March 12, 2009

SocketSite Sees Seasonality (Versus Signs Of A Rebound)

San Francisco Sales Seasonality (www.SocketSite.com)

We’ve put some DataQuick sales data behind the recent CBS5 "rebound" report to make a simple point. Despite significant discounting in the new development market, the recent "spike" in San Francisco sales activity is being driven by seasonality.

Any industry expert that claims a March spike in sales volume as evidence of a real estate rebound either doesn’t understand the basics of the market or isn’t being entirely forthcoming. We’ll let you decide which is worse.

Well, either that or the San Francisco real estate market "rebounded" in March of 2005. Then again in March of 2006. And again in March of 2007. And again…

CBS Calls It A "Real Estate Rebound In San Francisco" [SocketSite]

First Published: March 12, 2009 3:00 PM

Comments from "Plugged In" Readers

Everyone should be required to take a statistics class before being allowed to have an opinion.

Posted by: Tall Guy at March 12, 2009 3:29 PM

when those 5 lines converge....

Posted by: lolcat_94123 at March 12, 2009 3:39 PM

LOL at Hank Plante making you mad. How many exraneous media stories describing "San Francisco" tanking but using "San Francisco MSA" numbers did you go out of your way to make a graph about?

[Editor’s Note: Hank Plante didn't make us mad, he's simply reporting what the "experts" told him. And every single month in fact (with respect to graphing and reporting on San Francisco county specific sales data while others tend to focus on the Bay Area/MSA).]

Posted by: anonn at March 12, 2009 3:42 PM

That's true - but of course the extent of the bounce will be interesting. Thinsg are meant to be really bad right now, which should conceivably show itself in a lower bounce than prior years if so?
guess feb's dataquick numbers aren;t out yet, and March will be some time.
and of course, the jan to Feb numbers for 06 to 07 show that there isn't a simple forumla which can just be applied to allow for seasonality.

Posted by: REpornaddict at March 12, 2009 3:47 PM

What is the y-axis?

You're right, seasonality is a big thing. Sorry I didn't acknowledge that.

[Editor’s Note: Sales recorded.]

Posted by: kris at March 12, 2009 3:55 PM

"[Editor’s Note: Every single month in fact (with respect to graphing and reporting on San Francisco county sales data while others focus on the "

I knew you'd say that, and it's why I used the word extraneous. No, not your paraphrasing of Case Shiller, which is monthly content, and de rigeur. I meant when precisely did a negative housing television piece prompt a graph to dispell it? Correct me if I'm wrong. But I'm thinking pretty much never once. Even though the disparity between MSA and SF was, and still is, great.

[Editor’s Note: Note the link. We're not talking about Case-Shiller (which by its nature is MSA), but rather DataQuick which others tend to report for the entire Bay Area/MSA. So yes, every month.]

Posted by: anonn at March 12, 2009 3:55 PM

Thanks, editor. That's a really helpful graph that makes it easy to see that pendings in a two week period being higher than any two week period in the last 6 months is normal for this time of year, not indicative of any "rebound" and very misleading.

The source of the quote in the article is a company that sells "information" to real estate firms, so it's easy to see how they might have crunched the numbers and called a "reporter" at CBS who was eager to have a scoop to break. Clearly, some of this "information" is misleading "statistics" people in the real estate industry can repeat to buyers to make it seem like real estate only goes up! "National Semiconductor in Santa Clara just laid off 1/4 of the company, but don't worry about that, kids, because there have been more houses sold in the last two weeks than in any two week period since October 2008!"

And what a surprise! Anonn the realtor grousing about the careful analysis that exposes the misleading statistics being used to call a bottom for what they really are: normal seasonal patterns. I'm sure it was *wonderful* back in the day in which the real estate industry controlled the information. But those days are over, thank god.

The graphical analysis (as much as the two blue lines are a bit hard to discern) is one of the many things about this site that makes it head and shoulders better than anything else out there.

Posted by: tipster at March 12, 2009 4:11 PM

Well, its not that normal.
in 2 out the 3 last 3 years, sales in March were below those for October. One would expect the end of March being better than the start, and the start of October better than the end - so having a 6 month best at the start of March is probably better than what we managed in 06 and 08. and in 07, march was great but that came off the back of a trangely low feb.
so, still some positives I think.

Posted by: REpornaddict at March 12, 2009 4:30 PM

I agree this is likely seasonality...the one comment I'd make is that given how bad the economy has been, it was possible that even seasonal upticks would not have been present this year.

Posted by: mk92 at March 12, 2009 4:51 PM

In the video, Hank Plante clearly says that "there have been more home sales in the past two weeks than in the last 6 months".

[Editor’s Note: Translation: there were more sales in the past two weeks than any other two week period over the past six months. And once again, that’s not inconsistent with what one would expect based simply on seasonality.]

