been happening since 1913, with some notable periods of exception like 1930-1945 or so...).
But, much as I hate this expresion, I thik thiings are a little different, at least for now, and that will help us avoid an Argentina in the near (say, next 10 years) future. Reserve currency status, which we have really enjoyed since we set up the monteray system at the end of WWII, confers a special benefit, especially as foreign governments have an interest in keeping the status quo as well. Towards this end, I can almost guarantee that there are behind the scenes deals betweeen the Fed, USG, China, ECB and Japan, regarding the US money supply. We'll never know for sure of course, but the Fed's refusal to continue the monetary inflation that prevailed under Greenspan - even given the stress that the banking sector has been under - has been very telling to me. One thing I know, the US will not suffer an Agentina style blowout without the Fed printing large quantities of currency, and so far it hasn't.
Last, high inflation is deadly to a highly leveraged economy, as it raises equilibrium interest rates (which collapses the economy anyway). Although politicians are crass and stupid, they probably understand this much, and the Fed no doubt is "explaining" this to those who don't. High inflation is also painful for the USG, which will not be able to spend (in real terms) as much as it would like in order to curry favor with the population. If you really think about it, high inflation would be a "gift" to those members of the population who are highly indebted, the value of which is likely not to be even comprehended by those people! Now, call me cynical, but why would the Fed (which has all the money, and the monopoly ability to create it) and the USG (which is all too happy to have a dependent, struggling population so long as it does does not get so bad as to cause revolution) confer this wonderful gift on the public?
I've posted this essay from early 2006 before, but it's worth rereading:
Also, here's another fun article that I just came across that is sort of a counterpoint to that Nyquist essay :
I hope the above stuff is helpful (but very OT to the topic of median SF prices!).
Posted by: Satchel at July 21, 2008 7:09 AM
Thanks for the 4.11% BOFA CD info. This is an amazing rate today, and I think this is only the beginning of a new CD price war.
Agreed on Short Euros. Reckless financing was also a practice there. Not only UK, Spain and Ireland, but also very conservative countries like France. They are feeling an economical pinch too.
True, you should always keep some RE.
I'm 40% RE, 50% Euro bonds (at 5% guaranteed APY) and was Euro long in general for 3 years. Now I'm long USD long and slowly re-allocating into US stocks.
4.11% looks good for CDs but last time I did my shopping, my grocer had cranked its prices 10-15% overnight (Trader Joe's) or more. It was overdue, they had frozen price for a long time, but still.
Inflation in food and gas is gonna hurt more and more and it might spread into the overall economy. Being happy about 4.11% in this environment just shows how special our times are.
Posted by: San FronziScheme at July 21, 2008 8:33 AM
How will we know when the gov't starts to print money ?
Posted by: anon at July 21, 2008 12:49 PM
How will we know when the gov't starts to print money ?
Haven't you received your "stimulus check" yet?
Way, it is not money. It is debt.
The Fed just swiped your credit card for you...
Posted by: San Fronzischeme at July 21, 2008 12:54 PM
"How will we know when the gov't starts to print money ?"
IMO, 2 ways. The most obvious is expansion of the Fed's balance sheet. Of course, they don't publish audited financials, and the info that does show up is outdated by the time it shows up. But over time, the balance sheet will tell the tale (the Fed buys treasuries, which increases its balance sheet, and "prints" the dollars used to "pay" for those; note that the Fed is actually "lending" the dollars into the treasury/taxpayer, which pays interest on that debt - nice racket if you can get get it!!).
Second, the easier - and perhaps more timely - way is to look at the adjusted monetary base, which is basically the sum of currency in circulation + bank reserves in the Fed system:
(The short term chart looks a little scary, but note the scale, and the tables below the chart.)
Long term "printing" can be monitored here:
I'm sure there are other and perhaps better ways of monitoring what the Fed is up to, and I would love posts on any additional techniques that people are aware of.
Posted by: Satchel at July 21, 2008 2:15 PM
"regardless of who you are personally, i don't care for your message and i am uncertain about your agenda. you make comments about what you see and i offer a counterpoint-that's it."
If that was it, I would not be bothered. But that is not it. you ridicule and chide my contributions.
and i am definitely a glass half full person. Not a bear by any means, but a realist who believes deeply in economic principles and a free market approach.
Posted by: Spencer at July 21, 2008 3:27 PM
"If that was it, I would not be bothered. But that is not it. you ridicule and chide my contributions."
if the shoe fits...
like i said before, i have nothing against you personally; its just
your unfounded, inaccurate posts that i feel need a little slappin' around.
Posted by: paco at July 21, 2008 3:47 PM
" Not a bear by any means, but a realist who believes deeply in economic principles and a free market approach."
like, say, living in government mandated subsidized (aka rent controlled) housing?
