October 27, 2009
August S&P/Case-Shiller: San Francisco MSA Continues MOM Uptick
According to the August 2009 S&P/Case-Shiller Home Price Index (pdf), single-family home prices in the San Francisco MSA gained 2.8% from July ’09 to August '09, down 12.5% year-over-year and down 39.3% from a peak in May 2006, but up from a 46.1% fall from peak as recorded in March 2009.
For the broader 10-City composite (CSXR), home values gained 1.3% from July to August but remain down 30.2% from a peak in June 2006 (down 10.6% year-over-year).
While many of the markets remain down versus this time last year, the relative rate of decline has shown some real improvement. California, in particular, has seen some real positive prints in recent months. We see this general trend whether you look at the as-reported data or the seasonally adjusted figures.
Once again, however, we do want to remind people of the upcoming expiration of the Federal First-Time Buyer’s Tax Credit in November and anticipated higher unemployment rates through year-end. Both may have a dampening effect on home prices.
On a month-over-month basis San Francisco MSA single-family home prices rose across all three price tiers for the third time since May 2006, albeit only nominally at the top.
The bottom third (under $299,828 at the time of acquisition) gained 3.0% from July to August (down 20.4% YOY); the middle third gained 1.8% from July to August (down 10.8% YOY); and the top third (over $558,379 at the time of acquisition) gained 0.2% from July to August (down 12.5% YOY).
According to the Index, single-family home values for the bottom third of the market in the San Francisco MSA are back to May 2000 levels having fallen 60% from a peak in August 2006, the middle third is hovering around May 2002 levels having fallen 38% from a peak in May 2006, and the top third is almost back to March 2004 levels having fallen 24% from a peak in August 2007.
Condo values in the San Francisco MSA fell 0.5% from July ’09 to August '09, down 15.7% on a year-over-year basis and down 27.9% from an October 2005 high. San Francisco was the only MSA to record a month over month decline.
The standard SocketSite S&P/Case-Shiller footnote: The S&P/Case-Shiller home price indices include San Francisco, San Mateo, Marin, Contra Costa, and Alameda in the "San Francisco" index (i.e., greater MSA) and are imperfect in factoring out changes in property values due to improvements versus appreciation (although they try their best).
∙ Home Prices Continue to Improve According to the S&P/Case-Shiller Index [S&P]
∙ July S&P/Case-Shiller: San Francisco MSA Continues MOM Uptick [SocketSite]
∙ Whether Or Not Credits Moved The SF Market, Phase Out Hits Home [SocketSite]
∙ San Francisco County Unemployment At 9.7 Percent In September [SocketSite]
First Published: October 27, 2009 8:30 AM
Comments from "Plugged In" Readers
No one wants to start this conversation (we will hear the same exact arguments as a month ago) ... all I have to say is .... the plot thickens!
Posted by: il_guru at October 27, 2009 9:36 AM
I really don't think the first time buyer home credit has had any real impact on SFRs in SF. The income restrictions were very low and designed to help people into sub 500k homes, at best. More like sub 400k homes. My guess is that there is one more wave of prime foreclosures over the next year and that will impact prices, but we're prob going to start to see some stabilization so long as rates are low. No indication that rates on going to rise as this would simply be a death blow to housing. The USG has demonstrated that they are not willing to let that ax drop at any cost.
Posted by: eddy at October 27, 2009 9:43 AM
I agree - can we do something different this time around? How about we discuss when each of the tiers will return back to their 2006 levels (perhaps, a slightly more positive discussion)?
Top Third: Aug-2011
Middle Third: Aug-2012
Botton Third: Sep-2014
SF Condos: Jul-2013
Posted by: Tall Guy at October 27, 2009 9:48 AM
One question I have asked a few times, and had no reply to, is what effect the recent sharp rise (now up 12.5% in 5months) in the index has had on the traded market in the future value of this index.
It would be interesting to know what the traded values of this were, say now and a year ago, or 6 months ago, but not sure where to look for this.
Either way, such strong gains as these (an average of over 3% each month for the past 3 months!!!!) certainly exceed expectations!
