San Francisco's Millennium Tower: 1/17/09 (www.SocketSite.com)
From a plugged-in tipster with a unit in escrow at San Francisco’s Millennium Tower:

I have a deposit down in a unit in the Millennium and just received a call informing me that prices have been cut 15% across the board, including those already in escrow. They still intend to maintain their “no negotiating” policy and claim that this will be the last (only) drop for a very long time.

A tip of the hat to the Millennium team for taking care of their early adopters. And of course to our tipster, let’s not forget those invitations to the housewarming.
The Millennium: A Few Things You Might Know (And A Few You Don’t) [SocketSite]
Millennium Tower Sales Watch: Rumors Of Day One Results [SocketSite]
San Francisco Rising And A Fresh Perspective On Millennium Tower [SocketSite]

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Comments from “Plugged-In” Readers

  1. Posted by LMRiM

    Smart move to try to forestall walk-aways.
    0% chance that this is the final reduction, though, IMO. And 0% chance that they will maintain their “no negotiation” policy. This downturn is going to be brutal. Bubbles are much more damaging to an economy than most people realize, and we’ve had 20 years of nonstop bubbles, with SF one of the major locis for all of them.

  2. Posted by diemos

    “They still intend to maintain their “no negotiating” policy and claim that this will be the last (only) drop for a very long time.”
    Ok. And ORH tower 2 will break ground in january … er, february … er, march … er, once we find a new contractor … er, maybe someday.

  3. Posted by sf

    Stay on topic diemos.

  4. Posted by diemos

    And here I thought the topic was how much weight to attach to the pronouncements of developers.

  5. Posted by anon94123

    sf, I guess that rules out me bringing up the Transbay Tower as well?

  6. Posted by Antonio

    LMRIM, completely agree. Who is left to buy? The super rich have already bought, the move-up buyer is stuck for years in their current home , and first time home buyers are way priced out of the market. It is absolutely mind-boggling to me how completely clueless most of the people in the bay area are about home prices and where they are headed. We have had a 20 year period of cheap money/low interest rates and rising home prices, we are now in for a very long period of rising interest rates and lower home prices, that’s just the way the way cycles work.

  7. Posted by Ryan

    Still aways to go at 15%. Maybe another 15-20% once the building opens as well.

  8. Posted by ester

    I am really shaking my heads when reading all these predictions on the future.
    I am not referrring to any specific individual, not because I am a nice person, but because there are more than one person that likes to do this.
    There are people who got paid millions and millions of dollars each year, and they can’t predict with good accuracy. Who do you all think you are??
    If you are that good , you would not be typeing these posts yourself. ONE of your secretaries would do the typing for you.
    I worked in financial planning & budgeting for publicly traded companies for 10+ years now, with the last 5-6 years reporting directly to CEO/CFO.
    I watch these people stuggling to see 6-9 months ahead, and you are all comfortable foreseeing the next 5-20 years.
    When i was a little girl, mom used to tell me a story that started like” once a time, there was a frog sitting at the bottom of a well, looking up the sky, thinking that is the whole sky……”
    In a way, we are all that frog sitting in our own well. Some know that he is sitting in a well, some don’t. That is all.

  9. Posted by Paul Hwang

    Ester,
    Exactamundo.
    Paul

  10. Posted by Trip

    Ester, just go back and read the posts on this board starting about two years ago about where the local RE market was heading. A lot of them have proven to be just eerily accurate. And go back (if you can) and read the market predictions from other local realtors’ web sites from the same period of time. They have pretty much uniformly proven to be 180 degrees off.
    Recognizing broad macroeconomic trends is far simpler than projecting one company’s performance three quarters out.

  11. Posted by diemos

    “Who do you all think you are??”
    I think I am someone who has sat down and spent the time and effort to think through our economic system until it formed a clear and coherent pattern in my mind. A pattern clear enough that in 2004 I saw an inevitable series of events in the future. So far, it has played out according to the pattern I saw. Tune in Jan 1 2012 to see if the final part of my visions come true or not.
    “I worked in financial planning & budgeting for publicly traded companies for 10+ years now, with the last 5-6 years reporting directly to CEO/CFO.”
    You’ve said this before. I’m not sure what I’m supposed to conclude from it other than that you are no doubt a wonderful person with strong social skills who is a joy to be around. With a strong work ethic, basic math skills and an ability to use excel.
    “There are people who got paid millions and millions of dollars each year, and they can’t predict with good accuracy.”
    “If you are that good , you would not be typeing these posts yourself. ONE of your secretaries would do the typing for you.”
    As with many people with strong social skills you seem to have a tendency to confuse status and power with knowledge and ability. Even though you correctly note that most of these high status individuals can’t seem to find their ass with both hands.

  12. Posted by two beers

    Ester, a-yup. Bernie Madoff made billions, so that proves he was a great fund manager! Well, actually, as is now clear, there’s no relation between competence and compensation, and that’s one of the reasons we’re headed into GDII. We live in a piratocracy, and the buck-an-ears are on their last big looting and pillaging spree (TARP, etc.), before they scuttle the ship and send us all to the bottom. For years, people here have predicted the inevitable collapse of the bubble into total economic meltdown, and they were inevitably called bitter, jealous, etc. (not that you, Ester, would stoop so low). Well, who was right? The willful ignorance and denial displayed on this site is stunning at best, if not actually pernicious . As CR says, “whocoodanode?!”

  13. Posted by weatherman

    There is a catch on the 15% reduction…you have to close by May 15th. So, after that date the early adopters will be locked in and Millennium Partners will lower prices/negotiate as necessary to move the remaining unsold units. My guess is that they were afraid of the early adopters walking away and that would create problems for them paying off their construction loan (in addition to the bad publicity).
    They HAD to do something. I give them credit for protecting the early buyers though (full disclosure I am in contract for a unit there) and the 15% is at least part of the market loss. I doubt the Infinity or ORH were (or will be) as generous and transparent.
    I think the actual “mark to market” reductions might be 25-30% now (could end up being more, but I am not posting to fight with the uber bears on this site), and this may be what it takes to sell out the building. Their decision to “protect” those of us already in contract is not complete altruism, but a testiment to how bad things are in the downtown condo market.
    I was told by the MP sales office that a new California law allows them to keep 6% of deposits on luxury units over $1 million. Can anyone confirm?

  14. Posted by cooper

    Hard to predict? you guys have got to be kidding. There were about 6 of us who called these declines as we fought off the likes of fluj and paco.
    now as far as what’s next. prices will continue to decline in sfo. I used to think the condo index would go to the 2003 level for sfo, but I think late 1990s at this point before it stabilzied.

  15. Posted by none

    I think the code section you were talking about weatherman is California Civil Code § 1675(g)(1).
    You can access it online at http://www.leginfo.ca.gov/calaw.html
    See the following quote from the code section which is required to be placed in contracts for this type of development:
    Important Notice Regarding Your Deposit: Under California law, in a contract for the initial sale of a newly constructed attached condominium unit in a building over eight stories tall, containing 20 or more residential units, and located in a high-density infill development in a city, county, or city and county with 1,900 residents or more per square mile, where the price is more than one million dollars ($1,000,000), as adjusted by the Department of Real Estate, liquidated damages of 6 percent of the purchase price are presumed valid if the buyer defaults, unless the buyer establishes
    that the amount is unreasonable.

  16. Posted by Happily Retired Investment Banker

    ester,
    If you are really a numbers person you would not be posting the non-sense you did.
    Once you understand easy money (e.g. credit) is gone, all you have to do is look at medium price to income levels of a market and compare them to historical levels to see that real estate prices are going down. The only question is will they over correct on the downside.
    As to people not predicting this mess, well… that is also nonsense. The problem was too many people were talking their book, hoping the merry-go-round would continue as they lined thier pockets; instead of the truth. This crap about “whocouldaknow” is crap.
    A retired (happily) Investment Banker

  17. Posted by ester

    Status and power do not equal knowledge and ability, but knowledge and ability usually lead to status and power. Period.
    Realtor website has been wrong because they have a interest in predicting price increase. Some of you have been correct in predicting a price drop because that is the only thing that you have been saying for the past 300 years.

  18. Posted by ester

    I don’t doubt that some of you have been doing a lot of study to come up with your prediction. However,
    But, judging from some of your posts, I feel that your “research” has been more on a hear-say level. And let me be very specfic.
    Some one used AMD as an example to say that this economy is collapsing. Someone else quoted Pfizer 400 sales layoff. Did you know that these two companies have been struggling for years 99% due to company-specfic reasons, and has little to do with the recent market/economical condition?? Did you know the Pfizer laid off 15,000 sales 2 years ago??

  19. Posted by tipster

    Ester,
    I’m sorry the value of your investment properties is collapsing.
    And I’m sorry that it is happening in spite of your belief that the better properties would never decline.
    I’m sorry that your properties are locked up in leases or with rent controlled tenants and you can’t get out before you lose even more.
    Regarding the topic, this collapse in progress is really something! I’ve said it before and I’ll say it again, anyone who buys right now is a complete idiot. You really should just take hundred dollar bills and set them on fire.
    Then tell everyone how no one could foresee the loss from burning hundred dollar bills, highly paid people couldn’t predict the future so losses from burning hundred dollar bills aren’t foreseeable, or maybe tell them “some experts are predicting the market for burning $100 bills is expected to be flat to slightly down, and that’s just a reality we’re going to have to accept” and other such intelligent statements.
    In the meantime, I’ll be over here shaking my head at the stupidity. The country is losing 21,000 jobs per day and you are proposing that real estate isn’t in the process of a full-on collapse from preposterous bubble prices? Really?

  20. Posted by ester

    Tipster,
    No need to feel sorry for me. 4 out of the 5 have sizable appreciation, totally maybe $700K, with one below what I paid for.
    I actually have no plan to get out any of them, even if there is another 80% down like some of you predict.
    But thank you for your nice heart.

  21. Posted by ester

    OK, it is getting late. My last post tonight.
    Again, this is not to personally attack anyone.
    But good forecast is not just telling the general trend, it is more about telling the trend at the right time.
    If you have been forecasting this decline for the last 10 years, yes, you are correct today. But, in the mean time, you missed out on all these appreciation had you purchased earlier.

  22. Posted by tipster

    So did the people who didn’t invest with Bernie Madoff.
    Your so called “appreciation” has been a full on mirage.

  23. Posted by two beers

    When the radar maps started showing a tidal wave coming in, everyone on board with any sense abandoned ship and headed to shore. (in fact, some questioned the very route, as history showed these narrows were prone to tidal waves).
    One brave, stalwart sailor disdained the map readers, because their map-reading skills had not afforded them the status and power to own the ship. This sailor valiantly helmed the ship, Headquarters radioed in: first, there was no tidal wave; then, its size was greatly over-exaggerated. Finally, when the wave could be seen even from shore, headquarters radioed in to the last remaining sailor that no one could have anticipated the planes – I mean, the wave – coming in.
    The sailor, still ignoring the incoming tsunami, cheerfully gripped the wheel and began to sing a shanty about the calm seas, when the tidal wave tossed the ship like a coin into the breach and smashed it to bits.
    whocoodanode?!

  24. Posted by Paul Hwang

    Speaking of Madoff,
    Tell half the people prices are going to go up and half the people prices are going down and you will look like a genius to someone.
    Whip tee doo.
    Paul
    PS I don’t make predictions.

  25. Posted by anon

    “There are people who got paid millions and millions of dollars each year, and they can’t predict with good accuracy. Who do you all think you are??”
    How old are you ester, 6?

  26. Posted by Mavo

    Ester,
    YES, some of us saw this coming clearly… certainly much more accurately than your overpaid geniuses you work for! As for me and my wife, we sold our large house in the East Bay back in 2003 after it appreciated over 100%… maybe a few years early. But I underestimated the stupidity and greed of the “Masters of the Universe” on Wall Street and was amazed they kept this real estate bubble going for another two years! Then last year in January we moved ALL our retirement money into US Treasury’s as the meltdown got more imminent. So I guess based on your definition, I should be making millions and millions now! Wake up to reality Ester… this economy is going down the drain quickly! If you are smart you’ll get out of your property investments while you still have some appreciation to realize!

  27. Posted by San FronziScheme

    Mavo, ester,
    Yeah, some of us saw if coming in some way.
    I sold 75% of my sub-standard rental properties in 2005-2006 when I saw lemmings flocking to pay 4-6 times what I had paid in 1994-2002. Just think that this was purchased with 50% borrowed money. If it looks too good to be true, it probably is. Sell, sell, sell…
    I didn’t think the crash would be so brutal and devastating, though. But then again I am an european still thinking in Euro time. The markets in the US are working pretty fast to my everyday amazement.
    In 2006 I thought prices would correct 40-50% in around 10 years through higher inflation and small nominal declines if any. At that time I considered that to be way too long to wait and I decided to stay clear from RE for good, thinking the dumb luck I had was just a once-in-a-lifetime opportunity.
    But in 2007 the writing was on the wall. Prices would go down fast and few places would be spared. And the market keeps humbling even the strongest bears among us.
    It’s not market insight. Just rule of thumb.

  28. Posted by Laughing away

    “…and I don’t make predictions”
    Sure. Just like every republican I know now claims to have been a libertarian for the past eight years.
    Talk about confusing knowledge with a job title.

  29. Posted by SFOSEA

    Can we PLEASE get back to talking about what is happening at Millennium? I’m so sick of these post devolving into who thinks they understand the real estate trends in SF better than everyone else. What I would like to know is more about what is happening at Millennium these days. How many units are reserved? What are the new price points? What do people actually think of the project. I think it looks like a great place to live in terms of finishes and amenities, but worry that the Transbay construction will be a nightmare and that the views not what you can get at other places unless you have enough money to buy way up in the Grand Residences.

  30. Posted by cooper

    SFOSEA. It is on topic. When buildings start making wholesale price drops that is a trend. If you want to prevent people from talking about that- go do your own real estate website.

  31. Posted by SFOSEA

    I am not preventing anyone from doing anything. I am simply commenting that this conversation string is the same one that has been going on in others strings for a long time and I’m not getting anything out of hearing it all again. It ends up being more about people anonymously arguing with each other about who knows more, and less about useful information. I will say no more on the subject after this post since I don’t want to add yet another distracting conversation that keeps us from discussing Millennium.

  32. Posted by diemos

    “Status and power do not equal knowledge and ability, but knowledge and ability usually lead to status and power. Period.”
    I’m afraid I don’t agree, unless you count shmoozing and conniving as an ability.

  33. Posted by spencer

    wow. this got off topic fast. it may time for an ignore function on socketsite. ester is trolling and baiting and is clearly not what she says she is. Certainly she wouldn’ t have been qualified to work in the finance office of any of the companies I have worked for. Her homeownership stories have changed a number of times and her antipredicition tirade ( although a s a homeonwner she is clearly trying to predict tht the rental prices will go up) is old an tired. It doesn’t take an expert to see how the credit crisis threw housing prices way out of whack. It was a clear line and some of us bet that it would happen, not just on blogs. those who couldn’t see it were too highly vested in RE, were selling RE, were blind, were of the herd mentality, listened to too much cocktail party investing advice, were really high or were

  34. Posted by cooper

    What are the price points in this building per square foot? how much higher are they than current comps at infinity and even orh?

  35. Posted by Sb

    “Tell half the people prices are going to go up and half the people prices are going down and you will look like a genius to someone.”
    No, Paul, you will look like a flip-flopping moron to everyone.

  36. Posted by Lance

    Wow…this thread has degenerated into a cyber pissing contest. To echo Cooper’s question, does anyone have any stats on the Millenium (% sold, $ per sqft, etc.)? And to whoever does, thanks in advance for adding some substance to this thread.

  37. Posted by anon94123

    “does anyone have any stats on the Millennium ?”
    Agreed! I know about the children’s playroom, yoga studio, and personal wine lockers, but WHAT is it that makes this the “best” tower in S.F.? I find a lot of the public ammenities would never be used by me. Private Dining Room (!?) , wine tasting room, club lounge (would anyone really want to run into the same people at the bar every night?) The floorplans are good, but they are not 2006 Washington. If I were looking in this price range, (and I am not), I would rather use my own media room, have my guests sit at my own dining table, and have my children playing down the hall instead of 30 floors below.

