With recorded sales volume falling an average of 7.9 percent from June to July over the past six years, a seasonal decline is to be expected, but a 22.4 percent drop in sales from June (563) to July (437) this year according to Redfin might raise an eyebrow or two.
And perhaps even more telling, sales volume appears to have fallen 24.9 percent on a year-over-year basis in July with sales of single-family homes falling 20.3 percent (from 281 to 224) and condos falling 29.7 percent (from 290 to 204).
It’s the first year-over-year decline in terms of sales volume in San Francisco since August 2009 and suggests tax credits have been (temporarily) stimulating the San Francisco market more than some might have thought.
Redfin’s monthly market report draws from both Multiple Listing Services and government records, and as such should reflect both listed and unlisted transactions. In terms of inventory, keep in mind that Redfin includes listings which are in contract but contingent, an approach we don’t agree with and don’t do in our counts.
Nobody Move! Bay Area Home Sales Seize Up (July Insider Report) [Redfin]
SocketSite’s San Francisco Listed Housing Inventory: 8/02/10 [SocketSite]

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Comments from “Plugged-In” Readers

  1. Posted by scurvy

    Tax credits were propping up this market more than some had thought or more than you had thought? Most of us knew exactly what was going on. Which is why I’d expect to see another 7% slide in prices with the state and federal credits’ expiry. I said this a few months ago. Just as true then as it is now.

  2. Posted by A.T.

    I, for one, “misunderestimated” the impact of the tax credits in SF. I guess I just couldn’t believe anyone would be foolish enough to buy an $800,000 declining asset, and pay twice the cost of renting the same place, just to get a one-time credit of 1% of the purchase amount. As the saying goes, you will never go broke by underestimating the stupidity of the general public.
    In real estate, sharp drops in sales volume are always followed by price declines. We can already see it with the many price reductions out there.

  3. Posted by realtorhomme

    In real estate, sharp drops in sales volume are always followed by price declines
    False. Spring 2008 comes to mind immediately.

  4. Posted by A.T.

    “Spring 2008 comes to mind immediately” — you’re saying that prices did not drop after Spring 2008? Seriously?

  5. Posted by realtorhomme

    Clearly not. I’m saying volume prior to spring 2008 had shifted downward substantially, but spring 2008 prices are among the highest.
    [Editor's Note: Medians Are Up, But Don’t Confuse That With Increasing "Prices"]

  6. Posted by J

    “I guess I just couldn’t believe anyone would be foolish enough to buy an $800,000 declining asset, and pay twice the cost of renting the same place, just to get a one-time credit of 1% of the purchase amount”
    Some people will do anything to lower their tax burden. Especially justifying bad financial decisions. They never realize the stupidity of paying $3 in interest just to save $1 in taxes.
    Also, the other thing people seem to forget is the move-up cycle. Even if the $800k buyer doesn’t care about the tax credit, the person buying his old house for $500k MAY be motivated by the tax credit. And so on, and so on, down the line… The move up cycle is still in shambles.

  7. Posted by A.T.

    As the ed. notes, I don’t think there is any evidence that apples-to-apples prices in Spring 2008 were on the rise. Regardless, I’m not saying that dropping sales volume is immediately followed by falling prices. This industry is one of years-long trends. We’ve been in a trend of declining prices for a few years now, and I’m just saying that the plummeting YOY sales volume indicates that is going to continue — or accelerate. Obviously we’re only a couple months into the post-credit dry spell, and all sorts of things (more tax credits, another foreclosure moratorium) could kick in and alter the sales volume.

  8. Posted by sparky-b

    MLS only based information seems to tell a different story. Maybe ’09 had lots of “unlisted transactions” while ’10 has returned to a realtor and MLS sales model.

  9. Posted by SFwatcher

    This can’t be true. We reached bottom in June 2009. Prices and sales were going up since then (forget the uptick on the inventory).
    Or did we??

  10. Posted by realtorhomme

    No, so far the bottom has been March/April 2009. By June things were picking up somewhat.

  11. Posted by diemos

    Your daily fortune cookie:
    He who picks bottom winds up with stinky fingers.