Posted by: REpornaddict at October 27, 2009 9:53 AM
for the ones making a rent vs buy decision, in light of budget deficits at every level of government and the need to provide social services and repair crumbling infrastructure, do you weigh the potential of increased property taxes or parcel taxes in the near future as a factor? do you think they won't happen, or that they might happen but are immaterial to your decision?
Posted by: condoshopper at October 27, 2009 9:56 AM
Not sure what to expect on parcel taxes, but increasing property taxes in California will require amending or repealing Prop. 13.
Given that Prop. 13 has such strong support, I do not think we will see it change with regard to residential property unless (or until) the state of our state and local governments get much, much worse.
I think a change in commercial property taxes will be easier for voters to pass, but that would have little or no effect on residential property values, I would imagine.
Posted by: NJ at October 27, 2009 10:05 AM
Where is tipster's contribution to this discussion? These numbers must be wrong based on her 'broken record' rhethoric ... it's not possible for S.F. MSA to have risen 12.5% over the past 5 months. Oh, I forgot, her 'issues' only permit her to derive great pleasure in other people losing money. Let's face it, there were good faith purchasers who bought into the equity markets in October 2007 who lost money, as there were people who bought homes for reasons other than 'specuvesting'. Not everyone who lost money was trying to get rich quick so it's hard to understand the level of disdain in her posts. Looks like objectivity is not the tippy's strong suit.
Posted by: huh? at October 27, 2009 10:09 AM
For every winner in a zero-sum game, there's a loser.
If markets stay up, the people who can't afford to buy (or choose not to buy) a home at an historically unreasonable price will continue to be unable to do so.
You suggest that owners who bought at the top shouldn't be punished. Why should those who do not own, but would like to, be punished? You are as one-sided as you accuse tipster to be.
Posted by: NJ at October 27, 2009 10:31 AM
^^^ Here, Here (and well put)!
Posted by: Mark D. at October 27, 2009 10:36 AM
If everyone (regardless of your home-ownership status) could take a step back and just look at the numbers, you would agree that housing prices got way way out of hand. Housing is still too expensive relative to income levels and at some point will be at a more normal historical average. Maybe prices will stay flat, and incomes will rise. Maybe prices come down to income levels. No one on this board really knows how this will all play out. Greed is working on both sides of this equation.
Posted by: jworm at October 27, 2009 10:42 AM
Comparing this correction to last is hard because the scale is so different, but the shape is different in some potentially interesting ways. Last time prices fell more slowly and the high end languished while the low end did better. Perhaps the later period of this bubble bust will stagnate in a similar way. The recent bounce in the graphs doesn't really match the overall trend.
Posted by: Mole Man at October 27, 2009 10:48 AM
"You suggest that owners who bought at the top shouldn't be punished. Why should those who do not own, but would like to, be punished? You are as one-sided as you accuse tipster to be."
NJ - I'm not saying people that made bad decisions shouldn't face the financial consequences of their actions. I so no issue with anyone pointing that out either. However I think I, like several others on this site, take offense to the glee with which Tippy revels in these losses, almost like he has personally realized the gain. Even if he had personally benefitted, the level of grandstanding is obnoxious. It's a matter of taste and/or class ... or lack thereof.
Posted by: huh? at October 27, 2009 10:51 AM
Would have to agree with jworm here to some extent -- it's entirely possible prices will stay flat nominally and lose real value, as I think NoeValleyJim said once too. Most people just look at the top-line nominal number, which looks nice, but doesn't tell the whole story.
Note that Eddy also makes a good point -- the government intervention is definitely propping housing prices up. If loan rates shot up to 8%, prices would come down in a hurry. And if "jumbo conforming" loans were discontinued, prices (particularly in the $750K-1M range) would come down too, because banks would price in a higher risk premium without the GSE-backing. As long as the government keeps trying to protect the banksters, we're only seeing manipulated numbers.