  38. Posted by fluj

    “Hard to predict? you guys have got to be kidding. There were about 6 of us who called these declines as we fought off the likes of fluj and paco.”
    Pretty funny. I’m delving into this because you called me out by name.
    That is not a fair way to frame it. I’m pretty sure Paco and myself agreed that a change was likely to come, that it was only logical for it to come, but that it wasn’t here yet at the time. We objected to people such as yourself who continually got the current market wrong. The — still not here yet — idea of a calamitous sea change.
    And in this thread, no less? This thread about a condo tower? Neither Paco nor myself were ever all that bullish on condos. It’s a supply and demand thing, IMO. You’re just all sorts of wrong, again.
    Really, how many hundreds of times did you miscall an individual sale’s closing price on here, Cooper? How many hundreds of times did your possible-future-colored glasses screw you up?
    The stakes are very small for people who don’t own anything and simply spout off on the internet, tho. Please by all means continue to have fun with your hobby. But keep my name out ya mouth.

  39. Posted by cooper

    Fluj–you were the single loudest voice saying prices would not drop. You were 100% wrong. I suggest ya just own it instead of trying to weasel out of it. you’ll feel better, we’ll feel better, it’ll just be better period.

  40. Posted by Keepingitreal

    Fluj are you even kidding? You argued for like years against all the people that said there was a bubble. You can’t argue against a side so nastily and personally and then all of a sudden be like oh I never argued against them. Especially when there are like 9000 threads and comments by you paco and all the other real estate snake oil salesmen saying exactly the otherwise.

  41. Posted by jj

    Interesting. They obviously calculated that 15% cut in price will result in higher profit than having people walk away from their deposits. Just for fun, I computed the difference between the number people walking away before/after the cut with very simplistic assumptions:
    x = % of people walking away before the cut
    y = % of people walking away after the cut
    S = total sales in contract
    d = deposit percentage
    p = original gross profit margin
    c = price cut percentage
    P = profit before the cut
    Q = profit after the cut
    P = S(1-x)p + Sdx
    Q = S(1-y)p + Sdy – cS
    P = Q for the break even
    => S(1-x)p + Sdx = s(1-y)p + Sdy -cS
    => x-y = c/(p-d)
    If we assume 35% and 5% for the original gross margin and deposit respectively, we have x-y = 50%, or 50 percentage point reduction in walk-aways from deposit. (Of course, y can’t be less than 0, so this function should be capped by x).
    This calculation is very simplistic(no inventory carrying cost, unsold inventory eventually getting sold later time at different prices, no accounting for the units not in contract, etc, etc) and not terribly useful either. But, hey, what an unemployed person to do with spare time? I wonder if someone can come up with something more useful, like how much they’d be willing to cut/negotiate after 5/15.

  42. Posted by diemos

    “You argued for like years against all the people that said there was a bubble.”
    Aren’t archived websites great?

  43. Posted by ester

    SFOSEA,
    My apology. I agreed 100% that this is totally endless and meaningless.
    Going back to Millennium, I used to be extremely negative on SOMA, but not any more. The price reductions finally being it back in line in terms of value when comparing to other areas of the city.
    So, if you can afford without streching, it is probably a good time to buy. Who knows where the price is heading.
    If you live in it, all these up and down are just paper profit/loss. When you sell in another 10-20 yrs, you will have a lot of appreciation.
    Just my thoughts.

  44. Posted by Thisisfun

    “Dude, I’m pretty tired of your armchair baloney. You obviously aren’t trying to buy SFRs in a neighborhood where there aren’t occasional stray bullets. Everybody knows what’s going on except you, it seems.
    Again, I want the change to come. Bring it on. Where is it tho? you don’t get to holler “sea change” for two years and still be correct.”
    Fluj, October 10, 2007 Socketsite

  45. Posted by tipster

    “If you live in it, all these up and down are just paper profit/loss.”
    No, they are real losses if you buy at a price higher than you could have bought if you had merely waited, had you not been a complete idiot and bought now.
    Your mortgage payments for the entire 10-20 years you hold are higher than they would have been.
    Any profit, not guaranteed even after a 20 year hold (ask the Japanese), will be lower than if you wait. Losses will be higher.
    And 10-20 years is a good number to look at. That’s how long you could be stuck living somewhere you don’t want to live because you don’t have the funds to sell, or selling eats up so much of your down payment, you won’t be able to buy anything. Noisy neighbor. Better jobs elsewhere. 10-20 years is a long, long time.

  46. Posted by Dede

    …reading all of this back and forth and nonsense, I am glad I went out last night with friends and family…

  47. Posted by fluj

    Who are you kidding, keepingitreal? Cooper?
    Look at the archived comment that Thisisfun brought up.
    Go find a condo thread too. You’ll find I was not ever all that bullish.
    I pretty much argued the same thing the entire time. “It is patently dishonest to jump the gun like this.” Bubble, shmubble. And notice how Cooper avoided addressing how incredibly wrong he was on his guesses seventy zillion times.

  48. Posted by fluj

    “Prices will never drop”
    ¹
    “Prices haven’t really dropped yet.”
    People on this site have little regard for nuance. “Fluj you were the biggest cheerleader on here” and the like. No, not really.
    I got told all the time how mean all the permabulls were on this site back in 2006 and stuff. Gotta take the bears word for it on that one. I wasn’t here.
    But as far as me being the single loudest voice saying “prices would not drop.” Nope.
    You don’t get to be wrong about being right when you were wrong for so long before you were right. And guess what? Most of these guys are still very wrong. 40% drops huh?

  49. Posted by Jackson

    ORH is not in “serious do-do” as some of the same posters continue to chime. It is 70% SOLD. It has been occupied for nearly 11 months and looks great (I’ve seen the pool area and peeked into the townhouses and they are amazing). Millineum is in an entirely different boat. Their reservations, if any of them still have financing, would likely jump ship if not for the token 15%. Plus, they are not even open. Banks won;t even let them close if they aren’t 25% “sold.”

  50. Posted by tipster

    “40% drops huh?”
    Pssst. fluj.
    They haven’t stopped dropping yet.

  51. Posted by fluj

    Oh, I see Tipster.
    Keep patting yourself on the back, homie. Great job on being wrong for two years. So if prices level out in one year, does that mean your net wrongness is only one calendar year? Inquiring minds want to know.
    Then again, when did the persona known as Tipster come online? I may be giving your net wrongness short shrift. You could have been posting back in 2005 for all I know. Putting your net wrongness at three calendar years.

  52. Posted by fluj

    Also, one last thought before I leave for the day. When in doubt, please do the following.
    Ask the Japanese!
    (Caveat. This is not to be confused with a Japanese friend you might have. Not a guy on your soccer team, an acquaintance, colleague, sensei, etc. No. We instruct you to, please, make sure you ask all of them. Each and every one. Avail yourself of the national query option.)

  53. Posted by ed

    Millennium is doing the right thing. Offering concessions to purchasers in backlog creates good will towards the developer, may create some great PR and helps keep purchasers from shopping the competition until closing time.
    I sold luxury homes for a developer during the initial downturn in Phoenix in 2005. The developer failed to realize what was happening and lost over seventy percent of the initial sales.
    Long story short, the project should have been sold out in a year; to this date, the developer is still selling the remainder of the initial eighty-six homes.
    From my experience, Millennium is doing the smart thing and keeping their valuable buyers happy and vested in the project.

  54. Posted by paco

    “Especially when there are like 9000 threads and comments by you paco and all the other real estate snake oil salesmen saying exactly the otherwise.”
    Posted by: Keepingitreal at January 18, 2009 9:47 AM
    as i’ve challenged spencer and others who are factually deficient,
    please please show me a quote. out of 9000 comments you should be able to dig one up.

  55. Posted by tipster

    Yup. I was wrong AND I’m man enough to admit it.
    Here is a quote from me more than 6 months ago:
    “What happens when the Alt-A resets hit SF next year? And if it takes 9 months to hit full stride, well, then we’ve got more than a year before SF gets hit by this wave.
    Posted by: tipster at May 27, 2008 12:48 PM”
    http://www.socketsite.com/archives/2008/05/march_spcaseshiller_san_francisco_msa_declines_top_tier.html
    I admit that I thought it would start 4 months later than it did. And so I am wrong: it is starting SOONER than I thought.
    To all of you: I apologize. I am SO sorry that it is worse than I thought.

  56. Posted by fluj

    Some of you are still trying to say Paco is a realtor too! Paco actually advocates NOT USING REALTORS for people who know what they’re doing. “Snake oil salesmen.” Ha!
    And me? Trying to sell on here? “You know what, honey I’m going to telephone that Realtor Fluj fellow from the Internet. Wait, what’s his name? Where does he work?””
    The most interesting thing about this website is how people can read the same things and come up with such wildly divergent conclusions.

  57. Posted by vox

    “Especially when there are like 9000 threads and comments…”
    Proper use of the Dragon Ball meme is of the form “It’s over 9000!!!”

  58. Posted by anon

    “Also, one last thought before I leave for the day.”
    Just do us all a favor and leave for the day already Donald.

  59. Posted by Prospective MP Buyer

    Ah….what a blessed day May 16th will be! 15% is merely the opening volley…nice try, kids!

  60. Posted by LMRiM

    On the subject of condo deposits (and the seemingly question of which posters spotted the trends, offered advice, got the timing right, etc.), let me offer the same advice that I offered here on SS on December 18, 2007:
    “If the info that available units are drifting up (meaning actual cancellations)is correct…. people who have signed contracts: take your loss and walk away.
    Don’t be left doing a Miami Mambo in ’09.”

  61. Posted by fluj

    “Donald” — what do you think you know, guy? Something based off what someone else saw on a tax record? I don’t even have any ownership. Lame opinon? fine. Misinformation? I guess it goes with the territory. Derision based upon misinformation? No, not really trying to hear it. Get a new hobby, pal. You suck at this one.

  62. Posted by cooper

    Fluj–I don’t know who Donald or why you feel the ned to attack him. In fact, I don’t know who you think you are other than a realtor who suckered a lot of people into 50% over priced homes. On the plus side all these blarney skills you’ve got are going to come in handy when they need someone to unload them on to the next sucker to avoid foreclosure. Look out belloooooww…

  63. Posted by fluj

    Cooper, I’m pretty sure you never really read these threads in their entirety. I see a pattern.

  64. Posted by condoshopper

    the initial millenium prices were so high initially that they could not be compared to the general SOMA market. the 1000 psf to 600 psf fair value metrics did not apply here. it’s way out of my personal world (like the Ritz) that i did not try to rationalize how they came up with the prices. with a 15% reduction, it just seems like it came from an arbitrarily high price, to a lower arbitrarily high price.

  65. Posted by Debtpocalypse

    I’ve not really followed the SoMA condo market details closely, although some of the Millenium v. ORH debates have been spirited.
    Can someone tell me what a 2bd/2ba under escrow in Millenium would have been contracted at so I can get a sense of the $$$ value of the 15%? How many sqft does that purchase? Also, what’s HOA run on a 2bd/2ba?
    TIA.

  66. Posted by mediated

    Tipster, I respect your opinion, but you can be offensive.
    ‘Anyone who buys now is a complete idiot.’
    Will they still be an idiot if the Obama administration jump starts a recovery that brings back Bay Area RE? Or as esther points out, are you able to forecast with all certainty that we are not coming back from this anytime soon.
    I am someone who bought in the last 6 mos., and I can’t say I haven’t had my doubts, especially reading all of the bear arguments on this site, as well as other blogs like Paul Kedrovky and others. But I had read that info before I bought, and I still went ahead with the decision. Of course it was before September, but still, I had an inkling that things were not going great for the economy.
    Bottom line is, I wanted a place to live for a extended period of time with my family. I wanted the ability to do with the place as I see fit. I wanted to choose my own appliances. I wanted to live in SF. I wanted to live in a nice neighborhood.
    After watching the market for 9 years, and seriously considering a purchase for the last 4, I finally saw a window of opportunity to buy and I did.
    Does that make me stupid? I don’t think so. It does make me someone willing to take a risk in the middle of this turmoil. The risk not being that of depreciation of my home, but rather the risk that I could have gotten much for more my dollar. If SF RE drops by 50% in the next year, I won’t be tap dancing down Haight street, but I won’t be despondent either. A raise or drop in the value of my home won’t affect my mortgage payments.
    I didn’t buy more than I could afford, I didn’t buy with the expectation for immediate wealth generation. I bought the best place I could with my current salary and savings. One that I could stay in for 5 years without a problem. I like being a home owner in SF, and it took a lot of effort to get here. I don’t plan on letting a little global economic disruption get in my way. :)

  67. Posted by Spencer

    mediated:
    congratulations. personally i don’t think a person is an idiot for buying right now as long as they are not fooling themselves. I do think a buyer now needs to be prepared to stay in his/her home for 10+ yrs to recoup their investment. If you buy now and sell in 5 yrs, your chances of making a loss are >90%. For a 10yr hold, i would say the chances are still 50/50.
    Obama, or buffet or even jesus cannot control long term macrotrend lines. at least not this time as they are just too out of whack. Like never in our history.

  68. Posted by Mikey

    “Great job on being wrong for two years.”
    These kind of comments miss the point entirely. Think of it this way: 400 pound gentleman, smokes two packs a day, doesn’t exercise, lives on a steady diet of bacon and and ranch dressing. Many would say that such a person is overdue for a heart attack. Others may say that, hey – after this long, this guy may go on forever. “He must be bullet-proof.”
    So if the guy above doesn’t drop dead for two years, does that make those who predicted it any less wrong?
    Home ownership is (or should be) a long-term strategy. Calling a market correction two years out based on some basic fundamentals seems to be more common sense rather than prescient. Yet the nay-sayers can’t help but talk down everyone who “told you so.” Enough with this “being wrong” jazz to those who said this was coming — they weren’t.

  69. Posted by mac

    Response to ester
    Actually its quite simple to have forecast this fall in RE prices, even though your circle of friends didn’t. And for someone like me that’s not that bright, Ill tell you how it happened to me.
    In 2005/6 i read a report by Jeremy Grantham (one of his quarterlies) where, he drew a picture/graph of 28 bubbles that had hit the world in the past. He defined a bubble by a ceratin number of standard deviations from the normal uptrend.
    There were 28 graphs 27 had popped.
    The only one that hadn’t popped was the world stock markets in and around 2006. (I love pictures)
    Now to see where this is going all you have to agree with (at the time) was that stocks were in a bubble. And then even YOU ester would see the result.
    Following this train of thought, to see future RE prices, all you had to do was agree that Housing was in a bubble also. (Later Grantham said that every asset class was in a bubble) And that Bay Area prices were in a bubble. Of course not everyone believed this, especially those that followed former NAR Economist David Lereah. And maybe you, and your experts, did.
    Given that ALL bubbles burst. If you believe that SF Real Estate was in a bubble (u may or may not..but the point is that many did) then it follows as a near certainty that RE here would end badly.
    The only thing that you need to have discovered this was a certain lack of myopia.
    And all the little people like me had to do is study the finding of a broad spectrum of experts with an open mind..MANY of whom predicted that this would end badly, and then I would know more than YOUR panel of experts…
    Power to the little people.. aint the internets wunnerful?
    QED.

  70. Posted by mac

    And not to be sycophantic here, but truly Satchel has been smarter than most experts that I am exposed to daily.
    SO ester, all you had to do was read this little blog to be even smarter than those people that you work for that ‘cant predict 6 months down the road’
    Chose you experts wisely..

  71. Posted by two beers

    “So, if you can afford without streching, it is probably a good time to buy. Who knows where the price is heading.” – Ester
    Thanks for the laugh, Ester! But I feel sorry for anyone who destroys their and their loved-ones’ lives by taking your specious advice.
    And since I have the “knowledge and ability” to know that SOMA is TOAST, by your reasoning I now have “the status and power” to get “paid millions and millions of dollars each year.”
    Thank you!

