November 25, 2008
September S&P/Case-Shiller: San Francisco MSA Decline Continues
According to the September 2008 S&P/Case-Shiller Home Price Index (pdf), single-family home prices in the San Francisco MSA fell 3.9% from August ’08 to September '08 and are down 29.5% year-over-year. For the broader 10-City composite (CSXR), year-over-year price growth is down 18.6% (having fallen 1.9% from August).
Phoenix was the weakest market, reporting an annual decline of 31.9%, followed by Las Vegas, down 31.3%, and San Francisco at -29.5%. Miami, Los Angeles, and San Diego did not fair much better with annual declines of 28.4%, 27.6% and 26.3%, respectively.
Prices continued to fall across all three price tiers in the San Francisco MSA.
The bottom third (under $386,320 at the time of acquisition) fell 3.1% from August to September (down 43.2% YOY); the middle third fell 2.2% from August to September (down 27.3% YOY); and the top third (over $647,565 at the time of acquisition) fell 1.2% from August to September (down 14.4% YOY).
And according to the Index, home values for the bottom third of the market in the San Francisco MSA have retreated to March 2001 levels, the middle third has returned to July 2003 levels, and the top third has fallen to January 2005 levels.
The standard SocketSite S&P/Case-Shiller footnote: The HPI above only tracks single-family homes (not condominiums which represent half the transactions in San Francisco), is imperfect in factoring out changes in property values due to improvements versus actual market appreciation (although they try their best), and includes San Francisco, San Mateo, Marin, Contra Costa, and Alameda in the "San Francisco" index (i.e., the greater MSA).
First Published: November 25, 2008 7:45 AM
Comments from "Plugged In" Readers
Hey, CS now tracks condo values too! Only 5 MSAs, but SF is one of them.
[Editor's Note That they do (and they're on the way).]
Posted by: Trip at November 25, 2008 8:03 AM
Thank God prices are finally falling.
Posted by: fhfghfhgf at November 25, 2008 8:25 AM
Trip, thanks, its about time. Separate CS gripe, when oh when, is the data going to be more granular than the MSA.....
Posted by: Dede at November 25, 2008 8:26 AM
It's also imperfect in that it pulls info from County tax records, not MLS systems. To see why this is important, check these out:
County Records vs MLS
I personally find Case Shiller useless for the typical buyer, seller, or owner who wants to know what's going on out there.
Posted by: Binnings Team at November 25, 2008 8:27 AM
No index is perfect. What matters is the trend.
Of course the thinner the grain, the more diverse the data will be (some locales and properties will wildly contradict the trend), but week after week more and more local markets are being hit by the downturn. Nobody seems to be immune.
Posted by: San FronziScheme at November 25, 2008 8:42 AM
This correction is sharp enough that reaching within ten to twenty percent of historical norms should probably happen in 2009. This could also reduce the stagnation period that follows.
Posted by: Mole Man at November 25, 2008 9:08 AM
Isn't this still prior to the market meltdown? Whoa nelly!
Posted by: spencer at November 25, 2008 9:17 AM
Is this inflation adjusted? I always forget...
Also, note how well the indices overlapped until ~2001, where the cheaper the house was the faster the price grew. Now the same thing has happened in the downward direction. Either the lower third has over-corrected due to foreclosure, or the upper third has really yet to give it up. I prefer the latter. Since much of SF is the upper third, watch out!
Posted by: rr at November 25, 2008 9:24 AM
As noted, the C-S data is through Sep so largely prior to the latest meltdown. Here are MLS sales data for the first full 3 weeks of November (Nov 1 - Nov 21) for SFH and condo sales:
2008: 162 sales, $719.0K median
2007: 306 sales, $846.5K median
2006: 361 sales, $767.0K median
2005: 401 sales, $750.0K median
2004: 405 sales, $720.0K median
Of course there are mix effects in the numbers (and the Nov 08 count will continue to rise as late reportings are made). I'll drill down by district and psf - but this immediate downtrend is pretty dramatic.
Posted by: FSBO at November 25, 2008 9:36 AM
Goodness, BT, of *course* you find this index useless.
It's unclear for what purpose a realtor would actually be able to use the index? Convincing their clients not to buy? Taunting the clients who just did?
Thanks for stating the obvious: as a commissioned salesperson, you are going to use the tools you have to convince people to buy and not use the tools that would cause potential buyers to run screaming from the market.
That is, if there are any potential buyers left, that is!
Posted by: tipster at November 25, 2008 9:37 AM
I don't do any convincing. The market speaks for itself and speaks much louder than I ever could.
