San Francisco Recorded Median Sales and Sales Volume: January 2009 (www.SocketSite.com)

According to DataQuick, recorded home sales volume in San Francisco fell 21.8% on a year-over-year basis last month (229 recorded sales in January ’09 versus 293 sales in January ‘08) and fell 37.4% compared to the month prior. San Francisco once again experienced the sharpest year-over-year decline in sales volume of any Bay Area county last month with Marin the only other county recording a decline (down 7.5% YOY).

San Francisco’s median sales price in January was $562,000, down 24.5% compared to January ’08 ($744,000) and down 8.8% compared to the month prior.

For the greater Bay Area, recorded sales volume in January was up 40.8% on a year-over-year basis but fell 26.7% from the month prior (5,050 recorded sales in January ’09 versus 3,586 in January ’08 and 6,889 in December ’08), while the recorded median sales price fell 45.5% on a year-over-year basis, down 9.1% compared to the month prior.

Once again, think foreclosures and mix.

At the county level, foreclosure resales last month ranged from 16.4 percent of resales in San Francisco to 75.2 percent in Solano County. In the other seven counties, January foreclosure resales were as follows: Alameda, 51.9 percent; Contra Costa, 64.4 percent; Marin, 26.2 percent; Napa, 48.1 percent; Santa Clara, 45.6 percent; San Mateo, 34.1 percent; Sonoma, 55.6 percent.

At the extremes, Solano recorded a 126.7% year-over-year increase in sales volume (a gain of 313 transactions) on a 44.6% decrease in median sales price, while Contra Costa recorded a 99.9% increase in sales volume (a gain of 666 transactions) on a 52.5% drop in median sales price.

As always, keep in mind that DataQuick reports recorded sales (versus listed sales) which not only includes activity in new developments, but contracts that were signed (“sold”) many months or even years prior and are just now closing escrow (or being recorded).

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Comments from “Plugged-In” Readers

  1. Posted by Dude

    Starting to look like ex SF-er was right, and SF seems to be about a year behind the curve of other Cali bubbles.

  2. Posted by anonm

    Wow. At this point I would venture to guess that the average SF home has fallen more in value over the last 12 months than the average Napa or Sonoma home. The drop in median price is slightly higher for Napa/Sonoma (30%/31% vs. 25%), but the negative mix effect is also much stronger in those counties than it is in SF (48%/56% of sales are foreclosures in Napa/Sonoma vs. 16% of sales are foreclosures in SF).
    Of course, the total drop from peak is still higher for Napa or Sonoma since they started dropping earlier than SF. But the rate of decline for SF is, at this point, as fast or faster than those counties.

  3. Posted by curious

    Maybe this is a stupid question for this forum, but who exactly is buying all those foreclosures in Solano, Contra Costa, etc.? Is it another group of speculators, or “real” people finally able to afford something for their families? I guess the real people would need to get mortgages under the stricter rules, but…
    Just wondering if real demand is coming back in the lower priced areas, or it’s just another wave of speculation?

  4. Posted by Jason

    San Francisco volumes are down so far because, for the most part, prices have not caught up with the market. Most properties I’ve seen are still priced at 2006 levels. Until prices catch up, volumes will remain very low.

  5. Posted by mrbogue

    curious:
    a majority are real people walking away from homes in foreclosure and doubling up into new homes under the names of new buyer friends/relatives, hoping to catch a bottom that will probably be unfortunately L-shaped vs. V-shaped.

  6. Posted by San FronziScheme

    That’s a dismal report. But watch out before announcing the end of the world, folks…
    To beat a dead horse to the pulp:
    Mix is everything in this market. What would be interesting is to know how the recent wave of new condo “repricing” has affected this median.

  7. Posted by tony

    Time to change the period for the chart to start at 2000 (assuming data allows); we’re just about done with 2004 comparisons…
    Satchel, I’m planning to buy major indicies around DOW 6-6500. Any recommendations to the contrary? Any general updates to your macro economic and investment perspectives you care to share?
    (Sorry SS, you know I love the site, but you should have offered Satchel a byline a year or two ago…)

  8. Posted by anonm

    Interestingly, if prices continue on their current trends, then it will soon be irrelevant whether the conforming cap is at $625k or $730k because 125% (or is it 115%?) of the median in the highest cost county of the SF-Oakland-Fremont MSA (most likely either SF or Marin) will not exceed $625k by much anyway!

  9. Posted by ghost_of_fluj_past

    Why do you refuse to acknowledge that September [2007’s] lesser volume was due to August [2007’s] scare? Go ask any title company about that. October [2007’s] uptick wasn’t about delay. It was about loan programs evaporating and deals completely falling through for September [2007]. In October [2007], the new guidelines came into effect. People adjusted, and still bought. And 7.1% November [2007] to December [2007] is normal.
    That said, yes, there’s something happening. What is is, exactly, we don’t know. (1/17/08)
    I think we know now.