  72. Posted by fluj

    Can’t say I agree Mikey, but at least you present your case well. Suppose the downturn is not lengthy, tho, for a second. What if the length of time Chicken Littles holler exceeds the length of time sky = ground? Is that nothing at all?
    Also, some of these guys got individual properties so wrong, so many times. They tried to tack possible future on here and now, and we saw them do it. That was specific and measurable.

  73. Posted by Publius

    “So, if you can afford without streching, it is probably a good time to buy. Who knows where the price is heading.”
    This as ridiculous a statement as I have seen on this site. Unless you are a paco-like rehabber of distressed investment properties, this statement could not be more wrong. It comes from ignorance of the mortgage market and how it worked in the last ten years.
    Here is a “prediction” for you. Unless there is a VERY big change in the law or the practices of servicers, we are in for VERY bad times in the next two years as the 3 and 5-year ARMs reset in bulk. The reset alone is not worst of it. Most ARMs contain hefty margins that the borrower knew nothing about when they signed their loan. Sometimes the rate increase is capped at the first reset and second reset, sometimes not. Even if it is capped, however, many borrowers will see increases of $1,000 to $2,000 per month.
    In this economic climate, the vast majority of borrowers will not be able to deal with this level of payment shock. And, this time, they won’t be able to refinance out of the problem.
    The result: Record foreclosures; REO properties sitting around unpurchased and unrented; downward pressure on prices.
    Much of the legislation already enacted has done almost nothing to remedy this problem. A decent proposition is eliminating the exception to the bankruptcy code that a loan on a principal residence cannot be modified into affordable and sustainable terms. The general rule is a judge can modify terms of secured debt (e.g. your car, rental property, etc.). Not currently true for principal residences. Perhaps if this changes we will see more willingness to alter the terms of the loan rather than proceed to foreclosure as is the most common occurrence right now.
    I guess anything can happen, but unless there is a big change from the status quo, this is NOT a good time to buy at market value. Unless, of course, you are willing to see your asset depreciate in the next 5 years and all of your down payment evaporate to money heaven.

  74. Posted by mac

    Publius
    Not sure about that. The latest round of easing by the Fed has certainly helped the option arm crowd. See Mish here. Its a good optimistic analysis from a real bear:
    http://globaleconomicanalysis.blogspot.com/2008/12/arms-reset-problem-vanishes-into-thin.html

  75. Posted by Publius

    mac -
    I think I previously posted on this site that I didn’t think the resetting ARMs would be as big a problem as some have predicted based on similar data. That was before I found out how these loans really work.
    There are two problems with the analysis. First, there are heafy margins in addition to the index rate in these loans that do not affect monthly payments until the reset. I have seen some loans as high as 9% — just the margin!
    Second, many of these same loans set a floor on the interest rate. Guess what the floor is — usually the “initial” interest rate. So, even if the index goes down your rate does not (even without the margin).
    Some borrowers will see their interest rate double even though the index is gone down.

  76. Posted by diemos

    “Will they still be an idiot if the Obama administration jump starts a recovery that brings back Bay Area RE?”
    http://www.calculatedriskblog.com/2008/12/q3-2008-mortgage-equity-extraction.html
    At the peak of the bubble credit creation was pumping about 750B/year of money into the real economy, funding about 9% of consumer spending. The end of that flow of money is what is putting us into the consumer lead recession. The obama stimulus plan is 425B/year over two years. That’s not going to be anything but some methadone to get us through the worst of the withdrawal.

  77. Posted by LMRiM

    diemos and I disagree about this, and that’s cool, but I’d rather characterize the “Obama” stimulus plan as taking $850B from the wealth producing part of the economy, skimming a fair amount off for government waste/fraud, and then misallocating the rest. It will leave us all poorer and delay eventual recovery. To the extent that it succeeds in extending the same easy credit conditions that got us into this mess, the stimulus spending will make the situation worse, not better, continuing the structural misallocation of the American economy that has proceeded since the early 1980s, and which picked up speed after the 1991 recession (and went parabolic after the 2001 recession of course!).
    I sort of look at the final Bush months as the bankers looting the public fisc to cover up their misdeeds, and now they will be joined by the public sector unions. Perhaps there will be another public Department of Looting and Pillaging set up with regard to “green” energy, and look for some more money thrown away on all the usual suspects. Not really looking to argue here – I’m in too good a mood these days! – I’m just offering my perspective for those who’ve found my analysis cogent in the past.

  78. Posted by Jorge

    mac,
    Thanks for the link.
    It still sounds like Mish believes the easing only extends the L-shaped recovery into slow bleeding Japan style recovery. Flat or slightly declining GDP doesn’t bode well long term for RE. With no expectation of appreciation in an L shaped recovery, I imagine demand for leveraged assets including RE does as well.
    My guess is that SF housing will be more tied to price/rent ratios and unemployment rates than they will be to interest rates. I do believe Mish is correct on the effects of QE somewhat mitiagting the ARM situation, though it won’t stop the bleeding per publius’ above mentioned reasons.

  79. Posted by IamENTITLEDto3parkingSPOTS

    Real SF= Shanghai. Bye bye San Fran!!

  80. Posted by Embarcadero

    Can anyone cite a positive reason for buying in this climate? As someone who has been actively looking up until about a year ago, I’ve become convinced that – barring some very unlikely act of god – SF real estate has nowhere to go but down. There is oversupply and demand has been clipped a hundred times. I can’t imagine that demand will pick up any time soon.
    The sea change is here – at least as far as I can tell. When I moved here from Hong Kong 8 years back, I was very skittish about property – I simply knew too many people who were underwater and had no way out.
    Can anyone point to anything at all that would suggest it’s better to buy than to rent for the foreseeable future?

  81. Posted by Jorge

    Embarc:
    1) Pride of Ownership. Your friends will envy you!
    2) Real Estate always goes up! (Disclaimer: You may have to hold for 10 years.)
    3) You’d help prop up your nearby home values and become a very popular neighbor!
    4) You can get a HELOC to buy yourself nice toys to reward your excellent decision!
    5) It’s a huge tax write off!!!!
    6) You can spend $20K upgrading your bathroom and your home will instantly be worth $40K more!
    7) You can paint the walls any color you like!
    8) Rates are 4.75%!!!
    9) If you don’t buy now, you may be priced out forever!!!
    10) Some lucky RE agents will get to split 6% of your money to help further stimulate the economy and further validate your purchase!!!!!!!!!!

  82. Posted by Mikey

    Fluj:
    “Suppose the downturn is not lengthy, tho, for a second.”
    Okay – I’m trying to imagine that but I just don’t see how that can happen. Look at all of the things that that contributed to the bubble – easy and available credit (not only in housing but MEW’s, credit cards, etc) drove not only RE purchases but consumer purchases, high employment, record stock market performance, etc. We have none of those things today.
    Every sector of the market is contracting, unemployment is up and those that have jobs are fearful that they may not next month. Easy consumer credit has resulted in record debt, mortgage lenders will lend only to those in the best circumstances as housing prices fall ~30% YOY.
    This won’t continue indefinitely, but the size and scope of the macro problems we’re experiencing seem to point that a quick turnaround is not in the cards. And to be clear, those macro problems affect the SF RE market.
    Until credit markets stabilize, potential buyers are comfortable with their own financial well-being (and perhaps recover some of their down payments lost in the market downturn), and prices at least slow their YOY declines, we should expect a continuation of what we’re seeing today.
    All of the above items essentially filter into this: Assuming you want to buy (which also assumes a seller connected with reality), have a down payment, and are comfortable in your own financial situation, how many lenders will lend you the money to buy an asset class that has declined 30% in the last year? It seems wildly optimistic that any of these items should turn around in six months as some have suggested. While no one can predict the future, this one seems like a good bet.

  83. Posted by mac

    “Suppose the downturn is not lengthy, tho, for a second.”
    I dont think it matters. The economy can recover in the second half and it doesnt follow that RE will rise again any time soon. It may stabilize, but in the 80s and the 90s even after we pulled out of recession, RE prices didnt rise for a few years. Unlike the stock market, or the economy, there are no V bottoms in RE. Only U bottoms.
    The bull case for RE now is that we stop going down. The bear case, well, is we don’t. There really is no financial reason to buy now. If we pull out of this in the second half you will get lots of time to buy, or at least until mortgage rates start rising again.

  84. Posted by sharpie2828

    Hey check out park station summerhill homes near costco in south san francisco. They slashed prices significantly too as of last week. Down 20% from their prices a few months ago.
    http://www.summerhillhomes.com/find/parkstation/

  85. Posted by amused_in_soma

    mac,
    The massive wave of killer resets might have been delayed, but it hasn’t been diverted. Interest rates won’t stay this low forever, and it’s getting harder and harder for ARM holders to refinance as prices drop.
    I’m actually glad the resets aren’t coming fast and furious. A quick return to normalcy in the credit markets means a quicker recovery, which means less time or me to act and less chance for prices to overshoot downwards.
    Piecemeal efforts and delaying tactics mean that confidence is always lacking, so the recovery takes a lot longer to get going. Think about how easy it has been to buy RE in Japan in the last couple of decades. You never had to worry about being priced out!

  86. Posted by fluj

    When I speak of downturn here, I speak of r.e. downturn, not economy at large. I dunno fellas. There is meta, and there is macro, and there is micro. There are bubbles (tech, credit), and there are trends (re-urbanization, web 2.0). I sat and held an open house today. I saw people in the marketplace. You might think they’re foolish. But there were a lot of them.
    No bear has ever really explained the lag in say, west side LA, Seattle, Manhattan, SF, desirable Chicago, and the rest of the country. Eighteen months is a long time in the American consciousness. Yet they all could have very easily, if they were truly honest with themselves. It wasn’t ALL credit bubble. It’s capital. It’s unreported income. It’s changing workforces. And yeah, sure, it’s credit bubble.
    IMO.

  87. Posted by Jorge

    Fluj,
    How are San Francisco transactions looking so far for early January? Almost 50% down from last year from what I’m seeing reported.
    With respect to west side LA, Seattle, Manhattan and desirable Chitown, it’s all the same. Higher income areas just took longer to register the hit. All areas mentioned are showing huge month over month drops. Not too sure why you need to point them out.
    The credit bubble also killed the capital bubble as well. Take a look at S&P, DJIA, QQQ, commodities, etc. All asset classes took a huge hit. Leveraged ones just happened to take a multiplied one.
    Yeah, it was one big ass credit bubble. You can spin this one a million different ways, but show me one reputable economist who sees it differently.
    Nice 2% price cut by the way. That’ll draw ‘em in.

  88. Posted by 1stTimeBuyer

    jj – I felt the need to mention that your calculation was very smart – one of the reasons I still read the comments.
    I’m a first-time buyer. To some of you who say things like, “only a fool would purchase now,” I have 2 questions: can’t I just put in very aggressive offers in the hopes that someone eventually accepts? Second, how aggressive should I be? 30% below asking? 40%? 50%?

  89. Posted by 1stTimeBuyer

    jj – I felt the need to mention that your calculation was very smart – one of the reasons I still read the comments.
    I’m a first-time buyer. To some of you who say things like, “only a fool would purchase now,” I have 2 questions: can’t I just put in very aggressive offers in the hopes that someone eventually accepts? Second, how aggressive should I be? 30% below asking? 40%? 50%?

  90. Posted by fluj

    Jorge, Joe Friedman, Ted Kaczinscki, whatever.
    You want earnest dialogue? I’m glad to do it man. Seriously. I’ve told you this before and I mean it.
    High income areas took longer to register the hit, huh? Why? Tell me. Because those areas had more money to begin with? That doesn’t change the nature of the beast?
    Re: 2 % — I know what I’m doing. I really, really do. But again. I did not pay to advertise on this website. Thank you for the exposure.

  91. Posted by Jorge

    1stTimeBuyer,
    You’re better off waiting until DOM and price/rent numbers start converging to historical values. It’s still a ways off. In the meantime, lowballing won’t get many results. Sellers can be pretty stubborn when it comes to their own mistakes.

  92. Posted by San FronziScheme

    Catching up on all those posts.
    I agree with fluj that the resiliency of the upper market was pretty amazing in a last stand kind of way. Of course there’s the explanation of high net worth that helps people with enough reserves to “wait it off” and this is definitely a big part of the 2006-2008 lag phenomenon. These people have learned from the past that things would always get better. Let the weak give up, the strong will prosper. Sure, why now? Look at the early 90s downturn. Someone buying in 1990 and selling in 1996 would have been a net loser in many instances. Had he waited until 2000 he would have gone into the black and then all the way to the moon from there.
    And I feel that was the bet in the 2006-2008 lag for the wealthy: A 6-months recession followed by a gradual recovery. Big deal. That won’t affect us.
    But this crisis has been going on for more than a year and collapses happen one after another. This isn’t your 10-year sanitary clean-up to remove the weak growth and let the strongest strive.
    How many more 50B Ponzis are there to expose? How many more banks worried more about making the quarter than lending into a declining market? How many more millions out of a job? Those are hitting all classes. I read yesterday that an oligarch (Roman Abramovic) lost more than 80% of his wealth. and he wasn’t the only one.
    http://www.javno.com/en/economy/clanak.php?id=217914
    The richest are going to be the most hit in this next wave. This crisis is the result of too much confidence, and the most overly confident were the wealthiest, thinking they were immune for the sole fact they were getting insider information and who are now being clobbered for taking too much risk.
    This is affecting the richest. I think the best of SF will suffer ripple effects and maybe stronger than other segments.
    These are the real issues, not the sterile issue of who said what and when and for how long. Sure it took longer to get to the cliff. But the cliff hasn’t moved one inch.

  93. Posted by Jorge

    Fluj, Bernie Madoff, Bozo the Clown, whatever.
    You’ve told me what before? Not sure what you mean. Clarify.
    High income areas took longer to adjust because wealthier people have more assets/cash to withstand downturns, though it always catches up during prolonged periods. It’s definitely catching up now. Show me high end sales defying the current trend in the 1+M market. That’s right, you can’t.
    BTW, the 2% crack was regarding 219. We all know how well the multiple single digit price drops work in RE. LOL.

  94. Posted by Jorge

    By the way Flujie,
    The nature of the beast was the fact that assets were overpriced and people of all classes expected them to keep increasing. Not too hard to unederstand. Unfortunately wages didn’t foloow in suit.
    Word up mother flipper.

  95. Posted by Jorge

    Spelling: understand/follow
    Not that you read posts for content unless they agree with your appreciation assumptions, of course.

  96. Posted by 65 DOM

    Not that you read posts for content unless they agree with your appreciation assumptions, of course.
    LOL. You nailed it. This poney has only one trick and it’s called denial.
    65 DOM (aka San FronziScheme)

  97. Posted by Paul Hwang

    I think Ester’s comment was basically:
    “If you were a Master of the Universe, you would not be posting on Socketsite, by definition.”
    It seems that this idea has been rebuked sharply by the Socketsite masses. I am not saying there is or isn’t.
    If there is I want to ask an important question:
    Where will oil be in 18 months?

  98. Posted by Jorge

    Flujie,
    Oh yeah, please reply to my comment regarding sales of 1M+. Can you show results of decreasing DOM or higher YoY prices? Are micro, macro or meta (What’s dotcomese for meta by the way?) indicators pointing to a better market in 2009? Let us know. We’re always happy to hear the latest from our local real estate magnate. I know you don’t have the courage to predict anything on this blog, but most bears have done so and been right. You end up picking nits regarding the timing, but they sure seem to have the micro and macro nailed down.
    Let us know how the meta pushes this market back up.
    Sincerely yours.
    P.S. Glad you feel like you know what you’re doing. 1M+ with construction and carrying costs can burn a bit.

  99. Posted by LMRiM

    “65/66 DOM”. LOL. It’s the second bite of the apple – the old realtor trick of “reset the clock”. Actual DOM is around 136 days. Two 2% drops. Dig around here:
    http://www.sfhouseprices.net/blog/category/san-francisco/miraloma-park/
    You’re welcome, flujie, for the free advertising. Always happy to help a budding magnate :)

  100. Posted by 136 DOM

    LMRiM, thanks for the link. Even Redfin had it wrong. There’s noting like basic ground work to get the real info and the people at sfhouseprices do add some value there.