Btw, to compare seasonally adjusted MOM:
low tier: up 2.75% (below $292,812), at Apr-May 2000 levels, after trough at March 2000
mid tier: up 1.20%, at Apr-May 2002 levels, after trough at Feb 2002
high tier: up 0.53% (above $542,270), at Dec03-Jan04 levels after trough at Jun-Jul 2003
overall: up 2.59%, at Dec 2000, after trough at Aug 2000
Posted by: corntrollio at October 27, 2009 11:03 AM
Remember that the CS values are based on a three-month moving average, so real movements lag a month or so behind their first report. The imputed non-averaged monthly top-tier SF values for May, June, July, and August are roughly 142.8, 144.2, 145.7, and 143.7, respectively.
These data indicate that prices declined 1% between July and August for top-tier SF properties. This despite the $8K tax incentive. This likely reflects seasonality more than anything else, but it would seem likely that the summer surge is over. How far we retrace is a mystery, but it's a loooong time next prime selling season.
Posted by: SanMatean at October 27, 2009 11:09 AM
Also worth highlighting from the CSI report that the SF housing market performed better (up 2.8%) than every other city on the 20-city composite, except Minneapolis (up 3.3%).
Posted by: sanfrantim at October 27, 2009 11:52 AM
Of course, only four areas (Vegas, Phoenix, Miami, Detroit) have seen bigger CSI drops from the peak than the SF MSA has experienced.
SanMatean's point is pretty interesting. Let's see how things develop as the various trillion-dollar supports are eased and we leave the peak season. I repeat that these last few months have surprised me, but I also repeat that the SF price ranges that SS readers seem to be most interested in are so far above the top CSI tier (because it ha sfallen so much) that this has become far less relevant to the SF market. I do wish it was broken out into about 20 tiers. I guess we still need to talk about all the apples, medians, volumes, etc.
Posted by: Trip at October 27, 2009 12:10 PM
Can no one really help me re my question above about the traded future on this index?
I seem to remember this was a hot topic and much quoted item a year or so ago. Surely it's still in existence?
[Editor's Note: Where to start: They're Betting Against Us (San Francisco) On The CME]
Posted by: REpornaddict at October 27, 2009 12:25 PM
Yes, the "top tier" includes pretty much every single property ever shown on this website.
Posted by: anonn at October 27, 2009 12:27 PM
No one who reads economic news on a regular basis should be surprised by these numbers.
Posted by: anon at October 27, 2009 12:27 PM
I have been following the CME SF NOV2009 future, and it has been creeping up.
Here is the history:
Date NOV2009 Futures
The lowest it ever got was 107.
However, what is interesting is that it's all downhill from here. The SF NOV2010 future is at 128 and NOV2012 is at 117 (both of these numbers were obtained on 10/2/09).
You can get the latest data from
Posted by: doppelganger at October 27, 2009 2:04 PM
The historical C-S average is 100--it has seen higher, and certainly lower values. How is it that "100" is no longer the benchmark from which to assess the relative state of housing prices?
Posted by: Sonnyboy at October 27, 2009 2:49 PM
Here's one more historic datapoint for the SF NOV2010 futures:
I'll try to dig up some data from the meltdown period when the spreads were just crazy. Clearly, someone with guts could've done nicely playing the C/S futures. Cash settlement, cha-ching...
Posted by: EBGuy at October 27, 2009 2:53 PM
Sonnyboy -- I don't believe Case-Shiller is adjusted for inflation. Inflation has been about 25.4% based on CPI since 2000. Does that suggest that 125.4 is the benchmark now?
Posted by: corntrollio at October 27, 2009 3:02 PM
The historical C-S average is 100
No, it's not. C-S Indexes were normalized (PDF) to 100 for Jan. 2000. It is not an inflation adjusted index.
Posted by: EBGuy at October 27, 2009 3:04 PM
This doesn't surprise me, but it's based on nothing but pure anecdote: Virtually everyone I know around here who didn't buy before the peak bought something in the last few months. All had been sitting on substantial savings because they'd been renting until now. "We're worried we overpaid" is a common refrain.
On the flip side of the anecdote, virtually everyone else (who had bought around the peak) is now trying to sell, want to move but are trapped because they're underwater, or in some far worse state.
It's amazing to see how much money just vaporized.
Posted by: sidelined at October 27, 2009 3:23 PM
"However I think I, like several others on this site, take offense to the glee with which Tippy revels in these losses, almost like he has personally realized the gain."
