S&P/Case-Shiller Index Change: May 2011 (www.SocketSite.com)
According to the May 2011 S&P/Case-Shiller Home Price Index, single-family home prices in the San Francisco MSA increased 1.8% from April ’11 to May ’11, down 38.4% from a peak in May 2006 and down 5.4% year-over-year (YOY), the fifth consecutive month of year-over-year declines but versus a 5.5% year-over-year decline as recorded in April.
For the broader 10-City composite (CSXR), home values increased a nominal 0.7% from April to May, down 32.1% from a June 2006 peak as values fell 3.6% year-over-year.

“We see some seasonal improvements with May’s data,” says David M. Blitzer, Chairman of the Index Committee at S&P Indices. “This is a seasonal period of stronger demand for houses, so monthly price increases are to be expected and were seen in 16 of the 20 cities. The exceptions where prices fell were Detroit, Las Vegas and Tampa. However, 19 of 20 cities saw prices drop over the last 12 months. The concern is that much of the monthly gains are only seasonal.”

“While the monthly data were encouraging, most MSAs and both Composites fared poorly in annual terms. Nineteen of the 20 MSAs and the two Composites posted negative annual growth rates in May 2011. The 10-City Composite was down 3.6% and the 20-City Composite was down 4.5% in May 2011 versus May 2010. Minneapolis posted a double-digit decline in annual rate of 11.7%. The only beacon of hope was Washington D.C. with a +1.3% annual growth rate and a +2.4% monthly increase. We have now seen two consecutive months of generally improving prices; however, we might have a long way to go before we see a real recovery. Sustained increases in home prices over several months and better annual results need to be seen before we can confirm real estate market recovery.”

On a month-over-month basis, prices rose across all three price tiers in the San Francisco MSA for the first time in eleven months. On a year-over-year basis, however, values declined across all three tiers.
S&P/Case-Shiller Index San Francisco Price Tiers: May 2011 (www.SocketSite.com)
The bottom third (under $317,708 at the time of acquisition) increased 1.1% from April to May (down 6.3% YOY); the middle third increased 1.3% from April to May (down 8.6% YOY); and the top third (over $589,634 at the time of acquisition) ticked up 0.9% from April to May, down 4.5% on a year-over-year basis versus 3.9% the month before.
According to the Index, single-family home values for the bottom third of the market in the San Francisco MSA are just above May 2000 levels having fallen 59% from a peak in August 2006, the middle third is just above March 2002 levels having fallen 40% from a peak in May 2006, and the top third has returned to February 2004 levels having fallen 25% from a peak in August 2007.
Condo values in the San Francisco MSA fell 0.5% from April ’11 to May ’11, down 5.4% year-over-year, down 31.6% from a December 2005 peak.
S&P/Case-Shiller Condo Price Changes: May 2011 (www.SocketSite.com
Our 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).
S&P/Case-Shiller: April Seasonal Boost in Home Prices [Standard & Poor’s]
April S&P/Case-Shiller: San Francisco Benefits From A “Seaonal” Kick [SocketSite]
May Case-Shiller: San Francisco Tiers Up But Gains Moderating Atop [SocketSite]
San Francisco’s Condo “Double Dip” Is (Or Was) Here [SocketSite]

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Comments from “Plugged-In” Readers

  1. Posted by lol

    When this crisis started to hit, a safe bet for bears was that prices would drop, might overshoot and then stabilize towards what can be considered a “fair price” that depends on local demand/means that can be symbolized by market rents.
    I for one would have expected a 30-40% drop in prime SF that would make renting less interesting. But what I have seen around me instead in the past 2 years is rents shooting up and a lot of cash snatching quality places in the sales market. The local environment has changed a lot in 3 years.
    Now nationwide that’s another story.
    If DC doesn’t get their acts together we could see interest rates go up which would change some segments of the market. When you see how they have managed to give free money to the airlines with the tax SNAFU, there’s still a small chance they’re going to let the US go into a credit crisis.
    Any meaningful increase in rates will impact prices overall. I am especially concerned about resets. Many people’s finances are sound as long as their interest rates stay low. SF is different, but some people will be impacted.
    But it looks like DC is very aware of the importance of the feedback loop housing has on the economy, as they’re working really hard to maintain the conforming loan limit for 2 more years:
    http://www.housingwire.com/2011/07/22/white-house-to-tackle-housing-reform-after-debt-ceiling-fight
    I hope the crazies will not have their way.