  10. Posted by anonn

    “I think we know now.”
    Do ya? Behavior didn’t really change until about eight months later.
    Still getting it wrong in hindsight = awesome.

  11. Posted by Dude

    Ha! Ah, those old fluj quotes are a blast, aren’t they? Here’s one from his first farewell tour (which took place before the encore farewell tour).
    “Bye. I know I said I was out of here before. But this time I have a plan. I’m going to resurface in June or July. At that point in time I will either admit error if the market has changed by 10 percent or more, or I will ask for about six or seven others to admit error if it has not. As of right now market prices — as my Sunset numbers show — are largely the same for most parts of town, period. (And I am tired of arguing about it.)
    Meanwhile, again, and as always, have fun storming the castle!”

  12. Posted by anonn

    Yep. Market still hadn’t shifted by then either. Despite what many on here said.
    I would go back and get some Dude quotes. But then again, what have you ever said?

  13. Posted by Trip

    Prices have not changed, only the mix has (OK, I almost couldn’t type that because I was chuckling, but what other argument is there?)
    Seriously, I’ve been one of many noting that medians provide a pretty unreliable picture, and mix is a pretty significant factor here as the low end is about all that is moving. Even I don’t think apples-to-apples prices have fallen 22% since January 2008 — although that sounds about right off the peak in early to mid-2007. This is why SS’s “apples” are so useful — they put the lie to any party line others might try to feed the public.

  14. Posted by anonn

    Who is saying prices haven’t changed, now? Hey, things changed in September 2008.
    Too funny. Like about 20 posters on here didn’t take monthly MSA data and occasional individual sales and try to spin those things as if sea change was finally here. Continually. For years.
    Foolio for example didn’t ask for D1 sales data from me one time. Or that he didn’t take the dozens of D1 sales I showed him in spring 2008 (I think) and say, “Yeah. These are all showing growth, but Mrs. Foolio and I went for a walk to some open houses and it seemed like everything is cheaper in the Richmond these days. So everything is crumbling, fluj. MSA, Schiller, Contra Costa County, etc.”
    Really. That and similar things didn’t happen 500 times on here.
    How is that reset tsunami going, by the way? I feel so badly for all those poor people who are getting lower rates these days.

  15. Posted by FormerAptBroker

    Curious asked:
    > Maybe this is a stupid question for this forum, but who
    > exactly is buying all those foreclosures in Solano, Contra
    > Costa, etc.? Is it another group of speculators, or “real”
    > people finally able to afford something for their families?
    It is a mix of speculators, investors and “real” people…
    I bought a foreclosure home that was right next door to an apartment building I own in Sacramento last year. As an “investor” (defined as someone who needs to get a decent risk appropriate return on any cash I invest) the home purchase would not have made any sense if I did not factor in the facts that after I improved the home it would add to the curb appeal of my apartment and I would also avoid the chance of a sale to a recent immigrant extended family who would move 20 people in to the home and park on the lawn.
    About 40% of the foreclosure sales are to small time investors who are mostly buying the thrashed homes at deep discounts and turning them around with (mostly illegal immigrant labor) and renting them for positive cash flow. There is still a huge group of speculators/flippers/specuvestors buying since they think they are getting a great deal buying an $800K home for “half off”. I don’t know if we will have a “V” shaped recovery or a “L” shaped recovery, but right now we are “\” with a long way to go before we hit bottom.
    Most of the “real people” buying are putting down a decent down payment and plan to stay for a while so they should be OK (unless they lose a job and/or need to sell in the next 5 years)…

  16. Posted by noseeum

    Anyone else think this shows that any plan to try to keep people in their underwater homes is pure folly?
    Foreclosures equal sales. Let’s get this mess overwith, get people out of homes they can’t afford, which is better for them anyway in the long run, move quickly to a market bottom and start heading back up again. I don’t understand how any politician can believe it’s a good idea to support an underwater mortgage. The only one that’s good for is the bank in the short term, getting more cash than they would otherwise if the current owner would walk away today instead of 6 months from now.

  17. Posted by tipster

    Whoa! Look at the SLOPE of that GRAPH!!!
    I’m sure there will be blips up and down from here on out, but WOW!
    I don’t see any bottom from that graph!
    That’s just the greatest real estate porn ever. I’m just STARING at THAT SLOPE!
    Wow. Interest rates at all time lows and yet prices are falling OFF A CLIFF!
    Rates are trending up in the face of all that stimulus pork being thrown down the rathole. What happens then?