Posted by: jj at March 12, 2009 4:55 PM

Another fun-with-statistics and apples-and-oranges point:

I think (although who the heck can tell) that Hank was talking about homes going into contract over the last two weeks compared to homes going into contract during other two week periods in the last six months. These graphs show closings over the relevant 6-month periods. I think Hank's observation is even more clearly a reflection of seasonal trends than these graphs would indicate but we'd need hard data on both contracts (not all of which close) and closings to be able to tell. And we'll know more over the next few months.

Posted by: Trip at March 12, 2009 5:01 PM

The fact that ANY transactions are taking place is actually good. If you haven't noticed, the mood has shifted from "hmm, bad recession" to "better accumulate ammo" in the last two months... Despite the fact that the unemployment rate in SF is still hovering around 6%.

Posted by: "Dave" at March 12, 2009 5:15 PM

"Dave"

Yes it was 6.2% in December, but it jumped to 7.2% in January.

http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2009/03/06/BUOL169TQA.DTL

[Editor's Note: Actually 8% in San Francisco county (up from 6.5% in December).]

Posted by: San FronziScheme at March 12, 2009 5:38 PM

Seasonality? I thought there were no buyers right now...

Posted by: Mediated at March 12, 2009 5:41 PM

"more home sales in the past two weeks than in the last 6 months"

Now that would be a spring bounce!!!

Posted by: Repornaddict at March 12, 2009 5:43 PM

Does anybody know whether the inventory of houses follows a similar pattern? Are we still holding steady at 11 months inventory (or whatever the number is)?

Yes, this is seasonality, but don't prices typically bump up a bit during Spring because excess inventory gets absorbed? I'm not saying they'll bump up this Spring, or that the market is recovering, but if buyers absorb excess inventory, it's possible prices might stabilize a bit through summer.

Posted by: DataDude at March 12, 2009 5:53 PM

"[Editor’s Note: Translation: there were more sales in the past two weeks than any other two week period over the past six months."

That's the only possible translation, but that's not what people will hear. Combined with "hard facts", "mini boom" and "42 multiple offers", it all but creates an impression of a frenzy. A great journalism, if you ask me.

Posted by: jj at March 12, 2009 5:56 PM

Really at this point (with unemployment increasing from 6.5% to 8% since December) it is bullish news that the market hasn't completely shut down and is still operating fairly normally by showing seasonality, just at lower volumes then previous years.

Posted by: Rillion at March 12, 2009 9:50 PM

Here are the Week 1 sales for March (Mar 1 - 7) for SFH's and condos:

2009: 42 (Mar 1-7 as of Mar 12)
2008: 79
2007: 91
2006: 98
2005: 111
2004: 116

So closed sales volume is still low. The active counts stands at 1,627, so we're still at 9 (or so) months of inventory. Pendings and Active-Contingents (under contract) may indeed be up - but those figures are harder to trend historically. There are some stale listings with Pending or Act-Cont status - many over a year old. The sales count and active count are the important quantities. When a listing goes to Active-Cont (or Pending), it is no longer in the Active count. When it finally sells, then it is a sale.

The overall median price for the 42 Week 1 sales this month was $566K - this is 2001 territory (not accounting for mix, district, etc). The mean psf is low $500s - even for the condos. Of these 42 sales, only 3 SFH's went for over $1M. The most expensive condo was $925K.

Maybe a boom is coming - but it wasn't evidenced in Week 1 (nor in Week 2 so far).

Another factor to consider are listings that have gone to Expired or Withdrawn status. There have been a TON of such listings in the past 18 months that don't appear to have been sold or returned to active status (under a new listing). I think that there are likely as many (or more) pent-up sellers as pent-up buyers.

Posted by: FSBO at March 12, 2009 11:04 PM

OK, well that doesn't add up.
how can a week with 42 sales contribute to thebest two weeks for 6 months?
extrapolate 42 for week 2 also and you get sales levels below even January's - no where near a 6month high.

Posted by: REpornaddict at March 12, 2009 11:53 PM

Thank you FSBO for that analysis. That's the content the traditional media should be providing. Very measured and a much more sound way of looking at the data. Very illuminating.

No wonder people have to go to places like Socketsite and Jon Stewart to get the straight dope.

We've been fed nothing but drivel from fools and charlatans for too long. I'll take the analysis of a FSBO or a Satchel over a Plante any day.

Posted by: SFHawkguy at March 13, 2009 12:20 AM

tipster wrote:

> I'm sure it was *wonderful* back in the
> day in which the real estate industry
> controlled the information. But those
> days are over, thank god.

With print and broadcast media both looking for ad dollars (and wishing we were back in the days before the web and Craig's List) we are going to see a lot of "it is a great time to buy real estate" articles followed by ads we they got after telling them they would run the puff story...