  101. Posted by unearthly

    It’s probably against MLS rules to show data from old listings so as to reduce transparency. Redfin started posting Cumulative DOM (CDOM) from the Northwest MLS to get around the re-listing head fake; hopefully SF MLS will follow. See this example: 506 17th Ave E Seattle, WA 98112

  102. Posted by LMRiM

    Even Redfin had it wrong.
    Looks like the MLS listing number was changed from the September – November listing, and then it was relisted within days with a new MLS number. There’s a lot of discussion of DOM issues, and some of the rules around it in this old thread:
    http://www.socketsite.com/archives/2008/05/and_apple_is_withdrawn_without_selling_and_returns_with.html
    If you take the time to read through all the posts there, you still can’t figure out what the actual rules are, but there are a lot of “gems” in there from our friend.

  103. Posted by 1stTimeBuyer

    Withdrawing and returning a listing to reduce the DOM – is anybody fooled by that. Almost everyone in this market who is looking to purchase spends several months looking on the world wide web machine, long enough to see those tricks. From a buyer’s perspective, the lack of transparency only adds to the perception that the seller is desperate and creates a cloud of suspicion over the seller. As I buyer I think, “what else are they trying to hide?”

  104. Posted by Trip

    For those who are convinced you “can’t predict the future” and thus you may as well just go ahead and buy in today’s market, I’m curious what you think might stem the current price declines in SF. The demand curve has shifted way, way to the left. It currently looks like we may not even crack 100 total sales this month for SFRs and condos combined (that’s a drop of 2/3 from recent years) and inventory is way up. That is a real collapse. Does anyone truly think the gov’t will start giving $1.5 million loans to individuals with $150k incomes and no real down payment? I guess it’s theoretically possible, but does anyone attach significant odds to this?
    The reason for SF’s roughly 12-month lag behind the downturn in other parts of the state has been discussed at length here. One key factor is that the spigot for subprime loans was shut off earlier. These loans, at high interest rates, were given to those who really had no realistic prospects of ever making the payments even without any recast or reset. The scheme (a la Ponzi) kept going as long as banks were willing to lend to the next subprime sucker to buy the place from the previous one. These were not that common in higher-priced areas because the loan amounts were lower. This part of the bubble had already started deflating by early 2006, driving the banks to halt such loans over the next year, and this turned the deflating into a collapse. These loans had a shorter teaser period (0-2 years). Places began to flood the market as sellers had to sell (or were foreclosed) but there were no more buyers once the banks had stopped lending. Volume collapsed and months of inventory skyrocketed. Thus, Stockton, SF D10, Phoenix, Miami, Contra Costa, etc. saw prices really start to tumble by 2006. Prices in these areas continue to fall even though volume has picked up — no bottom yet.
    The funny loans that drove the bubble in higher-priced areas like “Real SF” were not subprime. These were the no-down, no-doc, neg-am etc. loans that often had a longer teaser period (3-5 years). So buyers were also buying places here (and West LA, and the beach areas of San Diego and OC, etc.) that they could not afford, but the calm-before-the-storm was stretched a little longer. Banks really did not stop making these loans until early 2008, so this bubble only really started collapsing then (although it was deflating before that, which caused the lending to end). So now we see in SF just what we saw in Stockton in 2007 — plummeting sales volume and rising inventories. We’re just not as far along in the process. As I’ve predicted before, it looks like the higher-priced areas may see even a bigger collapse than the Stocktons because the pool of buyers is smaller to begin with, the GSE backstop (at $625k) and low rates may provide some floor support at lower price levels, and I doubt Congress/Obama/Fed will be too interested in subsidizing $1.5 million home buyers enough to make enough people buy at that price level. And, of course, we are entering a long, massive recession combined with an epic stock market crash that has sapped tremendous wealth. Yes, and the Alt-A loans that fueled “Real SF’s” bubble are starting to recast (and prime loans are performing horribly as well).
    How many places have sold in Pac Heights or the Marina in the last month? A handful? 50% of the listings there have been reduced. It’s the same all over town. And places pulled for the holidays are now pouring back onto the market along with new listings. There are just too few buyers — those who can’t afford it but previously bought anyway because some bank lent them the cash can no longer do so, and the much smaller pool that can afford it are not in a buying mood. And there are too many sellers, because they HAVE to sell.
    So maybe “idiot” is not a good word for the very few who are buying right now. But this trend really could not be more clear, and unless someone can provide some compelling, or even plausible, reason why it will halt or be reversed any time soon (“the internet” and a plethora of trustafarians don’t cut it) I don’t see why anyone would be buying here right now.

  105. Posted by fluj

    You guys are too much. Joey, you actually seem intelligent. And I apologized for the comment I made on another site where I poked at renters patting themselves on the back. That seemed to insence you, and put you on the fluj-bashing warpath you follow now. It wasn’t deep. I didn’t intend any sort of personal insult. I spar with these characters on here. That’s it.
    LMRIM, your latest pile on was duly noted.
    By the way, I don’t make the rules. I changed brokerages. The MLS resets properties for that. I hide DOM from precisely no one who asks me in person. People who actually care enough to visit in person, and inquire about the property in question, you know? Once again, everything is not what it appears on a computer screen. I don’t know how many times you have erred in that regard, LMRIM.
    If any of you guys want to know what’s going on with the property, for your own edification or otherwise, please e-mail me. I will be truly happy to tell you. It’s going very well. You two know who I am.

  106. Posted by fluj

    Trip,
    I appreciate your perspective. And it’s true that prices have fallen somewhat. But the Stockton = SF thing is a real stretch, IMO. Stockton is a railroad town, a crossroads for produce. SF is SF. It’s true that properties aren’t selling anywhere near as rapidly, and often for less if they do sell, more are re-entering the market, etc. However, in nearly every neighborhood a property or three is still getting sold for near-peak prices. It is really gumming up the works.
    I wish some of you wouldn’t bring pre-text bias and baggage into each and every thing that you read. Take a poetry course at your local junior college or something. Seriously. The explication skills shown on here are sorely lacking.
    Joe Friedman, you’re all mad at me above because I won’t shot call a better market for 2009. I never went there in the first place! If you ever took the time to read my thoughts on here, I always said, “It’s logical a corretion is coming. I welcome it. But it’s not here yet.” Too many of you guys are like, “oh he’s a realtor. He’s Mr. buy now or be priced out forever.” all that rot. Cooper, you always say that when pressed. Whatever. Wasn’t me. And you know it.
    Oh, and about eight of you revel in the same joke over and over again. Only Foolio is good at it. Most of you suck at it.

  107. Posted by tipster

    Stockton had an economy in which housing was like our tech. Lots of jobs revolved around housing. When housing dried up, jobs disappeared. It would be the Bay Area equivalent of VC investing dropping by 40%. It was, for Stockton, a disaster.
    The WSJ reported saturday that VC investing in tech dropped 40% last quarter.
    Trip is right. And that will have long term repricussions for the Bay Area. Unlike Stockton, no one will move here because it’s cheap.

  108. Posted by mac

    Heres actually a less snarky response to ester re why some people ‘saw it coming’ and her crowd didnt. Its from Marketwatch and quotes Jeremy Grantham
    “Here’s Grantham’s fascinating analysis from a Barron’s interview a few months ago: “Why is it that several dozen people saw this crisis coming for years? I described it as being like watching a train wreck in very slow motion. It seemed so inevitable and so merciless, and yet the bosses of Merrill Lynch and Citi and even Treasury Secretary [Henry] Paulson and Fed Chairman [Ben] Bernanke, none of them seemed to see it coming.”
    Our government and banking leaders are “management types who focus on what they are doing this quarter or this annual budget are somewhat impatient.” However, “seeing these things requires more people with a historical perspective who are more thoughtful and more right-brained, but we end up with an army of left-brained immediate doers. So it’s more or less guaranteed that every time we get an outlying, obscure event,” a Black Swan, “that has never happened before in history, they are always going to miss it. And the three or four dozen odd characters screaming about it are always going to be ignored.”
    http://www.marketwatch.com/news/story/Take-test-see-how-youll/story.aspx?guid={5A72E7D0-D556-44B1-8436-6F5D0BB3CE4F}

  109. Posted by weatherman

    Someone asked a question about the Millennium and prices for 2/2 versus Infinity. First of all, the floorplans at The Millennium are less awkward than at Infinity IMHO. No curved living room and the LRs tend to be larger. The views at The Millennium are not as good as at Infinity in general, but having looked at both properties there is no comparison in terms of luxury and quality.
    Millennium prices in the City residences (below the 26th floor) are now $700-$1000 sq foot. In the Grand residences they are $1000-1400. Still no bargain and there may more downside adjustments after May 15. The Millennium has very few terraces, but I have been in the building several times now since I am in contract and it is really nice. The view in my unit is better than I thought There is no comparison between this product and The Infinity’s.
    I think you could get a good deal on one of the West facing units (Transbay direction) since I understand these aren’t selling. Last I heard they are over 25% in contract in total, but sales have been slow over the past few months for obvious reasons.

  110. Posted by weatherman

    Someone asked a question about the Millennium and prices for 2/2 versus Infinity. First of all, the floorplans at The Millennium are less awkward than at Infinity IMHO. No curved living room and the LRs tend to be larger. The views at The Millennium are not as good as at Infinity in general, but having looked at both properties there is no comparison in terms of luxury and quality.
    Millennium prices in the City residences (below the 26th floor) are now $700-$1000 sq foot. In the Grand residences they are $1000-1400. Still no bargain and there may more downside adjustments after May 15. The Millennium has very few terraces, but I have been in the building several times now since I am in contract and it is really nice. The view in my unit is better than I thought There is no comparison between this product and The Infinity’s.
    I think you could get a good deal on one of the West facing units (Transbay direction) since I understand these aren’t selling. Last I heard they are over 25% in contract in total, but sales have been slow over the past few months for obvious reasons.

  111. Posted by weatherman

    Someone asked a question about the Millennium and prices for 2/2 versus Infinity. First of all, the floorplans at The Millennium are less awkward than at Infinity IMHO. No curved living room and the LRs tend to be larger. The views at The Millennium are not as good as at Infinity in general, but having looked at both properties there is no comparison in terms of luxury and quality.
    Millennium prices in the City residences (below the 26th floor) are now $700-$1000 sq foot. In the Grand residences they are $1000-1400. Still no bargain and there may more downside adjustments after May 15. The Millennium has very few terraces, but I have been in the building several times now since I am in contract and it is really nice. The view in my unit is better than I thought There is no comparison between this product and The Infinity’s.
    I think you could get a good deal on one of the West facing units (Transbay direction) since I understand these aren’t selling. Last I heard they are over 25% in contract in total, but sales have been slow over the past few months for obvious reasons.

  112. Posted by fluj

    Because VC isn’t at all resilient, right Tipster? Dot com and 9/11 at least taught us that. When you’re gone, you’re gone forever. Right? I hope I’m getting this all down.

  113. Posted by unearthly

    I rent in the Infinity and can tell you the construction quality and finishes leave a lot to be desired. It feels cheap for a place that was purchased for ~ $1100/sqft; from the engineered floors, to the hollow core doors, to the entry-level Bosch appliances. ‘Upscale builders grade’ would be the best way to put it; something you see in a lot of flippers.

  114. Posted by Mikey

    “Where will oil be in 18 months?”
    On the commodities market where its always been subject to the usual vagaries of future traders and completely outside of the realm or influence to real estate.

  115. Posted by ex SF-er

    I will defend fluj and attack at the same time.
    there were two different varieties of fluj’s arguments in the past (1-2 years ago)
    1) that the downturn hadn’t hit YET. He often did argue this. I do agree that many of the “9,000″ quotes were him saying the downturn hadn’t hit YET. At the time some idiot bear posters were saying things like “there IS blood in the streets man!” but there wasn’t.
    So fluj is correct that many of his past arguments were of the “the downturn hasn’t hit yet” variety.
    ===
    however, there have been arguments where fluj told me that macroeconomic events would not affect SF because it was “special”. At the time, there were many “SF is special” arguments. They were all folly of course, but fluj did disseminate some of those arguments. (things like the Europeans will save SF, the rich asians, the googleaires, the everybody wants to live here arguments, and so on).
    FWIW: I think he did believe those arguments, because he tends to be a “man in the trenches” guy and not a macro sort of guy.

  116. Posted by ex SF-er

    someone above asked when would it not be “idiotic” to buy now.
    my thoughts:
    currently, the US govt is on a rampage to make the banks “whole”. they are disseminating countless amounts of money. However, we are not seeing significant amounts of monetary inflation (growth in the money supply) because the “velocity” of money is way way down from “normal” (or at least down from bubble times.
    At some point that may change. As it changes, we will see a spiral of inflation. the spiral of inflation could wipe out all of the real value of your assets…
    right now I am basically all in cash. (with a little oil and gold and silver).
    once I see signs of the inflation, then I will likely buy assets. Not sure if it would be a house or not, I’ll have to see… but the govt will try to blow a bubble in housing and we’ll see where those forces end up.
    but to be brief, I’d start looking at housing again when it looks like our currency is rapidly losing value.
    I don’t think we’ll see true HYPERINFLATION, but I wouldn’t be surprised to see severe inflation in the next few years.
    I’m sorry, I can’t give a time line,
    but watching what our govt is doing (throwing TRILLIONS of dollars away to connected interests), I get angry and sad.
    I don’t want to end up like this kid who is buying bread in Zimbabwe… not a joke, this is for bread.
    ======
    Lastly: Ester asked why we armchair economists could see this when the big bucked moneybaggers couldn’t see it.
    The answer is simple: they didn’t want to see it.
    by not seeing it they raked in BILLIONS of dollars. And now they walk away from the losses (which you will pay through taxes and depreciated dollars).

  117. Posted by fluj

    Never believed the Googleaires thing. Thought it was overrated. Saw quite a few Europeans at ~3M listing I had. Noted it in a post about Euro money. That was the extent of that. (We’re simply too far away. We’re not NYC.) Asians are prevalent in the SF marketplace, period. But yes, I do believe SF is different and so are some other cities. I’ve made the Seattle comparison many times, especially. My main take is that SF has undergone a worforce and economic shift that has coincided with both easy credit and an American re-urbanization.

  118. Posted by kthnxbye

    Trip and Ester are both spot on in their own ways. I have waiting for a burst bubble since the nineties! ;-)

  119. Posted by debtpocalypse

    It’s not only about the resetting of rates. It’s about the recast of pick-a-pay Option ARMs which are hitting percentage-of-original-loan thresholds hit far earlier than anyone previously assumed or modeled. A very large percentage of Option ARM borrowers make minimum payments and allow additional principal-owed to accumulate. Once a threshold is hit, the total loan (say, 125% of original borrowing) immediately converts (a.k.a., “recasts”) to a fully amortizing 30-year fixed. Then, former-owner-cum-renter walks away.
    A tidal wave of them is due in the next few years. Period.
    Regarding Ester & Paul and anyone else who wants to question the capacity of socketsite scribblers to “predict the future,” and/or compete with “Masters of the Universe,” well, I mourn for your capital. If anyone else wants to know the future, you can learn of it here first (if you have the time, patience and interest):
    http://www.valueinvestingforum.com.mx/pdf/T2%20Partners-%20WHITNEY%20TILSON.pdf
    Subprime loans were used for starter homes in less-attractive neighborhoods. Option ARMs were used by middle and upper middle class borrowers to wedge themselves into more desirable neighborhoods, and the implosion of that latter market remains dead-ahead, and will follow the path-of-financial-wreckage that subprime already has carved.
    Period.