What I'm talking about in my article, and you clearly missed the point since you're preoccupied with personal attacks on the real estate profession, is that Case-Shiller pulls data from County tax records, which includes a ton of transactions that are not "open market transactions", therefore making it highly questionable for any person that wants to know what the open market is doing. To see what the open market is doing you really need to dig through the MLS.
Posted by: Binnings Team at November 25, 2008 9:46 AM
To see what the open market is doing you really need to dig through the MLS.
which ignores non-MLS sales... which is a significant shortcoming.
which comes back to the original points made... all data has faults and limitations. one must then understand what the data is telling you (and what it is not telling you) for it to be useful.
Posted by: ex SF-er at November 25, 2008 10:01 AM
BT, you're simply wrong about the CS methodology. From its 40-page description:
"The main variable used for index calculation is the price change between two arms-length sales of the same single-family home."
"All available arms-length transactions for single-family homes are candidates for sale
pairs. When they can be identified, transactions with prices that do not reflect market
value are excluded from sale pairs. This includes: 1) non-arms-length transactions (e.g., property transfers between family members); 2) transactions where the property type
designation is changed (e.g., properties originally recorded as single-family homes are
subsequently recorded as condominiums); and 3) suspected data errors where the order of
magnitude in values appears unrealistic."
I understand you do not like the conclusion drawn from the data, but that doesn't justify setting up a strawman on CS's apples-to-apples-methodology and knocking it down.
Posted by: Trip at November 25, 2008 10:10 AM
First, it wasn't an attack. You are a commissioned salesperson and it's your job to use whatever information you can get that induces a buyer to buy, and ignore the stuff that doesn't. That's what any salesperson would do. That's just doing your job the seller has hired both his agent and the "buyer's agent" to do. There is nothing wrong with it.
I was a commissioned salesperson for a while myself: it's what you do or you starve. The people who cannot do it find another job, leaving the industry self selected with people who are good at it.
Take your argument that CS has non-open-market transactions. That would be a great one to use on someone who doesn't understand the index. Those of us who do, know that CS is a relative index. If there were non-open-market transactions last month, there were non-open-market transactions the month before and the year before, so that won't make much difference.
We also saw how "useful" the MLS data was when fl*j tried to use it a few months ago on Socketsite regarding the Caselli property and Satchel, FSBO and others absolutely exposed it for the complete laughingstock it was. The MLS is a marketing tool for realtors, not an objective source in the least. It can be twisted and turned whichever way a realtor wants it to be, like the proverbial "nose of wax".
(It starts around the middle of this thread: http://www.socketsite.com/archives/2008/08/eight_eight_eight_on_eight_eight_eight_76_caselli_retur.html)
I'm sure it can be very useful if used properly. I'm also sure, as we saw earlier, that it can be used to a Realtor's advantage, which is of course, its purpose. If I were using it for myself, I'm sure I'd be able to glean many insights from it as I'm sure you can. But I'm not allowed access to it and that is for a very good reason: it isn't there to help ME, it's there to help the Realtor sell.
And fl*j made it clear that one could get led VERY far astray if one allows their realtor to cite from it. So, newsflash: the rest of us don't find MLS data to be very "useful".
CS is not granular enough to know what is going on in any particular neighborhood. But it's the only *objective* source we have. And that makes it abundantly more useful than your friendly Realtor mining the MLS for "data".
Posted by: tipster at November 25, 2008 10:19 AM
Just a question guys, what are the non-MLS sales?
Are those auction sales?
How can we get into this market?
Posted by: K ramel at November 25, 2008 10:23 AM
If data were drawn only from the MLS, wouldn't that analysis miss the effects of pocket listings ?
Posted by: The Milkshake of Despair at November 25, 2008 10:26 AM
Even if a transaction is off market wouldn't it be tax fraud to report an unreasonably low value to the tax assessor's office? (Since the property tax you pay is based on the reported value)
Posted by: ct2k at November 25, 2008 10:38 AM
That is very much not what ocurred. FYI, meanwhile another property in the same area sold for much more than I said COULD be possible."Could," was my language and I was proven correct. It is you who posts laughingstock nonsense daily, tipster. l don't work for free for r.e. blog hobbyist conspiracy theorists -- why would anyone? All I did was post quick MLS grabs without digging into what sq ft was permitted or not, at like two properties, informally, in a cursory manner, on a blog, for non clients. And history proved me correct ....