No glee on my part, just shock and amazement about, as the poster above put it so succinctly, how much money just vaporized!
Posted by: tipster at October 27, 2009 3:41 PM
well, with the extension of the HBTC
and with the extension to make it available for move up buyers too, well, this party might never end!
C-S to the moon - all of our taxpayer dollars are yours now!
Posted by: polip at October 27, 2009 3:45 PM
Thanks, all, for the clarification!
Posted by: Sonnyboy at October 27, 2009 3:46 PM
Thanks re the indices!
Certainly it shows (looking at the suddent jump in 11/09 futures) that no one saw the sudden and significant rise in prices in the SF MSA coming!
Although the betting is that these gains will sloooowwwwwly evaporize - by November 2010 back to July 2009 prices, and by November 2012 back to March 2009 prices!
Posted by: REpornaddict at October 27, 2009 3:47 PM
Assuming the futures are correct and that the NOMINAL price doesn't vary by more than about 10% wouldn't those who have to finance their purchase (at least 80% LTV) be smart to do it now with the low rates? After all, the betting also suggests that by next year we will have a weaker dollar and perhaps substantially higher rates.
Posted by: bk at October 27, 2009 3:58 PM
Maybe bk, although it may be different for the average SF itself home as opposed to the wider MSA.
There is still a widely held view that SF will do worse than the entire MSA going forward - there may be some weight to this.
But, as far as the MSA goes, clearly 6 months ago was an even better time to buy - those who did managed to get in at low rates AND have seen a rapid appreciation in the value of their home.
Posted by: REpornaddict at October 27, 2009 4:15 PM
It still surprises me that we aren't seeing the acquisition values ramp-up more if there are a lot of forced sales going on in the Alt-A and ARM space. As these properties were acquired fairly recently shouldn't we see the tier values increase rapidly pretty soon?
I'll re-post the running stats for the MSA thirds.
Month...Upper 1/3....Lower 1/3
Posted by: HappyRenter at October 27, 2009 4:16 PM
^it hasn't started yet, but it will!
Posted by: tipster at October 27, 2009 4:47 PM
For all the predictors of horrible doom and gloom ahead (Tippy). You must be pretty damn smart, since even Shiller has no friggin idea what's going on:
"It's a time of exceptional uncertainty," Shiller said. "It doesn't seem like a time to see home prices booming, but that's what's happening."
He expects prices will continue to rise for the next few months, but can't forecast beyond that, explaining, "There's no way to be a statistician about this."
Posted by: R at October 27, 2009 5:05 PM
Shiller said. "It doesn't seem like a time to see home prices booming, but that's what's happening."
Wow - "booming" - seems like a long time since that word has been used in relation to the housing market - guess Shiller knows as well as any (and more than most!).
Posted by: REpornaddict at October 27, 2009 5:11 PM
Ha ha....got a phone bill and a library card? Then with a whopping 3.5% down, you too can qualify for a taxpayer-funded 5% mortgage to help make home prices "go boom."
Please try not to default in the next few months, though. Not like they're going to do anything about it....but we don't want too many clowns giving the whole circus away. Plus the Feds need some time to get the next bailout in place.
Posted by: Legacy Dude at October 27, 2009 5:40 PM
How about we discuss when each of the tiers will return back to their 2006 levels (perhaps, a slightly more positive discussion)?
Top Third: Aug-2011
Middle Third: Aug-2012
Botton Third: Sep-2014
SF Condos: Jul-2013
LOL - back to peak levels in less than 2 years! Let's call it Bubble 2.0!
Absent hyperinflation, I suspect that the top third (and possibly even the middle and bottom thirds) will be lucky to be near their 2009 levels in 2011 or 2012, let alone their 2006 levels.
Posted by: anonm at October 27, 2009 7:32 PM
well, you can throw this thread out. Newsflash: the price of SF real estate just jumped 15% on Bay Bridge news.
Wait until the transbay tube springs a leak.
If everyone can forget their personal fortune for a minute, maybe we can take stock on what is really important. Like not getting hit by falling pieces of infrastructure on the way home from work.