  120. Posted by Amir

    This thread has been a little patchwork and winding, but taking broader strokes at the DOM issue and specifically the very role that realtors play: an important question is the value they add in the current day.
    Being under the microscope is often not fun, but realtors are certainly not alone right now, as is often the case in a downturn, when all practices are scrutinized anew.
    A lot of what realtors used to add to a transaction, can now be had by a buyer who has the time and desire to do their own due diligence.
    The question is why is there an intermediary at all and why is it a realtor.
    Why isn’t the market modelled for the buyer and seller to meet and transact and they choose.
    Like most things, a lot of the reason is historical practices.
    Some of the value that realtors seem to add is local market and specific knowledge of the particular housing unit for sale. In addition to that info, it seems to come down to saving time for a potential buyer, and the intermediation that any major purchase seems to implicitly require.
    But what is the fair value of this role – and what will the market pay for their services.
    Would we better served by a flat fee in any given market to obviate the inherent conflicts of interest. And should unethical practices (manipulations to sell or elevate one’s reputations) be raised to the level of fiduciary responsibilities?
    What is off-putting after any bubble is the hyperbole, games and manipulation that seem to have played out and indeed added to the bubble that many got burned by.
    There is likely always to be a role for realtors (call them what you like – used-house salesman or agents) but their future role in the real property market will certainly re-size itself in the coming years.

  121. Posted by Debtpocalypse

    Thanks, weatherman. It was me who asked.

  122. Posted by fluj

    Amir,
    You may be right. But one should never underestimate the widely divergent perspectives of buyers and sellers. It’s future versus past. Potential versus sentiment. Hope versus hope. An intermediary is almost always necessary. As much skepticism as there is towards realtors, and sure, sometimes it is deserved, pales in comparison to the skepticism between buyers and sellers. They often simply could never be in a room together.
    Not to mention that real experience and hands on knowledge will always trump HTML on a screen.

  123. Posted by LMRiM

    The answer is simple: they didn’t want to see it.
    Oh, they saw it coming. Not the shills they put out on TV of course, but the real string pullers? You bet they did.
    I’ve been saying it for just over a year on SS. They knew that when push came to shove, the exit strategy would be the US taxpayer. Sure, some individual masters of the universe get taken down, but the system would survive to plunder again – and to count their loot from the last round of plundering.
    It was the easiest bet in the world that after the sheeple were shorn, they’d clamor for the “government” (which is funded by the sheeple, after all) to “solve” the problem. “Necessity” and all that.
    “Necessity is the plea for every infringement of human freedom. It is the argument of tyrants; it is the creed of slaves.” – William Pitt
    For a slightly more contemporary (and topical) treatment of the same idea, look no further than Stamp’s 1920s speech:
    “The bankers own the earth. Take it away from them, but leave them the power to create money, and with the flick of the pen they will create enough deposits to buy it back again. However, take it [power to create money] away from them, and all the great fortunes like mine will disappear and they ought to disappear, for this would be a happier and better world to live in. But, if you wish to remain the slaves of bankers and pay the cost of your own slavery, let them continue to create money.”
    As the population descends into blaming “deregulation” and one party (the “evil Bush cronies”) or the other (Rubin, Summers, Barney Frank, et al.), the Fed is laughing themselves silly. I guarantee it :)

  124. Posted by two beers

    Trip @ 8:57 – excellent summary.
    ex-SFer @11:00 in response to Ester -
    Upton Sinclair said it well, and this should be kept in mind whenever a businessman, government official, or pundit speaks:
    “It is difficult to get a man to understand something when his salary depends upon his not understanding it.”

  125. Posted by PresidioHtsRenter

    Paul Hwang wrote:
    > Tell half the people prices are going to
    > go up and half the people prices are going
    > down and you will look like a genius to
    > someone.
    Every Realtor I have met tells the sellers “prices are going down” “time to list with me and sell” and tells the buyers “prices are going up” “we have hit bottom let’s write an offer before you are priced out of the market forever”…

  126. Posted by Kathleen

    For first time buyer-
    Re: aggressive offers – it is not a simple matrix of 30% off list etc. Smart sellers are pricing agressively, staying ahead of the decrease value curve. It is not a one size fits all approach. Some seller are ready to listen to the marketplace, some are not.
    Always, only offer what it is worth to you as a buyer.
    Re: Re listing withdrawn properties or resetting DOM clocks, no one is hiding anything clearly – since you know about it.
    Sales and listing histories are on the MLS and are easy to check.
    Properties get taken off the market, for a variety of reasons, when it doesn’t go into contract.
    Sellers stay or lease it, sellers can improve the property, or devise a new marketing plan with his broker, or switch staging or re-list with another agent or brokerage that may offer a fresh marketing approach.
    When you change teams, it’s a different game.
    A large price reduction will reset the DOM clock.
    A large decrease in the listing price is also a new ball game.

  127. Posted by 1stTimeBuyer

    Trip
    I hear what you’re saying – the housing and stock markets are going to get worse, and we’re inevitably (perhaps soon) going to enter an inflationary cycle. Inflation leads to higher interest rates because the interest rate for every dollar loaned must take into account the belief that that dollar will not be worth as much in the future.
    So Trip (and others) wouldn’t a first time buyer be better served by negotiating hard with a seller (say a 25 to 40% price reduction)locking in a low interest rate, and watching things unravel from their new home? Would buying now under those conditions still make me an “idiot?”
    Jorge – thanks for answering my previous question re: negotiating with sellers.

  128. Posted by Trip

    I’ll let the economists chime in, but my two cents:
    I’m not so certain we’re going to see inflation before this price decline has played out for many more quarters. And it looks like the powers that be are going to keep interest rates low for quite a while as well. And when interest rates begin to rise again (whether prodded by that inflation or otherwise), that will put further downward pressure on prices as it reduces borrowing power, so this will not result in housing appreciation right (in either nominal or real dollars) away.
    That said, if you can negotiate 40% off recent comps on a place, and you like it and can afford it and won’t be hurt if you have to sell for some reason, go for it!

  129. Posted by tipster

    1stTimeBuyer:
    In a normal market, as interest rates rise, wages rise and the cost of raw materials rises. This puts upward pressure on housing prices. There is downward pressure too because owning a home becomes more expensive due to the interest payments.
    This will be different. The interest rate increases will not be in tandem with raw materials prices and wages increasing, it will be from the demand cause by politicians sinking money into failed banks. So you’ll have interest rate increases with no real job growth. Raw materials will probably be flat.
    So all you’ll get on housing is the downward pressure with none of the normal upward pressures.
    That coupled with the fact that we are still coming off bubble pricing (though LA is correcting big time – see dqnews.com) means housing prices will fall.
    You would be better off paying a low price in a high rate environment, then waiting to refinance, than paying a high price in a low rate environment, because you cannot refinance that problem away.

  130. Posted by EBGuy

    ester,
    Please ignore your detractors and continue to post. You are one of the more interesting SS personalities on the “buy” side and I’ve always valued your transparency. Not many folks look at the rental potential of SOMA condos so your comments are appreciated.

  131. Posted by Jorge

    Fluj,
    Still waiting for those stats to show how well the 1M+ market is doing. Also, since you claim you know what you are doing with the “death by a thousand cuts” pricing model, could you clue some of us ignorant users on this technique?
    I love how you post BS and then walk away from it like you never said it. LOL.

  132. Posted by fluj

    Do you suppose I don’t acknowledge and understand that the absence of jumbo lending is greatly affecting the $1M+ market? There are 29 1M+ SFRs in contract or sold since the new year, 25 condos, and 28 2-4 unit buildings.
    Jorge, I mentioned that you are free to email me. So if you really want my opinions, you’ll email me. On the other hand if you only want to goad me on a BBS, you’ll continue in this same vein both here and elsewhere.

  133. Posted by SFOSEA

    Any idea of what they are now asking for the City Residences in the detached “cube?”

  134. Posted by 1stTimeBuyer

    Trip & Tipster
    Thanks for sharing your wisdom. After all, that’s what this site is all about.
    Now, for the topic of buyers representing themselves without an agent – say we have a buyer who is trained in the law (but not a lawyer) and a compulsive reader of legal documents. Say this person acknowledges that they will have to hire an attorney to read through the documents, but would prefer to do the negotiating themselves. This person presents as a pretty nice guy, and is not in a huge hurry to buy. My questions are: 1) how will this person be perceived by the typical seller in this market? 2) what is likely to fall through the cracks because this person is not represented by an agent? and, 3) is not having an agent, in the end, likely to cost more than it potentially saves?

  135. Posted by JohnK

    Hi 1stTime,
    I basically fall into a similar category as you describe above — legally trained, plus know the process, have purchased before, etc. I personally would never buy/sell from/to an unrepresented private party. Too many problems dealing with people who think they know what they are doing, but in the end, do not have a clue. Agents do really earn their money by dealing with all the BS that a picky buyer/greedy seller can put you through as well as keeping the process on track. There can be a lot of moving parts to a transaction and real estate law can be tricky.
    If we are talking about buying from one of the professionally developed and marketed condo projects (i.e. Millennium, Infinity, etc), then its a little less obvious. I have purchased in developments both represented and unrepresented and neither time did I have any major regrets. Sometimes you can get the development to credit back part of the commission that would have gone to an agent. Sometimes it helps tohave someone with relationships in the sales office who can help speed the process, get you a few extra amenities or concessions, and navigate potential problems. This last time, I was very glad I was represented since the unit promised was not the unit delivered and my agent handled the issue very quickly and with minimal hassle for me.
    Just one perspective. Hope it’s useful.

  136. Posted by unearthly

    RE Agents are sales people not attorneys; they can not give you legal advice but they can be used for RE transactions. Alternatively you can get a good RE attorney to draw up the purchase and sale agreement. On the buy side I would always use an RE attorney; even if I hired an agent. Most sellers could care less about the buyer as long as there’s earnest money in hand and the financing checks out. YMMV.

  137. Posted by condoshopper

    is it common to hire attorneys for the buy-side? i read it a lot on the internets but i haven’t heard any friends and family hire attorneys when buying in california.

  138. Posted by viewlover

    has anyone paid attention to the ad for the brannan unit flashing on this site that has just been reduced by $280,000? That’s a significant reuction for the Brannan.

  139. Posted by viewlover

    I don’t know why realtors are being portrayed as not adding any value. A buyer does not have to buy what they are told, they are free to buy what they want, specially when they are paying to pay alot of money. I used a realtor that showed by almost 100 properties over a 3 month period before I finally bought something. Picked me up and drove me around too. In the process I learned quite a bit. I liked the openenss of a loft, were it not for the realtor knowing the area and pointing out all of the issues that I would have never seen, I would have really made a very bad decision. First time buyer, be prepared to look at as many properties as you like and find a realtor that won’t have a problem showing you as many as it takes. When you find the one that is the best for you, don’t settle (find a good compromise) it will be also quite valuable to have that same realtor negotiate on your behalf. You can’t just push a button or work with a realtor and expect everything will line up. In this market one has to be very careful, but by looking hard, you can still find a home within reasonable parameters that can work for the individual buyer. If the goal is to buy a home to live in. If you are not willing to do the leg work, then just rent.

  140. Posted by diemos

    “No bear has ever really explained the lag in say, west side LA, Seattle, Manhattan, SF, desirable Chicago, and the rest of the country.”
    Ok fluj, I’ll give you a serious answer.
    As we previously discussed prices rise when there are more buyers than sellers and fall when there are more sellers than buyers. Many things can effect the buyer/seller ratio:
    Changes in demographics
    Changes in employment
    Changes in the availability of loans
    Changes in the cost of money
    All of these effects are linear. You change them and the market moves to a new equilibrium point. A different effect is speculation which behaves non-linearly.
    When people think an asset is going to go up, more people want to buy and less want to sell and this causes prices to go up in a positive (self-reinforcing) feedback loop. The loop works just as strongly in the opposite direction. When people think an asset is going to go down, more want to sell and less to buy and that causes prices to go down.
    How any particular micro-market behaves is the sum of these effect and because of the feedback loop can behave non-linearly. For instance, a real change in employment can cause a rise in prices which then engages the speculative feedback loop to drive the price even higher.
    As much as I take people to task when they say “SF is different” as a euphemism for “SF real estate exists in it’s own universe where the laws of economics don’t apply” it’s true that every place is different and will have it’s own trajectory based on it’s own situation.
    That’s the beauty of the price/rent ratio. All of the linear effect from demographics and employment have the same impact on rent as they do on price. As well, all of the intangibles of living in a particular place (weather, culture) are identical for rent and price. All that buying gets you that renting does not is an asset and the potential for a change in asset value. When the price/rent ratio changes that gives you a measure of how much speculative premium is in the market. Namely, how much people are willing to overpay for an asset based on the belief that it will be worth even more later.
    In the latest episode we had one more pernicious positive feedback loop operating. When Greenspan lowered rates to 1% investors started looking for better things to invest in and started piling into MBS. As money flooded into MBS people took it and bought houses driving the price up. As the price went up anyone who got into trouble with their mortgage could easily sell or refinance and so the mortgages never went bad. Since mortgages never went bad people thought it was ok to relax the lending criterion and even more money flooded into the market. But as with all positive feedback loops it goes in both directions. When house prices stop going up people can’t sell or refinance and the loans go bad. As the loans go bad investors pull back. As money stops flooding into the market prices fall.
    So we’ve got the pieces in place for our micro-market analysis.
    Circa 95 the bubble starts as dot.com money floods SF leading to a real rise in prices. This engages the speculative feedback loop. Price rises extend all the way out to the central valley as people are priced out of SF. There’s a small pull back in SF as the dot.com ends in 01 but lowered lending standards reengage the positive feedback loop.
    In the central valley you have people who live paycheck-to-paycheck, buying houses with subprime loans that they will not be able to pay once they reset. You also have endless open space and no planning restrictions to prevent new homes from flooding the market. Around 05-06 the flood of new homes entering the market hits the surge in sales from subprime resets and tips the buyer/seller balance. New home sellers have enormous margins and can easily undercut existing homeowners to move their properties. Prices fall. Subprime lending is shut down, further restricting the buyer pool and increasing the number of sellers as refinancing shuts down. The speculative feedback loop flips sign as people lose faith in real estate in the valley and prices collapse.
    In SF there is little effect at this point. Subprime is a small part of SF. General employment is not effected. Prices hold. However, the subprime collapse sets certain thing in motion which will eventually effect the buyer/seller situation in SF.
    1) There’s the psychological blow from seeing that house prices in California can collapse. I actually thought that this would be enough to put the fear of god in SF buyers but, as Darth Vader would say, “[shaking fist] You don’t know the POWER of the ‘SF is special’ meme. I MUST buy SF real estate.”
    2) When subprime collapses the value of the subprime MBS will collapse. This will make vast tracts of the financial system insolvent and will precipitate a financial crisis that will restrict lending even to prime customers. This almost hit in summer 07 when the Bear Stern’s hedge fund tried to sell their securities and got a bid of 10 cents on the dollar. But we quickly entered the era of “Don’t ask, don’t sell.” and everyone was allowed to pretend that they were still solvent. It didn’t finally blow up until it became clear that AIG had no hope of covering their credit default swaps late last year.
    (oh, and for the woocoudanood file. Prime and Alt-A portfolios are still to blow up and will create a second round of the financial crisis when they do.)
    3) The real economy was supported by MEW at 10% of consumer spending. A significant recession was inevitable once this flow of funds was cut off, leading to a general rise in unemployment and reducing the number of buyers and creating forced sales. The consumer finally gave up the ghost at the end of last year.
    4) SF mortgages start resetting in bulk in 2010 leading to payment shock and forced sales. The reduction in interest rates will cushion this somewhat but there will still be plenty of people who can’t pay their mortgage.
    So we had four effects that were coming. Any of which could have tipped the speculative feedback loop into declines. All of them together were guaranteed to. The only open question being what order they would hit and which one would finally break the camel’s back. Once the psychology changes the declines won’t stop until all of the speculative premium has been erased.
    And yes, this was the broad outline of my analysis in 2004.

  141. Posted by unearthly

    Think of it as preventative; most people hire an attorney after they get into trouble. You’re about to sign multiple legally binding contracts. Would you hand someone a million dollars without checking to see if you have covered all your outs?