  12. Posted by tipster

    It’s surprising the sales downturn is so deep when you consider that a lot of people dropped prices by 5-15% right after the expiration of the federal tax credit. I thought that, plus much lower interest rates, would have kept volumes constant, but apparently both of those things aren’t enough.
    So prices will fall, but very soon the state tax credit will run out. So prices will fall further.
    But this is nothing. After the elections, interest rates will start to rise. That’s when home prices will get clobbered. That’s only three months away.

  13. Posted by diemos

    “After the elections, interest rates will start to rise.”
    Maybe after the next chinese elections to the politburo. I don’t think ours has much to do with it.

  14. Posted by oscar

    “So prices will fall, but very soon the state tax credit will run out. So prices will fall further.”
    Anyone have any idea how close the state tax credit is to running out?

  15. Posted by sparky-b

    “He who picks bottom winds up with stinky fingers.”
    We’ll see, I called bottom in Feb./March ’09

  16. Posted by A.T.

    I don’t see interest rates rising any time soon — in nominal terms. In real terms they are currently quite high and they could “rise” further as deflation does its dirty work.
    IMHO the reason sales have stagnated is that the consensus is now widespread that housing prices ain’t going up any time soon and they will likely fall further. That is a sea change even from 2008. The main factor driving sales and prices in the last 10 years was the groupthink that RE is a winning investment. That is no longer the case. People buying homes now plan to live in them, and the numbers are quite different in that scenario (nb, as I’ve said, at the very low end investors are buying up places as the economics are a bit different there — excludes just about everything in SF at prevailing prices).

  17. Posted by lol

    Spring 2008 low volume was not followed immediately by a drop in prices. The reason has been explained over and over again. Selling side: Wealthier people that can “ride it out” and waiting 1-2 years for the market to come back. Buyer side: no shoe dropped in SF in 2006. 2 years later overconfidence struck a few crazies with too much cash on hand.
    Now the 2 years are up and where are prices? Have buyers who overpaid between 2005 and 2008 managed to be “in the money” again? Most are not. A sizable minority is pretty close. The killer is the selling costs. 5% when you can only sell at 2005 prices comes right out your pocket.
    In the mean time, people who bought these past 7 years are probably wasting 2X on owning compared on buying with no clear positive outlook on prices.
    Caution: slow motion train wreck. Enjoy the show from a distance…

  18. Posted by Brahma (incensed renter)

    oscar wrote:

    Anyone have any idea how close the state tax credit is to
    running out?

    Sure. The California State Franchise Tax Board has a web site where you can keep track of how many applications for the First-Time Buyer Credit have been received and thus indirectly how fast the money is being allocated.
    The site’s updated often, and can be viewed off the FTB’s site at http://ftb.ca.gov/individuals/new_home_credit.shtml. Hat Tip to sfgate.com columnist Kathleen Pender for publicizing the link.

  19. Posted by Skirunman

    It is fun to speculate, but no way to prove a causal relationship between tax credits and the supposed volume drop in July YOY. I am waiting to see MLS data. In any case, one month does not make a trend, a quarter’s worth of data, or better, 6 months is what is needed to really see the story. Quotes like “We’ve been in a trend of declining prices for a few years now…” and “It’s surprising the sales downturn is so deep when you consider that a lot of people dropped prices by 5-15% right after the expiration of the federal tax credit.” crack me up with their obvious agenda when the data says otherwise with SF prices flat to slightly up on YOY volume increases through June.
    [Editor's Note: MLS only data seems to be showing a 20% decline for single-family homes but closer to a 10% decline for condos, think unlisted and new construction activity which the MLS misses. And again, don't confuse changes in medians with appreciation.]

  20. Posted by lol

    “obvious agenda”
    Obviously you have one too.

  21. Posted by tipster

    It is fun to speculate, but no way to prove a causal relationship between tax credits and the supposed volume drop in July YOY.
    Ha ha, this is the funniest realtor posting I’ve ever seen on Socketsite!! LOL!!!
    “Supposed volume drop” tells me this guy is going to fight tooth and nail on every piece of bad news that gets posted. That really told me everything I needed to know, and there is no point in even responding to such nonsense.
    The “supposed sunrise” this morning was disbelieved by everyone who predicted the world would end last night! Ha ha!!

