November 20, 2008

San Francisco Recorded Sales Activity In October: Down 21.3% YOY

San Francisco Recorded Sales Activity: October 2008 (www.SocketSite.com)

According to DataQuick, home sales volume in San Francisco fell 21.3% on a year-over-year basis last month (414 recorded sales in October ’08 versus 526 sales in October ‘07) and fell 9.6% compared to the month prior. San Francisco was the only Bay Area county to record a year-over-year sales volume decline.

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 October was $699,000, down 12.1% compared to October ’07 ($795,000) but rose 3.6% compared to the month prior.

For the greater Bay Area, recorded sales volume in October was up 38.8% on a year-over-year basis and increased 4.7% from the month prior (7,613 recorded sales in October '08 versus 5,486 in October ’07 and 7,271 in September '08), while the recorded median sales price fell 40.6% on a year-over-year basis, down 6.3% compared to the month prior. Once again, think foreclosures.

At the county level, foreclosure resales ranged from 10.6 percent of resales in San Francisco to 68 percent in Solano County. In the Bay Area's other seven counties, October foreclosure resales were as follows: Alameda, 41.1 percent; Contra Costa, 58.9 percent; Marin, 17.2 percent; Napa, 45.6 percent; Santa Clara, 36.4 percent; San Mateo, 21.6 percent; Sonoma, 49.7 percent.

At the extremes, Solano recorded a 141.1% year-over-year increase in sales volume (a gain of 436 transactions) on a 38.7% decrease in median sales price, while Contra Costa recorded a 86.7% increase in sales volume (a gain of 877 transactions) on a 46.3% drop in median sales price.

Bay Area median price tumbles to $375K; sales reach high for '08 [DQNews]
San Francisco Recorded Sales Activity In September: Down 2.3% YOY [SocketSite]

First Published: November 20, 2008 1:00 PM

Comments from "Plugged In" Readers

The way I read the chart at the end of the article, volume is down 21%, not 12. It's median that's down 12%. When volumes collapse like that, it usually means a VERY BIG DROP in prices is next.

Goog and apple dropped another 7% today. Goog is heading for its IPO price, adjusted for inflation. And everyone is laying off.

It's hard to imagine how home prices are going to do anything but collapse.

I can't for the life of me understand why anyone would buy anything in SF right now. Go to the burbs, maybe, but watch out for all those layoffs. As for SF, it just seems like a sure way to lose a lot of money, when waiting even a few months will almost certainly save a lot of $$

[Editor’s Note: Correct read on volume and median, percentages originally transposed but since corrected.]

Posted by: tipster at November 20, 2008 1:14 PM

The most shocking county in the DQ release was Marin. They saw a 32% decrease in median price even though they still have a relatively low share of foreclosures (17%...second lowest after SF's 11%), so it doesn't look like it's purely a story about mix. Seems like Marin is lagging Coco/Alameda by 6-12 months and leading SF by 6-12 months. And the job losses haven't even started hitting in earnest yet.

Posted by: gmh at November 20, 2008 1:18 PM

My patented google lazy indicator is holding up well (real SF = spring 05 prices)! -- Is There Anything Google Can't Do? :)

It's a bit of a stretch to say google is heading for its inflation-adjusted ipo price, unless you bought it in Zimbabwe...

Posted by: dub dub at November 20, 2008 1:28 PM

A few comments:

- The trend line is bubble-shaped. Is that a coincidence?

- When both lines will cross, that will be the bottom!

Posted by: San FronziScheme at November 20, 2008 1:33 PM

The listed sale numbers are pretty consistent with DQ: 388 sales at $730K median for Oct 08 v. 467 sales at $815K for Oct 07. I'm with tipster - who is stepping up and buying today? So far this month, 125 sales at a median price of $734K.

Posted by: FSBO at November 20, 2008 1:35 PM

About Marin,

I think the mix is in play there. Ask LMRiM how much he rents his house and how much are the asking prices for these houses.

There's a big huge denial on the seller's side (no-one would blame them) and only the lower priced are selling. Affordability is again the key word.

Look at the Sausalito numbers. 4 sales at 480K vs. 1.079M last year. That's mix effect.

When sellers will accept it's a buyer's market, you'll see the true value of this market and it won't be pretty.

Posted by: San FronziScheme at November 20, 2008 1:44 PM

"When volumes collapse like that, it usually means a VERY BIG DROP in prices is next."