  2. Posted by Narl

    Suddenly, that March 2009 CS value of 117 — the one that the bears at the time were screeching was “nowhere near the bottom” — is getting smaller and smaller in the rear view mirror.

  3. Posted by A.T.

    We’ve gone over many times how ridiculously off-base the early 2009 CSI numbers were. No matter. We’re now at 6 months (and counting) of further YOY price declines at all tiers, and that false March 2009 “low” is not that far away regardless. Anyone who bought in SF in March 2009 and is trying to sell now knows very well that they would be lucky to break even and more likely to take a loss (even before transaction costs). We’ve seen example after example of it here.
    We are, notably, at the 5-year anniversary of the CSI high, and we’re still 38% below that number. I would bet on passing the “low” as far more likely than passing the high within the next 10 years.

  4. Posted by Legacy Dude

    “I hope the crazies will not have their way.”
    Which crazies are you referring to, lol? The crazies who want to stop spending money we don’t have on artifically supporting non-productive assets? Or the crazies who bought real estate in an obvious bubble, and now demand this country go even further into debt to paper over their bad decisions? Just want to make sure I keep my crazies straight.
    “If DC doesn’t get their acts together…”
    Umm…did you not read the article? DC is the only place where home prices are rising. Looks to me like they have their act together pretty well.

  5. Posted by djt

    I was recently surprised to see a house that sold for 1.1 million in 2004 in my area sell for exactly the same amount last week. If they had sold two years ago, the price would have been $900k maximum. In fact, the seller asked under 1 million this time around. Quality properties are desired. I see tons of junk sitting. What is going to change that dynamic?
    Ref. DC and ridiculous spending, I just returned from a visit there and that town is much too rich. It should be a modest town of civil servants and citizen legislators. Instead it is filled with the rich taking their cut lobbying for the rich. The whole thing stinks. It’s shameful.

  6. Posted by lol

    LD,
    It’s pretty clear now that the GOP has been taken over by people who cannot comprehend basic math, or do, but will use their new stance to make people forget they were doing the same thing for 2 terms.
    When you give yourself trillions in tax cuts and vote for debt limit expansion year after year, you have to be pretty hypocritical to come back after the next president pretending you were a budget hawk all along.
    Bush found a surplus. He left with a deficit and a depression. Whatever knee jerk attempt to look white as snow by the GOP is just for show.

  7. Posted by Longtime-Lurker

    A.T. –
    “Anyone who bought in SF in March 2009 and is trying to sell now knows very well that they would be lucky to break even and more likely to take a loss (even before transaction costs). We’ve seen example after example of it here…”
    Not true, and depends entirely on location. We’ve seen examples of both appreciation and depreciation since early ’09 on this very site. If you want to attribute it to the “Brazilification” of America, that’s fine. But the prime SF neighborhoods are doing well, while the outer areas continue to get hit.
    http://www.socketsite.com/archives/2011/04/oh_la_la_as_135_rue_locust_closes_up_14_percent.html

  8. Posted by Legacy Dude

    Interesting comment on hypocrisy, lol. Weren’t you the poster who used to talk about how low real estate prices are good for the economy and society, workforce mobility, and all that? Looks like you’re singing a different tune now that you’ve bought in, although maybe I have you confused with somebody else – I don’t plug in a lot anymore.
    Besides, we don’t need the high conforming limits – see comments above from Lurker and djt. Why does resilient SF real estate need to be subsidized by nationalized zombies? If our market is so strong, and the local population so wealthy, regular banks should be thrilled to make loans here, right?