  22. Posted by Skirunman

    I expected a response like that from tipster, but @lol, what do your surmise is my agenda?
    What I want are facts and real data, not speculation as I can do well in any market. I know this is a blog so some speculation is fine as long as it is stated as such and not as fact.
    @tipster, I’m been called a lot of things in my life, but never a realtor as one could easily surmise from reading my other posts.
    I’m actually a math and comp. sci. guy. I worked 20 years in Silicon Valley and started and was CEO of a SW biz from 2002 – 2008 and sold with rev at $8M. I have also owned real estate in Bay Area and Tahoe since 1989 and started doing development projects in SF in 2003 and I am now doing that full time. I am plugged in to many realtors in SF as I look for potential projects and monitor my potential outcomes.
    @editor, I appreciate your re-post of the “don’t confuse changes in medians with appreciation” link, but also don’t confuse cherry picking apples-apples comparisons as the “true” state of the market either. It is just one metric, with its own set of flaws, just as are median, avg, $/sq.ft. I certainly don’t have the most expertise in this area, but I did have an internship as an actuary my senior year in college, most boring job ever, as well as the standard set of stats/probability theory classes one takes to get your MS degree. Also, I did stay at a Holiday Inn last weekend! Finally, may you all prosper in good and bad times.

  23. Posted by Mr. logical

    “suggests tax credits have been (temporarily) stimulating the San Francisco market more than some might have thought”
    What suggests that? As we all know, correlation does not imply causation.
    Just wondering what evidence there was of that, how that conclusion was reached, as no evidence was provided to support that conclusion.

  24. Posted by lol

    Skirunman,
    Thanks for sharing. Now we know you’re invested in RE. Lower prices would hurt you, right? Also, the prospect of lower prices in the market wouldn’t go in favor of your investments.
    Glad we got that sorted out.

  25. Posted by Skirunman

    Here is the MLS data for July YOY:
    SFR
    # 249 194 -22.09%
    med $780,000 $783,000 0.38%
    avg $1,011,000 $970,000 -4.06%
    Condo
    # 155 162 4.52%
    med $650,000 $700,000 7.69%
    ave $741,000 $746,000 0.67%
    So yes, volume for single family homes in July is down 22% with pricing unchanged City wide. Condos up slightly up, but insignificant. What does this mean? Speculate away…
    Seriously, it does not mean much to me until I see all of Q3 data.
    I will say (my speculation) that I don’t believe tax credits have anything to do with the SF single family home market. $8k is such a nit when you get in to all the dynamics behind purchasing a home, especially anything above $1M.

  26. Posted by Skirunman

    @lol, yes, in general I would prefer market to be flat or rising as an investor. However, I actually care more about volatility and timing. Certainly times are better now to start projects then in 2005-2007 when things were crazy. The fact that prices have dropped along with construction materials and labor makes it easier to have a positive outcome. If prices dropped 10% this year I frankly would not mine greatly as I can start future projects with a lower basis so it is not that simple.

  27. Posted by Kathleen

    Seasonally homes sales go down in July and August in SF. High priced homess, mean high wage earners who in the summer do the following nstead of moving.
    Trips home to show off baby to Grandma, to the beach or lake, attending or having weddings all stall SFR sales in the Summer.
    Sales volume generally picks up after Labor Day, along with increased inventory.

  28. Posted by Skirunman

    Since I am on a roll and usually don’t have time to post much, let alone read this blog, let me speculate why I think July SFR volume dropped by 50 homes or 22%. I blame it on the especially cold and foggy July we had. No one wants to go looking for a home in SF when the weather sucks so bad. Instead, the people that would be buying homes want to get out of town to Tahoe or Napa/Sonoma to enjoy some sun. Sarcasm off and enjoy the weekend.

