Marcus & Millichap San Francisco Rental Outlook (And Quick Rebuttal) [SocketSite]
SocketSite’s Residential Real Estate Outlook For 2009 [SocketSite]
Renters rejoice: Prices falling citywide [San Francisco Examiner]

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Comments from “Plugged-In” Readers

  1. Posted by diemos

    Flujie keeps castigating me for thinking I can see the future.
    I’m not sure why.

  2. Posted by Trip

    Well, I still think you’re all wet with that “sun will set tonight” forecast. Jury is still out on all your “predictions.”
    Of course rents are falling. The economy is tanking and the unemployment rate in SF is shooting up. Rents are set at the margins in SF, just like home prices. The demand at the margins is dropping quickly.

  3. Posted by jj

    Yep, the units I made offers on in Jan are still vacant. Individual landlords have the same problem as individual home owners: they are slow to adjust to the reality. Professional buildings, on the other hand, are much quicker to adjust.

  4. Posted by Moving to SF

    So diemos (and anyone else interested in sharing) how much longer do you think we have until SF hits a reasonably low level. I’m not asking you to call bottom but just low enough so I wouldn’t feel like a fool if I bought a place.
    I’m actually going to be moving to SF by October and have cash to spend on a huge downpayment. Should I rent for a little while or do you think the market will be more tolerable by then.
    I’ll be working in the financial district, but I would be willing to do a reasonable commute if that is the best way to get a good place. I’m not familiar with the Bay Area but i’ve had some friends suggest places like Emeryville for a decent commute. (Although the distance from Oakland concerns me)

  5. Posted by LMRiM

    So diemos (and anyone else interested in sharing) how much longer do you think we have until SF hits a reasonably low level.
    My guess is that you should look to buy a place in about 18-24 months, but only if you are fairly certain you’ll be in the place for 7-10 years. I bet prices fall for another 4-5 years (and then level out for a while), but the low rate environment probably won’t last forever and in 2 years I bet the risk/reward will look pretty good (bulk of nominal declines will be in, and at some point over the next five years rents will begin to rise in nominal terms).
    have cash to spend on a huge downpayment
    Please don’t do this. Bubble Law Numero Uno: always use other people’s money as much as possible. There is no way to know for sure how this disaster is going to play out. The government and the anti-deficiency laws give you a free put. Take advantage of it. With regard to your hard-earned cash, don’t get any more than absolutely necessary caught up in this folly. Any downpayment is going to be in the first loss position, so it’s best to minimize it.

  6. Posted by jessep

    Also, I wouldn’t buy from any of these new developments. They’re markedly overpriced, at least in SF.
    If you’re going to buy something in SF go for an older building, at least the sellers are a little more realistic.

  7. Posted by LongTimeRenter

    For god’s sake don’t rent in Emeryville, you’ll be miserable because it’s not really a town, but a collection of chain stores.

  8. Posted by Karl and Lenny

    @ Jessep:
    Is that sarcasm? I think the new development prices are more negotiable then older buildings with individual owners. Developers are not “attached” to these homes like individual sellers and can reduce prices up to 30% from original asking and still make money. I’m not sure I see your logic on avoiding new developments?

  9. Posted by Moving to SF

    Thanks for the advice guys.
    Thanks LMRiM, your posts are very informative. A few weeks ago I was pretty set on buying a place for my move. Now after reading through a lot of posts here, I have no problems with renting a bit to wait things out.
    Ironically, I was actually going to take a look at some of the new developers. As indicated on this site, many of the developers have already claimed to have price cuts up to 20%. Karl do you think I could get a reduction of 30% off of these already reduced developers by the time I move in October?
    Also, Jessep thanks for the advice about the older buildings. I will certainly take a look at some SFHs. However, i’m sort of at a loss for some good locations to start searching. Also, I’m concerned about dealing with hassels of fixing up an older house. I would almost rather pay an HoA to not have to deal with the stress. Plus new developements look nice, and i’ve heard it might be difficult to renovate an older house in the city.

  10. Posted by 45yo hipster

    Moving to SF- the *most* important piece of advice: when you come here, take the time to explore SF’s varied neighborhoods. There is a huge variety of atmospheres and ammenities, all within close proximity. If you can rent first, that will give you weekends to go neighborhood exploring, as well as checking out open houses.
    As for ‘predicting’ when to buy, if you’ve spent time on this site you know there is a huge debate between bulls and bears. The decision is yours of course but I’m on record that SF will not see declines over the next 5 years, and that -50% off in most hoods and on most properties is serious wishful thinking.
    There are alot of quants here that analyze ‘real’ data and numbers ad nsusem, but fail to acknowledge, much less quantify, the substancial psycometrics that go along with buying a home, and the specifics of the SF marketplace. Quant analysis is important, but is not enough. Even in the stock market quantitative analysis will only take you so far. Just ask all the hedge fund geniuses who recently got their asses handed to them. There is a difference between being smart and possessing wisdom.