  142. Posted by ex SF-er

    My main take is that SF has undergone a worforce and economic shift that has coincided with both easy credit and an American re-urbanization.
    Fluj: I agree totally. However, I will change “coincided with” to “partially CAUSED BY” easy credit.
    almost all boats were lifted by easy money policies. real Estate, banking, Tech, Medicine, Commodities prices, Venture Capital money, Hedge Fund money, Tax receipts by municipalities. Almost everything (except for the economies of the rust belt/deep south)
    Thus, almost everywhere EXCEPT the rustbelt and parts of the deep south saw massive price increases due to their “special” way of manifesting the common credit bubble.
    SF saw tech gains.
    Iowa saw corn prices explode
    Wyoming saw Oil/Nat’l Gas prices explode
    Silicon Valley saw huge VC funding boom
    Manhattan/East Coast saw amazing Hedge fund fundings.
    SoCal had Mortgage lending boom.
    and so on.
    So SF IS special. Just like farmland in Iowa, and downtown lofts in Minneapolis, and vacation homes in Utah. they’re all special.
    and all of those places say “we’re special. we cost so much because of the XXX boom. we should cost this much”. however, they forget that their specific XXX boom was underpinned by easy money. So as we see global unleveraging those underpinnings are ripped away.
    So there isn’t as much money now for VC capital, or as much money for hostile takeovers, or as much money for Hedgies to lever up, or as much seed money for new tech adventures, or for corn for use for biofuel.
    thus, those prices must fall to non-credit bubble pricing, BARRING GOVT INTERVENTION. (and there will be significant intervention).
    where is that level? I dunno. but as I’ve said many times, I don’t know why 2000 pricing is unreasonable, as those prices were supported by a major BOOM itself (the tech/.com boom).
    almost nowhere has changed much demographically from 2000 in a positive way that would explain higher prices today vs 2008. thus, 2000 prices would seem reasonable. as would 2001 prices or 1998 prices. I’m not a fortune teller.
    But 2004-5-6-7 prices are clearly out of wack with fundamentals (again barring the govt.).
    unfortunately, these credit events have a way of taking YEARS and YEARS to sort themselves out. and unfortunately, they tend to OVER correct to the downside.
    I’ve said this so many times I cannot count:
    “watching this downturn will be like watching the paint dry of a painting of grass growing.”
    only 3 more years left per my original estimations. It’s falling apart faster than I had planned, and so I wouldn’t be surprised if the bottom comes as quickly as 2 years from now. now the recovery on the other hand… who can say? it could be a few years after that? or maybe 10+ years like japan. who knows? it all depends on just a few people, that all change tomorrow (Obama, Geithner, Bernanke, Shumer, Feinstein, Sheila Bair, and like 10 other people).

  143. Posted by Bob

    This thread has just gone off the cliff. I’m looking to get some insight on the Millennium and it’s just a pissing match about general RE topics. Go to a coffee shop and discuss the macro effects of RE in SF or do it on another post that is more appropriate. Stick to the topic of the Millennium.

  144. Posted by cooper

    “No bear has ever really explained the lag in say, west side LA, Seattle, Manhattan, SF, desirable Chicago, and the rest of the country.”
    Fluj. You and I had this debate a year ago. I told you one of the reasons San Francisco would fall is because all real estate markets operate with a lag historically. One a critical mass of them fall, they all do. You told me I was full of $##$#.
    It happens every single time, always has and did this time too.
    I don’t understand how you can be a realtor and not like, study real estate while having such a know it all attitude. I guess if you are wrong all the time you must just be super comfortable with it.

  145. Posted by unearthly

    I’m looking to get some insight on the Millennium
    It’s still overpriced – wait 6-months and you’ll probably get the same answer, at least from me. The SOMA condo market is about to be flooded by 2nd Infinity tower, sales start Jan 29th. Top floors in the Infinity will compete with mid-level floors in the Millennium. The Millennium looks to have better fit and finish.

  146. Posted by fluj

    Cooper your theory is not in keeping with what occurred here. I’ll leave your guesses about my acumen and your trite reductions alone. You never reacted to my pointing out how incredibly wrong you were, on dozens if not more properties, for years either.
    Diemos, I’m going to get to your points later on when I have more time.

  147. Posted by gowiththeflow

    Fluj you mention that:
    “There are 29 1M+ SFRs in contract or sold since the new year, 25 condos, and 28 2-4 unit buildings.”
    Do you know how many of the 25 condos sold were Infinity units?
    Thanks

  148. Posted by weatherman

    SFOSEA
    You asked about pricing in the City Residences. Initially they were in the 1200 per sq foot range. Great layouts, no view. With the reduction they should be in the $1000 range. Can’t confirm this, but someone told me that HOAs are higher in the detached cube because there are fewer units. HOAs in the Grand Residences are $1300 for a 2200 sq foot unit as a benchmark.
    I can’t help myself, but I am going to chime in on the unfortunate left turn this thread has taken.
    Bears are a curious lot in my opinion. They seem to get a charge out of the financial misery of others’ irrational exhuberance,they perennially forecast doom (I assume because they feel a certain insecurity in always running against the grain), and then once in a while they get it right. The bears have reason to growl right now. They predicted the collapse in the housing market and they were right, even here in SF. But the other pattern that has repeated through boom and bust cycles in the past is that once the bears convince enough people to join them in their joyless rent-controlled dens, the cycle is generally close to being over.
    Not sure where we are on this sine curve, but just as the bulls were predicting that prices would continue to rise forever, and they were clearly wrong, so does the bear argument of decades of asset destruction seem somewhat melodramatic. Clearly this recession will be deep and painful, job losses will continue, but the Bay Area will hold up “better” than some other areas because our economy is reasonably diversified (certainly compared to Stockton – jeez). It is not all about Web 2.0 and Silicon Valley VC. Biotech, insurance, financial services and even tech will lead us out of this. The Bay Area is not “done”.

  149. Posted by gowiththeflow

    Does anyone know pricing per square foot on the terrace units at Millenium – do any of the terrace units have views?

  150. Posted by Trip

    “once the bears convince enough people to join them in their joyless rent-controlled dens, the cycle is generally close to being over.”
    weatherman, what do you mean by this? I’m not being snarky — it’s just that this seems to be the central thesis and premise of your post but I just really cannot tell what you are saying.

  151. Posted by fluj

    go with the flow,
    I don’t think the Infinity releases information like that?

  152. Posted by gowiththeflow

    Ok thanks.
    I think you are right, was not sure if realtors have access (guessing by the post you may be one?)?
    Any idea how long it takes for new building sales prices to become available to the public typically be it via tax records, or other means?

  153. Posted by Jorge

    A simpler explanation to the delay in price reductions in better performing markets is the fact that the bottom two rungs of the property ladder were knocked out. Fewer homeowners could use their equity to buy more expensive properties. This significantly reduced demand in areas considered to be prime.

  154. Posted by weatherman

    Trip -
    It was just a bad analogy for when otherwise bullish people become bearish, i.e. when the bears’ arguments start to resonate and everyone gets extremenly pessimistic. I guess I see that as a contrarian indicator.

  155. Posted by Trip

    OK, now I understand the point. I agree that when everyone finally starts yelling “sell” it often signals the time to start buying. I just don’t see that reversal in SF real estate coming for a long time — more than a couple of years. I don’t even think we’re at the point yet when the typical SF owner would acknowledge that the price of HIS (or HER) home has indeed started coming down. Hence the freeze in sales volume.

  156. Posted by RinconHill_Res

    This may have already been stated above, but the Infinity’s prices were already, on average, about 10-15% higher than ORH’s even as far back as 2006 so any comparions between the two projects might be a red herring.
    One of the reasons I chose ORH over the Infinity was because for an equivalent sized condo with a similar view (20thish floor corner unit facing twin peaks and downton), the price wasabout 15% higher than the unit I ultimately purchashed. Granted, I reserved my unit on the 2nd day of the preview week so the disparity may be more or less attributable to that particular circumstance.

  157. Posted by unbelievable

    Why won’t people in contract with the Millennium balk at a 15% reduction? Let’s do the math on a Grand residence place that was priced at $3 mm (remember, this is a mid-level place at millennium). Wouldn’t you rather lose 6$, or $180,000, by walkng away from a down payment than you would lose $1 million+. Just wait until they reduce the prices more. This 15% is a laugh.

  158. Posted by peninsula renter

    debtpocalypse said :
    It’s not only about the resetting of rates. It’s about the recast of pick-a-pay Option ARMs which are hitting percentage-of-original-loan thresholds hit far earlier than anyone previously assumed or modeled.
    A tidal wave of them is due in the next few years. Period.
    =================
    I agree, but I haven’t been able to find specific data about these loans in the Bay Area. I’ve seen nationwide graphs, and I know these loans are common here… but I’d still love to see some localized data, if anyone has it.
    peninsula renter.

  159. Posted by gowiththeflow

    debtpocalypse thanks for the great link. Looks like the info is about a year old, anything more current, from this year, future projections? What is the direct URL for the blog? Thanks.

  160. Posted by tipster

    Uh oh. Obama is expected to unveil his replacement theme for Bush’s “ownership society” and it doesn’t look good for homeowners expecting a bailout from their foreclosure problems.
    His theme: responsibility.

  161. Posted by fluj

    “No bear has ever really explained the lag in say, west side LA, Seattle, Manhattan, SF, desirable Chicago, and the rest of the country.”
    Ok fluj, I’ll give you a serious answer.
    As we previously discussed prices rise when there are more buyers than sellers and fall when there are more sellers than buyers. Many things can effect the buyer/seller ratio:
    Changes in demographics
    Changes in employment
    Changes in the availability of loans
    Changes in the cost of money

    I agree with these tenets. I’d ask you, has America shifted toward urban centers in the last decade? and is SF not the most urban, complete city on the American West Coast? Has the workforce shifted?
    All of these effects are linear. You change them and the market moves to a new equilibrium point. A different effect is speculation which behaves non-linearly.
    When people think an asset is going to go up, more people want to buy and less want to sell and this causes prices to go up in a positive (self-reinforcing) feedback loop. The loop works just as strongly in the opposite direction. When people think an asset is going to go down, more want to sell and less to buy and that causes prices to go down.
    How any particular micro-market behaves is the sum of these effect and because of the feedback loop can behave non-linearly. For instance, a real change in employment can cause a rise in prices which then engages the speculative feedback loop to drive the price even higher.
    As much as I take people to task when they say “SF is different” as a euphemism for “SF real estate exists in it’s own universe where the laws of economics don’t apply” it’s true that every place is different and will have it’s own trajectory based on it’s own situation.

    Yes, and no. Of course we’re all in the same reality. But in my view there are certain aspects to San Francisco that cannot be found elsewhere, or many places. I don’t want to get into that. Ex-SFer essentially said that “All locales are different in their own way.” And that’s true too. But SF is pretty small, there’s a lot of money, and the things that make us different such as tech are a whole lot newer than say, corn in Iowa. The Internet only started making money around four years ago. That’s only one thing tho. (And you’re like my brother always using the same “it’s” regardless, but I’ll let you off the hook because you’re obviously a very smart guy.)
    That’s the beauty of the price/rent ratio. All of the linear effect from demographics and employment have the same impact on rent as they do on price. As well, all of the intangibles of living in a particular place (weather, culture) are identical for rent and price. All that buying gets you that renting does not is an asset and the potential for a change in asset value. When the price/rent ratio changes that gives you a measure of how much speculative premium is in the market. Namely, how much people are willing to overpay for an asset based on the belief that it will be worth even more later.
    This is your view. I respect it. It is definitive for you. But here is where you diverge from Joe and Susy Homeowner. I’ll briefly mention that tax advantages in the right situations can be a factor. But that’s not really where you differ. To you, Tipster, LMRIM and others it is all about rent to own ratios. You do not factor in sentimental premiums, an American predisposition to ownership, and other hard to quantify, but real, intangibles. Most people would prefer to own where they reside. You and I have been down this road before. I do not dispute your metric. Just know that not everyone views residences in purely economic terms.
    In the latest episode we had one more pernicious positive feedback loop operating. When Greenspan lowered rates to 1% investors started looking for better things to invest in and started piling into MBS. As money flooded into MBS people took it and bought houses driving the price up. As the price went up anyone who got into trouble with their mortgage could easily sell or refinance and so the mortgages never went bad. Since mortgages never went bad people thought it was ok to relax the lending criterion and even more money flooded into the market. But as with all positive feedback loops it goes in both directions. When house prices stop going up people can’t sell or refinance and the loans go bad. As the loans go bad investors pull back. As money stops flooding into the market prices fall.
    I agree with all of this. Greenspan set it in motion. Somehow Clinton has largely escaped blame. There are some very telling clips floating around on the internets where Clinton sure sounds a whole lot like Dubya on the subject of home ownership. I think this is where he went “centrist,” truth be told.
    So we’ve got the pieces in place for our micro-market analysis.
    Circa 95 the bubble starts as dot.com money floods SF leading to a real rise in prices.

    I disagree with this timeframe. I think you mean more like ’97-’98 to be honest.
    This engages the speculative feedback loop. Price rises extend all the way out to the central valley as people are priced out of SF.
    I don’t think so. It is a different economic region. If by Central Valley you mean Manteca and Tracy, then OK. I guess, to an extent.
    There’s a small pull back in SF as the dot.com ends in 01 but lowered lending standards reengage the positive feedback loop.
    In the central valley you have people who live paycheck-to-paycheck, buying houses with subprime loans that they will not be able to pay once they reset. You also have endless open space and no planning restrictions to prevent new homes from flooding the market. Around 05-06 the flood of new homes entering the market hits the surge in sales from subprime resets and tips the buyer/seller balance. New home sellers have enormous margins and can easily undercut existing homeowners to move their properties. Prices fall. Subprime lending is shut down, further restricting the buyer pool and increasing the number of sellers as refinancing shuts down. The speculative feedback loop flips sign as people lose faith in real estate in the valley and prices collapse.
    In SF there is little effect at this point. Subprime is a small part of SF. General employment is not effected. Prices hold. However, the subprime collapse sets certain thing in motion which will eventually effect the buyer/seller situation in SF.
    Nor should it. It is not the same economic region.
    1) There’s the psychological blow from seeing that house prices in California can collapse. I actually thought that this would be enough to put the fear of god in SF buyers but, as Darth Vader would say, “[shaking fist] You don’t know the POWER of the ‘SF is special’ meme. I MUST buy SF real estate.”
    A psychological blow, in 2005/2006, in San Francisco? No. No there was not.
    2) When subprime collapses the value of the subprime MBS will collapse. This will make vast tracts of the financial system insolvent and will precipitate a financial crisis that will restrict lending even to prime customers. This almost hit in summer 07 when the Bear Stern’s hedge fund tried to sell their securities and got a bid of 10 cents on the dollar. But we quickly entered the era of “Don’t ask, don’t sell.” and everyone was allowed to pretend that they were still solvent. It didn’t finally blow up until it became clear that AIG had no hope of covering their credit default swaps late last year.
    Labor Day 2007 scared some people, definitely. I had a buyer foolishly back out of a deal at that time. (I can say foolishly because he went on to buy something else in a worse neighborhood six months later. The place I had him in contract on had enormous untapped equity to be obtained in the worst of markets, and the guy is a contractor.) But AIG and Merrill Lynch marked the real shift in real estate behavior around here and everywhere.
    (oh, and for the woocoudanood file. Prime and Alt-A portfolios are still to blow up and will create a second round of the financial crisis when they do.)
    To be quite honest with you, I doubt it. The government is trying like hell to prevent this. It depends upon the loan’s language, of course, but some people are actually seeing loans reset to lower rates. There is also bailout money. When push comes to shove, does a bank want to be a landlord? No. It doesn’t.
    3) The real economy was supported by MEW at 10% of consumer spending. A significant recession was inevitable once this flow of funds was cut off, leading to a general rise in unemployment and reducing the number of buyers and creating forced sales. The consumer finally gave up the ghost at the end of last year.
    4) SF mortgages start resetting in bulk in 2010 leading to payment shock and forced sales. The reduction in interest rates will cushion this somewhat but there will still be plenty of people who can’t pay their mortgage.