No offense Tipster, but sales volume has been down for a couple of years now, and you've been predicting big price drops for just as long. It seems like if we were going to get those "VERY BIG" price drops that they would have happened already.

It's pretty remarkable that given the increase in foreclosures and poor overall market conditions, SF has only dropped by 12% in price. But I'm sure the response to that will be it's due to the mythical mix shifts we keep hearing about...which have no hard data to back it up.

Either way, it's nice to see SF hanging on relatively strongly despite the horrendous economic conditions.

Posted by: Lance at November 20, 2008 1:52 PM

Sellers that don't accept it's a buyers' market aren't sellers, just would-be-sellers.

125 sales to date this month -- looks like we are looking at a really slow month with next week likely not to add much with the holiday week. At that level, the numbers are so low that medians cease to have much relevance at all. Even if we double it and make it to 250, wouldn't that put us at about 8 months of inventory?

Posted by: Trip at November 20, 2008 1:53 PM

Arm's reset? I don't think that's even an issue at this point. Volume is down because the prices are in fantasy land. Take them down 30% then volume will come back.

Posted by: cooper at November 20, 2008 1:58 PM

If we had a relative percentage of foreclosures here, volume would be way up. Look at Solano. Instead, volume is down but median actually slightly up from the month prior. (I know I know wait till the ARMs reset.)

Posted by: fluj's intrepid e-assistant at November 20, 2008 1:58 PM

"I think the mix is in play there. Ask LMRiM how much he rents his house and how much are the asking prices for these houses."

There is some mix, but I'd estimate prices are 15-20% off their peak in the nicest southern Marin towns, on average of course. There is NO question in my mind that Marin is going to be put into the crusher. Expect starter 3/1s and 3/2s in places like the "flats" of Tiburon or the outskirts of Mill Valley town proper to fall 50%, and I also think that the way overbuilt McMansion market in Tiburon (for example) will also fall at least 50%. I think special properties in nice spots (right on the water, older gracious construction, best views, etc.) will fare much better, especially because there will not be a lot of pressure to sell and the supply is very limited.

Rent v. buy? Right now I am sitting in the office of my 3/2 expanded rancher in Tiburon (about 1800 square feet). I have a completely unobstructed view of Richardson Bay, from Belvedere Island to Mt. Tam, including both towers of the GG bridge (the roadway is obscured by part of the headlands), all of Sausalito and its harbor, Strawberry Point and even SF from about the Marina to about the Sutro Tower (looks like it's fogged in today). I pay $2800/mo. and we expect to pay less next year (already have an option to renew at the same rate) I just got the rental in July - no special connection or "friends and family" rate. We saw the place (asking $3800), we showed the owner a few statements that demonstrated we could just buy the house for cash, and moved right in, with a 70 lb dog! Oh, every single floor surface is brand new, all new paint, some updating and new appliances, but it is a 50s house updated to 80s standards. Good enough for us - we're not house fetishists.

People across the street paid $1.3M for a house in worse shape, with not as nice a view, and a tiny bit smaller - in 2005. The people next door to us paid around $1.2M for a shack. There are four or five houses in the immediate area that have been for sale - most have been pulled off and none has sold.

50% off is my prediction for houses like these, and that estimate is supported by the rents being paid (others on our block are paying $2600 to $3700 in rent) and by the fact that we are going to fall into another Depression (the prices would have adjusted anyway, but the economic climate should speed things up from here on out).

Posted by: Laughing Millionaire Renter in Marin at November 20, 2008 2:00 PM

But I'm sure the response to that will be it's due to the mythical mix shifts we keep hearing about

I don't know if mix is mythical or not... but one way of looking at the data would be to compare price per square foot as opposed to absolute price.

others recently posted this data.

of course, you also want to control for neighborhood.

I personally believe that mix causes an UNDERrepresentation of appreciation on the upside, and also UNDERappreciation of the depreciation on the downside.

the reason:
during a boom, all properties that are put on the market sell. high end, low end, fixers, you name it.
thus, the lower end sales pull the median down.

in a bust, only the higher end or the renovated properties sell, although they sell for less than what they otherwise would have. thus, the median falls slower than it should

HOWEVER, in some markets the mix really pulls the median down more than you'd expect. this is happeningin SoCal right now. Only foreclosures are selling. however... given that data (only distressed is selling) then distressed IS the market.

I'm sure that was clear as mud.

Posted by: ex SF-er at November 20, 2008 2:08 PM

All these recently reported sales are already past tense. In this economic quagmire, it is tomorrow's sales that really matter.

