March 30, 2011
San Francisco’s Condo "Double Dip" Is (Or Was) Here
According to yesterday's S&P/Case-Shiller report, the index for San Francisco MSA condo values has officially "double dipped," falling to 134.59 in January versus a localized low of 135.79 in March 2009 and after having ticked up to 149.49 this past July. The index is now back to between December 2002 and January 2003 values.
At 133.37, the aggregate San Francisco MSA single-family home index remains 13 percent above its localized low of 117.77 in March 2009 while the index for the top third of properties, as defined by original purchase price, is currently 6 percent higher than its March 2009 level of 133.23 versus 13 percent higher last May (150.07).
With respect to a recent uptick in condo sales volume which some might characterize as "hot," keep in mind that it’s being driven in part by a downtick in values, which to those who own the properties might be considered to be more of a "not" (quite so hot).
First Published: March 30, 2011 11:15 AM
Comments from "Plugged In" Readers
It's about d*mn time that the condo index double dipped. I can't wait until the sfh index double dips as well, but it's probably going to take some time. Still, great news on the condo front to be sure.
Posted by: El Bombero at March 30, 2011 11:58 AM
Excellent - it's here - now the gloom and doomers, the bears and everyone sitting on their hands instead of jumping into the market can start talking about the "triple dip" and other reasons to do nothing.
Posted by: [bubblesurfer] at March 30, 2011 1:58 PM
I prefer to not attempt catching falling knives.
Posted by: lyqwyd at March 30, 2011 2:09 PM
Bubblesurfer, it's generally considered sound policy to buy investments while they are rising in value, not falling. As for "doing nothing," I wish there were a way to short SF housing but I can't think of any.
Posted by: A.T. at March 30, 2011 2:14 PM
I remember March 2009, there were nothing but crap on the market, even my agent said so. The listing was littered with contractor specials, tear-downs, and properties with long-term tenants. Future sellers were holding on to inventory because of the market. Any decent house that was not crap, or rather, less crappy than others would get a ton of traffic.
What I know is that if you bought at the bottom you most likely bought crap, but you got a good deal.
Posted by: Samuel at March 30, 2011 2:19 PM
I never understand the commenters who are like bubblesurfer who try to put weird characterizations and motivations on people they don't know or try to make bizarre black and white proclamations without context. Don't feed the trolls.
Posted by: sfrenegade at March 30, 2011 2:39 PM
@AT -- CME trades Case Shiller futures and options including ones based on SF MSA. But they are very thinly traded and not necessarily ready for prime time.
[Editor's Note: They're Betting Against Us (San Francisco) On The CME.]
Posted by: tc_sf at March 30, 2011 2:55 PM
What constitutes a "dip?" The March '09 dip is pretty clear, and we've gone below that this past January. But what about the depression in the first quarter of 2010? Why isn't that also considered a dip?
Posted by: joh at March 30, 2011 2:57 PM
I think it's also considered a dip, but not a "double dip" as it didn't go lower than the previous dip's (March '09) bottom.
Posted by: lyqwyd at March 30, 2011 3:08 PM
According to the graph, isn't it triple dip?
Posted by: John at March 30, 2011 3:08 PM
"now the gloom and doomers, the bears and everyone sitting on their hands instead of jumping into the market can start talking about the "triple dip" and other reasons to do nothing."
if you like to waste money by over paying, go ahead and buy.
the folks that waited made a good decision. the only reason i can think that you'd want people to buy is that misery loves company.
Posted by: * at March 30, 2011 3:49 PM
Misery also likes their commissions and sales volume has been dropping like a rock. That always happens before the next big drop in price. Although prices ticked up a little when interest rates shot up, and that takes a while to ripple through the stats, it didn't last.
Posted by: tipster at March 30, 2011 5:22 PM
"Misery also likes their commissions and sales volume has been dropping like a rock. That always happens before the next big drop in price. Although prices ticked up a little when interest rates shot up, and that takes a while to ripple through the stats, it didn't last."
You're by and large completely detached from reality these days, aren't you?