  18. Posted by Pumpkin Patch

    Repricing needs to happen. I looked on sfgate.com to check out recent sales not too long ago. It looked like only two or three (maybe four) homes sold for a little over $1m and one lonesome home sold for $3m. Most of the recent sales have been right around the median. It would be interesting to quote the range for this and all the other medians. The, you could really see a pattern forming. One dot on a graph is not enough information right now.

  19. Posted by anonn

    “Rates are trending up in the face of all that stimulus pork being thrown down the rathole. What happens then?”
    Rates trending up is precisely what the government does not want.
    In fact, the polar opposite of what you said is true.
    http://www.bankrate.com/brm/news/mtga/Jan0809_mortgage_analysis_a1.asp
    Jeez. Even for you that was a ridiculous thing to say.

  20. Posted by DataDude

    Even I don’t think apples-to-apples prices have fallen 22% since January 2008 — although that sounds about right off the peak in early to mid-2007. This is why SS’s “apples” are so useful — they put the lie to any party line others might try to feed the public.
    This is somewhat unscientific, but most of the “apple” sales on SS tie back roughly to 2004 prices, or earlier, regardless of type, price point or neighborhood. So maybe an appx 22% price decline is legitimate.

  21. Posted by unearthly

    Home buyers shouldn’t be depend on a permanent bond bubble. Rates will go up and there’s little more the USG can do from here on out.

  22. Posted by David

    lot of houses getting bought for positive cash flow in Oakland.

  23. Posted by dogboy

    @David
    What part of Oakland?

  24. Posted by tipster

    Thanks fluj, for correcting me with a link dated Jan 08, 2009. It says so right in the link! Let me just step into my time machine and set the dial for Jan 8, 2009…
    Hey! You are Right On!!!
    Now let me set the dial for Feb 19, 2009!
    Whoopsie. Rates seem to be going up, up up! (bottom of the right hand column)
    http://www.bloomberg.com/index_americas.html
    You lose!

  25. Posted by Real Estate Mogul Extraordinaire

    Based on the data I am getting we will be back to the top of the V in the 3rd quarter 2009. Then up up up from there.

  26. Posted by anonn

    Tipster, shut up. You know what “trending” is.
    http://finance.yahoo.com/news/US-mortgage-rates-drop-toward-rb-14412861.html
    Tipster wants to call what Treasury rates did TODAY “trending.” Why? Because he is the Tipster. A sensationalist hobbyist troller par extraordinaire.
    One day of miniscule, SUPER LOW, vacillation is not “trending up.” Trending? The 10 year has been at 4.21 this year! That’s 2009 for the folks at home. Nor is it a platform for terming it the result of “pork down the rathole” followed by an arch rhetorical of “What happens then” ?
    http://finance.sfgate.com/hearst?Account=sfgate&Page=QUOTE&Ticker=USAYIELD10YR
    LOL

  27. Posted by Valentino

    http://www.bankrate.com/brm/graphs/graph_trend.asp
    That link allows you to chart the bankrate.com mortgage rate data (which is where Bloomberg is getting their numbers anyway).
    Yes, Jan 2009 rates were very low, and Feb rates are a little higher, but an upward trend hasn’t fully developed yet, has it? It isn’t clear (to me).

  28. Posted by Dude

    Ha ha…I’m not sure if I can believe your link, tipster….I’ve heard you intentionally spread misinformation (all part of your agenda/endgame, no doubt).

  29. Posted by asiagoSF

    the median price chart has the vertical axis chopped off at above $370K above the zero line, making it look more of a decline in relative terms than it really is.
    it’s an old trick…
    The scale of the sales volume seems to be OK, though.
    [Editor’s Note: No “trick” intended (and it starts at $400,000), it’s simply the same scale we’ve been using for a couple of years and pre-dated the precipitous decline. We’ll see if we can’t reformat for February.]

  30. Posted by unearthly

    IMO the 10-year has bottomed; the Fed can’t lower rates from here.
    10-Year Treasury Note (1-Year Chart)

  31. Posted by REpornaddict

    Blah.
    Mix makes any discussion of median sales prices using this data useless.
    If you take each district’s single familty home sales and rank according to median price: The median SFH sale for Jan2008 was in district 2 (Sunset). The median sale for Jan 2009 was in district 10.
    Nuff said, really.

  32. Posted by anonm

    Tipster: I thought it would be obvious that the bottom will come when the dark blue and light blue lines cross.

  33. Posted by nonanon

    “If you take each district’s single familty home sales…”
    What happens when you include condos or are condos no longer “real” sf?