  29. Posted by lol

    Skirunman
    Sure, it’s a much better time to buy than in 2007 or 2008. There are major forces at play that we cannot control that are new to this market though:
    1 – The willingness (or lack thereof) of the Govt to sustain housing. Low rates are not doing the work. Will helicopter drops work this time?
    2 – The huge overhang of housing sitting there waiting to come online: banks are sitting on houses that they repo-ed or haven’t started to repo. All the short sales stuck at the bank that will end up going into the stats one way or another. All the 2007-2009 sellers that have started to come out of the woodwork earlier this year.
    My usual rule of thumb: when it costs 2X to buy than to rent, either prices go down or wages go up. The path to either of these is anybody’s guess. The current conundrum on wages is the US does not function in the vacuum. Global Wage Arbitrage takes care of that for now. What’s left is asset price deflation…

  30. Posted by lol

    I doubt weather has much to do with the slump.
    In all the open houses I have gone to, I have noticed that places with flaws priced at standard market rate would sell 4 months ago without too much room down. Now I see similar deals sitting without serious offers, even though foot traffic is there. I am looking at 3 places in the same area and am waiting for sustained weakness (is any). So far, all 3 have had reductions. One had 3 reductions already! They are within 15% of my target price but if prices go on dropping I might have to change my target even lower…
    I feel this is October 2009 – March 2010 all over again: great deals will sell. Everything else will sit.

  31. Posted by Skirunman

    @lol, you must have missed my “Sarcasm off” comment in my weather post. Cheers!

  32. Posted by sparky-b

    lol,
    thanks for sharing now we know you are interesting in purchasing real estate and low prices would help you, right?
    Glad we got that sorted out.

  33. Posted by Skirunman

    @Mr. logical, there has been no evidence presented to support a causal relationship, hence why I made my first post here. Editor, care to comment? If not, no worries as I think we all understand part of your job is to create controversy as this makes for much more interesting blogs.
    [Editor’s Note: We could care less about controversy. If you prefer, just stick with San Francisco sales volume suddenly falls by double digits on a year-over-year basis, and triple what one might expect based on recent June to July declines, for no apparent reason for the first time in a year.]

  34. Posted by VancouverJones

    A layperson’s analysis:
    1)No jobs recovery = no housing recovery.
    2) Also, I’m guessing that all the “knifecatchers” didn’t suddenly run out and read the 2nd edition of Irrational Exuberance and suddenly “see the light”.
    Therefore: People will continue to buy and prices will continue to fall.

  35. Posted by Shza

    Seasonally homes sales go down in July and August in SF. High priced homess, mean high wage earners who in the summer do the following nstead of moving.
    Kathleen, this post and these numbers are YOY, July vs. July. Your comment is a non sequitur.

  36. Posted by lol

    sparky-b,
    I guess we agree on that. We wouldn’t be all posting if we didn’t have an agenda of some sort.
    Skirunman,
    This is Friday the 13th, I have absolutely no sense of humor today. Just trying to make it through the day running around the crashing anvils ;)
    Kathleen and Shza, about volume: last year’s July was a big rebound month, wasn’t it? Just like March 2010 couldn’t really compare with the dismal March 2009, July 2009 has to be taken with a grain of salt.

  37. Posted by Mr. logical

    The data shows a decrease in sales volume. The data doesn’t show why. The redfin article contains a number of authoritative-sounding statements to the effect that this decline is due to expiring tax credits. However, it provides no evidence of this supposed direct link, even though it is stated as if it is indisputable fact.
    This is the sort of fuzzy, statistically-questionable real estate “logic” that socketsite usually tends to question (and rightly so).
    If this direct link can indeed be proven, I imagine there are probably some politicians who would be interested in seeing that proof.
    It could very well be that this direct link does exist — it is just that there has been no evidence of that provided here yet (except that the events happened to occur at the same time, which, statistically speaking, may or may not be coincidence).

  38. Posted by Rillion

    While it could just be coincidence, there is also a track record showing that government incentives to buy something during a specific period of time have a tendency to time shift demand foward. So while it is not direct evidence, it is logical that tax credits would have caused people to buy earlier then they would have otherwise, hence we would expect to see less demand after the expiration date.