Posted by: [anon.ed] at March 30, 2011 8:19 PM
Oops, wasn't done. anyway.
agree with john insofar as those who bought at the bottom were smart to wait. at this point though, so many prices are so insanely low that I almost feel that you should base your buying process more around getting a mortgage than anything else. mortgages are going to be a lot harder to come by than a cheap house.
Posted by: MH for Movoto at March 31, 2011 10:52 AM
According to redfin, there were only 45 sales in SF for SFRs, condos and townhouses last week. Do I have that right? It has dropped so far and so fast, that I worry I am making a mistake in my search. We've been running an average of about 100 sales per week for the prior 12 weeks, so that 45 just seems ridiculously low. It's worse if you consider the 12 weeks were what are usually some of the slowest.
If its true that sales are screeching to nearly a complete halt (I must be doing something wrong, they can't be this bad - if anyone wants to correct me, I'm all ears), that's typically a huge sign that prices are about to take a big tumble.
Condos and SFRs are both in the same boat: sales volume about half of the prior average weekly volume of the last 12 weeks. I saw it slowing down a week ago, but this seems almost ridiculous.
Posted by: tipster at March 31, 2011 11:15 AM
The last time you quoted Redfin you were way off. And I am tired of wasting my time to confirm that you're misrepresenting things once again. A neighborhood association won't allow. This condo, which last sold as a 3-unit, versus this SFR. This number is this, when it's not. This article says that, when it doesn't. That sort of stuff. Always false, and since when is week over week valid in the first place?
Posted by: [anon.ed] at March 31, 2011 12:03 PM
^So that means it's true.
Look out below!
Posted by: tipster at March 31, 2011 12:12 PM
No. It means nearly everything you say is a lie or a mistake.
Today it's "Week over week! Look out below!"
Posted by: [anon.ed] at March 31, 2011 12:18 PM
@anon -- Note that Redfin's definition of San Francisco includes part of Daily City. So you may need to manually pick out three or four sales in Daily City to have your results match tipsters.
Posted by: tc_sf at March 31, 2011 2:35 PM
I just checked redfin and it said 56 sales in the last week. So that is 11 sales in the last 6 hours. Might as well forget about any double dip at the rate of almost 2 sales an hour there is going to be another bubble in a few weeks. Buy now or be priced out forever.
Posted by: sparky-b at March 31, 2011 4:08 PM
77 new listings in the past 24 hours. That means more is coming on in one day than is selling in a week!
Posted by: tipster at March 31, 2011 9:54 PM
"I almost feel that you should base your buying process more around getting a mortgage than anything else. mortgages are going to be a lot harder to come by than a cheap house."
Another variant of the discredited "buy now or be priced out forever" meme.
If mortgage terms become more restrictive so that people cannot afford houses then the price of houses will fall until they can afford them under the new terms.
In the long run, houses can never be more expensive than the inhabitants can afford to pay.
Posted by: diemos at March 31, 2011 10:41 PM
And yet, diemos, we had a four-to-six year period not too long ago where houses could sell and were selling for significantly more than a solid majority of inhabitants could afford to pay. So that leaves a two possibilities for the future other than the one you identified:
•mortgage terms will not become so restrictive so that people cannot afford houses and therefore the price of houses will not fall significantly
•mortgage terms become more restrictive so that most working people cannot afford houses, which promotes most new homes and existing housing stock to be purchased by investors and landlords who rent them out to a downtrodden nation of renters, akin to what the situation in the U.S. was like before the advent of the long-term self amortizing mortgage and certainly the mortgage securitization market. Since demand from owner/occupiers will be replaced by demand from members of the rentier class looking to turn their priced-out neighbors into a stream of mortgage-payment-makers-by-proxy, then the price of houses does not have to fall.
I'm sure there are at least a few other scenarios that are just as likely as a wholesale, secular long term decline in housing prices.
Posted by: Brahma (incensed renter) at March 31, 2011 11:02 PM
Excellent point about the effect of investor activity, Brahma. Of course, smart, rational investors are not going to pay more than they can receive in rents, so prices would continue to drop until at least that point.
