July 28, 2010
Apples, Medians, And May Case-Shiller For 1251 44th Avenue
Purchased for $479,000 in June of 2002, the one bedroom single-family home at 1251 44th Avenue was taken back by the bank this past May with what would appear to have been $567,000 owed. The property was just listed for $448,900.
The median sale price per square foot for homes in the neighborhood was $396 in 2002, peaked at $579 in 2007, and is currently weighing in at $508, down 3% year-over-year and down 12% from peak, but up 28 percent versus 2002.
Keep in mind the median sized home sale in the neighborhood has averaged around 1,450 square feet, size matters when it comes to comparing price per square foot on an absolute basis, and remodeling has been particularly popular over the past eight years.
The Case-Shiller index for middle tier homes in the San Francisco MSA measured 146.28 in May, up 12.7 percent year-over-year, down 34 percent from a peak in May 2006 (down 30 percent from a 2007 average), and up 3 percent versus June 2002.
∙ Listing: 1251 44th Avenue (1/1) 1,000 sqft - $448,900 [MLS]
∙ May Case-Shiller: San Francisco Tiers Up But Gains Moderating Atop [SocketSite]
First Published: July 28, 2010 10:45 AM
Comments from "Plugged In" Readers
Adam, you really need to be more obvious in your point. I'm starting to get a headache trying to decipher these cryptic messages. Here is my shot of the summary of this post:
C/S = +12%
Median = -3%
apple = ?
% Peak Drop
C/S = -34%
Median = -12%
apple - -20% (inferred from bank debt?)
% Change from 2002
C/S = +3%
Median = +28%
apple = -6%
Translation? Who knows, I need an Excedrin!
Posted by: eddy at July 28, 2010 11:19 AM
size matters when it comes to comparing price per square foot on an absolute basis, and remodeling has been particularly popular over the past eight years.
2 very good points.
1 - Intuitively, bigger places have a more limited buyer pool than smaller places, and therefore could be cheaper in $/sf. A 200K / 200sf place might not scale into a 2M / 2000sf place, depending on the neighborhood. Therefore looking at $/sf might not work where there is a wide range of properties. Were the market an efficient one (if people could divide up their houses at will, for instance), it would level prices very quickly. But the city won't allow it that easily, which means big houses in average neighborhoods will sell at a $/sf significantly lower than smaller houses.
2 - Quality/remodeling. Also true. Some remodels can cost almost as much as new construction which means a dump could be worth $500/sf and a high quality redo worth $800/sf, all in the same neighborhood. That's a problem with US housing where a redo involves a lot of tear down work. In Europe, solid walls limit the amount of redo. No dry rot or termites on concrete or solid stone.
But both caveats are also valid for ANY other metric. Median, Average, etc. That's the "mix" we talk so much about. I still like the idea of $/sf as an alternative to medians that depend so much on the methodology.
Posted by: lol at July 28, 2010 11:24 AM
I have no idea what paragraph three of this post means.
When talking $/sq ft, the obvious has not been stated, the smaller the home, the higher the $/sq ft.
The expensive parts of a home, kitchen and bathroom(s) take up more percentage wise,
of the total square footage of the home.
The Case/Shiller take away lesson for me
is this house is worth less than it was in 2002.
Cutting upone big house into smaller housing pieces, reduces, not increases, the value of the home.
Posted by: kathleen at July 28, 2010 1:28 PM
Eddy, I think this is one data point that helps indicate the following hypothesis:
"Case Shiller is a better indicator of the value of a home at two different points in time than median price per square foot at those two different points in time."
In this case, CS is up 3% from 2002, median PPSFT is up 28% from 2002 and yet, for this house at least, CS is the better indicator: the home is listed for less than the 2002 purchase price.
The issue regarding size matters/remodling matters, is that the current median PPSFT cannot be used on an absolute basis because it will vary strictly on size, and furthermore, on a relative 2002/2010 basis, the fact that median price per square foot is up in an area could be more a function of how much remodeling went on, and less a function of intrinsic changes in value.
However, I would add that before the boom (and possibly after the bust), over long periods of time, updating should matter less and less. Homes need to be updated continuously and the generally are. If a 2002 home is updated the year before, also gets updated in 2009, but sells for more, an increased price *can* be an indication that values have risen.
However, when your home is going up in value AND you have the easy ability to extract equity from that increase in value, you are more likely to update. Thus, a 2010 home is more likely to be updated than a 2002 home was, so the increase in median PPSFT between recent times and times many years ago probably has as much to do with updating as anything else.
Posted by: tipster at July 28, 2010 2:45 PM
@Tipster, Agree. Still have the headache from this post.
Posted by: eddy at July 28, 2010 5:09 PM
The 2002 purchasers simply paid too much for it. and, it looks like those free wheeling banks just gave out too much money for it, too.
Posted by: Pumpkin patch at July 28, 2010 5:19 PM
More variables for $/sq.ft-- lot size/expansion potential (a small house on a big lot obviously worth more $/sq.ft. than a big house on a small lot), and also how much space there is in the house that's not counted-- basement and attic.
Posted by: Al at July 29, 2010 2:59 AM