Posted by: FormerAptBroker at March 13, 2009 6:00 AM

thanks for this post. i think the story on CBS and all the chatter about a market recovery/rebound right now is ridiculous. despite the fact that i'm in the real estate biz, i don't see many (if any) positive signs in the market right now (not just housing, but the economy in general). people are so eager to grab and hold onto a little good news, so they'll take what they can get, but a post like this puts things into perspective. to those that want to believe, this may be hard to swallow... we are not at the bottom, we are not yet recovering, brace tightly, the road to recovery is a long, bumpy one and we may not have started the journey yet.

Posted by: garrett at March 13, 2009 8:51 AM

Alex Clark (whose weekly newsletter is pretty decent) says that the MLS will soon provide to the public complete active, sold, and pending listings. Result of the DOJ's antitrust settlement (as z lawyer who works on a lot of antitrust matters, this one seems like a no-brainer to me). Good news for those looking for solid information. Bad news for the old guard in the RE industry who liked that unlawful monopoly on information.

Posted by: Trip at March 13, 2009 10:20 AM

That's a good pickup Trip. The loss of the real estate "professional's" monopoly is the real story that should be covered. Funny that one doesn't see much reporting by the Hanke Plante's of the world about the monopoly but instead we get more of the same, wherein Hank Plante passes along information he KNOWS OR SHOULD KNOW is patently false and misleading. I refuse to believe that Plante and his fellow RE boosters in the press are so retarted to make the same mistake over and over again about seasonality and constantly fall for the real estate "professional" spin; he clearly is actively participating in the fraud (his was a journalistic fraud--not necessarily a legal fraud--that I know about).

Think how much damage the real estate industry's control of basic and fundamental market information has done to our economy. The real estate "professionals" on the front lines aren't the most culpable--in many cases they know not what they do and were simply chasing the American dream--a quick buck for nothing. The people in Summers and Geithner's contact lists are the ones that are the most culpable. But the agents were the the ones on the front lines whipping up the bubble (see the realtor comment on the other thread about the buzz she's hearing in the Excelsior for a good example).

Frankly, I'm ready for people to go to jail. Why aren't real estate professionals held to the same standard as other financial "professionals"? If a company had total control of its data and put misleading data out there with the intent to deceive and drive its prices up they would (or should) be in jail.

One good thing is the government and other litigants are finally starting to go after these bad actors in the real estate profession. The little I have seen has truly shocked me. There are lots of guilty actors walking around and still deceiving people and the Hank Plante's of the World give them a large soapbox to uncritically deceive the general public. It's time for the general public to disgorge these ill-gotten gains and put these criminal in jail and level the playing field. Ending the monopoly is a good first step. Getting rid of a 6% fee, an effective tax on all real estate without much value added, is the next step.

There is a whole class of victims who paid ~6% fee so they could have the privilege of being manipulated and defrauded through deceptive practices.

Posted by: SFHawkguy at March 13, 2009 11:01 AM

Are you serious? Did you read a newspaper in 2008? Every single news story about Bay Area decline had a big headline about calamity. And then midway through the story, "and San Francisco saw X amount per square foot, a moderate increase" or similar.

Please. The media is culpable for incessant hyperbole, period. They overhype both upward, and downwarnd trends. This Plante piece is only typcal media hype. But it is really funny to look at how this ONE piece has Socketsite crafting a graph, and all the bears up in arms. Where were you 18 months ago when the headlines were doom and gloom, yet the fine print read "San Francisco still doing well"? The hypocrisy around here overwhelms.

Also if you think typical individual consumers with access to sales data can bring to the table what good realtors can, you are crazy. And way out of touch. Jail time? You're a joke. Typical. If it weren't for realtors, suspicious people like you would be involved in lawsuits every single time a real estate transaction occurred.

[Editor's Note: Might we suggest a bit of basic research before ranting? Our headlines from 18 months ago pointing out the difference between San Francisco and the Bay Area (and noting "mix" which the industry has finally started to acknowledge and embrace):

San Francisco's Sales Volume Falls, Broader Bay Area Plummets
August S&P/Case-Shiller HPI: San Francisco MSA Falls (But Less)

And once again, we’d be willing to bet that the vast majority of the headlines you’re referring to were driven by data from either DataQuick (which we graph and "headline" every month specifically for San Francisco county) or Case-Shiller (which we always point out is MSA).]

Posted by: anonn at March 13, 2009 11:30 AM

"And then midway through the story, 'and San Francisco saw X amount per square foot, a moderate increase' or similar."

Exactly. That was anywhere from completely misleading to a flat out lie. Just quoting some source from the RE industry.

http://www.redfin.com/city/17151/CA/San-Francisco

Posted by: Trip at March 13, 2009 11:53 AM

Of course not every real estate transaction is fraudulent. Nice straw man though.

But many are. The lure of free money was just too sweet. And finally the prosecutors and regulators are acting, albeit years too late: http://www.nytimes.com/2009/03/12/business/12crime.html?_r=2&hp

I guess I should differentiate between bright line fraud, which appears to have been rampant, and the systemic "fraud" we are discussing on this thread i.e. the monopolistic control of the MLS, the constant cheerleading in the press and in legislatures via lobbyists, and the dishonest presentation of data to the public.