. . . which brings up another point about mortgage support/subsidies. Throughout world history it has been less expensive to own than rent. That is how landlords make money and were it otherwise nobody would become a landlord. This includes SF until the '00s when, like the rest of the U.S., the housing bubble turned things upside down. The "barrier to entry" for would-be buyers was the steep down payment, and there was a catch-22 in that it was difficult to save the down payment while you were paying the renter premium and thus unable to save as much. So the GSE mortgage products and similar innovations were designed, in part, to allow those qualified buyers who could afford the monthly payments to own and avoid the renter premium. Makes financial sense - encouraging smart wealth-building behavior. But then this got twisted into supporting home ownership simply for the sake of home ownership, even in the nonsensical circumstance where owning cost MORE than renting (who would be so foolish?). Let's get the programs back to the original point which is to encourage home ownership where it is financially sensible but not where it results in a foolish "owner premium."
Posted by: A.T. at April 1, 2011 4:50 AM
"we had a four-to-six year period not too long ago where houses could sell and were selling for significantly more than a solid majority of inhabitants could afford to pay."
Oh, everyone who bought during that period could afford it. At least for the teaser rate period. Or the negative amortization period.
Just not to the point where they would be able to one day pay off the loan.
Posted by: diemos at April 1, 2011 6:26 AM
"Oh, everyone who bought during that period could afford it. At least for the teaser rate period. Or the negative amortization period."
Huh. "Afford," really? That's a new one for a bear to say on here.
Posted by: [anon.ed] at April 1, 2011 8:01 AM
"Shouldn't people be focusing on whether the people who bought the properties can afford to live there?"
Although I think there may be a cognitive problem as I use the old definition of affordable rather than the new.
Affordable (old): Having sufficient income, barring job loss or illness, to make regular monthly fixed payments for 30 years until the loan is payed off and the house is owned.
Affordable (new): Having sufficient income, barring job loss or illness, to barely make the teaser rate payment while subsisting on ramen noodles.
Which leads to my own personal dilemma, that I can easily afford(new) to buy a place in SF I just can't afford(old) it.
"And whether or not they are happy living there?"
As mom always said, "All that matters is that you're happy."
And in the past several years millions of people in the central valley, inland empire, vegas, phoenix, florida, NoVa, Maryland have been VERY happy with their house, ecstatic even. They would laugh and sing. Oh, how they would laugh and sing.
And then their payment reset. And they discovered that they couldn't make the new payment and couldn't sell or refinance because they were upside-down on their loan ... and now they are very UNhappy.
Posted by: diemos at November 26, 2007 5:08 PM
Posted by: diemos at April 1, 2011 9:23 AM
OK, ha. I stand corrected and nice touch with the ramen noodles.
Posted by: [anon.ed] at April 1, 2011 9:31 AM
Some of us that bought can afford our places under the old standard. We still may default eventually if the market doesn't come up by at least 25% from where it is today in the next 6 years.
Posted by: Rillion at April 1, 2011 9:42 AM
i can't believe Case Shiller still sparks an arguement about the CITY of SF.
not to mention that this is OLD data. firstly, January sales are reflective of Nov/Dec contracts.
So woop de doo - we have the "triple dip", or each period early in the year - reflective of late in the year contracts - being lower than the rest of the year. Looked at another way, we also have a double top, and that means a triple top is on it's way..... as in prices going up the rest of the year - not down.
so i agree with [anon.ed] - this report and most of the commenters are not in touch with the market - just joyous over old mostly not the City data.
Posted by: hangemhi at April 1, 2011 11:56 AM
"not to mention that this is OLD data"
The CS data release has always been delayed by the same amount.
I believe CoreLogic has less of a delay, but in my opinion is not as good as CS.
Note that, while thinly traded, the CS SF futures closed at:
May 11 130.6
Aug 11 128.6
Posted by: tc_sf at April 1, 2011 12:38 PM