  11. Posted by 45yo hipster

    Moving to SF- the *most* important piece of advice: when you come here, take the time to explore SF’s varied neighborhoods. There is a huge variety of atmospheres and ammenities, all within close proximity. If you can rent first, that will give you weekends to go neighborhood exploring, as well as checking out open houses.
    As for ‘predicting’ when to buy, if you’ve spent time on this site you know there is a huge debate between bulls and bears. The decision is yours of course but I’m on record that SF will not see declines over the next 5 years, and that -50% off in most hoods and on most properties is serious wishful thinking.
    There are alot of quants here that analyze ‘real’ data and numbers ad nsusem, but fail to acknowledge, much less quantify, the substancial psycometrics that go along with buying a home, and the specifics of the SF marketplace. Quant analysis is important, but is not enough. Even in the stock market quantitative analysis will only take you so far. Just ask all the hedge fund geniuses who recently got their asses handed to them. There is a difference between being smart and possessing wisdom.

  12. Posted by dub dub

    Hey moving to SF: if this is a serious post, I suggest you rent first. The bay area has many, many, micronbhds, and you may not know what you like until you’ve been here awhile (echoing 45 hipster’s comments, which I just read before posting anyway).
    For example, many folks complain about fog in the inner sunset, but in my experience, it’s not too bad unless you are allergic to fog or something.
    East bay commutes are doable, but it really depends on where you work/live (this is true within SF as well).
    Don’t worry about Scary Oakland. It’s easy to stay out of the killing fields there.
    Emeryville is smack up beside one of them — but if Pixar can survive on that side, how bad can it be?
    Actually, Emeryville itself is a fantastic place to work if you are in tech (we have our offices just north in Berkeley, and Emerville itself is like silicon valley lite), but I wouldn’t buy there.
    I’ve always thought of Emeryville as a cleaner SOMA with more trees. You can get your blue bottle coffee (SF hipster coffee) as it is roasted on the spot (actually, just over the city line into Scary Oakland) :)

  13. Posted by jessep

    K&L:
    That is such a red herring.
    Most people who buy homes do so with loans, and their “emotions” don’t prevent them any more than do sales teams at giving good prices.
    Sales teams, like individuals, can and do get emotional about prices and are constrained by loans.
    Attributing the risk averse only to the Sales Team and not the individual owners is ridiculous. They all want high prices.
    Can you tell me why One Rincon out by the freeway costs as much as it does and is goosing up their marketing by giving buyer’s agents 4% commisions?
    Please. They’re so duplicitous.

  14. Posted by RenterAgain

    Moving to SF,
    I third the advice to rent for a bit and use that time to explore different neighborhoods. There’s a world of difference between the Mission, the Marina, and Emeryville.
    I’m not convinced that prices will go down another 40% in nice neighborhoods, but even if they only go down another 10%, you’ll save a lot of $$ by renting for a year or two, and you’ll have enough information to buy a place that you’ll be happy with.

  15. Posted by San FronziScheme

    substancial psycometrics (sic) that go along with buying a home
    45yo,
    This works both ways. The background behind this behavior is the social mood. It has many facets: Jonesing, positivism, attraction to tangible values, conformism. Also the illusion that it’s happening to “them” not “us”.
    Now a single look at our moribund 401(k)s/IRAs is enough to realize a few wise guys in WS played us like a Palm Bach widow and that the Ponzi could happen again anytime, anywhere as long as we have cash, income or the possibility to borrow.
    I think the key word to the next few years will be “trust”: can you trust your banker? Your investments? Your job? With this kind of insecurity, I think owning will take a backseat to savings and getting out of debt.
    People have started to save again. They used to save 8% of income until the Reaganomics nutjobs came to teach us the virtue of perpetual indebtedness. Savings crumbled to negative in 2007. Today, they’re back to 4% and more, breaking a 30-year trend.
    That’s a fundamental mood shift. The pride of ownership will come second to the pride of money in the bank.

  16. Posted by 45yo hipster

    SFS- I agree with your worldview to a point, as I think it applies mostly to buyers out of CA. There have been many reports of buyers piling in on the low end in CA, especially in outlying bay area and so cal. 1st time buyers and investors seeking an ever elusive cash flow. Psyc(h)omertics (sue me, I’m typing on a frickin iPud :) are behind that. Apparently buyers have not forgotten being priced out for years, or waiting for a ‘correction’, and apparently finding a foreclosure at 40-50% off peak counts as a correction in their minds.
    You’re going to hear alot more about people who thought they could never own in the bay area buying foreclosure sub $300k. And I believe that phenomena is ‘trickling up’ to SF buyers, as there has been increased activity in the sub $600k here.
    But perhaps My reference to psychometrics is a bit of a misnomer- the qualities you characterized in your post (sorry, no C&P functionality on the iPod yet) are indeed very difficult to quantify, though certainly worthy of discussion. I was actually referring to data based studies such as professor Richard Florida, about future demograhic trends and the fate of cities and major metros. I recommend his latest book, “who’s your city” as an interesting read. He backs up his hypothesis with loads of data and primary research.
    I’d be curious to read what others on SS think of his latest city and how it characterized future city development and by extension city desitesbility. You can goog the dude, he even has a site for the ‘who’s your city’ book. Or go to amazon, I believe you can get detailed excerpts there too.

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