I'm all for these investigations and prosecutions and the one taste I've had of real estate fraud in civil litigation was eye-opening for me--I got the impression this is the tip of the iceberg and am starting to realize that many a real estate and mortgage brokerage shop were operating like it was the wild west. When you're playing with hundreds of thousands and millions of dollars fluj, not to mention peoples' lives, expect the victims and losers to be very pissed off. Litigation and prosecutions you shall receive.

Posted by: SFHawkguy at March 13, 2009 12:30 PM

And I should add that you realtors are the low hanging fruit for the government. It's much easier for Obama to go after you guys than his Wall Street masters.

I'm sorry. You're going to be the sacrificial lamb. You thought you layed a golden egg getting into real estate sales but many realtors are instead heading off to the slaughter. I almost feel bad for them . . . . .

Posted by: SFHawkguy at March 13, 2009 12:39 PM

Hawk Guy, you're a nutcase. I'll never exchange words with you again.

Posted by: anonn at March 13, 2009 1:10 PM

Yeah. I'm impervious to you realtor spin so I can see how that frustrates you. Are your clients really this gullible that they fall for all the happy talk and "buzz" about a Spring bounce?

Well, I'm not that sucker and evidently most posters on here aren't suckers which is why I'm not the only one you can't have a conversation with and why you repeatedly have to take your marbles and run home like a little baby boy. Boo Hoo. Flujie made a killing off suckers in the good times and now he can't handle a little debate.

So take your snake oil to some other sucker. As I'm sure you will.

Posted by: SFHawkguy at March 13, 2009 1:20 PM

Fluj ain't selling you any snake oil, and has always been more than happy to share any data he's got with his clients. You, SFHawkguy, are the one bringing in the lawsuits and jail, and saying how he is going to be a "sacrificial lamb". Fluj will personally be a sacrificial lamb, really? come on,

Posted by: sparky-c at March 13, 2009 1:30 PM

Sparky, I'm sorry to personalize that last bit about Fluj. If you noticed I switched from the personal (@ fluj) and then make it more general (@the industry). I don't know who Fluj is other than what he writes on here and I have no reason to doubt that he's honest in his personal dealings. I meant that realtors will be the sacrificial lamb (and mortgage brokers)--not Fluj personally. I hope you weren't intentionally misreading my intent (and granted I often do a quick job of typing cause I'm in a hurry and don't review it).

I'm responding here to his online defense of the industry, which most assuredly is snake oil. I give him props for actually engaging with the other side on this website (even though he often takes his marbles and runs home to mommy). Just like I give props to Cramer for showing up on the Daily Show last night.

And to the extent I'm angry . . . I'm guilty as charged. I'm fit to be tied and that comes out a bit in my writing and I have to say I have gotten carried away with the emotion here because it is a big deal to me. I take this stuff seriously. And maybe I use this forum to vent to much . . . .

But my broader point still stands. The prosecutors and litigants are starting to take this stuff as seriously as I do. The New York Time's article I linked to above demonstrates the prosecutors are now going after the low-hanging fruit--realtors and mortgage brokers.
I'm sorry that scares some of you. But it's a reality--not a baseless threat.

I wish no personal ill-will to Fluj. He's just choosing to stand in for the real estate industry and I'm expressing my opinion :)

[Editor's Note: And now back to seasonality...]

Posted by: SFHawkguy at March 13, 2009 1:44 PM

This article, http://www.nytimes.com/2009/03/12/business/12crime.html?_r=2&hp

does not mention realtors, or even real estate agents once. It doesn't even imply them.

The article is about mortgage bankers, and whether or not they will be culpable in the months to come under the Obama administration. In fact, the article at several points talks about how difficult mortgage fraud is going to be to prove.

Way to try to lambaste "realtors" with something that isn't even applicable.

Posted by: anonn at March 13, 2009 1:57 PM

I'm sure he doesn't want to stand in for the industry. Nor does he make himself out to be a financial adviser (most agents don't).

Posted by: sparky-c at March 13, 2009 2:02 PM

If we're going after culprits, I'll also suggest combing through all the old Option-ARM applications and ask proper tax returns to back up all these phantom incomes...

The blame game is fun to play, but I think the market is doing a good enough punishing job to take care of many. Careless flippers are losing their shirts, realtors have very low sales volume, mortgage brokers are losing their jobs, WS execs have to accept sub-50M bonuses. Everybody's hurting;)

Posted by: San FronziScheme at March 13, 2009 2:29 PM

Fluj, thanks for talking to me again. Whew. I was worried we were going to break up for good.

Yes, the NY Times focuses on mortgage brokers who are the lowest of the low hanging fruit. But don't think the agents won't be in the cross hairs or that they weren't tempted as well. It was easier, and thus probably more common for the perps to be mortgage brokers, but I bet a lot of agents got caught up in it as well (that was true of the one case I am personally familiar with).