Posted by: paco at July 21, 2008 3:59 PM
"And yes, we're doing some digging on the effect of mix"
what was the result of this digging?
would be interesting to compare SFH median/volumes by district for June08 and/or June07/May08 to see if the 11/8% falls were centered in only a few districts, or were across the board.
Similarly, have any changes in mix of sales by 'hood exaggerated the true fall in median price, or as is oft claimed, is mix supporting the median and are the true falls greater.
Posted by: REpoenaddict at July 21, 2008 4:44 PM
"like, say, living in government mandated subsidized (aka rent controlled) housing?"
I don't make the rules. I rented on the free market (craigslist) and my landlord has never raised the rent. does this make me culpable? should i ask her to raise my rent?
Posted by: Spencer at July 21, 2008 4:49 PM
"believes deeply in economic principles and a free market approach"
sounds like a recipe for cognitive dissonance
Posted by: paco at July 21, 2008 5:21 PM
somehow i doubt you even know what cognitive dissonance truly means.
Posted by: Spencer at July 22, 2008 9:01 AM
Of course he doesn't. He has admittedly developed many projects, and as we have heard he many times that means he is high school bully drop out moron who can't do simple math and can barely formulate a sentence.
Posted by: sparky at July 22, 2008 9:16 AM
perhaps i have given you too much credit by assuming that you felt the conflict between what you say and what you proclaim to believe. maybe you are not aware(cognition) of how inconsistent
(dissonant) your actions are with your words?
or maybe hypocritical might be a better description of your musings...
(and thanks sparky, for the support. maybe we can ditch math and english classes and go look for some nerdy little spencerboys to beat up!)
Posted by: paco at July 22, 2008 9:38 AM
Darn, that's a proper bully beating OK.
Someone can be capitalistic and live in the rent controlled system.
Actually, I would say this would be a the best option to take in a government controlled system and if the market doesn't make sense.
Everyone looks out for his own personal interest and will try and get the most bang for his bucks.
Buying property for the sake of showing off your wealth is not capitalistic, but moronic. But buying into investment properties either to unlock value or get a proper ROI is capitalistic. And the SF market offer few opportunities right now, that's for sure.
Before the pack of wolves go blindly for the jugular, I didn't say "none", but "few" opportunities. There will always be opportunities.
In such an unfavorable environment, it makes sense to lay low, preserve capital and use the current socialistic system against itself. Rent instead of buy while prices are out of whack with reality. That's what I'm doing. And I am preserving my capital as well as saving 50% of the cost of owning thanks to rent control.
But when things will be more attractive, I will be ready.
Posted by: San FronziScheme at July 22, 2008 10:58 AM
Rent control should be means tested. If you are gaming the system, it should end. Period.
Posted by: RC Means at July 22, 2008 11:03 AM
Yeah, they do this in a few countries in Europe too. I have seen it working firsthand as a landlord and all it does is ... increase the rents.
Applicants for rentals simply factor in the government subsidies into their calculus. They'll shoot for a place a little pricier they can afford under the older rules.
As a landlord, I LOVE rent subsidies!
Landlords will price the subsidies into their asking rent as well. Not all, but some. Say a place should rent for 1700. They'll ask 2000 knowing 500 will be paid by the city. That's 300 gained without lifting a finger.
Usually, everyone wins (renter and landlord) but the taxpayer.
Posted by: San FronziScheme at July 22, 2008 11:14 AM
come on fronzzz,
the issue above is about one person claiming he "believes deeply in economic principles and a free market approach." i call bs on that.
we both know that RC keeps vacancy unnaturally low and rents
unnaturally high. and that creates abundant opportunities. he takes the opportunity to enjoy the benefits of subsidized rent and i prefer to take the opportunity to unlock value.
Posted by: paco at July 22, 2008 11:49 AM
OK, well you've at least proven that you don't know exactly what cognitive dissonance means, but that was decent for a layman (non scientist).
"maybe you are not aware(cognition) of how inconsistent (dissonant) your actions are with your words?"
maybe you can help me understand. I rented an apt that was lsited on Craiglist in Apr 06 for 2200. My landlord has not raised the rent since i moved in. how am i gaming the system?
I would vote against rent control for sure as well as I would vote to end Prop 13. I agree that both of them artifically keep rents and housing prices high.
I do admit after being educated by such wise men as yourslef that $2200 is below what people are asking now. another unit, same as mine, one floor up just rented for $2850. should I canl;l my landlord and ask for a rent increase?
Posted by: Spencer at July 22, 2008 3:56 PM
"In psychology, cognitive dissonance is an uncomfortable feeling or stress caused by holding two contradictory ideas simultaneously."
sounds like i used the term correctly. what did i miss?
Posted by: paco at July 22, 2008 4:08 PM