  39. Posted by lyqwyd

    Here is the causal relationship, based on the basic economic principles of supply and demand:
    If a buyer suddenly gets $8,000 to increase their down-payment, assuming banks require 20% down, they will automatically qualify for an additional $40,000 in loan, plus the $8,000 in free money, they can buy almost $50,000 more house than they otherwise could. If almost everybody gets this, it will dramatically increase demand.
    Add in FHA loans with 3.5% down-payment, and somebody with no, or little, money, will now be able to qualify for a home worth hundreds of thousands, where before they wouldn’t qualify at all. This will also increase demand.
    The housing supply may increase because of the additional demand, but not enough to keep up with the large increase in demand, since there is a somewhat fixed number of potential sellers, especially when the market has dropped.
    Increased demand, without a commensurate increase in supply, will result in rising prices.
    Now that the credit has expired, the demand has drastically dropped (as evidenced by the large YOY drop in sales), thus prices are starting to fall again.

  40. Posted by Mr. logical

    Reasonable-sounding hypotheses and theories have been put forth here about a possible link. Nothing in the way of actual evidence to support them, though. Nothing that would have a remote chance of standing up in a court of law, a statistical analysis, or in a scientific proof. It is all just conjecture. It might be conjecture based upon experience, expertise or well-informed educated guesses, but so far it is just conjecture never the less.

  41. Posted by sfrenegade

    Duly noted, next time the Editor will say “San Francisco sales volume fell drastically for reasons suspected to be the disappearance of the tax credit, albeit not scientifically determined to a p-value less than 0.05.”
    [eye roll]
    Anyway, as to more substantive non-trolling points, we still continue to have massive amounts of government stimulus for mortgages. It’ll be interesting to see what effect QE 2 has, if any, on the housing market.

  42. Posted by Mr. logical

    For example, you might do a survey of purchasers during the period in question and ask them what affect, if any, the tax credit had on their decision. Polls are definitely not perfect, but there are well-known techniques (such as done during elections), and at least they would be some actual supporting evidence.

  43. Posted by Mr. logical

    Hmm, eye rolling — the Sarah Palin technique to indicate that all statements made must of course be factual and of course should never be questioned. Any questioning of such statements is obviously not to be taken seriously.

  44. Posted by Skirunman

    @lyqwyd, sorry, but I don’t think your arguments hold water (pun intended).
    “If a buyer suddenly gets $8,000 to increase their down-payment, assuming banks require 20% down, they will automatically qualify for an additional $40,000 in loan, plus the $8,000 in free money, they can buy almost $50,000 more house than they otherwise could. If almost everybody gets this, it will dramatically increase demand.”
    Not everyone gets it and not everyone cares, I personally don’t. I also know 5 other friends of mine buying right now that don’t care either. Of course this is not scientific, but neither is the statement that demand has/will increase dramatically with the offer of the $8k tax credit in the SF house market. Just stating so does not make it fact, and yes, I understand supply/demand theory just fine.
    I’d like to be able to examine some current underwriting rules for SFR > $1M in SF right now, but my personal experience with First Republic Bank says you have to have much more liquidity then your 20% down to qualify anyway with high income ratios. $8k tax credit is in the noise IMO for any property > $800k (1% of PP), which is about half the places sold in SF.
    “Add in FHA loans with 3.5% down-payment, and somebody with no, or little, money, will now be able to qualify for a home worth hundreds of thousands, where before they wouldn’t qualify at all. This will also increase demand.”
    I don’t know what % of loans are FHA in SF, but not many homes sold for < $500k in SF so not sure this is moving the needle much either. I would like to have the FHA data if anyone has it. As I stated earlier, income levels/credit are more important to qualify in this market and lending environment than an extra $8k cash, of course based on my personal experiences.
    “The housing supply may increase because of the additional demand, but not enough to keep up with the large increase in demand, since there is a somewhat fixed number of potential sellers, especially when the market has dropped.
    Increased demand, without a commensurate increase in supply, will result in rising prices.”
    OK, prices generally rise if demand outstrips supply. In reality, the equation is much more complicated based on limited supply in SF and other factors as we all know.
    “Now that the credit has expired, the demand has drastically dropped (as evidenced by the large YOY drop in sales), thus prices are starting to fall again.”
    Aha, the old circular argument. Demand is a function of $8k credit (not proven), therefore, no credit means demand down, and therefore, sales volume down, thus eventually leading to decling prices.
    Let’s wait to get the full Q3 numbers to see if this is really a trend of a single month blip. Even if it is not a blip and Q3 numbers are down 20% there are 10 other just as valid reasons why the numbers may be down including increasing unemployment numbers, decreasing incomes, and decreasing consumer confidence. Finally, where did you get the “prices started to fall again”. Prices are flat July YOY based on the only data I have seen.