    This is seemingly central to your theory. I think you’re not acceding enough influence to what’s going on with rate manipulations. And, not to go all “SF is special” on you, but there’s a lot of liquidity around here. I see it every day. And Ex-SFer, that isn’t true of Iowa.
    So we had four effects that were coming. Any of which could have tipped the speculative feedback loop into declines. All of them together were guaranteed to. The only open question being what order they would hit and which one would finally break the camel’s back. Once the psychology changes the declines won’t stop until all of the speculative premium has been erased.
    And yes, this was the broad outline of my analysis in 2004.

    Fair enough. I thank you for your time and effort.
    1. I disagree with your strict rent to own/ residence-as-numbers metric. Many people simply do not behave that way.
    2. I disagree with your outside-in hinterlands to city bubble map. The same products were available everywhere, at the same time.
    3. I disagree that the reset tsunami will be as severe as you say.
    4. I think you underestimate some fundamental shifts in the local workforce and population, not to mention American life in the past decade. We’re starting to look like Europe with the bad neighborhoods on the outskirts.
    And last, this was all variegated from the start. Variegated on the way up, and variegated on the way down. The market started shifting in Bayview, for example, much earlier. Even back in the summer of 2007. I know. I had a listing out there. Oh man. I got those folks two offers in the low 6′s. They could not be reasoned with. I bet the property wouldn’t sniff 500 right now.
    Also, what was South Beach in 1996?
    Ignoring San Francisco’s changes over the last decade plus is one bear tactic I can’t understand at all. South Beach is only the most glaring example. The entire city gentrified southward. Many firm roots were put down … the type that aren’t quickly reversed. New commercial corridors, etc.

  162. Posted by fluj

    Diemos, my man. Sorry for the lousy HTML misuse. I tried to make your comments all italics and mine normal. Man did I botch that one. Who is that ever ugly. Would it kill Socketsite to put some easy quick tags and a preview function on here?

  163. Posted by diemos

    “A psychological blow, in 2005/2006, in San Francisco? No. No there was not.”
    Man, that’s for sure.
    “1. I disagree with your strict rent to own/ residence-as-numbers metric. Many people simply do not behave that way.”
    They certainly don’t when they’re in the grip of a mania but that can change. We’ll have to disagree on that one.
    “2. I disagree with your outside-in hinterlands to city bubble map. The same products were available everywhere, at the same time.”
    We’ve been through this before. They weren’t equally used in all areas.
    “3. I disagree that the reset tsunami will be as severe as you say.”
    We shall see. I don’t have any access to hard numbers that would let me estimate the number or severity of the resets. Just general figures for loan type usage in the area and a general understanding of their terms.
    “4. I think you underestimate some fundamental shifts in the local workforce and population, not to mention American life in the past decade. We’re starting to look like Europe with the bad neighborhoods on the outskirts.”
    “Also, what was South Beach in 1996?”
    “Ignoring San Francisco’s changes over the last decade plus is one bear tactic I can’t understand at all. South Beach is only the most glaring example. The entire city gentrified southward. Many firm roots were put down … the type that aren’t quickly reversed. New commercial corridors, etc.”
    I don’t ignore or deny them at all. I claim that the price/rent ratio captures and controls for these changes. You don’t accept that so we shall have to disagree.
    Cheers.

  164. Posted by LMRiM

    Just to focus in on one of fluj’s major arguments – namely that people are “sentimental” about owning and are not rational economic optimizers (the other major argument being that SF is special, has become increasingly special, and has fundamentally changed in character because of tech and because people now “love cities”):
    Unless people suddenly got more “sentimental” about owning versus renting, than the propensity towards this sentimentality is already there in the historical data.
    If they did “suddenly” become more sentimental, then they could just as easily become “unsentimental”, couldn’t they? We should consider that large, visible losses may be a catalyst for such a change.
    The fact that some people are more emotional than others is doubtless true, and is already in the historical data, which aggregates preferences.
    As a thinking bear, there is nothing I have ever seen put forward by the bulls that I haven’t considered. I’m open to being surprised, but at this late stage I doubt I will be.
    I’ve watched markets (all kinds) for more than 15 years, and I’ve seen all this a hundred times. SF is going to get a bigger adjustment this year IMO than last, and last year’s was worse than most understand or will at least admit (the volume declines mean that the “true” extent of the price declines have not been fully revealed).
    A better description of what has gone on in SF than what is typically offered by the bulls can be found by noting that the cumulative effects of supply constrictions in SF (caused by distortions like Prop 13, rent controls and draconian building restrictions/regulations) were amplified by a generalized credit bubble and mania. A very good overview description of what went wrong in housing markets that I just came across is contained in the postscript to this very interesting article (the whole thing is worth reading):
    http://www.mises.org/story/3296

  165. Posted by Louis

    The great thing about this site – sometimes – is that the collective intel assembled is greater than what you can find in any single “expert” source. the collective argument.
    The bad thing about it is that is devolves into really petty bickering about who said exactly what and when. and no one really cares except the arguing posters.
    it still a good trade overall – as long as you all who provide good content and data and links, keep doing so…
    ps – it is really hard the imagine that the millenium price drop doesnt put pressure on every project competing with them — or any re-sale that a potential buyer is cross-shopping.
    the first Q 2009 sales psf figures have to drop — another 10% ? – just with the backlog of neg sentiment built up and the steepness of every curve.
    we all have a way to go — carlos slim is “buying” the NY Times – fiat is buying chyrysler – and RBS just lost 40 BIL. and it sound like Broadway may be going bk on sf office props.

  166. Posted by Louis

    ps – lmrim – re post number one -
    you may already know this – but when millenium developed the 4 seas at the end of the dot com bubble – they lost half of their pre-sale book, and had a really long climb back.
    in that project that really did have a strict no-neg policy and even bought a few resales to keep them off mkt and preserve their pricing for remaining units on the tail of a long sell -out.

  167. Posted by fluj

    See, but reducing it to “sentimentality” only is your language. Your prism. Your discipline. Yours and others. And you do not allow for the pendulum to swing in the other direction, at all. It is finite for you. It is not finite for others.

  168. Posted by fluj

    And you are very correct about prop 13 distortions. Not to mention the zaniness and power of San Francisco city councilpeople (a city council that has only become as powerful as it is, coincidentally and oddly, in the same timeframe as the loosening of credit), and rent control. You’ll notice that I didn’t mention 7 X 7 and running out of land. But hey what the heck, 7 X 7 and running out of land just the same. My take is that it is not so simple as “credit bubble, period,” so why not?

  169. Posted by MoneyWhereYourMouthIs

    All of you “bulls” out there who argue “real” SF market can’t go down, great time to buy, etc I challenge you to put your money where your mouth is and start buying. All this talk about sentimental premiums, blah, blah is just blowing hot air without real dollars at risk.
    Fluj – are you man enough to shell out your hard earned cash and put your theories to the test?
    Otherwise, admit that now is a really bad time to buy SF real estate.

  170. Posted by fluj

    “real” SF market can’t go down, great time to buy, etc
    Wow. I’m speechless. I spent all this time typing out what I think is a balanced viewpoint. I never once was an “up up up” or “can’t go down” or “buy now or forever hold your piece” guy. And that’s what you say.
    This site continues to amaze with its polarization abilities. People can read the same thing and see something entirely different.
    To answer your question, I bought a 3 unit building in 2006. My money is where my mouth is. But I knew what the hell I was doing. Like my clients do too.

  171. Posted by ester

    MoneyWhereYourMouthIs:
    You did not ask me, but may I responde?
    As a solid RE bull, my money has been where my mouth is, one property in Pac, one is RH, one in Pleasanton, one is Phoenix.
    I am currently looking, but I little unfocused now. I used to look at dist 7&8 every day, and I can claim to know every single 2 bedrooms that is under $850K that sold in the past 3 years. Every single one of them.
    Then, i got a little less patient since every other areas seem to be so much down and Pac is just coming down to the level that I hoped to see.
    So, I switched to SOMA. Price looked good at 20%. But some one on SS reminded me that rent is unreliable with so many units going up now. Supply > demand.
    So, I swithed to West Portal, but there are absolutely no listing now.
    Any idea whereas is worth putting under rader screen now?
    Some thing that is mid to upper mid class but still affordable, where renting is easy.

  172. Posted by sfrob

    The SOMA/SB market dropped roughly 15% since mid-Sept’s financial crisis became national news. So the Millenium’s announced price drop is just a lock step move. Of course at $1200 to $1800 per SqFt to start it is WAY above the market… I think they’ve got another 20% to go before even luxury buyers should take them seriously.
    As for the bulls vs. bears argument, I suggest the bears go out to Solano, Contra Costa and the like and buy there… per this report http://www.thegoldmanreportblog.com sales are WAY up BECAUSE prices are down over 40%.
    Since SF is not special, they won’t mind living in Stockton or Vacaville. Enjoy.
    fyi – there was most certainly a bubble in SOMA… $1000 per SqFt to listen to and stare at a Bay Bridge off ramp and dodge homeless and traffic and grime to get to a grocery store when you could pay $800 per SqFt for a Pac Hghts place was and is just outrageous. Supply keeps coming to SOMA/SB (well, not so much any more – but Infinity 2, BLU, Milennium – it’s still coming) whereas it doesn’t in the north end of town. SOMA/SB/MB will get hurt more in ’09 and won’t recover for years. But Pac Hgts, Marina, Cow Hollow, etc… don’t hold your breath… sanity will return and these neighborhoods will be worth more than SOMA/SB as they should.

  173. Posted by gowiththeflow

    Anyone care to chime in?
    I have been watching info on a site called:
    http://www.sfcondosales.com where they track medians provided from Altos – is this a legitimage means for keeping an eye on SF condo stats?
    The reason I ask, is the numbers for Southbeach have not changed that much since May 2008, even the updated numbers for January 2009 (not reflected below but available on the site) show a fairly flat median.
    So what gives? Bad Info, not good to use median,
    or the SOMA/Sbeach the bears are discussing only relates to very specific buildings, blocks or?
    Specifically I do not see a 15% drop from Sept to January?
    Thanks..
    Avg Psf Per CondoStats:
    05.01.08 09.19.08 10.17.08 12.12.08
    94103: Soma
    590.00 569.00 591.00 635.00
    94105: Southbeach
    853.00 888.00 896.00 869.00
    94107: Miss Bay/Soma
    714.00 703.00 688.00 657.00
    94110: Bern/Miss
    608.00 608.00 604.00 575.00
    94114: Noe/Miss
    724.00 722.00 711.00 671.00
    All of SF
    680.00 672.00 671.00 657.00

  174. Posted by 137 DOM

    I suggest the bears go out to Solano, Contra Costa and the like and buy there…
    Great suggestion. I thought about that as I prefer numerous smaller investments than a few bigger ones. One downside though: SF bears need to be cautious when investing in these counties. The RE bubble created a lot of fiat jobs in construction and other no-skills services that benefited lower wages areas. These jobs are gone. This is where the needle hit the bubble, so to speak. And this is where the economy is hit the most for now.
    Sure prices are down 40 to 50% locally from peak, but 1 – make sure you can find roadworthy renters (would Modesto and the new University be a good bet?) and 2 – remember prices DID more than double in 10 years, sometimes tripling, leaving maybe some wiggle room on the downside.
    I’ll stick to SF for now because of the high quality of new renters, and as said fluj, it’s 7X7 and not much room for expansion. It’s the actual “they don’t make anymore of the stuff” paradigm even though speculation on this scarcity gave too much confidence to specuvestors and created overbloated areas. East Bay counties can sometimes “create” land whenever they like by simply converting agro land to housing.

  175. Posted by 137 DOM

    gowiththeflow,
    I don’t know neither about the 15% drop. Just one comment:
    12/12 closing sales are with october prices, right? I think what many are referring to are the lowered expectations/sale prices from coondo towers which will be reflected in February or March.
    I think we’ll have more clarity when the figures reflect the full extent of the post october 2009 blow.

  176. Posted by ex SF-er

    above, someone talked about “all the bears this” and “all the bulls that”.
    too many people assume that current bears have always been bears, and that current bulls have always been bulls.
    I’m a RE bear, and have been since 2005 in San Diego and 2006-7 in Chicago/SF/Midwest. I have put my money where my mouth was. (I’ve bought property in the midwest as recently as 2003, and sold SD in 2005, etc).
    But i was a RE bull from 1999-2005.
    Likewise I was a huge Stock bull from 2003-Summer 2007, and was still mainly long until winter 2007. In fact, you can read my posts right here for that info.
    I was a commodities bull BIG TIME in early 2008. then a big time bear in late 2008. Again, you can read about it.
    I was a Treasuries bull from Jan to Dec 2008. Now I’m getting bearish again.
    at some point I will be a RE bull again. Not now. At some point I will be an equities bull again. Not now.
    so “bear” and “bull” are transient phenomena IMO.
    to be uber-one or the other is foolish IMO.
    but that said, using the arguments like “you’ve been bearish and wrong for years so you’re stupid” doesn’t work, at least not with me. Because I haven’t. I had very particular reasons for when I switched from one to the other. And I do switch easily. with data, that is.

  177. Posted by ex SF-er

    I agree with all of this. Greenspan set it in motion. Somehow Clinton has largely escaped blame. There are some very telling clips floating around on the internets where Clinton sure sounds a whole lot like Dubya on the subject of home ownership. I think this is where he went “centrist,” truth be told.
    Clinton doesn’t get a pass from this current-bear. And anybody who is intelligent and knowledgeable gives him plenty of blame.
    3 things in particular:
    1) allowing Phil Gramm to pass legislation that essentially repealed Glass Steagal (Clinton’s biggest transgression)
    2) allowing the Mortgage interest rate deduction. (in many of people’s opinions, this was the first step of blowing the RE bubble)
    3) listening to anything that Rubin said.
    Clinton had more at fault than a silly BJ.

  178. Posted by anon

    SFS – the new UC campus is in Merced, not Modesto. They’re quite a ways apart.

  179. Posted by gowiththeflow

    DOM137 I don’t know, it notes the info is “real time”? Any realtors know if Altos is 1) reliable, 2) when it says “real time” is it real time?

  180. Posted by DOM 137

    anon. Good point. I stopped by last year while on the 99 and always confuse the 2. I should never post after midnight.

  181. Posted by Debtpocalypse

    Gowiththeflow,
    I posted a May 2008 version of the T2 Partners’ presentation, when I meant instead to post the more recent December 2008 version. Sorry – my bad. I do not know how different they are, but it should contain some updated data (e.g., the 2/28 charts that show default rates for various vintages – Slides 89 through 100):
    http://www.erieri.com/PDF/T2_Housing_Analysis.pdf
    Peninsula Renter, I found the following data:
    According to First American Loan Performance, the East Bay’s optional-payment ARMs jumped from 0.9 percent in December 2003 to 39 percent of all refinance loans in December 2006. The greater Bay Area numbers were similar, jumping from 1
    percent to 38.1 in three years, year-over-year. Interest-only loans, both as purchase or refinance loans, dropped across the Bay Area.
    http://www.beaconecon.com/people/press/InsideBayArea030607.pdf
    You can also read this very recent story:
    http://www.latimes.com/business/la-fi-optionarm14jan14,0,6318190,print.story
    It doesn’t take a crystal ball; only a modicum of common sense to realize that Bay Area housing is on the eve of another Very Large Downdraft, this time outside of the subprime neighborhoods that bore the initial brunt.
    Which include both the “real SF” and its “phony” neighbors….

  182. Posted by LMRiM

    The threads are all a little slow today, but I’m stuck watching the markets (incidentally, unless we get a radical change in the last 30 minutes, we’re looking at by far (more than 2SDs I bet) the worst performance of the markets on an inauguration day in the modern era).
    So, to revisit a theme developed above (see Posted by: Keepingitreal at January 18, 2009 9:47 AM, and associated posts), and to roust up Der Fluj, here’s a choice quote that both addresses the topic (lux condos) and gives the lie to fluj’s position now that he hasn’t been a cheerleader:
    “It’s over. Sorry. Scare tactics are dead. San Francisco never really took a price hit and it won’t, either. Gee, this one bedroom SOMA condo only got $1.3M and not $1.5? Boo hoo.
    Posted by: fluj at June 23, 2008 9:57 AM” (emphasis added)
    http://www.socketsite.com/archives/2008/06/a_concerning_comp_and_empty_shell_at_the_ritzcarlton_re.html
    Looks like as late as June 2008 (!!) our fluj had no inkling what was coming. So much for “in the trenches”. (Sorry for “piling on”, fluj, but you’ve called me out one too many times and you’ve been wrong continuously, and yet like 137 DOM I admire your indominable spirit in this fight against the markets that you are nevertheless going to lose).

