Inventory of listed single-family homes, condos, and TICs in San Francisco fell 1.4% over the past two weeks to 1,529 active listings, driven by an uptick in sales activity rather than a slowdown in new listings. Listed inventory levels have increased an average of 5.4% in San Francisco during the same two weeks over the past five years.
Current listed inventory is down 1% on a year-over-year basis, up 12% versus the average of the past five years, and up 45% as compared to an average of 2006 and 2007. The inventory of single-family homes for sale in San Francisco is up 4% on a year-over-year basis to 623 listings while listed condo inventory is down 3% to 906.
The percentage of active listings in San Francisco that have undergone at least one price reduction ticked up two points to 32% as the percentage of active listings that are either already bank owned (85) or seeking a short sale (159) dropped to 16%, up 27% for bank-owned listings but down 22% for short sales on an absolute basis over the past two weeks.
The standard SocketSite Listed Inventory footnote: Keep in mind that our listed inventory count does not include listings in any stage of contract (even those which are simply contingent) nor does it include listings for multi-family properties (unless the units are individually listed).
∙ San Francisco Listed Housing Inventory Update: April 11, 2011 [SocketSite]
Inventory down 6% from 2009 and 1% from 2010. And good (dare I say strong?) sales activity. I don’t see the value in comparing the average over the last 5 years. I think we can all agree that the activity levels and prices of 06/07/08 are not coming back any time soon. Not saying those years and the data are irrelevant, but its certainly less relevant now and going forward to get a sense where the market is headed and where the market is now. I remain surprised at the market activity.
[Editor’s Note: We wouldn’t necessarily equate up with strong, nor are we seeing enough activity to put substantial upward pressure on values (our barometer of hot or strong), but recorded first quarter sales (1,168) were up 3 percent versus 2010 (1,138) and up 40 percent versus 2009 (833), down 37 percent versus 2004 (1,845).
Recorded sales activity in San Francisco was down 1 percent in March.]
I’m surprised too – though it remains to be seen whether inventory will spike this year (like in 2010) or stay flat-ish like many others. That may be decisive.
a lot of money being thrown at tech right now, it may trinkle to real estate, certianly for rents it has.
Sales for April look like they’ll come in a little down for SFRs and a little up for condos/TICs YOY. So I don’t think particularly strong sales are driving inventory levels right now. Things remain slow but certainly not dead.
Care to give us data on that, Paul, or just making things up as usual?
WSJ mentions that 100 billion valuation for Facebook is around the corner. So, wait for SF prices to hit the roof soon.
^ SFwatcher… I have a purely anecdotal observation based on a friend who works in Planning in Palo Alto. Apparently a lot of homes are being snapped up down there right now by tech people who have been sitting on the sidelines, and who are afraid that once Facebook goes public, there will be flood of new money chasing real estate.
Again, this is purely anecdotal, so you can take it with a very large grain of salt.
Certainly a sign of moderate strength.
Totally anecdotal, but I saw more reductions in the 94114 in 10 days than the 2 months preceding that. Maybe sellers are getting more realistic?
One thing for sure: no-one wants to be stuck during the summer. In addition to the slower activity, you have the big 2 unknowns comes fall:
1 – the impact of the end of QE2, if any
2 – FNM and FMC are supposed to lower the jumbo limits from $729,750 to $625,500 on 10/1/11
If I were a seller with a decent offer, I would negotiate instead of waiting for a better buyer to come.
sfrenegade,
You are obviousely not in tech and do not live in SoMa South Beach.
If you were it would be pretty obvious to you, compared to the last 2-3 years. Opportunity is up, and so are rents.
This just got leased today: http://www.paulhwang.com/301_main_31B.html
Lot’s of office space is getting taken up too. I would say the $1.5-2.00 /ft IG office of 18 months ago is $2.50-$3 / ft IG today.
Paul
sfrenegade, I don’t have any hard data any more than Paul does, but all of my friends and associates who are in high tech have remarked to me lately that an awful lot of capital seems to be pouring into the area lately. None of them have any real estate-related angles to work.
Of course anecdotes are no substitute for data. On the other hand, what would someone like Paul who wants to substantiate his claim going to do? Ask John Doerr to post a comment here?
All that said, from the WSJ the other day, In Silicon Valley, Investors Are Jockeying Like It’s 1999 (I originally read this on dead trees, so if you run into the paywall, use the “google the headline first” technique):
Of course that $21.8B figure doesn’t mean that the new money will all end up on The Peninsula or even that a lot will flow into Bay Area real estate in general or S.F. Real Estate in particular.
……… if it looks like a speculative bubble, and it swims like a speculative bubble, and it quacks like a speculative bubble……….
SF is different! We have social media to save us!!