By the way, Google closed @ $259.56, which hasn't been seen since May 2005. From what I found, its IPO price was $85 a share. I doubt it is going to go back to that price....

Posted by: Pumpkin Patch at November 20, 2008 3:03 PM

I am just surprised there was any sales at all. With the economy and stock market like this, I would think buyers would back out of the deals and stay out.

Why would anyone buy at all?

Posted by: john at November 20, 2008 3:15 PM

BTW stock market going down means downpayment money going down.
This with tighter lending standards makes it more difficult for people to buy a house.

Posted by: il_guru at November 20, 2008 3:21 PM

"For the greater Bay Area, recorded sales volume in October was up 38.8% on a year-over-year basis ... while the recorded median sales price fell 40.6% on a year-over-year basis."

Everywhere--except San Francisco where volume was down 21.3% and median sales price was down 12.1% YOY.

The Bay Area (minus San Francisco) is bottoming out and correcting on it's own. At the right price, buyers step up to the plate, even when the local economy is facing mass layoffs and stock market crashes. Shelter is on the bottom tier of Maslow's hierarchy of human needs. This local correction is proof that the government doesn't need some huge national rescue package. It will only slow down the correction and waste taxpayer money.

San Francisco will take longer to bottom out because for now fewer sellers are forced to lower prices aggressively due to foreclosure. Banks on the other hand are pragmatic and lower prices without sentiment until properties sell. How deep SF's bottom is will depend on the number of foreclosures as a percent of overall sales.

And an obvious point, the only way to increase sales volume in SF is to lower price. Econ 101. Obvious--but this point seems to allude many sellers. Some homes have been on the market over a year, and appear to be more wishful thinking than true seller motivation.

Side note to Editor: "San Francisco's median sales price in October was $699,000, down 12.1% compared to October ’08 ($795,000) ..." -- shouldn't this be "October '07 ($795,000)? And thank you for all you do! I for one am grateful!

Posted by: DataDude at November 20, 2008 3:56 PM

Google closed @ $259.56, which hasn't been seen since May 2005. From what I found, its IPO price was $85 a share. I doubt it is going to go back to that price....

GOOG has lost 60%+ since its bubble peak. Another 60% would bring it around $100 or where it was around the first weeks after the crazy IPO.

Remember Citibank used to be the largest company in the US in terms of market cap. Many thought it couldn't go under $20, then $10. There's no telling where things may go.

Rule of thumb: in this downturn, the higher the emotion pushing a bubble, the larger the fall. GOOG will most certainly succeed on many of their ventures, having the smartest people around, but they will pull the plug on some. They can't be 100% right all the time, which means gravity ultimately applies.

Posted by: San FronziScheme at November 20, 2008 3:57 PM

Dont' mean to sound smug but I came *this* close to buying in the spring. The fact that I didn't along with having kept my down payment and savings in cd's for the past few years have me waking up feeling like the luckiest guy alive these days.

Posted by: Mktwatcher at November 20, 2008 3:59 PM

DataDude,

I think East Bay volumes (the biggest chunk of the BA volumes) will tamper down and prices will slowly continue to go down.

Big drops in any markets attract bargain hunters. Call it a "dead cat bounce". These people were on the sidelines and had the power to buy and borrow. Once this resource is tapped off, the market will rely on the "baseline" of regular buyers which is will be low considering the economy. On the seller side, you will still have all the foreclosures plus the flippers who bought repos trying to make a buck.

In any case, I think this will not be the V shaped market today's bargain hunters are expecting. Salary, employment and credit supply will ultimately decide the equilibrium of volume/prices.

Posted by: San FronziScheme at November 20, 2008 4:07 PM

Mktwatcher,

That will be 2 of us.

Posted by: San FronziScheme at November 20, 2008 4:08 PM

@ tipster & pumpkin patch

Regarding GOOG closing at $259.56 -- how much further can it fall?

Looking at YHOO (similar, but not identical), it's all time high adjusted for splits was $125.03 on 1/4/00. Less than two years later, it was trading at $4.01 on 9/27/01. A 96.8% fall from it's high.

Anything's possible...

Posted by: DataDude at November 20, 2008 4:13 PM

I agree with dub dub
Google is neither Yahoo or Citi.

Google can obviously fall much further, but it will be for very different reasons than the above two mismanaged companies if it does. (specifically it will likely be because in the end Google is still just an advertising company wrapped in a tech blanket) I personally would never go long it or short it these days!

the Google effect is fun to watch, but I think that the overall market is more important.