  9. Posted by EBGuy

    I’m still willing to bet on a new relative low next January (lower than Jan. 2010). That said, I just got back my appraisal (in a prime, at least I’d like to think — right, East Bay location) and was pleasantly surprised. BTW, I locked a 20 year FRM at %4.25. Nothing revolutionary, but it knocks two years off my loan with the same monthly payment. Any feedback appreciated on the rate (have others done better?)

  10. Posted by eddy

    I’d say that actually a fair bet. It seems a bit more pessimistic than what i’m seeing in the market; and things would have to break pretty bad over the next few months to get there. I’d give it a ~35% chance of probability but not likely. So it’s a good bait if anyone wanted to take it, IMO.

  11. Posted by Brahma (incensed renter)

    Like Legacy Dude, I think that S.F. should be an ideal environment for lenders to make nonconforming and jumbo loans going forward without any kind of assistance from the GSEs. If prices toward the top tiers do decline when the limits are returned to normal and mortgage brokers are running around complaining that they can’t close deals due to financing, that’ll be quite telling.
    The socketsite editor likes to link to articles published by bloomberg, so here’s a relevant one from earlier in the month: U.S. Home Prices Poised to Climb as Foreclosures Wane, HUD’s Donovan Says talking about the price level nationally:

    “It’s very unlikely that we will see a significant further decline,” Donovan said yesterday on CNN. “The real question is when will we start to see sustainable increases. Some think it will be as early as the end of this summer or this fall.”
    Home sales have increased in six out of the past nine months …“In the long run, it’s a good time to buy,” Donovan said. “It’s so affordable today compared to where it’s been for generations.”

    So there you have it. “Buy now or be priced out forever” :-)
    And this time for sure, like Bullwinkle J. Moose used to say, because interest rates will only go up, and the lax mortgage lending practices that held sway up until 2008 are over for at least a generation so we won’t get another bubble and crash combination that benefits buyers.
    We’ll see in a few months how good of a forecaster Mr. Donovan is vs. Bob Shiller. I’m betting on the latter.

  12. Posted by lol

    LD,
    I announced my change of tune a bit before I bought fall of last year. After being very active on the market and confronting my ideas with realities for 4 years it was time to look at this market very closely. I was a bull from the mid 90s to 2003, then a bear. I acted accordingly and lucked out a few times and missed out a few other times. Now I am a semi-bull realist still shopping around for depressed assets (though not in SF now). Not all properties will fare well I think. Still amazed at the resilience of some segments of the market.

  13. Posted by ex SF-er

    my reading of the current RE market:
    Not surprising it is doing somewhat better It only took yet another Trillion dollars of Fed support to get it. The Fed support allowed support of equities and commodities… and thus holders of equities/commodities did relatively well since QE2 started. SFers in general hold more equities and commodities than residents of other MSAs, and thus SF RE did relatively well.
    in my opinion this is all noise right now. as I’ve said many times RE is basically political right now. The politics are however shifting strongly against housing.
    Tea Party is for cuts cuts cuts. Repub leaders cannot control them.
    Obama is a center-right and moving further to the right… and thus also for cuts cuts cuts (remember it was O himself who brought Social Security to the table and suggested cuts, something most Repubs wouldnt even dare to touch)
    it is therefore inevitable that we will either have no deal which means technical default on the US debt (remember, it is PHYSICALLY IMPOSSIBLE for the US Government to truly default on its debt, because our debt is in our own currency which we can print at will… this is a manufactured “crisis” engineered to cut Social Security and Medicare). A technical default on US Debt if allowed to go for any period of time will cause chaos in the mortgage market. (do you think people will buy Fannie and Freddie paper, that is backed by the Govt, when TREASURIES are not being honored! hahaha)
    otherwise a deal will be put in place raising the debt ceiling without increasing taxes, and seeing minimal cuts in spending. in this case things will settle down until the next deadline (in a few months if Boehners plan, in 2013 in Reids plan).
    Regardless, the short term euphoria from a deal getting made will be just that… short term. More and more cuts will have to be made. not only that, we have a President and Congress who are aligned… they all believe we need more cuts. the argument is only how much cuts and where. (again, all manufactured. I see no mention of cutting Military spending, or cutting out high priced Halliburton contractors… just Social Workers and what not).
    Thus, it seems a given that Social Security and Medicare will be cut. There are few arguing to save them. (Libs were sold out and don’t seem to have any balls to fight for SS or Medicare… this is the dream come true that Obama has meant to Big Corporations). This cuts will most likely lower aggregate income and increase health cost outlays, reducing aggregate income available for housing. It is a given that further cuts in govt employment will occur as well. Thus again, les aggregate income.
    Forced austerity clearly causes problems for an economy (witness Ireland and Greece and any country that was forced into it by the IMF) and thus looking forward the signs are not good for the US economy. This will require yet more austerity, and you can bet that the mortgage interest rate deduction will very soon be on the table.
    in sum: there are strong political headwinds for RE.
    The saving grace for RE is that the banks are all still quite insolvent and will fail catastrophically if RE fails too quickly, despite all the Govt Welfare given to the Banks that is thousands of times more than aid given to poor people.. Since they have bought almost every major politician, it is a counterbalance to help keep the politicians from directly torpedoing housing/RE.
    I’m happy to be proven wrong.. however I have not ever heard of a country that is being forced into austerity having a robust RE market.
    If someone thinks we are in for a good RE market, then I’d basically ask
    -do you really think we are not headed for austerity?
    and
    -please find me one example of a country forced into austerity that had a robust RE market.
    funny to hear lol talk about a credit crisis. I have been warning for 3 years now that our leaders and Fed are risking a credit crisis. Finally some of the mainstream media are getting the idea.
    we also face depression… similar to what happened in the Great Depression. A downturn for a few years, then mild
    “recovery” and then the worst happened after austerity measures were put into place. (Mellon’s famous “liquidate everything” campaign)