“Lot’s of office space is getting taken up too. I would say the $1.5-2.00 /ft IG office of 18 months ago is $2.50-$3 / ft IG today”
That is accurate. I got the same quote from a commercial broker during the middle of last week.
“If you were it would be pretty obvious to you, compared to the last 2-3 years. Opportunity is up, and so are rents.
This just got leased today: http://www.paulhwang.com/301_main_31B.html“
If you’re to use your outlier as an example, you at least have to tell us what the prior rent was and how the current rent is higher, in addition to giving real examples. Considering what you can get for $10K/month in this city, your new lessor got ripped off.
sfrenegade,
see….bubble talk.
You only have bubble talk, when, well there is the environement for the bubble to form.
I can list everything out (sales and rentals) for you as I have done previousely in other posts but the editor tends to delete everything if I list a bunch of sales and rentals, which I take to mean that he / she doesnt want me to do that.
[anon.ed],
thank you for the confirmation. maybe more importantly explain to sfrenegade why you are looking for office space in SoMa. I do not think he quite understand the current environment.
I’m not. A client is considering renting his live/work space commercially and I wanted to double check that what he wants to get is in keeping with market values. A colleague verified what you said, which is that at least in SOMA, rents have risen about .$50 to $1 a foot pretty recently. Anything under 2 for a decent space is apparently very inexpensive at the moment.
That’s because you quite transparently use SocketSite as a vehicle to promote Paul Hwang, Paul. If you weren’t so shameless about it, the editor wouldn’t delete it.
Anyway, I’m not seeing why commercial real estate is relevant to SocketSite, especially when residential investment usually leads the economy.
Btw, Brahma, that’s down from almost $30B in 2007, but it’s a good start for the local economy. You also have to think about how much of that money was already in the local economy.
Pent up supply appears to be holding steady over the past month. Currently, 1523 homes are in some state of foreclosure (NODs, NOTS, bank owned) in Ess Eff. This is compared to 1522 homes two weeks ago. Standard disclosures about noise in the data; information deemed reliable but not guaranteed.
sfrenegade,
Yeah I am trying to promote Paul Hwang, that’s how we do it in America. I feel like we do an excellent job on the marketing, buy side, sell side and rental side. Socketsite is a good venue to see if our philosphy matches those of prospective clients. We try to answer people’s questions if we can such as in this case:
“Anyway, I’m not seeing why commercial real estate is relevant to SocketSite, especially when residential investment usually leads the economy.”
Socketsite seems to be largely focused on the financial aspects of real estate. Residential real estate is derivative of commercial real estate. If commercial is doing well, that is a good indicator that income and population are doing well (i.e. jobs), that almost always translates to residential.
Sfrenegade, I think you’re being a little overly combative here. Commercial office rents in SOMA are going up, and vacancy going down (supply and demand works its magic). That is evidence of a tech led expansion. That tech expansion is increasing employment locally (at least in that sector). We have a lot of experience with tech expansion and bubbles…and we can see where that’s going.
We can argue alot about how important it is, and how closely connected the price of office space is to the price of residential real estate. But I think ALL that Paul Hwang was really pointing out is that SOMA is getting a bit “bubbly”, and providing some anecdotal evidence backing him up. (the evidence is way beyond anecdotal btw…take a look at commercial real estate reports on price and vacancy for back up..)
Yes, some of the real estate folks on here may self-promote a bit, but I appreciate the data points they provide. Particularly because it is often before the collated data becomes available. With critical reading skills you can learn something.
it does feel like 1999-2000 again in many respects.
The only thing that I’d argue is about the correlation between higher rents boding for higher r/e prices. While at some point, there should be some relationship, generally in larger moves in real estate prices, rents go the opposite way. i.e. in big down markets in real estate, rents go higher for a time. This is why the Owner’s Equivalent Rent component of CPI was so counter to the increases in real estate value and home ownership during the last decade.
Eventually, there obviously has to be a point where higher rents make people lean towards the purchase side of the equation, but at what point?
Separately, on the positive side, household formation is increasing at the fastest rate since 2007- though not sure how much that applies to the Bay Area
nanon,
The pattern I have seen in the last 20 years for SoMa South Beach has been rents and sales going in the same direction with a strong correlation to tech. If you chart VC activity versus rents and sales I think you see at least a 3 standard deviation statistical significance. I haven’t really looked at it in detail, and I could be wrong, but I don’t think so.
“With critical reading skills you can learn something.”
If Paul generally said anything besides useless spin, I’d learn something. It’s rare that he gives an actual data point like the commercial PPSF number above, and I do thank him for that.
However, if we’re going to say things are “bubbly,” as curmudgeon did, what were commercial rents in 1999-2000 and 2007? Are we close?