If the federales are investigating a mortgage shop that also has a realtor shop attached or a close relationship to a realty shop or some agents working out of there (and other various hangers on--assistants, notaries, etc.) do you think the investigators will not look at the agents? And, as you know many agents used their position to get in the game themselves.

Agents are not the only ones to blame nor are they the most culpable. Like I said. I would rather start at the top and go after the big boys first. Team Obama will take the easy road and go after the mortgage guys first--the little guys not the guys securitizing them and selling them to gullible big guys.

I'm not the only one that's angry. America wants some justice. And were finally starting to get some.

For instance, how ridonculous is this seasonality stuff? Every. Single. Time. we go through these silly statistical fights about a seasonal "surge" and how pretty much the entire real estate sales industry beats the drum that we're about to rocket up and now is the time to buy. How can this not be advise? Why is it necessary to give this information? Does it give any sort of illuminiation to a potential buyer? Is it honest? Do you really feel we are on the verge of rocketing up? Have you bet any of your personal money on this theory?

This seasonality discussion actually does a good job of proving my point. The industry is hyping a couple of dubious and cherry-picked facts to give an impression most reputable economists disagree with. And it's a close enough call that the agents can claim they're not giving advise; when clearly your advice to all clients is the same, "it's never been a better time to buy". Pure snake oil.

Posted by: SFHawkguy at March 13, 2009 2:30 PM

There you go ending with something totally not true. You are speaking to fluj there and put something he didn't say in quotes, then add the snake oil junk.

Posted by: sparky-c at March 13, 2009 2:42 PM

Sparky. The quotes come from probably the most recognizable real estate advertising campaign ever. It comes from the real estate industry writ large.

As a member of the general public I don't see how anyone could not have heard of the great time to buy NAR advertising campaign. I recently heard something similar from NAR on the radio re CRE. With nary an exception, almost all real estate agents give a similar speil like a trained dolphin.

But I suspect you're not interested in ah honest conversation and honestly hearing what I have say. Which is why you are muddying the waters.

Are you a realtor? If so those questions above are directed towards you.

As an agent, will you use this CBS report to convince people the market is rebounding? Do you think agents should rely on this CBS "report" to analyze the market or inform their clients of this? Is that ethical?

Posted by: SFHawkguy at March 13, 2009 2:57 PM

No, I am not an agent. I am a client of fluj. And so I have first hand knowledge that what you are saying in regards to him is false. Fake quotes when used the way you did make it sound like you are quoting him. I'm trying to clear the waters, claiming that all agents are alike is muddying the waters. Fluj is on this site and thefrontsteps saying he does not believe what this article is saying.

Posted by: sparky-c at March 13, 2009 3:02 PM

Great for fluj. Once again, I do not have any personal information or knowledge about Fluj's business acitivites or any other of his activities outside of this site. I assume he is an honest man. And good for him if he is giving his client's the straight dope on this issue. But it's really not about Fluj. It's about the industry.

So can I interpret your response as an admission that any agent that uses this CBS report to tell a client the market is rebounding and now is the time to buy is engaging in unethical behaviour?

Posted by: SFHawkguy at March 13, 2009 3:10 PM

Sure you can interpret it that way, as long as you note that not all agents are saying it. They don't all "give similar spiel like a trained dolphin", and few spout the company line. Also, noboby pays 6%.

Posted by: sparky-c at March 13, 2009 3:33 PM

^^ "Signs of a real estate rebound? We’re getting various tips to confirm the reports and it is definitely good news."

http://thefrontsteps.com/2009/03/12/241-7th-avemake-an-offer/

thefrontsteps is a joke.

Posted by: nonanon at March 13, 2009 3:45 PM

How on earth are you asking anyone to have an honest conversation, [SFHawkguy]? First you try to paint realtors in a bad light with an article that isn't about realtors in any way. I read the article and point that out to you. THEN at 2:30 you spout a bunch of total nonsense jumping from one hypothetical to another via weird logical leaps such as this entire passage:

But don't think the agents won't be in the cross hairs or that they weren't tempted as well. It was easier, and thus probably more common for the perps to be mortgage brokers, but I bet a lot of agents got caught up in it as well (that was true of the one case I am personally familiar with).

If the federales are investigating a mortgage shop that also has a realtor shop attached or a close relationship to a realty shop or some agents working out of there (and other various hangers on--assistants, notaries, etc.) do you think the investigators will not look at the agents? And, as you know many agents used their position to get in the game themselves.

Dude, again, the NYT article you incorrectly cited and now are making logical leap after logical leap about is not a credible platform for your rant. It's more about how the feds are gonna have a difficult time going after mortgage bankers than it is about how they're gonna get them.

Oh, but you want to have an "honest conversation"?

You were a joke today. Clearly you're angry. But that was comedy.

Posted by: anonn at March 13, 2009 5:26 PM

@nonanon

Wow! My first time back to SS in a good long while. Glad to see nothing's changed. Thanks for the link.