  14. Posted by ex SF-er

    on a side note: I am not suggesting that we should raise our debt ceiling forever, nor that printing away our debt is a panacea or even a good idea. I simply show which way the political winds blow. our economy is now centralized somewhat like communist Russia was… winners and losers chosen by lobbyists in Washington. thus one must watch what they do to try to predict the economy. And this is very difficult to do!
    Unfortunately when it comes to our major issue (bubble deflation and deleveraging): there is no good outcome. this is what happens when you allow a major credit bubble to form. remember, the bubble of the 00’s was not just a housing bubble… it was a credit bubble that artificially raised the prices of everything including housing, student loans, credit card debt, securitized debt, derivatives, equities, commodities, etc.
    there is no easy cure. the cure was to never blow the bubble in the first place. Now what we have to do is minimize damage… just like cancer. the way to treat lung cancer for most people is to never start smoking. Once you have the cancer your options are grim.
    In the post above I am merely suggesting that these current debt talks are Kabuki theater, entirely manufactured for the purpose of terrifying the people into thinking we are “broke” and thus must have austerity now. This is of course ridiculous. One cannot compare the USG to a typical family or household for the simple fact that a household cannot go and print money, whereas the USG can.
    Eventually our leaders will need to get serious about this issue, but there is no reason that time must be Aug 2. And when they are really serious about the debt/deficit then the leaders will bring ALL revenue and outlays to the table including the 15% capital gains income tax, mortgage deduction tax, military spending, subsidies to oil/agriculture, medicare, corporate tax rates, international tax havens, etc.

  15. Posted by Snowball

    Re: “In the post above I am merely suggesting that these current debt talks are Kabuki theater, entirely manufactured for the purpose of terrifying the people into thinking we are “broke” and thus must have austerity now. This is of course ridiculous. One cannot compare the USG to a typical family or household for the simple fact that a household cannot go and print money, whereas the USG can.
    Eventually our leaders will need to get serious about this issue, but there is no reason that time must be Aug 2. And when they are really serious about the debt/deficit then the leaders will bring ALL revenue and outlays to the table including the 15% capital gains income tax, mortgage deduction tax, military spending, subsidies to oil/agriculture, medicare, corporate tax rates, international tax havens, etc”
    Ex-SFer,
    I don’t always agree but your posts are always very thoughtful.
    While The USG can print money at will, don’t you agree there will come a time when our creditors will ask for better terms (higher rates or simply no further credit)? And, should that be true, isn’t austerity inevitable? So, when do we face the music?
    Isn’t that what this Kabuki Theater is about?