  45. Posted by mikel

    The tax credit definitely played a part in the increased sales volume over the last year. Especially for the people that were on the fence, it definitely tipped them over but these people were most likely in the market anyways. I don’t think people just doesn’t decide to buy a $800K+ (at least) home because of a tax credit. It’s a large purchase and to get a loan is a battle but you’d also need to have a chunk of change saved for the down payment, reserves, 3-6 months of emergency, etc. FHA loans could be used with lower down payment, etc. but I believe those cap at $765K so you can assume that very little, if any of those loans could be used for anything more than a 2bdrm. I’m speaking strictly of the city. Not east bay,Marin, etc.
    Most likely the drop in volume has more to do with a combination of other factors such as:
    1. stock market volatility (If market consistently drops on double dip fears, expect Real Estate in SF to follow 3-9 months later as a result)- there’s a direct correlation with Bay area prices and the markets
    2. Unemployment rising
    3. The lack of housing stimulus (This will eventually dry out)
    4. Skirunman’s theory of weather. Never thought of that but very interesting. East Bay and Marin is looking more and more promising. I’m sure many people (myself included) are re-evaluating those SF summers. I’m looking to get out of the city any w-end I can.
    5. Lack of qualified buyers, many of the potential buyers already bought. If lower interest rates can’t fuel new sales, then what can? Lower prices or much improved economic/stock market conditions.

  46. Posted by ex SF-er

    Skirunman:
    I agree with you that it is impossible to prove that the expiration of the FTHB tax credit caused the reduction in SF home sales volume. as others and you have correctly stated, correlation does not equal causation.
    however, I’m not sure that matters anyway.
    there is very strong recent historical correlation between access to credit and the SF housing market.
    when credit is increased, SF housing sales volume and sales prices increase. (such as the 2003-2007 time period).
    when credit is decreased, SF housing sales volume/prices decreased precipitously (such as 2008 and early 2009).
    when credit reintroduced SF sales volumes/prices recovered. (2009-present).
    so in other words: access to credit is strongly correlated to sales prices/volumes in SF
    thus, those of us paying attention were not surprised when SF RE improved last year, due in part to the “modernization” of FHA, Fannie, and Freddie (modernization=loosening of credit to high COL markets like SF), and also due in part to the federal FTHB credit and the CA FTHB credit.
    we likewise will not be surprised when the removal of those programs leads to pressure on the SF RE market. Because credit is strongly and positively correlated to SF RE.
    doesn’t matter if it’s causal or not, one can act on strong correlations.
    SF RE is affected by far more than access to credit however. Also to jobs, income, equity valuations, etc etc etc. Thus, the correlation of credit to SF RE is not 1.
    ====
    all that said:
    you set up the research parameters for the “proof” in a somewhat arbitrary way.
    there is no reason that we need to restrict ourselves to this particular housing credit and SF proper.
    we can use tax credits and assets in general. as example, we could argue that the Cash For Clunkers credit would be supporting evidence for what we see now.
    C4C was enacted, car sales went up precipitously, C4C expired, car sales dropped precipitously. C4C did not only affect the low end of cars, it affected luxury car sales as well.
    we could also look at US, Regional, State, and various metropolitan data to see if the enactments of credits seemed to affect each state/region similarly. We could also look back and see if other similar FTHB credits have been used in the past, and if there was subsequent change in the housing sales/volumes in those areas. We could try to dig through and pair places that had credits to those that did not and see if there were divergences. But as you well know, nobody here has done exactly that.
    there have been other tax credits used throughout US history that will also lend scientific support to the FTHB credit affecting SF housing hypothesis
    I do find it interesting that originally we heard “FTHB won’t affect housing at all” and as soon as it expires we see a precipitous drop in SF and now we hear “well, it dropped, but it’s probably just coincidental. you can’t PROVE there was a link.”