Posted by: fluj at November 25, 2008 10:40 AM
ct2k - You don't report a "value" to the assessor's office, but rather the sales price. The two need not match. For example, you could legally sell your house to your prized pet monkey (or perhaps your prized pet monkey's trust) for $1. Obviously this is not the property's value and the assessor's office will then need to do a little work to determine the true value.
Yes, most of the time they can simply use the sales price as the assessed value since the vast majority of sales are closed at market rates. But if you visit the assessor's office you'll see a Jules Verne-ish machine sitting on the shelf in the back. That's their bullsh!t meter and when it goes off they know that they cannot use the sales price as the assessed value.
But no-one gets taken to court for reporting a low sales price.
Posted by: The Milkshake of Despair at November 25, 2008 11:11 AM
Trip: Thanks for highlighting the fine print within the CS methodology. My bottom line is if they aren't looking at open market, arms-length transactions, I'm not interested. If they have taken this very important factor into consideration, then I am all for it. And this goes not just for CS, but for any info out there.
Which brings me to a question for you all. I'd like to know which sources out there look at arms-length transactions only. I intend to find out on my own but if anyone knows about these I'm all ears:
Case-Shiller Verdict: Looks at arms-length only
MLS Verdict: Looks at arms-length only
DataQuick Verdict: Looks at all transactions
Altos Research Verdict: ????
Terradatum / Agent Metrics Verdict: ????
Posted by: Binnings Team at November 25, 2008 11:26 AM
It's chilly today.
It must be the thermometer.
Posted by: San FronziScheme at November 25, 2008 11:35 AM
I am sure the the C/S Index can be a very useful tool for Used Home Salepersons, especially those representing the seller.
That puts real estate agents in a precarious position of pricing a house to sell, but not insulting the homeowner by recommending a lower asking price. To a homeowner, a low but realistic listing price is "like someone calling your kids ugly," Ariely said with a laugh.
Remember, Used Home Salepersons are the grease in real estate transaction machine. I mean, how much more impartial does it get than "Well, Mr. & Mrs. Homeowner, if we miss the selling window this month, your home will be worth at least 3.5% LESS next month according to the C/S Index. If you really feel feel differently, I suggest you buy some Home Price futures on the CME, as you could make quite a bit of money right now." Quiet sobbing followed by a commission...
Posted by: EBGuy at November 25, 2008 12:00 PM
Well put EBGuy.
It is quite obvious that most Realtors pick and choose the data they feel is acceptable for them and their agenda, and do not base their opinion on the actual validity or usefulness of it.
You don't have to rely solely on CS numbers, but to completely throw it out doesn't make much sense.
Posted by: dg at November 25, 2008 12:07 PM
BT, I agree that most MLS sales data would consist of arms-length transactions. But I don't think you can say this is always the case. I have seen numerous listings that pop up on the MLS when the property is in contract -- i.e. the transaction was consummated off the MLS and it is posted on the service after the fact, essentially as a done deal. Nobody can tell whether the actual transaction was an arms-length deal or not. The MLS is quite useful, but as others noted, it is a realtors' selling tool, not an objective source of anything. So I think the verdict may go the other way on that one, or at least it is unresolved.
Posted by: Trip at November 25, 2008 12:15 PM
EBGuy and tipser,
I am not sure that the CS is any more useful than describing general trends across wide geographic areas such as the MSA referenced. It is simply not useful when looking at a particular city within the MSA or especially not a neighborhood within that city. So for that reason, I would find it not at all useful for sales people in reference to particular properties.
The CS index is much more useful for organizations which have MSA wide views, such as ABAG (the Assoc. of Bay Area Governments, the State of California), and businesses looking at regional trends (HomeDepot, Best Buy, Walmart, etc.).
If CS were more granular, such as at the city level or census tract we would be having a much different discussion.
Posted by: Dede at November 25, 2008 12:19 PM
You are correct-- MLS is not perfect in the arms-length regard. I see some sales that are entered into the system after they took place, and under agent comments it says "for comp purposes only". Although you are right in that MLS is not perfect (which we'll never really have in ANY system), it is by and large representative of open-market, arms-length transactions.
Secondly, this thread has motivated me to run CS-style analysis in the pockets within SF. CS looks at the macro (leaving out condos all the while), SocketSite looks at individual properties one at a time (which is great), but I'd like to take it to the neighborhood level.
I'll post the findings and methodology on my blog (www.insidesfrealestate.com) and see what the data looks like. My mission is the same as everyone else's. I just want quality data and trends I can trust, regardless of the fact that I'm a sleazy, scumbag of a human being because I'm a Realtor.