Trillions of dollars of wealth have evaporated in the last few months in the equities market. Trillions more in the housing markets.

there is a lot of pressure on all industries, including SF specific ones
-tech has pressure
-Venture capital has a LOT of pressure
-Hedge funds are screaming in pain
-Banking is catastrophic

even the bright future industries MAY see headwinds... like biotech and green technology
(green technology suffers when Oil prices crash... the things that were viable at $100 oil aren't so viable at $50 oil).

earlier I thought we would try to reinflate a bubble, and I was thinking it might be green technology and sustainable technology. now I'm not so sure. It might be general infrastructure plays instead like roads, highways, bridges, sewers, electrical grid, coal, etc.

Posted by: ex SF-er at November 20, 2008 4:19 PM

SFS -- woa, there bub. Google has no leverage and many brazilions of cash in the bank. It could also instantly lay off 20% of its staff and cut capex to zero to conserve that cash in an armageddon scenario.

Citibank was/is highly levered, and its non-cash assets are probably crap (for all I know), so its effective leverage is even higher -- and indeed it is working-capital insolvent right now (as of Sep 30 -- maybe they got an equity injection since then? Who cares). They barely had enough cash to cover payables as of Sep 30 (!).

Who knows where stocks will go, but you can't compare the two companies financially.

Posted by: dub dub at November 20, 2008 4:21 PM

Dub Dub...Thanks.

Google capsizing when its fundamentals are strong just means we have entered the Second Great Depression...yeah, that is the real Google effect.

Posted by: Pumpkin Patch at November 20, 2008 4:27 PM

dub dub,

Sure Citibank was leveraged. And GOOG has cash.

I used to work for a small post-crash dotcom that did a reasonable IPO 4 years ago. They had plenty of cash in the bank. Fast forward to today. Stock price has bled 90% of its market value. The gazillions from the IPO are 50% gone. Mainly due to overhead and successive new businesses that didn't replace the diminishing original business. The profits became losses as they tried to design the next killer app. It is trading around cash value today. Of course GOOG has plenty of time to explore other businesses, but the economic environment will be tougher than these past 5 years.

Posted by: San FronziScheme at November 20, 2008 4:29 PM

The housing market would correct most swiftly without a bailout, but labor markets get taken way down by such fast transitions. The postwar era high taxes and all the New Deal and Great Society programs put people first because politicians couldn't get away with anything else at the time. It doesn't matter much how houses are priced if throngs with pitchforks and torches show up. Labor market disruptions quickly degenerate into social disruptions.

Posted by: Mole Man at November 20, 2008 4:30 PM

I think we are going to see the rents start to reflect reality very shortly. I quibble a bit with LMiM's rental experience, not saying it is not true, but that it is not all that common. We looked extensively for SFH's in nice areas (Berkeley, Rockridge, Burlingame, Orinda, and even some in Marin) and if you go in with the expectation you are going to get a nice 3/2 house for $2800 in those areas you will be disappointed, although that is probably changing rapidly now.

We never ran into a good value that did not have competition, and competition usually means you don't get a good price for rent. In another few months or year, I do think those sub $3000 prices will be much more common that what we have seen over the last year. We saw rental prices spike as many people avoided buying and were fine paying a relatively high rent, to negate the risk of owning.

Posted by: The Bunk at November 20, 2008 4:39 PM

"Shelter is on the bottom tier of Maslow's hierarchy of human needs."

True, but you can acquire shelter by either purchase or rental (or squatting for the adventurous)

Buying a home actually appeals to the 4th tier of Maslow's hierarchy : Esteem.

Posted by: The Milkshake of Despair at November 20, 2008 4:42 PM

SFS -- so, you worked for SUN! ;) ;)

Only slightly off-topic:

It's possible google's incredible adwords success can be attributed to the credit bubble/easy money. Lots of spammers, startups, and companies pour (poured?) money into adwords (it's sooooo easy to do), and maybe that will dry up now (except for the adwords/adsense spammers).

Take a look at Start-up Junkies, available on hulu.com. You can see how the company (Earth Class Mail) absolutely flushed money down the toilet via adwords (it is shown in various episodes). You have to be familiar with adwords to understand what you are seeing, but if you are it is fascinating.

We'll see what happens -- I thought google's model would crater long ago, and I was (quite obviously) wrong. And to be clear, it has not cratered yet!