  34. Posted by anonm

    Reporn: The graph is for condos + SFH, not solely SFHs. Where was the median unit located in 2008 vs 2009? Maybe the answer is the same, but it’s hardly a given.
    Regardless, mix is no doubt playing some role. But let’s be realistic: prices are plummeting. Denying that now is as futile as denying that there was any rise in prices between 2001 and 2006/2007. Realistically, mix effects are even stronger in places like Contra Costa, Sonoma, etc, where the median place sold is now a foreclosure. So you could just as easily argue that prices haven’t fallen in those areas either, and in fact the entire nationwide housing bust is just a big illusion. I’m sure policy-makers will be relieved to hear that! 🙂

  35. Posted by San FronziScheme

    nonanon,
    This graph is for Houses / Condos / TICs. Which is why I think we need to have a detail of the mix to see what’s going on.
    But the market is going down, no doubt. And this show is far from being over, more like end of first act. {put your “fat lady” joke here}

  36. Posted by tipster

    Honestly, fluj,
    6 weeks ago, when your article was written, Bush was still president and Obama was going to save us with magic pixie dust.
    Fast forward to today. The stimulus bill was passed less than 48 hours ago, and everyone realizes that it’s going to help some, but not a lot, and it’s going to raise the national debt by a lot and not some.
    So interest rates are rising. Of course, it’s hard for them to get much traction while more and more people are laid off, so who knows how long that will last and how far the reversal will go.
    As to people arguing “mix”, you need to ask yourself when the “mix” might reverse course. Will there be a stampede of people rushing to flip $1M Soma condos any time in the near future? Doubt it.
    The mix has changed because the loan requirements have changed, income is dropping, jobs are dropping, and, due to the short term teaser rates on sub prime loans, the prices at the low end have fallen far enough to motivate some knife catchers, while prices at the high end aren’t there yet.
    Certainly some of this change IS mix, but when you understand the reason why, it doesn’t bode well for the long term.

  37. Posted by eddy

    Personally, I find these charts / reports only moderatly useful. They validate little; and only prove that the overall RE markets on average have changed in a particular direction. Without Apple to Apple comparisons this is just not good science.

  38. Posted by West Portal

    When the median price crosses through 400k in a year or so (perhaps even by the end of this year), then the axis range will need to be adjusted. At 8% declines MoM, the median will be below 400k by June.
    562*.92*.92*.92*.92*.92=370.4

  39. Posted by San FronziScheme

    Not so fast, West Portal. You are not accounting for the army of Knife Catchers that are busy hunting for homes in the spring. There’s still a whole lot of these around. I am certain they’ll make a strong enough stand for some to call the bottom prematurely.
    We have to get those fools to catch the falling knives before we can find the real good deals.

  40. Posted by 1stTimeBuyer

    SanFronziScheme’s got a point. One thing that is consistent with this chart is that Sales Volume increases after January. If it doesn’t do so this year, then we’ll understand the depths of the dukee we’re in.

  41. Posted by REpornaddict

    Well no, I obviously am not claiming that prices haven’t fallen. But claims like that are no more ridiculous than extrapolations such as West Portals..
    anyway, at least there is finally some recognition of the downward mix factor. I have been arguing this for some time now, and have had to refute ludicrous claims such as however much d10 houses fall will have no effect on the median price, as well as dispute the strength of the “beauty pageant effect” – if anything it is the opposite – only those who have to sell are, and that tends to give the very opposite of a beauty pageant effect.

  42. Posted by anonm

    I wasn’t aware anyone was arguing at this point that mix is working the opposite direction at the county level. Perhaps if you look at things on a district-by-district level, it may be true that only the nicer places are selling and places with imperfections are languishing. But no one disputes that D10 sales are making up a larger proportion of SF sales now.
    Tipster is right, however, that the mix argument only has negative long-run implications for prices all over SF. The mix argument admits that SF sales volumes are crashing outside of D10. How can they recover? You need either (a) further price reductions of substantial magnitude or (b) strong economic recovery in the pretty near future. I sure wouldn’t be betting on (b) right now.

  43. Posted by anonn

    “6 weeks ago, when your article was written”
    Please. You know how to use bankrate.com. Read the many articles that say otherwise. Today, yesterday, six weeks ago, whatever.

  44. Posted by Mr.Lereah

    Let me be on record being the first to say this will not be an “L,” “U,” or “V”-shaped recover. It will be a checkmark-shaped recovery! A checkmark with such an eensy left arm and such a huuuuge right arm that there is no standard computer key to do it justice! By July, SS will find itself adjusting the UPPER bounds of the chart’s scale!