  16. Posted by Rillion

    “our economy is now centralized somewhat like communist Russia was… winners and losers chosen by lobbyists in Washington.”
    Total rhetorical overreach. Communist Russia was much more then just the government picking winners and losers, the government controlled all aspects of the official economy and large amounts of the ‘black market’ economy to boot. Like saying 10 is similar to 100 because they both have a one and zero in them.
    Also your statement strongly implies that lobbyists in Washington picking winners and losers is a recent thing (is now) and not something that has been going on since we had a government.

  17. Posted by ex SF-er

    While The USG can print money at will, don’t you agree there will come a time when our creditors will ask for better terms (higher rates or simply no further credit)?
    yes. but that time is nowhere near now. there is theory and there is action. Look at the action. Treasury rates are near historic lows. From a practical manner, a country that owes debt in its own currency can never default. For instance, look at Japan, a country that has had 20+ years of deficits/debt and who has a debt to GDP ratio of > 200% !!!!
    the end game for the US is if/when we lose reserve currency status or if creditors ask us to take out debt denominated in a DIFFERENT currency. (for instance, of the Chinese lent to us in Yuan, and the Germans lent to us in Euros). But for multiple reasons that is not in the SHORT TERM cards. This is the problem that the countries under the Euro have.
    again: so-called printing is not a good thing, nor a cure for everything. And we do need to get govt back in balance. but the people on TV clearly don’t understand how the Govt works when they talk about the owner of the World’s Reserve Currency “not being able to pay back its debt” or when they compare the USG to a household or a company or Greece or Ireland.
    So, when do we face the music?
    I don’t know. That said, I think many of us ARE facing the music. (high unemployment, etc). more will continue to face the music.
    Isn’t that what this Kabuki Theater is about?
    no.
    I guess I’d explain it this way. Let’s pretend that you are a 30 year old smoker. The smoking will kill you in the end. You need to stop smoking. Smoking is not good. do you need to stop smoking by THIS August 2nd? Is it life threatening if you don’t stop smoking NOW? No. it is something that needs to be done as early as possible.
    Likewise, there is nothing special about Aug 2. we can have these debates on Aug 2 or Dec 23 or next July 3. Aug 2 was arbitrarily chosen. it was done to incite fear in the American public so that we demand “change”. And the “change” being offered by both parties is to cut Social Security and Medicare.
    The “change” being offered is NOT to cut the military, to cut big Ag or big Oil subsidies. It is NOT to cut subsidies to the banks (through ZIRP).
    why do you think that is? the concept is called “Disaster Capitalism” or “the Shock Doctrinie” and has been used around the globe successfully. the US now faces it.
    here is something that most people do not know. did you know that the Treasury, AT ANY TIME, can have the US mint create a $1 Trillion dollar coin and deposit it, which would allow it to have $1 Trillion dollars to spend immediately??? (it is called “coin seignorage, and it is 100% legal). This does not add to our debt, because the Treasury is not borrowing the $1T, it is creating it.
    Most people don’t know that. (by design, our leaders manufacturing this crisis don’t want you to know that).
    is it a good idea? arguable. but it is possible.
    I only present it again to teach people that our current debt crisis is completely made up.
    the fed created TRILLIONS of dollars to save the parasitic banking class. now suddenly nothing can be done for Social Security? Laughable.
    all that said: the reason I brought this all up anyway was simply to show that the political winds strongly favor AUSTERITY, and that austerity will likely negatively impact future RE valuations.

  18. Posted by Rillion

    “it was done to incite fear in the American public so that we demand “change”. And the “change” being offered by both parties is to cut Social Security and Medicare.
    The “change” being offered is NOT to cut the military, to cut big Ag or big Oil subsidies.”
    Actually neither bill under consideration right now cuts Social Security or Medicare. Meanwhile the Reid bill in the Senate gets about a trillion in “cuts” from military spending due to the scheduled drawdown in forces in Iraq & Afghanistan. The Reid bill also reportedly has some cuts in farm subsidies, although certainly not enough to really make a dent.