Happy Thanksgiving everyone.
Posted by: Binnings Team at November 25, 2008 12:33 PM
FWIW, if you squint slightly, the latest Cow Hollow apple (yes Virgina, it is a condo!) maps almost perfectly into the newly released C/S Condo Value index. Just sayin', in case you're looking in THAT neighborhood. Maybe its just a statistical anomaly...
Posted by: EBGuy at November 25, 2008 12:40 PM
Searching for a bottom . . . (career-style)
As a lawyer who just passed the broker's license exam I'm glad to know public perception of me can't get much worse -- now, is anyone interested in a lightly used '87 Chrysler LeBaron . . .
Posted by: Fundy Mental at November 25, 2008 12:46 PM
I've been on the sidelines of buying for quite some time. When I first noticed these charts, my budget was for the bottom third. Now, my budget is for the middle third. If I wait long enough, will my budget get me into the top third? I can only hope.
Posted by: D at November 25, 2008 12:51 PM
Thanks Fundy Mental... just spit my drink on my computer screen.
Posted by: Binnings Team at November 25, 2008 12:52 PM
Funny how when CS was going up, no one brought up the "usefulness" of that data.
Now that it's heading straight into the toilet, that's the topic of the day.
Let me not forget to say Woohoo!! 29.5% in ONE YEAR!!!
And at the same time, the number of sales is *absolutely collapsing*, portending HUGE PRICE DROPS to come.
It really doesn't get any better than this. Not useful my ass. This is as useful as it gets!
Posted by: tipster at November 25, 2008 1:06 PM
BT, an analysis like you describe would really be useful. Indeed, I imagine the appraiser community and the tax assessor would think it doubly so!
IMHO, you've got the right business plan for thriving in this industry. I think the "provide as little info as possible and just get the deal done" model of real estate is a dying profession. Those who provide real service to an ever more knowledgeable clientele will make a killing.
Posted by: Trip at November 25, 2008 1:09 PM
It's always interesting to check in and see what the CME has to say about the market. Next stop for Ess Eff (and environs) is 124.6 in May 2009 (an approximately 16.5% drop from where we currently stand). Exciting times. Bottom in Nov. 2010 at 121.4.
Posted by: EBGuy at November 25, 2008 1:17 PM
Or is that 122.0 in May 2009 -- the fun never stops.
Posted by: EBGuy at November 25, 2008 1:21 PM
Don't forget that this is September data. Most of the deals that closed in September were baked in July/August, when the mood was still cautiously optimistic. Remember anything else noteworthy that happened in September? Like maybe the entire financial system nearly collapsing?
Numbers from October onwards will show a much steeper pace of decline, IMO. The graph above is still showing the "good old days," when the real SF was still whistling past the graveyard.
Posted by: Dude at November 25, 2008 2:34 PM
Wanna hear something funny?
Print out that chart, show it to your stockbroker and ask them, "what is a head-and-shoulders?".
THAT will be an interesting conversation.
Posted by: dweeb at November 25, 2008 3:38 PM
This condo data is very interesting, and it just goes to show that the CS data should become much more useful when they start providing it by zipcode or city. What I find interesting in this is that if you look at the decrease in value of condos, it has experienced roughly half of the decrease of all homes in the SF MLS over the past two years. Also, if you look at the top tier of prices, you’ll notice the same thing (i.e. – half the price drop). It's pretty widely accepted that that San Francisco represents a disproportionate amount of the condo and top tier sales, so if CS ever decides to publish data for San Francisco proper, I’m pretty sure that the drop in prices will be MUCH less than these negative 30% figures that are getting thrown around. In fact, it’s probably closer to 10% range…which is within the range of historical price drops for the city.
Posted by: Lance at November 25, 2008 3:53 PM
I think the "provide as little info as possible and just get the deal done" model of real estate is a dying profession.
Trip: I couldn't have said it better myself. I am glad the hucksters are running for the hills in this down market. Weed 'em out, I say.
I envision a similar future for real estate... one where natural selection favors agents who are able to give their clients solid and trusted advice because they truly are experts in their field. There is no substitute for specialized expertise, and expertise is the only thing anyone should ever pay you for. Otherwise, you're nothing but a slick salesperson with a short-sighted business plan who's stinking up the place with commission breath. It's time this profession moved forward. I'm glad SocketSite does its best to keep people honest and I intend to follow suit on my blog.
Posted by: Binnings Team at November 25, 2008 11:12 PM