  45. Posted by RinconHill_Res

    Just to double-check, does any of this data really matter to a “long-term” owner (i.e., 5 to 7+ year horizon) that obtained a good rate (less than 6%) on a 5-year ARM during 2008, even if that person paid 06-07 prices and therefore is currently underwater on paper?
    Or is it that it’s just more fun to talk about the sky falling even if in reality it only affects a very select group of people thateither “have to” sell due to unforeseen circumstance or bought purely on speculation?

  46. Posted by Dude

    RinconHill_Res, this should matter to everyone.
    Hypothetical scenario: you paid going rate for a Soma condo in ’07, so say $850 per square foot. For simplicity, let’s say $850K, with 10% down. So you owe $765K.
    Now, let’s say the market bottoms next year, at which point your place is worth $700K. Prices have fallen about 20%, and you’re upside down.
    Since we’re speaking hypothetically, let’s say the market magically fixes itself in 2011, and historically normal appreciation of 3-4%/year comes back. How long will it take for you to be able to sell and break even? At least 5 years, or 2016. Long after your loan has adjusted.
    So hope you can afford the ARM adjustment in 2013, because you won’t have enough equity to sell or refi without bringing cash to the table.
    Of course it all depends on your particular LTV and income, but this is one possible scenario which answers your question.

  47. Posted by Valentino

    Yeah, it does matter to the “long-term” owner.
    If you were a long-term owner and someone offered you $100,000 to move out of your home and rent for a few years, with the only major penalties being the loss of “the pride of ownership” and a blight on your credit report, would you do it? How about for $250,000? $500,000? At some point the amount of money that can be saved becomes too much to ignore, and it doesn’t make sense NOT to stop paying your mortgage (maybe you had bad credit or a bankruptcy in your past already anyway – it’s not like those people were denied loans in recent years). At first, every home owner looks down on others who go into foreclosure (this purchase was my decision, the market has ups and downs, I can ride it out, I’m too good for foreclosure). Eventually, purposely defaulting on your loan is the only thing that makes sense.
    We can argue about whether or not we have reached the “eventually” part yet (I think we have), but the longer these values decline the more people will fold their hand.

  48. Posted by REpornaddict

    It does matter to be fair.
    Yes, unless you have to sell its only a paper loss, but then again so is a 401k to a 35 year old say, or someones equity portfolio due to recent Dow losses.
    The difference is the price isn’t trackable daily quite in the same way an equity loss is, it’s no less of a (paper) loss – and of course you can’t go underwater with equities.

  49. Posted by rr

    Someone go dig up that graph of housing prices relative to real income. Is returning to 2000-level prices an overcorrection on those terms?
    At some point, we are going to overcorrect. I’m not sure if we’re there yet. It would be at that point I would consider buying an ‘investment’ home.
    I almost wonder if we are going to get a U shaped recovery as everyone tries to time the bottom of the market, sees it level off, and starts to come back in.

  50. Posted by Michael

    “Just to double-check, does any of this data really matter to a “long-term” owner (i.e., 5 to 7+ year horizon) that obtained a good rate (less than 6%) on a 5-year ARM during 2008, even if that person paid 06-07 prices and therefore is currently underwater on paper?”
    Property tax reassessment. Might as well try to save a hundred for every ten thousand you lost.
    Access to HELOC’s, second mortgages and home ATMs. Cross your fingers if you need to borrow to replace a roof.
    Retirement or move-up planning. How much equity were you planning on having to spend?
    Etc.

  51. Posted by condoshopper

    i don’t have any real basis but a somewhat cynical gut feeling is telling me SOMA condo prices are not going up to their ’06 or ’07 prices for the next 20 years. high HOA costs and property taxes are going to put a cap on how much one can pay for them, as opposed to renting it instead and thereby not pay HOA and property tax. once these units reach a bottom, they won’t appreciate any faster than the prices of rents. and then with condos, the age of the building counts against it whereas for SFR’s people can focus on how much the land is worth instead of the older structure. the 15-20 year old buildings in SOMA, they have discount compared to the newer buildings. of course, SF could somehow become more desirable, relatively, than it is now, but i’d be surprised if that happened given the way this city is governed.

  52. Posted by Valentino

    I don’t buy the 20-year call. Property taxes go down with values, right? And I’m assuming HOA fees also get lowered at some point during a deep nationwide depression.
    It’s not just the age of the building that matters, it’s also the location, and you can only fit so many condo buildings close together. They aren’t going to be building new ones if the old ones are not appreciating, either.

  53. Posted by scorpio

    i got a chance to visit SF last week (found a house-sitter for the pooch in KC) and while i’ve fastened on a neighborhood i like (Cole Valley-Haight-Hayes) i saw a couple open houses around town and i must say folks are still a little complacent about that train coming down the tracks. life is going to be difficult for all kinds of people for at least the next year or two.