  19. Posted by Brahma (incensed renter)

    Snowball wrote:

    Ex-SFer,
    I don’t always agree but your posts are always very thoughtful.
    While The USG can print money at will, don’t you agree there will come a time when our creditors will ask for better terms (higher rates or simply no further credit)? And, should that be true, isn’t austerity inevitable? So, when do we face the music?

    I also enjoy reading ex SF-er’s comments. Snowball, the scenario you’re describing is not only possible, but highly likely, and not just in theory.
    Recall that very early on in the The Obama administration, the Secretary of the Treasury had to fly to China to essentially kowtow to Chinese Foreign Minister Yang Jiechi for offending them by an offhand comment about currency manipulation during confirmation hearings. A little later, there was another meeting with President Hu Jintao and some other Chinese leaders here. Still later, during the debate over the Patient Protection and Affordable Care Act, The Secretary of the Treasury, The President and The Secretary of State met privately with some Chinese officials, who cross examined them (the Obama administration) on how the U.S. would pay for the costs associated with the proposed legislation without impacting the creditworthiness of the country.
    So if the Chinese almost want us to get a permission slip from them anytime we do something on a long term basis that could just cost the government a lot of money, you can bet that they’d take an immediate and intense interest in any action like “printing money” that affects the safety of their existing investments in treasury bonds. They’ve got us by the short and curly hairs.

  20. Posted by Brahma (incensed renter)

    Re: The Chinese caring a lot about the U.S. debt level and potential to monetize our debt; From the NY Times yesterday, Global Concern Over U.S. Debt Ceiling Disagreement, third ‘graph:

    China, which has the most to lose because it holds the largest amount of Treasuries — at least $1.16 trillion — offered a blistering attack on Washington on Friday, calling for a show of responsibility and an end to the partisan bickering.
    “The ugliest part of the saga is that the well-being of many other countries is also in the impact zone when the donkey and the elephant fight,” the state-run news agency, Xinhua — considered the propaganda arm of the Communist Partysaid in an opinion piece Friday, referring to the standoff between Democrats and Republicans.

    And if you follow the link to Xinhua’s site (the English translation is there, it’s not the original) you can read the final paragraph of the editorial:

    Another ready topic is the United States’ debt addiction. With its debt approximating its annual economic output, it is time for Washington to revisit the time-tested common sense that one should live within one’s means.

    Zing! If you think that the Chinese are going to stand idly by as we print money to get out of debt, or even reduce it significantly, think again.

  21. Posted by NoeValleyJim

    I locked a 20 year FRM at %4.25
    Good job EBGuy. I got a 4.375% 20 year about a year ago, with no points or closing costs. Same as you, I knocked a few years off my mortgage with no increase in the monthly payment.
    —-
    I don’t think the Chinese really have any leverage here. They keep making noises that they are going to reduce their holdings of US Treasuries, but then go and buy them anyway, usually through intermediaries in the offshore banks.
    What choice do they have? As long as they keep generating a trade surplus with the United States, they are going to keep piling up dollars. They have to do something with them. They could convert them to Euros but the EU looks like an even riskier place to invest than the United States. They could convert them to Yen, but as noted above, the Japanese have a much larger overall government debt than the United States. No other currency has the kind of liquidity they need to absorb that amount of cash.
    China has been spending like mad on infrastructure, but they are worried about inflationary pressures and are starting to reach the point of diminishing returns on their investments. They are also investing in projects overseas, mostly notably Africa, to improve their access. But they still keep running into the problem of what to do with all the spare cash they keep generating due to their trade surplus. These projects cannot absorb the vast sums of money their trade surplus generates.
    It is funny, I wrote all this up and started Googling and found this finance professor who wrote up pretty much the same thing as me:
    http://www.businessinsider.com/the-truth-about-chinese-threats-to-dump-us-debt-2011-7
    China can complain but anything they try to actually do would hurt their own economy more than ours. Threats to dump US Treasuries are hollow.

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