Posted by: alex at March 13, 2009 5:42 PM

Yes, not my best work fluj. . . trying to do too many things at once and didn't expect to have this, er, debate with you.

Yes, I am a bit angry at your profession at large right now because of behavior like this; passing on fake Spring Surge stories to Hank Plante. The profession wants to be able to quote these rah rah stories and then claim that they had nothing to do with it or that it's only a few bad apples. Everyone passes the blame and says they didn't participate in the hype but no one will nip it in the bud. It's actually very similar to Glenn Greenwald's observation that Cramer sounded like Dick Cheney last night: http://www.salon.com/opinion/greenwald/2009/03/13/cramer/index.html

As to the NY Times story: it's about increased federal and state resources to prosecute real estate fraud and other related crimes--across the country. I'm simply making the point to get ready for more prosecutions and litigation (it's already happening). That's been my observation and is my prediction of what is to come. As pain rises up the socioeconomic classes look for more anger. No one wanted to go after mortgage fraud and related crimes when real estate was skyrocketing up . . . . and then when it was only the already poor getting crushed. . . people are going to want scalps as this vice grip slowly squeezes more and more people.

And using Hank Plante's story to imply there is a an imminent boom in real estate in San Francisco is downright irresponsible. I don't know. You tell me. What are your ethical requirements regarding this CBS report and how you use it?

Posted by: SFHawkguy at March 13, 2009 6:08 PM

that should read: "Cramer sounded like the reporters interviewing Dick Cheney"

Have a good weekend fluj and all!

Posted by: SFHawkguy at March 13, 2009 6:14 PM

SFHawkguy you are outright lying about the very article you post. Then go to off the charts extremes with claims that the press "cheerleading" is equivalent to fraud.

Your comment that socketsite is great for setting the record straight isn't anything you help with. If all the things you site are fraud, then you are clearly committing the very acts you condemn.

Posted by: sfrob at March 13, 2009 6:27 PM

If you actually read my comments on the subject you'd see that I found Hank Plante's piece to be typical media hyperbole and little more. As an optimist, I said that at best it's premature. I pointed out that it was similar to the "San Francisco Housing Has Been Destroyed by a Giant Space Laser of Death" headlines that ran in the Chronicle pre September 2008. Bogus on the way up, bogus on the way down. Hank Plante wants to sell 30 second car commercial spots. I would never in a million years send that to clients.

The only thing interesting about it, the real trend, is that a lot of people are buying in the southernmost parts of town. And of course they are buying with a lot of cash down nowadays. Some of these neighborhoods are merely former blue collar, or still blue collar, but some were downright dangerous seven or eight years ago. Yet these folks are putting 20 to 25% down to purchase I have a firefighter client who wants to buy in Lakeview, for example. Now, that notion is something I might send to my clients. It seems that IF this turns out to be a real, sustained trend then people can make good value buys by getting in ahead of gentrification. But I didn't send that on to clients. I didn't send anything to my clients. I spent all day wrapping up two deals that had contingencies until the very end.

I understand anger and frustration. But really, even in your parview, why be mad at realtors? They weren't the ones filling out sheet after sheet of bogus financial information. Realtors only know what their clients tell them. "I'm looking in this price range, and in this area. I'm pre-approved."

It's a little more difficult to channel frustration when the perpatrators are our friends, family, and neighbors, isn't it? OK, some of these mortgage bankers had to know that they were lending to people who they should not have lended to. Some appraisal shenanigans were done. Some immediate re-fi's were dodgy. But this site is about SF r.e. By and large in my opinion SF was mostly people buying with 10 to 20 percent down. Why sell to the guy with the dodgy looking loan and no money down when there are four other offers who have 20 percent? That sort of thing.

Posted by: anonn at March 13, 2009 6:29 PM

some were downright dangerous seven or eight years ago.

Heck, even 1 year ago.

http://sfcrime.blogspot.com/2008/04/2nd-excelsior-shooting-victim.html

Just kidding, one shootout doesn't make a trend.

Posted by: San FronziScheme at March 14, 2009 12:11 AM

wow. people really do get carried away. I highly doubt that realtors will be the sacrificial lambs. (although they may see restriction of their ability to monopolize info).

I think much could be improved in the world of real estate if we just re-named the players.

we shouldn't call a RE agent an agent. we should call them "Real estate salespeople." it sounds stupid, but once people understand that they're dealing with a salesperson then the relationship is changed in a significant way.

when they hear "agent" many people don't realize that the agents in general have fiduciary responsibility to the SELLER. even Buyer's agents are a tricky case, since they are motivated to get the highest price for the property (2-3% of purchase price is conflict of interest for a "buyer's" agent)

if we rename them as RE salespeople, then you lose the connotation of them representing you... I think it's a healthier dynamic.

also, we should drop RE "experts" IMO. Because often times they ask RE "experts" about general macroeconomic trends... when they're really experts about very micro local sales events... so again, a sales person. also, people tend to ask RE "experts" about general personal finances when they should not. RE agents are not experts at personal finance..