  54. Posted by 45yo hipster listening2: tubes/white punks on dope!

    FormerAptBroker- how is the vacancy factor in your area of sacramento? I assume it’s a blue collar area, or are investors able to get pos cash flow in the better upper- middle class areas?
    FYI- I have rentals in SF and though it’s still pretty easy to fill a vacancy here, the prices are softening. I just re-rented a condo in the mish for $2450 (was getting 2600 before.). But I lost only 4 days of rental income. Reminds me of that 05/06 buzz-phrase the velocity of money…I’m down with the velocity of tenancy.

  55. Posted by tipster

    It matters when you sell. It matters a lot.
    If you bought at $800K and it bottoms to $600K, and you sell at $750K, you lost $50K instead of gaining $150K.
    That would matter to anyone under 95 years old.

  56. Posted by Pumpkin Patch

    Mr.Lereah,
    Do you mean that you are predicting that this downturn is small and it will be replaced with a very long uphill? That is what a check-mark looks like. If so, are we on the same planet? You know, the one that looks like the Blue Marble? Where people are predicting a rise of unemployment to 8.8% by the end of the year (even with the stimulus package)?

  57. Posted by Mr.Lereah

    Ha! Just a bit of juvenile sarcasm, dearest Pumpkin. Google “David Lereah” and enjoy a chuckle. Or order one of his fine books on Amazon.com (my favorite is 2006’s “Why the Real Estate Boom Will Not be a Bust – And How You Can Profit From It”).
    Coming atcha from the big blue, marble,
    – L –

  58. Posted by diemos

    I preferred his 2008 book,
    “Foreclosures Don’t Count Dammit! – Why the Housing Market isn’t Imploding”
    although his 2009 book is also good,
    “Why the Housing Market Will Stay Strong – As Long as the Government Hands Out Hundreds of Billions in Free Money to Homedebtors”

  59. Posted by LMRiM

    I’m planning to buy major indicies around DOW 6-6500. Any recommendations to the contrary? Any general updates to your macro economic and investment perspectives you care to share?
    I’m just getting back from almost a week in the Sierra (wow!!) so I’m just catching up with all the news and SS posts.
    This might come as a surprise, but I am not super negative on US equity returns on a medium term time horizon from these levels currently. I’ve been pretty consistent in my view that US returns were likely to be negative for (possibly) two decades from the 2000 highs, which marked in my view the high point of the secular credit inflation driven valuation that began in the early 1980s. We’re 10 years into that period, and 50% lower in the major indices, and I’d think the long term view is not so terrible from here (in nominal terms of course).
    However, I don’t have a specific “low point” in mind in which I would get “all in” to equities, and I’d guess I’d caution anyone who does. I’ve said that if we get below 500 in the S&P in the very short term, I’d be a big buyer on a 1-3 year view, but in general investing is about placing good risk reward bets, and not trying to pick absolute bottoms and tops.
    All that being said, though, if you are a USD earner and live in the US (which I assume you do), I would not have too much risk capital in the US risk markets. I think we are going into a secular decline, and the policy choices being made now are going to cripple us. I couldn’t recommend specific allocations for you, but fwiw I am going to keep my long US equity exposure below 20% of net worth (I’m probably around 10% now – but I overlay structural positions with a lot of trading options positions, so I flip around a bit).
    I much prefer geting exposure to Asian equity indices, slowly over the next few years (I am buying at about 0.5% of net worth per month – I started abot two months ago). Europe is toast – forget about them. In the US, I am more inclined towards diversified junk bond holdings to replace some exposure that would otherwise be in equities.
    I hope those ramblings help a bit, tony, and thanks for the kind words – I hope some of my postings over the past year or so have helped you structure your thinking on how to prepare for what was coming.

  60. Posted by Sammy

    Nobody is immune! The point this article makes is that this is now the real economy affecting homeprices and not risky homeowners that took out subprime mortgages.
    Jumbo Loan Defaults Rise at Fast Pace as Rich Suffer
    http://www.bloomberg.com/apps/news?pid=20601087&sid=a0O1vDxlPEBA&refer=home