  47. Posted by diemos

    A sample of headlines written to skirun’s standard of proof:
    “Sales went down last month because fewer houses were sold.”
    “Stocks went down today because today’s sellers were willing to take less for their stocks than yesterdays sellers.”
    “The trade deficit increased last month because imports increased more than exports did.”
    Absolutely accurate, undeniable and useless.
    Any attempt to understand the causality behind the headline will involve speculation that is less than perfectly provable.
    Demanding that people only put forward what can be absolutely proved is a sophomoric debating technique designed to shut down opposing viewpoints by requiring them to jump through an impossible hoop. Far more interesting is to put forward your own theory about why these things are happening so that we can debate it.

  48. Posted by scurvy

    “So prices will fall, but very soon the state tax credit will run out. So prices will fall further.”
    The state ran out of money over a month ago for the program. However their “computers” aren’t up yet so they were still accepting applications up until a week or two ago. Now, they’re not accepting applications any longer.

  49. Posted by lyqwyd

    @Skirunman
    “Not everyone gets it and not everyone cares,”
    I didn’t say everyone, I said almost everyone. While you may not care about $8,000 free, and an additional $40K (or more if you can get a higher leverage loan) in purchasing power, most people do care.
    “I also know 5 other friends of mine buying right now that don’t care either.”
    I have 3 friends who recently completed purchases, all were very influenced by the tax credit, and 1 of them was only able to buy because the credit existed.
    “I don’t know what % of loans are FHA in SF, but not many homes sold for $1M in SF right now, but my personal experience with First Republic Bank says you have to have much more liquidity then your 20% down to qualify anyway with high income ratios. $8k tax credit is in the noise IMO for any property > $800k (1% of PP), which is about half the places sold in SF.”
    Per your own posting the median for SFR in July is $783K, and $700K for condos, meaning half the sales are less than that, and you arbitrarily pick $1M and over? And as I pointed out earlier, even though $8K may be 1% of purchase price, with leverage in winds up as 5% increase in buying power, and with FHA at 3.5% down it increases purchasing power by over $200K (Meaning somebody who qualified for $500K FHA loan prior to tax credit qualifies for over $700K loan with the tax credit).
    I think there has been more than ample evidence provided by a number of people in this thread, as well as a preponderance of historical evidence that subsidies affect prices, both in housing and in almost every other imaginable market.
    While it’s true that correlation does not mean causality, with the high level of correlation, basic economic theory, the evidence provided here, and the huge amount of historical evidence that shows subsidies cause price increases, if you think that the tax credit does not have a causal relationship with the prices, it’s incumbent on you to “prove” it.

  50. Posted by Skirunman

    @lyqwyd, I respectively disagree. If someone states a theory as fact it is not the person(s) disagreeing with the theory that must provide the proof. I’m fine if you say this is my theory and why, but to say it is fact without providing a clear causal relationship is disingenuous and misleading. Further, this particular statement of fact still lacks credible data IMO. One month does not make a trend.
    @diemons, sorry, but calling my debating technique sophmoric is sophmoric. Like I said, go ahead and state your theory, but stating it as fact when no reasonable proof has been presented is wrong. In no case was I trying to shutdown a debate with my thoughts, in fact, just the opposite. As I stated earlier, I will wait until all Q3 data is in to make my own theories.

  51. Posted by The Milkshake of Despair

    Maybe this disagreement is simply over the concept of causality. I doubt it even makes sense to say that the credits caused a pull-forward on sales. The system has too many actors and moving parts for a single element to cause a result.
    However it is sensible to say that the credits influenced people’s decisions to buy. I have no doubt about that. Heck, even if $50 P.F.Changs gift cards were given away that would influence decisions, albeit the influence would be a lot less than $10000 freebies.
    True analysis of people’s decisions and what level of influence that credits created is a huge undertaking : this is a very complex process involving thousands of people. Even the raw data would contain a lot of noise and might render the analysis pointless.
    I really don’t know how many sales were pulled forward. 1% ? 3% ? 20% ? Who knows ? Still it does seem naive to think that the credits have no influence.

  52. Posted by lyqwyd

    @skirunman.
    You presented the theory that there is no causal relationship, and you have provided nothing to support your theory.
    I and others have presented the theory that there is a causal relationship, and have provided loads of evidence to support it.