I've said this before: there is nothing wrong with being a sales person. People immediately think of a "used car salesman" but that shouldn't be the case. I use salespeople all the time. When I bought a TV and when I bought a Mac. when my clinic converted to Electronic Medical Records. and so on.

salespeople often ARE experts at what they sell. But again, when you hear information from them, you always understand they're a salesperson so you can better weigh what they say.

Thus, if I wanted to buy RE I'd use a house salesman. they could give me valuable information.

Sure, the Realtors embellish. they have their "it's never been a better time to buy" campaign. And they really put out their "talking opints" and their marketing packets from Lawrence Yun and Leslie applegate-young, and so on...
so we should call NAR information "marketing" or "market data" instead of "expert information".

but who cares? ALL all salespeople embellish their product somewhat. doesn't mean that it's a RICO violation!

Does Bud Light REALLY make you super popular? Does Maybelline REALLY make you that beautiful? Is Samsung's picture REALLY that much clearer than Sony? Are the Dallas Cowboys REALLY "America's team"? Is Organic food REALLY that good for you? Are diamonds REALLY "forever"? Is Evian REALLY pure?
you get the point. all of these things are products being sold to you.
they all have plusses and negatives.
when you buy these things, you often do it through salespeople
you may ask the salespeople for info.
but you understand their bias because they're salespeople.

America forgot that Realtors are sales people. They started affording them the position of "agent" when in fact the relationship is not that clear. They afforded them the position of "expert" when it's not necessarily true (or untrue). And worse, they forgot that the relationship is complicated by payment method which creates inherent conflict of interest.

Rename them as salespeople to clarify their role: as a salesperson. Then you get less of "well the EXPERTS told me I could afford this house" and "well the EXPERTS told me that Real Estate never goes down!" and so on.

I don't blame Realtors that much... they do what all salespeople do. some of their practices are unethical. (like the NAR changing the formula for "affordability index". or like agents playing with the DOM or other MLS information as example. or making serious photoshopping alterations like removing a hill). but many RE salespeople are upright wonderful citizens.

Posted by: ex SF-er at March 14, 2009 7:04 AM

There aren't enough jails to hold everyone who lied on a mortgage application. (although building, staffing and filling them would provide full employment.) ;)

I doubt realtors™ are going to get swept into the dragnet except insofar as they were involved with specific cases of mortgage fraud and there are currently plenty of bigger cheeses to go after.

That realtors™ cheerleaded the nation to financial ruin while collecting 6% along the way is annoying but not actionable.

That the vast herd of americans were dumb enough to believe that you can get something for nothing and chased after McMansions in the central valley is annoying but not actionable.

That the financial system cheerfully handed our retirement savings over to these people while collecting their percentage is annoying but not actionable.

Now all that's left is picking up the pieces.

Posted by: diemos at March 14, 2009 8:11 AM

You guys and your "6%" every time shpiels. Just another clew as to your actual detachment from the marketplace.

Posted by: anonn at March 14, 2009 10:42 AM

"Buyer's agents are a tricky case, since they are motivated to get the highest price for the property (2-3% of purchase price is conflict of interest for a "buyer's" agent)"

I really don't think that an additional small increase to the commission motivates a buyer's agent to cajole their client into making a higher bid. A higher bid risks causing the buyer to walk away.

The buyer's agent financial self interest lies in simply getting a deal to go through. If it can be done by getting a 10% discount for the buyer then so be it. 90% of a full commission is still better than 0%.

However a buyer's agent is motivated to get their client to bid high if that's what is required to come to terms with the seller. That effect is far more important than the percentage increase on commission.

Posted by: The Milkshake of Despair at March 14, 2009 10:47 AM

"Buyer's agents are a tricky case, since they are motivated to get the highest price for the property (2-3% of purchase price is conflict of interest for a "buyer's" agent)"

No. The buyer's agent's job is to get the buyer the property he or she wants, period.

Posted by: anonn at March 14, 2009 10:47 AM

OK fluj. Why don't you set us straight on the commission question? What is the reasonable range of outcomes a person (me) negotiating their agent's commission could expect?

Posted by: Jimmy (No Longer Bitter) at March 14, 2009 11:56 AM


5% is the standard, Jimmy. Try to get it down from there.

Posted by: sparky-c at March 14, 2009 12:37 PM

Yeah, Jimmy, it's been 5 by and large for quite some time. I actually think most of these guys are aware of that. It's just what they do. A kitchen remodel? Tack on an extra 100K. A guess about a sales price? 150K less, and nowhere to be found two months later when the sale goes public. The life of a profitable real estate venture? Jack up every single cost, ignore tax benefits, and tack on opportunity cost even though everybody lost money in equities last year. Oh, except these guys. They were all in 5% CDs the whole time.

Posted by: anonn at March 14, 2009 12:48 PM

"It's just what they do."