  61. Posted by LMRiM

    On the topic of this thread, I always find this paragraph from the “form” DQ release the most interesting:
    “The January median sale price [of the entire Bay Area] – the point where half of the homes sold for more and half for less – stood at its lowest since it was $299,000 in December 1999. It was 54.9 percent below the peak median of $665,000 reached in June and July of 2007.”
    Wow. The Bay Area is getting a good lesson in how markets work.
    This month’s decline seems outsized to me – clearly mix is an issue (as always), but there is also tremendous noise in the data because of the small sample size.
    I’d expect some retracement upwards in the median stats sometime in the near future (perhaps as early as next month?) and I’d also expect a whole chorus of “bottom callers” to cheerfully emerge from their lair. Don’t believe them 🙂 From my point of view, the only thing positive in the numbers we are seeing is that after a 54% drop in medians, at the lower end of the Bay Area spectrum of residential real estate assets, we are closer to nominal bottom than to the top.
    I still think SF is only 25% or so into its downturn (as measured by typical apples-to-apples pricing, or by time), and the losses of value are going to be horrific by the time it is all said and done (at least to some 🙂 ).
    I am still thinking 1997-99 prices, on average, and depending on the region/neighborhood, etc. There is a lot of variance in 1997-99 nominal values, so perhaps that won’t be too helpful for any specific asset, but I do think there is still a long way down from here for most SF properties (especially The (Almost) Real SF). Losses this year should accelerate, but I still think the bulk of the nominal decline will be in by the end of 2010.

  62. Posted by 45yo hipster listening2: tubes/white punks on dope!

    Wow, what ru guys doing up at this ungodly hour? (I guess that goes par for the course for stock traders?)
    [Removed by Editor]

  63. Posted by diemos

    “Wow, what ru guys doing up at this ungodly hour?”
    For me it’s the price of being part of an international experimental collaboration. Hard to find a time for phone meetings that is convenient for collaborators in the US, asia and europe. Next week it’s midnight meetings.

  64. Posted by Rillion

    “I’d expect some retracement upwards in the median stats sometime in the near future (perhaps as early as next month?)”
    Why? It seems to me at this point that REO is driving the market and will continue to do so for some time.

  65. Posted by David

    Dogboy,
    houses all over East Oakland. Parts of Fruitvale, parts of San Antonio park ‘hood.
    Anything less than $150K will cash flow anywhere in Oakland. The only question is how long your renter will live in certain ‘hoods.

  66. Posted by tony

    Satchel, thank you very much for jotting down your current thinking; very helpful.
    (And yes, so you know, your posts helped confirm and add urgency to my thinking — and more importantly convince my fiance — on where the markets were heading. Between the two of us, getting out of equities saved us about $350-400k. Sadly, she wasn’t convinced enough to sell the condo she bought before we met when she could have still made a profit, but it is now on the market with the hopes of finding a knife catcher. Time will tell on that one.)
    Thanks again and best wishes!

  67. Posted by 1stTimeBuyer

    LMRiM – you were missed. Your 6:27am comment is spot on. It seems correct that the median would stay about the same, with more of the downward action on the top end of the median yet to come.

  68. Posted by San FronziScheme

    http://www.youtube.com/watch?v=Y6FzvWjQ_A0
    When Black Friday comes
    I’ll stand down by the door
    And catch the grey men when they
    Dive from the fourteenth floor
    When Black Friday comes
    I’ll collect everything I’m owed
    And before my friends find out
    I’ll be on the road
    When Black Friday falls you know it’s got to be
    Don’t let it fall on me
    When Black Friday comes
    I’ll fly down to Muswellbrook
    Gonna strike all the big red words
    From my little black book
    Gonna do just what I please
    Gonna wear no socks and shoes
    With nothing to do but feed
    All the kangaroos
    When Black Friday comes I’ll be on that hill
    You know I will
    When Black Friday comes
    I’m gonna dig myself a hole
    Gonna lay down in it ’til
    I satisfy my soul
    Gonna let the world pass by me
    The Archbishop’s gonna sanctify me
    And if he don’t come across
    I’m gonna let it roll
    When Black Friday comes
    I’m gonna stake my claim
    I’ll guess I’ll change my name

  69. Posted by RinconHill_Res

    “Property tax reassessment. Might as well try to save a hundred for every ten thousand you lost.”
    Already head of you on that one….valuation appeal form has already been printed and completed and will be mailed the SF assessor on July 2….
    I totally get the points about not being able to refi….but again, that’s not really concern of mine in terms of evaluating what I would concede is a wholly paper loss right now. I qualified for a JUMBO loan in the middle of 2008, when underwriting standards were tightened to ridiculous levels…I’m just not concerned about being able to refi either before or during 2013….I probably wouldn’t look to sell until the earlier of another market peak or 2018…I’m in my mid 30’s….why should I sweat it?