Posted by: obro at October 27, 2009 8:50 PM
Buying a house at a time of low interest rate would only be advantageous if you plan to stay in your house for the duration of the loan, eg. 30 years. Otherwise it would not be profitable to do so (from a financial point of view).
A house's "affordability" is mostly a function of what the monthly payment is, probably more so than even the absolute price of the property itself.
Back in the boom days, the "affordability" factor was helped by the artificially low interest rate and financial "innovations" a la Option ARM (especially the negative amortization option).
If we assume that the monthly payment that people can afford is somewhat constant, then if interest rate goes up, then the price of houses must come down. Option ARM won't be coming back anytime soon.
Posted by: doppelganger at October 28, 2009 12:31 AM
Option ARM won't be coming back anytime soon
The government may try to do it. In fact you could say they already are doing it in stealth.
let's say I use an FHA mortgage and get the tax credit to pay my down payment. That's a 0 down mortgage.
Then I get into trouble in a few months, so stop paying my mortgage.
I can then refinance under HAMP into a low interest rate modification, as low as 2% interest.
sounds like an option ARM to me.
heck, let's even skip the FHA.
let's say I bought a home with an Option ARM 3 years ago. Now it's reset and recast and I can't afford it. I get a HAMP mortgage for 2%. AGain, sounds like an option ARM to me.
If you notice, the housing support is getting BIGGER over time, not smaller.
we started with a modest tax credit that had to be repaid. this caused a little bump in the market. Then we changed it to a tax credit that DOESN'T have to be repaid. this helped goose the market a bit more. Now we're extending the credit, AND we're extending it to more people (not just first time homeowners, raising income limits, etc)
The same thing happened with toxic assets. First the Fed took solid assets, then more dodgy assets, and then toxic crap.
First we had the PDCF, then mini TARP. Then Mega-TARP. Then we added TLSF and TALF and other letters that I forget. (order of facilities might be off, who can remember them all anymore? except for the greedy bankers who will continue to feed at the trough while trumpeting their free market earnings)
we started with "foreclosure moratoriums" then we had increasing foreclosure assistance ending with an expanded HAMP.
Then the Fed started buying MBS, and then even Treasuries
All of these actions serve a single purpose: to bail out the banks. PART (not all) of bailing out the banks is trying to refloat the housing market, because the Fed/Govt correctly understands that there is a tsunami of overleveraged houses out there. If they are allowed to go to foreclosure then the banks fail openly (all the big banks failed over the last 2 years, but are held in zombie state so we can all pretend.)
I see two key points here:
1) eventually, each level of support gets exhausted, and then a new level of support must be added... typically a bigger level of support.
2) the government/Fed has openly stated their intentions and will not stop until they are forced to stop. "There will be no more Lehmans".
(how do you think they intend to keep the other zombies afloat?)
just like a crack addict. the addict will keep smoking their crack until someone else pries the pipe out of their fingers or until they are dead.
I agree with Shiller (and I've said this for well over a year now): economic forecasting is useless, because there are not economic models that work, because we don't have a market system right now.
We have crony capitalism and a centrally influenced market (although not fully centrally controlled it is significantly influenced).
Thus, to predict the future of the various markets, you must understand POLITICS.
SF housing will rise so long as Global politics are favorable to housing. SF housing will crash if those politics change.
(for instance, if foreign central banks stop buying our debt).
I've said this before as well: watch the Treasury market. we won't get much warning IF (not when, if) things collapse. But the Treasury market will hopefully forewarn us. Rates going up means that FCBs aren't buying and also that the Fed isn't monetizing. This will mean that the political will for our current global system is waning.
Posted by: ex SF-er at October 28, 2009 7:09 AM
ex-SFer - An astute analysis, as always. This site needs more of this type of competent commentary and less delight in the misfortune of others.
Posted by: huh? at October 28, 2009 10:18 AM
Case-Shiller data for September should be out tomorrow. Anyone placing bets?
Also, does the release of September C-S numbers mean that First Republic will update their "Prestige Index" for Q3?
Posted by: sfrenegade at November 23, 2009 4:40 PM
"Case-Shiller data for September should be out tomorrow. Anyone placing bets?"
why not ... 136.32
Posted by: sanfrantim at November 23, 2009 5:22 PM