Just when the financial markets seemed to have recovered from the Great Greek Debacle, the S&P 500 dropped 3.67 percent today stoked by uncertainty over Italy and the stability of the Euro as a whole.
Financial Markets Balk At Vote To Accept Voluntary Writedowns [SocketSite]
U.S. Stocks Fall on Concern About Euro Exit [Bloomberg]

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Comments from “Plugged-In” Readers

  1. Posted by badlydrawnbear

    Don’t worry the [insert tech company name here] IPO will save the SF RE market.
    Don’t worry, all those rich [insert foreign country name here] will save the SF RE market.
    Don’t worry, all those [insert employment sector name here] workers with their obscene salaries will save the SF RE market.

  2. Posted by BillyBalls

    couldn’t agree more. too much funny money running around these days.

  3. Posted by sparky-b

    So I sold a house to somebody with tech IPO money this year.
    I sold a house to a rich foreigner this year.
    Guess I will be selling to a worker with obscene salary next.
    thanks for the heads up.

  4. Posted by A.T.

    Tech IPO guys, foreigners, and tech workers are all still buying homes in SF, of course, as are doctors, lawyers, trustafarians, plumbers, and many others. They’re just collectively buying fewer than last year. By my count, October sales were down YOY by about 7.5%, from 391 to 362. Fewer sales = less demand, leading to lower prices.
    Stock market turmoil has generally not been good for home sales in SF (I lost 6 months of mortgage payments just today, and I’m only about 25% equities these days), but you never know – maybe everyone else cashed out at the peak.

  5. Posted by johnny

    markets are going lower. more deflation to come. could be worse that 2008. europe is imploding. euro is crashing. will impact us at some point. especially if congress is not decisive at Nov month end on budget/fiscal agreement. china will implode next after europe is done or concurrent w/it. china yield curve is inverted. bad sign. san francisco real estate cannot avoid market realities. luxury real estate is going lower. if you’re a buyer and can wait, you should wait. if you are a seller, you should sell now.

  6. Posted by dontgetit

    Agree with johnny. Forces seem to be “confluencing” to take the financial markets lower and perhaps back to 2008. But SF real estate did not tank last time, so is there a reason it will now?

  7. Posted by sparky-b

    That is what I was gonna say, It (the luxury market) didn’t tank last time so I don’t think it will tank now either.
    Plus all the deflation makes Alt-A more All-Awesome.

  8. Posted by BillyBalls

    dontgetit –
    1) per 2008 case shiller, sf didn’t tank, but certainly wasn’t isolated from the downward trend.
    2) my thesis would be the following; we’re still deleveraging the inflated prices of the early 2000s.
    There is some new demand driven by new industry, tech biotech etc… but not enough of that, in my opinion, to drive prices upwards.

  9. Posted by johnny

    nope. w/china’s inverted curve and the implosion in europe, these negative/deflationary forces will even wash up on the shores of san francisco luxury real estate – all in the fullness of time -find a real estate advisor/agent that is sophisticated on these topics.
    prediction: a $20 million property today will be $15 million at best w/in 2 years. $7.5 million will be $4.5 million.
    the biotech/tech ipos you refer to will not occur at prices anticipated and the ipos that have occurred will be underwater by time 6 month restriction expires.
    just watch…luxury real estate in SF is going Lower.

  10. Posted by tipster

    Compare pent up demand in 2007 to pent up demand now. That should give you and idea of what is to come.
    However, never under estimate the government’s desire and ability to spread out the decline

  11. Posted by kg

    Wow. Wishful thinking much?

  12. Posted by Been there

    @ Johnny
    I disagree the yield curve I see in China is positively sloped.
    1 yr yield = .88
    5 yr = 1.88
    10 yr. = 2.40
    I admit the 3 mo- 6 mo is inverted, but the muti point curve is positive.
    The FX non deliverable forward curve for the yuan has been inverted for a while.
    Also , the point about IPO money isn’t that speculators buying groupon, linked in, etc. on the firs day of trading have made or lost money. The point is that employees/ insiders/ private round investors with low priced vested shares will have new found money after the unlock date, if not before. Funny money. Will this help create new buyers? Perhaps only a little. Also recall that the private exchanges have allowed some to exit with new wealth prior to an IPO.

  13. Posted by R

    In case nobody was paying attention, S&P 500 closed up for the week.

  14. Posted by anon.ed

    Oh, they were all paying attention. But yeah, decent economic news equals crickets here. Nice one, R.

  15. Posted by Brahma (incensed renter)

    The S&P500 might have closed up for the week, but it still is down 7.2% from the first week of May, so that probably explains the lack of cheers around here. Also, the Veterans Day Holiday probably had an effect on folks’ attention even if most trading was still taking place.