  53. Posted by J

    Gravity – also just a theory…
    Coincidentally, the idea of “what goes up, must come down” is not so popular with some people here…

  54. Posted by sparky-b

    Cosmic Radiation Pressure, believe it.

  55. Posted by Skirunman

    @J, gravity itself is not a theory. Gravity is a scientific law, and in addition, the effects of gravity are measurable as fact, i.e. an apple will fall on your head if dropped from above every single time. What we use in attempt to prove gravity are still theories.

  56. Posted by sparky-b

    An apple will fall on your head when cosmic radiation pushes it down.

  57. Posted by Skirunman

    Yes, my issue is over no data showing causality and the reliance solely on correlation, especially a single data point i.e. the August YOY drop in sales, to prove a belief. Stating, or strongly implying, that the drop in home sales in August was caused by removal of the $8k tax credit is still not known to be true at this time. In fact, even calling this a theory does not hold up to any accepted scientific or mathematical definition of a theory as no rational proof has been given.
    I certainly respect any individual’s right to believe this to be true and act on it in anyway they so choose. I also believe I made it clear what I think, but I also made it very clear that these were simply my own opinions based upon my own experiences and that I was in fact actually withholding any more of my thoughts until more data was available. I did not, and do not, espouse the idea that tax credits had absolutely zero effect on the drop either. I simply don’t have enough data to come to a conclusion either way at this time.
    I believe it is very important to differentiate between fact and belief (or even theory) in decision making, especially when beliefs or theories are based upon small data sets. It can even become quite damaging when beliefs are acted upon as fact, especially when those individuals making decisions can effect a much broader population, such as managers in companies, or even worse, politicians. Logic, set/probability theory, and the scientific method should provide the basis for this understanding.
    @lyqwyd, I’m sorry, but I still disagree with your logic. I believe I showed you used a circular argument in attempt to provide proof that the removal of the tax credit caused the drop in home sales in August YOY. This is probably the most common of the formal logical fallacies used to attempt to prove something to be true.
    Let me give a hypothetical (yes, a ridiculous example) why I feel this is so important, and in fact, such flawed thinking has directly effected the SF housing market:
    All scientific studies show a direct correlation between a decrease in skin cancer incidents and the increase in the body mass index (BMI) of an individual. In fact, you can chart a nice functional relationship between the two. Therefore, being fat reduces your likelihood of getting skin cancer. False conclusion: being skinny causes skin cancer. The FDA promotes a new “food pyramid” with higher intake of fats. This leads to the dangerous outcome, deaths from heart attacks increase more than lives saved from skin cancer. This is the old “law of unintended consequences”. Actual causal relationship, skinny people go to the pool and beach more often and expose more of their skin to the sun (skimpy bathing suits) for long periods of time.
    Of course this is a silly example, but you can find just as many stupid examples in the real world. Politicians and business leaders make decisions everyday using just this flawed logic. In fact, I will claim that much of the SF Rent Ordinances are based upon such flawed logic. One of the unintended consequences actually being a bifurcated rental market leading to actual higher rents for everyone. There are many other examples specific to the housing market, but this post is already too long and this thread has probably run its course, at least for me.

  58. Posted by J

    Falling apples are actually a result of excess inventory(distressed or not), and insufficient demand.
    Gravity is described in modern physics by the General Theory of Relativity, which is still an active area of research.

  59. Posted by Skirunman

    @J, that is a good pun.
    Now I am really done.

  60. Posted by Rillion

    All this silly argument over: “and suggests tax credits have been (temporarily) stimulating the San Francisco market more than some might have thought.” ??
    Come on, if people can’t speculate and even use words indicating that they are speculating (ie, “suggests” over “shows”, “proves”, “indicates”, etc) then we would be reduced to 1-2 threads a day with very boring posts. So please everyone keep up the guessing and don’t give into the irrational calls for having to scientifically prove everything.

  61. Posted by sfrenegade

    I’m with Rillion here. The only goal of the people arguing that it’s improper to “speculate,” “suggest,” “supports,” etc. is to shut down the conversation.

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