  183. Posted by gowiththeflow

    Thanks Debtpocalypse.
    I hope some of the info is right, if I am reading it correctly it notes we have had a 14.5% drop in SF (obviously as a whole but not necessarily in all districts) and only have 3.9% more to fall to restore historical affordability. Of course we will most likely overcorrect some but not bad.

  184. Posted by YourMoneyWhereYourMouthIs

    exSF-er, you’ve called every major move in the equities, commodities, and real estate market over the past 5-10 years. My portfolio is a train wreck and I need your help. What’s your crystal ball saying now.
    Here are the asset classes I’m interested in:
    Domestic equities (large cap)
    Treasuries (short and long maturities)
    Commodities (oil, natural gas, gold)
    Corporates (HG and HY)
    Alternative (long/short, macro, distressed, PE)
    Municipals (AAA only)
    Please provide you 3mo, 6mo, 1yr, 2yr predictions. No numbers or estimates needed, just “up” or “down” will be sufficient over the respective time horizons. And forget about real estate. We all know that it’s going down and there’s no efficient way to short.
    Thanks in advance.

  185. Posted by YourMoneyWhereYourMouthIs

    exSF-er, you’ve called every major move in the equities, commodities, and real estate market over the past 5-10 years. My portfolio is a train wreck and I need your help. What’s your crystal ball saying now.
    Here are the asset classes I’m interested in:
    Domestic equities (large cap)
    Treasuries (short and long maturities)
    Commodities (oil, natural gas, gold)
    Corporates (HG and HY)
    Alternative (long/short, macro, distressed, PE)
    Municipals (AAA only)
    Please provide your 3mo, 6mo, 1yr, 2yr predictions. No numbers or estimates needed, just “up” or “down” will be sufficient over the respective time horizons. And forget about real estate. We all know that it’s going down and there’s no efficient way to short.
    Thanks in advance.

  186. Posted by Dude

    This thread has gone six kinds of sideways.
    Regarding the Millenium, this has been grossly overpriced from day one, so no surprise on the reduction. Don’t get me wrong – a 15% blanket drop is definitely meaningful, especially given it comes from the tower that refused to negotiate and catered to the uber-wealthy, etc. But it doesn’t move this place close enough to market IMO. What’s the new tagline in their sales office?
    “Soma’s worst value in new condos has now become less bad!”
    In my opinion, there’s a “luxury curve” to be evaluated here, for lack of a better analogy. The curve picks up steeply but goes flat thereafter. So the delta between, say, a Beacon unit that hasn’t been upgraded and a unit at the Infinity is huge. But the delta between a nicer unit in the Infinity and the Millenium is barely noticable (unless you’re some kind of appliance fetishist or something). So why should the pricing be 20% higher here?

  187. Posted by gowiththeflow

    It is like Goldilocks and the three bears….
    ORH – too cold, millenium nah too hot, Infinity just right. No pun intended with the bear analogy…

  188. Posted by MoneyWhereYourMouthIs

    “To answer your question, I bought a 3 unit building in 2006. My money is where my mouth is. But I knew what the hell I was doing. Like my clients do too.”
    I see.
    You bought in 2006 when everybody and their brother was buying. That’s not so interesting.
    My question was, are you putting new capital to work right now in SF real estate. Just trying to gauge your level of conviction based on your actions with money at risk. Marketing pitches just don’t cut it.
    I’d be interested to hear from Paul H and other RE agents out there who have been touting that now’s a good time to buy. You guys have the inside scoop on market data, foreclosures and new listings and should be best positioned to buy relative to us non-experts. So are you buying?

  189. Posted by Sunny Jim

    LMRiM,
    I’ve finished Rothbard’s “What Govs Done To Money” Any essays covering this melt down you’d suggest? Also, how about a prediction list. Timeline for the hyper inflation to kick in. Timeline for US sheeple’s panic.
    Timeline for the SOMA meltdown and price predictions (Hwang On!).
    Timeline for Dows drop and where it evens out at.
    Timeline for the best in freudenschade for so many of the San Francisco Me Monkeys.
    Did you notice that the whole inauguration was paid for by the banks?

  190. Posted by LMRiM

    Sunny Jim,
    That’s a great read. I love all Rothbard’s stuff.
    The inauguration speech was pretty bad. Unlike the campaign speeches (which were excellent, and clearly ghost written), maybe O’bambi really did write that one :)
    As for most predictions, let’s revisit in threads as the year progresses (and in threads where they might be a little topical), but just a few, now:
    1. 2009-2010 will be great years for freudenschade, especially for the Real SF ™
    2. Hyperinflation won’t happen for a good long time I bet. Tough to say the timing, but we have to have the depression first, so maybe 15 years? Many unforecastable events could throw this off, but it will be a while. The USD will hold in there for a while, if only because the rest of the world is just as scewed if not more so (maybe Singapore and nearby countries will do relatively better)
    3. I like the Section 8 idea more and more (I know you are doing this), and wil probably do one or two properties to get started by end of the summer. I’m seeing potential cap rates of 13-17% (with a little sweat equity) if my contacts are to be believed.
    4. CA is going to be toasted. $70 BILLION spent on K-12 education? Between the unions, the waste, and the uterly clueless voters, I don’t think the state is governable. I’m glad I’m not working for a W-2!
    5. I’m not sure we’ll get “panic” by the sheeple. Probably more like a gradual beatdown as they realize that the Messiah is not going to be able to fix anything, and is more interested in creating voting blocks to ensure reelection than solving problems. Panic will set in for individuals who trust the government to give them a comfortable retirement after about 10 years from now. Investment advice: go long tins of cat food!

  191. Posted by weatherman

    Dude
    Have you been inside the Millennium and the Infinity to compare the relative quality of the two projects? It doesn’t take an “appliance fetishist” to see a huge difference in quality. The Infinity is closer in quality to The Beacon than it is to the Brannan or the Millennium. The Infinity feels like a mid-range apartment complex (hollow core doors, cheap porcelein tiles, awkward floor plans, don’t even start on the kitchens which have no storage for food).
    The Millennium may be overpriced still, but it should sell at a premium to The Infinity in any market. I have spent time in both buildings and it is pretty obvious that you are overstating The Infinity’s position on the luxury curve.
    I am not a realtor, just a condo buyer that has checked out most of the downtown buildings.

  192. Posted by Dude

    weatherman: Like you, I’ve been in most of the newer Soma buildings, and I agree that the Millenium is nicer than the Infinity (although I think Infinity has a better location). I’m just saying it’s not an order of magnitude nicer than an upgraded Infinity unit. Not enough to still be asking for $1,000 psf when Infinity is struggling to sell in the $750 psf range and Beacon units are going in the $600 psf range.
    I guess we just disagree where they lie on the spectrum, that’s all. I think Millenium, Brannan, and Infinity are closer than Infinity and Beacon. I’d add BLU to that first group as well (my personal favorite). Not that I have anything against the Beacon – this city needs more Beacons and less Milleniums and BLUs. I just don’t think the Millenium should command a 30-40% premium over Infinity. Just my personal opinion.

  193. Posted by gowiththeflow

    I am guessing many people would rather pay less (much less, and let’s not even start on the HOA difference) to live in a better location at the Infinity with in all fairness less luxurious finishes in comp to Millenium and be able to take the difference if desired and upgrade the unit exactly how they want to. No? Besides it is much cheaper to do the upgrade yourself than take the upgraded finishes from the get go or use the interior sales team on assignment.

  194. Posted by Rubicon

    LMRiM:
    “CA is ungovernable”
    Dan Walters (SacBee columnist) hits on this often and for all the reasons he lays out, I partially/mostly agree. (I can elaborate, but won’t here)
    Re. home buying sentimentallity/irrationality/”lifestyle center”: tho it’s always been built-in, I think you understate its potence (among the “sheeple”, which is to say most people, which is to say the market makers)
    Fluj:
    Re. demographic change/urban-core rebirth.
    I think this is happening, but perhaps not (yet) to the extent you see. I think the trend has legs and will affect the market in the decades to come, but it’s my sense that not enuff people are doing it yet to affect the market to the degree you suggest.
    It would be interesting to see if there are any studies by HUD, RAND corp, Packard foundation, Leg. Analyst Office, etc. that show I’m underestimating it and it’s more like you say.

  195. Posted by weatherman

    Dude -
    Maybe the Infinity’s prices have come down now and the 30-40% difference you cite (which I agree with you is way too much of a difference between these two projects) is real, but when I was looking at a high floor B stack at The Infinity they wanted $1400 per sq foot. This is comparable to slightly more than The Millennium with the recent price cut. I also agree The Infinity has a better location, but I think earlier threads have already exhausted the relative merits of the two projects so I’ll just leave it at that.
    Blu looks like a great development. Boutique building, but bad time to be coming on line with this market. Do you know how it is selling?

  196. Posted by viewlover

    I like Blu too but the units don’t have outdoor spaces, neither does Millenium. A little bit of a patio goes a long way in my opinion.

  197. Posted by Dude

    Regarding sales at BLU, they told me they were about 12% in contract when I last visited in November. They need to hit 25% by 3/31/09 to meet loan covenants – sales office was very open about this, which I found refreshing compared to the condescending rhetoric and B.S. I got from Infinity and ORH offices when I visited there and asked these kinds of questions.
    They admitted the market was bad, and were willing to negotiate prices. But the best deals were the most undesirable units, as expected (E plans on lower floors). Not sure how much has changed since then.

  198. Posted by amused

    I didn’t realize until this thread that Satchel ([Removed by Editor] or whatever his handle is) is completely around the bend.
    His boilerplate hard-right lunatic fringe “Messiah” commentary about Obama, blaming CA’s problems on education and unions, etc… he’s one of THOSE. Wow. No wonder I’ve always found him an unrelenting [Removed by Editor]. He likes Bush/Cheney, Fox News, Ron Paul, Ann Coulter and Sean Hannity. That’s all I need to know.
    BTW — he’s wrong about the resiliency of the economy. Yes, it’s bad. No, it’s not getting better soon. But he and his deregulation advocates (like Phil Gramm) caused it. And his prognostication right now is nothing more than shallow popular sentiment obfuscated by quasi-sophisticated financial market blather. He’s like Jim Cramer, except afraid to show his face.
    He’s just another anonymous Internet poster (like me!). Unlike me, he’s upset about what’s transpired today. Today was rad.

  199. Posted by Mole Man

    This building dominates the skyline with a grace that bears similarities to the classic pyramid from two or three booms ago depending on how exactly you count. These units are well built on a prime location with excellent plans. My prediction is that no matter how far this market falls as a whole, these units will remain at or near the peak for this area.
    This stuff about taxpayers picking up the tab is a distortion. An RTC style entity will disperse assets back to cash holders. Among the big winners will probably be both boom time criminalsand also enduring savers.

  200. Posted by spencer

    RE: Millenium vs. Infinity location.
    Saying the Infiniti is in a better locale is a matter of opinion that can certainly be debated. Personally, i think Millenium is in a better location, especially if you like to walk to most places, work in the financial district or are a foodie and/or nightlife person. The choice of restaurants and nightlife are far superior near Millenium and you can quickly walk to many more city attractions and shopping. In other words, it is much more central. I spent time in South Beach and near the ballpark this weekend and personally think it is still a traffic filled dead zone devoid of any character, good restaurants or anything interesting (besides the ballpark). Although the embarcadero has beautiful views, it is filled with tourists and IMHO is only a couple of steps above fisherman’s wharf. I now i will get a lot of flak for this, but SF is all about neighborhoods, and this area still barely qualifies. maybe in 5 more years, but not now (again IMHO). Also I think Infiniti is the single most externally ugly building of all the new buildings in downtown or SOMA or South Beach or RIncon Hill ( although that blue radiator building is damn close)

  201. Posted by ex SF-er

    Yourmoneywhereyourmouthis;
    I just saw your question today.
    I would love to give you answers to your questions, but in truth I do not know, even for myself (seriously).
    it has been my opinion for some months that the markets are too influenced by politics at this time to make rational economic decisions. and politics just took a major turn yesterday (new administration). The financial capital of the world is Washington… and I dislike politics.
    if you’ve read me for a while you know I rarely if ever give investment advice. that’s especially true now.
    I am personally defensive and waiting for now.
    My thoughts: (I have said this before)
    1. don’t worry about making money now. worry only about losing as little as possible
    2. avoid big purchases right now. this will hurt the economy, but your cash is king (for now)
    3. have 6-18 months of LIQUID cash instruments on hand. things like Treasuries, CDs, Saving’s Accounts, Checking Accounts
    4. spread your assets into several different entities, keeping all of them under the FDIC limits
    5. have physical cash at home. such as 1 month’s worth of cash for necessities at home (for food, gas, etc).
    6. reduce debt as much as possible. only keep “sensible” debt. (very low interest rate debt, debt that can be forebeared or deferred, etc)
    if you read my posts going forward, you’ll likely see when I change my mind on things. you likely can “read between the lines” on what I’m doing.
    but better yet, I would pick 1 or 2 investment ideas that you have, and then research them like mad. learn them better than anybody else knows them. THen when the time is right YOU will know it and you’ll tell me!
    Good luck! remember, almost all of us have taken a drubbing of late so you’re in good company!

  202. Posted by MoneyWhereYourMouthIs

    ex Sf-er,
    Thanks for your thoughful reply. My question was half tongue and cheek, and your response is appreciated. I agree with you that markets are in a state of disarray and even good money managers have no idea how to invest in this environment.
    We’ve already executed the six things that you recommend – all very prudent given the damage already done. My investment approach lately is the “bailout” play. I think Bill Gross hit the nail on the head saying essentially: figure out where the government is going to do a bailout and get in before its announced. Financials, Agency Debt, Autos have all been working lately (at least on the credit side).
    At some point over the next couple of years perhaps SF real estate will be a good investment again…

  203. Posted by anon

    Spencer – it doesn’t sound like you spent a lot of time of time in South Beach and simply strolled along the Embarcadero. Epic, Waterbar, Hi-dive, Red’s, The Java House, Momo’s, Paragon, 21st Amendment, Tres Agaves, District, Pete’s Tavern, O’neil’s, South, Zeke’s, Coco500, Koh Samui & The Monkey, Hotel Utah…..any of these ring a bell?

  204. Posted by Real Estate Info ONLY

    Could the amateur investors and economists move your comments to a yahoo finance chat board?
    This is a real estate site. This particular thread is about 15% reductions at the Millenium. I suspect the majority of readers are not interested in whether any of you did or did not predict anything.
    Thank you.

  205. Posted by spencer

    anon. i know about all those places. several are tourist hotsports only, several suck and there are a handful of good ones. District, Koh Samui and COCO are good IMHO.

  206. Posted by gowiththeflow

    Most of the places listed seem more Mission Bay to me?
    You forgot the other direction – within walking distance of the Infinity: Local/Kitchen and Wine Merchant, Chaya, Boulevard, Perrys, Slanted Door, the new Peruvian place, Embarcadero and surrounding shops, rest, bars and movies, Cosmopolitan, Hotel Vitale, etc.

  207. Posted by mark

    Millenium Tower’s addendum has two provisions addressing liquidated damages, one specifically states that the entire deposit(10%)is liquidated damages amount, the other stating that the accounting dept shall compute the damges involved with markeing,signing up etc,..which may be 3% or greater than 3%. Is there a lawyer here who can inform me any last resort tactics-or legal ground to get out of the ironclad contract with the entire amount of refund?I heard if a buyer isn’t satified with the new findings from public report toward/ even after completion date can get out with the deposit intact. Can someone elaborate?

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