It's a rhetorical short-hand not a statement on the market. Since it bothers you I shall henceforth refer to it as 5%, but only for you my dear friend.

"They were all in 5% CDs the whole time."

Snort. If I could have got 5% on a CD I'd a been a happy camper. There was one brief glorious moment when we had an armistice in the war on savers but that's over.

Posted by: diemos at March 14, 2009 1:12 PM

xsfr -

You make a good point, but I don't think it will be a reality. The connotations b/w the words salesperson and agent are too vast.

But I do agree that that's how agents are best thought of.

Titles, especially those historically established can be difficult to dislodge once in place and have certainly deviated from what they once meant. And some have been certainly subject to manipulation in internet era.

It sounds like you're in the medical profession, possibly a nurse or doctor. Or is it a physician or surgeon or "provider." Certainly, given the connotations you're wouldn't refer to yourself as "provider xsfr" but no doubt that's what insurance companies do.

The point is that what one is called these does, and what their actual function is can deviate dramatically - no where is that more true than b/w re agents and used house salesmen.

Posted by: Amir at March 14, 2009 4:20 PM

There was one brief glorious moment when we had an armistice in the war on savers but that's over.

2000 through very early 2002. The USG offered zero coupon I-bonds (30Y final maturity) at CPI-U + 3-4% (the fixed component varied a bit during that period). USG-guaranteed real yields of 3+% over 30 years was probably the biggest giveaway that I've ever seen in 15 years of obsessive market-watching. Even better, they're completely state tax free, compound interest on a zero coupon basis, and are fully deferred for federal tax purposes. Truly the holy grail.

Married couples could take down $120K per year (assuming they did book entry for $60K and paper bonds for the other $60K). I've got bonds from Apri 2001, and they are currently yielding 8.40%, and the value today is up 63.44% from issuance ($196K value for $120K initial investment).

The USG wised up pretty fast, cutting the fixed yield component to 0-1% in recent years, and restricting purchases to $5K per year per social security number last year I think.

(I've got a bunch of I-bonds from later years as well, but I intend to cash those in to buy some income real estate on leverage when we're closer to the bottom - but I'm not letting go of the 2001 bonds until 2031 maturity or death, whichever comes first :)).

Posted by: LMRiM at March 14, 2009 5:44 PM

admittedly, the I-bonds were better, but the real ytm on 18-28yr secondary market TIPS reached north of 3.5% during the frenzy of forced liquidation this past fall.

that's as close as I've seen to a free lunch in my saving lifetime - 3-4% I-bonds were incredible, but I had no money back then :(

Posted by: polip at March 14, 2009 11:02 PM

Sort of, polip. But the problem with the TIPS is that is that they're not zeros. So, shorter duration but but more importantly they generate current taxable income (the coupon + the change in principal b/c of inflation adjustment)!

TIPS also have the technical problem that in CPI deflation (unlikely over any sustained period, but possible) their principal could adjust downward after you already paid the taxes for previous adjustments upwards (I assume there is some basis adjustment available, though, for future tax purposes, but I've never really thought through it thru too deeply).

Last, all savings bonds (including I-bonds) can be cashed in totally tax free to fund college education and in some other limited circumstances. There are income limitations, though, so at the point of paying for college for a child, one might have to look into either lowering reportable income to below the threshold if possible or "strategic" divorce where the non-income earning spouse retains the asset - don't laugh, I've seen some crazy things done by people trying to lower tax (divorce would be extreme for the small amount of $$ at stake here though :)).

TIPS at those yields were a good bet for retirement and other tax-privileged accounts.

Posted by: LMRiM at March 15, 2009 8:07 AM

oh, I'm well aware of the phantom interest (or lately lack thereof!) associated with TIPS, and of course, anyone paying attention could figure out that 1.) tax rates will rise (spend till the end!) 2.) TIPS must be in tax advantaged accounts.

we both agree that in a fiat money system, true price (CPI) deflation is not going to happen over longer periods of time (that doesn't mean massive monetary deflation cannot occur though!). So, while I-bonds were outstanding (friends made fun of me when I told them they were still a pretty good deal a couple of years ago when the fixed coupon was 1.2%!) back in the 3+% fixed days, TIPS with real ytm of 3+% (with durations of longer than 15 years - over which time I'd be willing to bet a large sum that the CPI will rise signicantly) were as close to a free lunch as I have seen in some time.

Now, I bonds have their place (if your tax advantaged accounts are non existent for instance), but so do TIPS. They are relatively liquid (though we found out that they are not nearly as liquid as nominals when the financial world burst into a supernova - but hey, it was nice as a retail investor to find a liquidity premium there for the taking - more please!).

Right now, they are both highly mediocre.

Posted by: polip at March 16, 2009 5:35 PM

The chart above has been updated to include February sales results for 2009 (up 18.8% from January but down 36.9% year-over-year).

Posted by: SocketSite at March 25, 2009 8:52 AM

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