“at least a 3 standard deviation statistical significance. I haven’t really looked at it in detail, and I could be wrong, but I don’t think so.”
3 standard deviations is a 99.73% confidence interval, which is rather uncommon. I’m not sure there’s enough good data to determine this. If anything, I would guess that real estate lags a little bit.
sfrenegade,
You are welcome.
In the future I will try to reduce the useless spin and increase the data points. Good advice.
my premise is simple: more people + more income = higher rents, higher sales prices.
3 standard deviations
I don’t know what commercial rents are doing – or for that matter residential rents. But I do know that with respect to residential real estate sales, we continue to see results like this:
http://www.redfin.com/CA/San-Francisco/360-Nevada-St-94110/home/1447966
Bernal SFR sold for $749k in 2005 and $620k today (and according to the listing that was the best of four offers).
And this is a neighborhood that is performing better than average in SF. Once again, there are only degrees of bad.
“If you chart VC activity versus rents and sales I think you see at least a 3 standard deviation statistical significance. I haven’t really looked at it in detail, and I could be wrong, but I don’t think so.”
I would have to believe you are wrong here.
Consider that over the past 20 years the price/rent ratio has seen dramatic changes. So if rents and sales are not tightly pairwise correlated, then there is not going to be a tight 3-way correlation between rents, sales and VC funding.
[Editor’s Note: Bay Area Rents Surge, But Housing P/E Ratio Remains Out Of Line.
Or as we wrote in January 2008 back before it was fashionable: “…a return to the historical 24x would either require rents to rise another 60%, property values to fall 37.5%, or a combination of the two.”]
Your premise may be simple, but you are presenting no data.
“more people” -> how many more? Than when?
“more income” -> how much more? Than when?
I can just as easily say “fewer people + less income = lower rents.”
You are also ignoring the very important factor of “much tighter financing = fewer buyers = lower sales prices.”
I.e. supply and demand determines sales prices. Not VC activity or population or incomes.
“Consider that over the past 20 years the price/rent ratio has seen dramatic changes. So if rents and sales are not tightly pairwise correlated, then there is not going to be a tight 3-way correlation between rents, sales and VC funding.”
The more I think about it, the more that 3 standard deviations figure can’t be even close to right. Paul would be lucky to get even 1 standard deviation (66.7% confidence interval). I’m calling this myth busted.
editor edited out my response. I’m not interrested in wasting time arguing whether or not the sky is blue or not.
more people + higher salaries = higher rents and sales prices.
you can post all u want, you wont change my mind.
[Editor’s Note: No editor did any such thing (although we did combine two back-to-back comments which only seemed to be posted separately in an attempt to maximize links).]
I think Paul has been proven to be all wet on this one – asserting unsupported assumptions and clearly disproven correlations with absolutely zero factual information is not the same as saying “the sky is blue.”
I do, however, agree with his statement that “it does feel like 1999-2000 again in many respects” – SF real estate prices are looking an awful lot like 1999-2000, at least getting pretty close. Paul, do you think supply and demand might have some role?
“SF real estate prices are looking an awful lot like 1999-2000, at least getting pretty close”
No, they’re not.
“If you chart VC activity versus rents and sales “I think you see at least a 3 standard deviation statistical significance. I haven’t really looked at it in detail, and I could be wrong, but I don’t think so.”
yeah . . . umm, I can say with 99.7% certainty that people who make comments like the above are talking out their, uhhhh, talking out of their r-squared (I meant “ar–“). But, on the bright side the r-squared of generating commission vs talking out of your r-squared is very high.
Good to know realty seminars now provide a thorough understanding of statistics. They wouldn’t want a realtor to sound like they are just repeating buzzwords without understanding their meaning.
It’s true I’m not a statistician, but I do have 9 years of experience in DOE for large Pharmas as well as many patents. How about you anonymous Socketsite posters?
For what it’s worth, tech employment does appear to be near peaks again:
http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2011/05/04/BUHP1JB97H.DTL&tsp=1
good article, BernalDweler, and exactly what we are talking about here. I think that some bears are willfully ignoring this reality, and the inevitable impact it has on the real estate market.
From the SFgate article:
“Similarly, the report pointed out that while venture capital investments and initial public offerings are both increasing, they remain at fractions of the levels seen in the late 1990s and early 2000s.”
So am I to conclude that within 3 standard deviations home prices and rents are at “fractions of the levels seen in the late 1990s and early 2000s.”?
Even for tech jobs the article shows the following data:
S.F. Silicon Valley
Approx. peak of Q1, 2001 32,800 112,700
Rough ebb of Q1, 2004 17,100 81,600
Q4, 2010 30,700 106,300
Does this look at all like the trajectory of SF housing prices?