Posted by: dub dub at November 20, 2008 4:47 PM

Trip,

Look at Shanghai SE vs. S&P over the past 2 years:

http://finance.yahoo.com/echarts?s=000001.SS#chart6:symbol=000001.ss;range=5y;compare=^gspc;indicator=volume;charttype=line;crosshair=on;ohlcvalues=0;logscale=on;source=undefined

Sure Shanghai was a bubble while the S&P was tamer.

I think CoCo vs. SF could follow the same pattern.

Posted by: San FronziScheme at November 20, 2008 4:52 PM

Notice that even with the significant uptick in sales volume, median prices in SF's neighboring counties continue to plummet. They are nowhere near the bottom and SF is even farther as indicated by its still-accelerating slowdown in sales. Mix tells some of the story, but not all of it. We're all a single relevant market, and while SF may not fall as as far as CoCo (then again, it may) because, as some argue, it did not bubble quite as high, so far SF has been trending right in line with its neighbors, just about 9 months to a year behind. And SF has now started snowballing down as loss begets loss, just as we saw in nearby areas.

I would be very surprised if we don't see 50% declines in SF given the horrific signs -- no credit, severe recession at best looming, staggering market declines. In fact, my bet is that when we all do hit bottom, SF will have fallen further than our neighbors simply because we had further to fall with our higher prices -- SF's bubble started earlier and inflated more slowly, but it was actually bigger. Getting ugly.

Posted by: Trip at November 20, 2008 4:53 PM

Does anybody think this economic meltdown will give the great State of California any leverage to repel prop 13? Even partially?

The alternatives are to raise income and sales taxes, both already astronomically high. At some point higher taxes backfire and drive people to less expensive states. (Another alternative is for CA to spend less--but that's no fun when you can legally confiscate property by force under the guise of taxation and patriotic duty.)

And thanks everyone for batting around all these theories--it's easier to have holes poked in them here than in real life. Learning in the real world is usually quite expensive, I have found. Especially the last two months!

Posted by: DataDude at November 20, 2008 5:01 PM

The reason I ask about prop 13 is because this would obviously have huge implications for the CA housing market. Presumably, owners with low cost bases ("seniors") would be more likely to sell, because they'd be less likely to afford their home. And buyers would be more likely to buy, because presumably their annual property taxes would cost less, lowering the overall cost of home ownership.

Sooner or later, prop 13 has to get the axe, even if it's just partially or in stages. What happens when people start living to be 150?

Posted by: DataDude at November 20, 2008 5:17 PM

Prop 13 will be a lesser problem if prices shed more than 50%.

Retirees will feel less that they are leaving an "opportunity they won't ever see again" if they sell.

I think of this lady in upper Noe I met a few months ago who sold her Victorian house in upper Noe to get a condo in SOMA. She cashed out pretty nicely, but some of the profits are going into increase in expenses (property taxes, leased garage, HOA) that she didn't have.

Posted by: San FronziScheme at November 20, 2008 5:33 PM

I agree with PHR that Prop 13 for commercial properties will eventually fall by the wayside in this downturn. I have a hard time imagining Prop 13 for owner occupied units ever being repealed. BTW, we are holding our own in Berkeley (median was up); all this is beyond me as the foreclosures are a comin'.

Posted by: EBGuy at November 20, 2008 6:03 PM

I used to work for a small post-crash dotcom that did a reasonable IPO 4 years ago. They had plenty of cash in the bank. Fast forward to today. Stock price has bled 90% of its market value. The gazillions from the IPO are 50% gone.

Hmm, sounds like me, except my former-company stock is down 99% from IPO. Is this a San Francisco based company that you used to work for?

Posted by: NoeValleyJim at November 21, 2008 9:16 AM

Speaking of LMiM's rental experience, my co-worker just told me today that she signed a lease on a 2bdr 2ba apt, walking distance to the best part of sausalito, with 2 decks and full wall glass windows looking onto bay and city, and a small shared yard, for $2100/mo.

I find that absolutely amazing

Posted by: spencer at November 24, 2008 2:48 PM

spencer,

Surprise! When financial decisions are made based on facts and not voodoo "we'll all get rich" predictions or emotion, people actually spend what they can afford.

On the landlord side: they will not accept everyone at every price. There's no such thing as no-doc rentals! With rent control/protection, you want a good and responsible tenant.

On the renters side: this means spending what you can afford and leave some wiggle room to save for an eventual purchase.

Posted by: San FronziScheme at November 24, 2008 3:09 PM

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