  70. Posted by 45yo hipster listening2: the cars/candy-o

    I’m back, post latte and getting back to the graph at hand. Besides the obvious discussions this far…how bad the decline looks, what spring will look like, mix…the most interesting question in my mind is if SF will end up weathering the storm better than other parts of the bay area, LA & SD.
    Some here have alluded that SF will now take that big dive in price and will stay lower longer than said areas. They think that lack of foreclosure volume is keeping sales volume down, and that is the prime indicator for a price turn around. I beg to differ. As I have said before, SF will be one of the last places to fall in price (factually true), it will fall les than other areas (true so far, but SF has a long way to go to reach -40-50% discount), be that it will recover just as fast or faster than other areas. I don’t think SF will have a latent recovery (I.e. Experience the same pain only later.). This is based on how SF fared in the early 80’s and early-mid 90’s housing busts. The economic malaise is national/global; SF prperty did not go higher percentwise than the other areas ( on the contrary, it was less); and the ‘SF is specia’l argument, although annoying to some here, is based on real and discernable qualities like the tech job base, upcoming industries based here, diversity of population, nice weather, etc.etc. I agree this final point won’t carry the day, but it has a significant effect on local recovery. So SF property holders: relax a bit, plan to ride this storm out, and hopefully the down cycle will be less severe here than elsewhere.

  71. Posted by Clay

    RE: V vs. L shaped recovery as a cautionary note
    Few quotes that I thought worth commenting on – for what its worth… (“Based on the data I am getting we will be back to the top of the V in the 3rd quarter 2009. Then up up up from there…., etc.)
    Work for a consulting company and in the last month have discussed potential scenarios the current downturn is likely to take with mgt of several Fortune 500 consumer facing companies (e.g. retailers, CE manufacturers, etc) – and how it affects their planning (e.g., how many stores to close, investments to make, cash planning). Three takeaways from those conversations that might be relevant here for others as they think about managing their own personal financial planning, cash, real estate:
    1.) Likelihood of a V-shaped recovery is very low. Fundamental changes in growth engines of economy due to likely changes in trade policies, nationalization of industries, and decreased appetite for risk from corporations / banks (“We can’t get a loan from our bank b/c their too worried about losing their own jobs by sticking their neck out…and we’re profitable. With all the mergers – they don’t even know who their chief risk officer is.” – CEO of Fortune 500 retailer)
    2.) Most felt that the recovery was likely to be L-Shaped … not returning to 2007 levels of productivity until 2012 or beyond
    3.) All felt that forecasts from Morgan Stanley, and others were too bullish on recovery scenarios due to this shift in fundamentals of growth.
    What I take from that is, if true – why would real estate here do anything other than continue to fall and then bounce like a dead cat? Seems like its going to be flat for a while – and unless your buying for non-NPV+ related reasons, there’s no rush.
    As a disclaimer: I’m a renter – and like minded with many on these boards – but just relaying a few facts / quotes as context here. Sorry such a long post.

  72. Posted by 45yo hipster aka old school U2/war

    clay- interesting perspective from your consumer corp contacts, and thanks for sharing it. i think most people here agree the ‘V’ is unlikely and the L or fat ass U will prevail.
    i expect SF RE to fall to a certain level and bounce like a dead cat for 1-3 yrs. but if it falls less than other places, and perhaps is one of the first to recover, it’s certainly a better outcome than having already crashed -40-50% two years ago.

  73. Posted by gowiththeflow

    “2.) Most felt that the recovery was likely to be L-Shaped … not returning to 2007 levels of productivity until 2012 or beyond”
    2012 completion of various areas around the infinity and groundbreaking for those things that will really add value to the area. I personally feel buying in the area for those looking to play it a little safer, live and enjoy, perhaps see some return come 2012 after vs. buying only for a quick investment is a decent bet.
    I may end up eating my words but I sure hope not.
    Also while I am putting myself out on the line, I still feel we will have a W recovery vs. V, L, or a true dead cat b.

  74. Posted by Clay

    Double dip recession is definitely very possible. No doubt. But the main point is that – long-term recovery is multiple years away, and likely with a lower slope in the growth curve due to fundamental changes in global economy (e.g., becomes less global – witness ‘buy american’ clause in current bailout. will be repeated around world) and lending environment.
    The other interesting takeaway was that the current consumer bailout package – even if perfectly implemented is only 1/3 of the required need. Until the corporate credit market unfreezes, its all pissing in the wind.

  75. Posted by 1stTimeBuyer

    45yo hipster – I dunno if I agree with your comparisons to previous downturns. If those were V or “narrow U” type downturns, this was is starting to look more sustained. I think your term “fat ass U” is looking more likely.
    As of today, the DOW is now at 1997 levels?! If housing were to reach 1997 levels in SF, would that be much of a downturn? Things were booming here in SF around then.
    Is anyone aware of an analysis showing correlations between housing prices in SF and the DOW? I would imagine that they move together and are highly correlated, but I’d like to know for certain.

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