No, it doesn’t. Late 2004 was when housing prices skyrocked. What you’ve displayed looks like separate events, first tech boom, then easy credit, that have come and gone. And it looks like they’ve been replaced by newer developments that aren’t necessarily like for like so “lack of IPOs” isn’t necessarily applicable.
Housing prices aren’t going to be linked one to one with employment trends.
The only thing that I would assert from the tech employment trends is that this is potential “wind in the sails”. We had nothing but bad news for years. We continue to have alot of bad news, but this fact IS good news for real estate demand. (even more so, obviously, if these tech companies are successful, and if they have IPO’s that enrich some of their workers).
It’s been stated before that there is a very close correlation between residential rents and employment. But the connection between real estate sales is dependent on many other things, including interest rates, market sentiment, etc.
For those disliking the time lag of Case-Shiller Data ClearCapital just released a repeat sales index composed of data through April.
They show a national double dip. Although SF is not listed in the press release, it’s absence from both the top 15 and bottom 15 markets would seem to place SF between -3.9% and -6.8% Q/Q.
” * Generates the most timely indices in patent pending rolling quarter intervals that compare the most recent four months to the previous three months. The rolling quarters have no fixed start date and can be used to generate indices as data flows in, significantly reducing the multi-month lag time experienced with other indices.
* Includes both fair market and institutional (real estate owned) transactions, giving equal weight to all market transactions and identifying price tiers at a market specific level. By giving equal weight to all transactions the HDI is truly representative of each unique market.
* An address-level cascade results in an index with the most granular, statistically significant market area available.
”
http://www.clearcapital.com/company/MarketReport.cfm?month=May&year=2011
As they claim to have solved some of the geographic granularity issues with Case Shiller this could potentially provide interesting data for SF proper, but they do not appear to be including this level of granularity with their free market reports.
Zillow chimes in also calling a double dip, and analysts basically declaring the tax credits a failure:
“Home values posted the largest decline in the first quarter since late 2008, prompting many economists to push back their estimates of when the housing market will hit a bottom.”
“But the improvements, spurred by federal programs that gave buyers up to $8,000 in tax credits, proved fleeting. Sales collapsed when the credits expired last summer, and prices in many markets have been falling ever since.
While most economists expected sales to decline after tax credits expired, the drag on the market has been greater than many anticipated.”
“Mr. Humphries attributes the “double dip” in those markets, which include Los Angeles, San Francisco and San Diego, to the way in which the tax credit stimulated demand from buyers. When the tax credit went away, markets were left with rising supply from foreclosures but with less demand from buyers.
”
http://online.wsj.com/article/SB10001424052748704810504576309532810406782.html
I’ve learned 3 things from observing the markets over the past few years when it comes to information sources:
The talking heads who never saw this real estate bubble coming cannot be relied upon as valuable sources of information.
Headline news tends to be more of a contrarian perspective on what is likely happening in the real world.
Anyone who cites Zillow as a reliable source of information should be treated as similarly reliable.
🙂
@eddy — I do think that the Case-Shiller index is one of the better ones out there. But it can be useful to look at more timely and finer grained data. Other’s on SS have often complained about the lag and/or wider SF MSA coverage of Case-Shiller.
When looking at the second tier indices it’s useful to look at a few different ones to see how they compare to each other. CoreLogic, ClearCapital and now Zillow have all reported fairly steep declines in recent months.
I’m not sure how index data counts as talking heads though. And a cure for headline bias is to seek out the index data regardless of whether or not it gets picked up by the MSM.
Regarding Zillow, while their Zestimates may be dubious they presumably get the same public records data as other index providers for their historical reports. Although Case Shiller is probably does a much better job of curating the data if you are willing to tolerate the time lag. Which in general, I think the better data is worth the wait.
Corelogic’s release today has a steep, but slightly moderated decline for all houses, with non-distressed properties doing markedly better.
For March SF MSA they show a change of -6.1% vs six months prior compared to -7.44% for Feb Data.
Excluding Distressed they have a gain of 0.81% vs -3.6% for Feb.
Nationally they show prices 4.6% below the previous bottom.
http://www.corelogic.com/uploadedFiles/Pages/About_Us/ResearchTrends/CoreLogic%20HPI%20Monthly%20Marketing%20Data%20March%202011WEB(1).pdf
Interesting debate on the ideal target inflation rate, albeit with a overly complicated web interface.
http://www.economist.com/debate/overview/203
As a readers digest summary and to give some context of scale the debate is between the “traditional” 2% target and a 3-4% target. And they are debating a target, not attempting to predict future inflation.
While noting that central banks may or may not be successful in hitting an inflation target, the difference between 2% and 4% may seem small, but for mortgages in the 4-5% nominal range can greatly change the real rate paid by homeowners.