  16. Posted by R

    Yes Brahma. But this post wasn’t about the S&P being down in the last six months. It was about the S&P dropping on Wednesday. Which it very quickly recovered from.
    I just question why [SocketSite] sees the need to throw in these ‘stock market plummeted X% today’ from time to time (and very rarely, if ever, posting the opposite), when it has at best a very tenuous relationship to SF real estate, which this blog is supposedly about.

  17. Posted by SocketSite

    I just question why [SocketSite] sees the need to throw in these ‘stock market plummeted X% today’ from time to time (and very rarely, if ever, posting the opposite), when it has at best a very tenuous relationship to SF real estate, which this blog is supposedly about.
    That’s right, it’s been almost two weeks since we last never pointed out the opposite (which we never, ever, do). And yes, we do see correlation between the S&P 500 and the San Francisco real estate market, especially with respect to activity in the over million and second home segments of the market.

  18. Posted by tc_sf

    A real point here is to question the direct causality this post and the media in general draws between the stock market performance and how the european debt crisis is going. If you look at the bond yields of some of the troubled countries vs the S&P the correlation is a bit hit or miss day to day. Over a longer period, the S&P is higher then a month ago, yet the yields speak to the crisis being worse.
    Not to say that a messy end of the euro issue won’t hit the US, but I’m always a bit skeptical of headlines that imply the market did ‘X’ because of ‘Y’. Specifically as I mentioned before it seems likely to me that the increasing trouble in the larger italian and spanish economies will trigger capital flight into other non-euro assets.

  19. Posted by tc_sf

    Such as today. Equities up slightly, but yields worsened. Seems hard for France to pitch into a rescue loan at 3.5% when their 10-year just is just a tad under 3.7%!!

  20. Posted by johnny

    equities down
    euro down
    lux real estate down
    china exposed as massive economic fraud in fullness of time

  21. Posted by Brahma (incensed renter)

    tc, sure. But we’re in for a long, hard slog from here. From CNBC.com, European Debt Crisis: You Haven’t Seen Anything Yet:

    Though the daily market gyrations might indicate otherwise, realization is beginning to creep in that the European debt crisis and its effect on the U.S. will not take days, weeks or months to unwind–but years…a common range bandied about among investment experts is two to five.
    That prolonged time frame — which entails the period it will take to reduce government spending, come up with workable debt repayment plans, and, most likely, witness the contagion that will follow —means that the market tumult that the crisis has brought also won’t be going away anytime soon, either.

    Frankly, having major equity market indices here go up or down ± 3% pretty much daily on the news coming out of of Europe is going to get irritating pretty quick. I agree that it “seems likely that the increasing trouble in the larger Italian and Spanish economies will trigger capital flight into other non-euro assets”, so the overpriced treasuries that everybody keeps talking about staying away from are actually a good buy in the medium term.

  22. Posted by R

    “And yes, we do see correlation between the S&P 500 and the San Francisco real estate market, especially with respect to activity in the over million and second home segments of the market.”
    You see a correlation in SF real estate based on daily ups and downs of the S&P? Wow, you must really dig deep into the data.
    I’m not arguing that longer term trends in markets certainly affect real estate, but daily bounces?
    And, let’s not forget this or this or this or this or this or this or this. All in the last year and a half, where the S&P sits up 5-10% in that time period.
    [Editor’s Note: Our bad. We didn’t understand that when you wrote trends in the financial markets offer “at best a very tenuous relationship to SF real estate” you actually meant “trends in markets certainly affect real estate.”]

  23. Posted by sfrenegade

    “I’m not arguing that longer term trends in markets certainly affect real estate, but daily bounces?”
    Volatility might, as Brahma suggested. My impression is that the editor only flags the largest daily bounces, and they happen to be in times of relatively high volatility, which is no coincidence.

  24. Posted by tc_sf

    “But we’re in for a long, hard slog from here.”
    Any end to the euro crisis that keeps everyone in the euro will probably be long and slow. If the end involves either a euro exit or per-country revaluation it seems that would have to be sudden and “unexpected”.
    On the chinese note the Atlantic claims that chinese immigration is going in reverse (i.e. back to china):
    “Historically, over 50 percent of the people who came here in the first half of the 20th century left. In the second half, the return migration slowed down to 25, 30 percent. But today, when we talk about China, what you’re actually seeing is more people going back … This may still be a trickle, in terms of our data being able to capture it—there’s always going to be a lag time of a couple of years—but with the combination of bad labor conditions in the U.S. and sustained or better conditions back in China, increasing numbers of people will go home.”
    http://www.theatlantic.com/magazine/archive/2011/12/the-end-of-chinatown/8732/

  25. Posted by A.T.

    Editor, we’re still waiting for that positive story on the strength of the stock markets.
    Well, at least treasuries continue their impressive rally . . .

  26. Posted by sparky-b

    Is it the same to say ‘I am for lower real estate costs, it helps the economy so it’s not schadenfreude’, as it is to say ‘I am rooting for the stock market to tank so people can buy stocks low’?

  27. Posted by Legacy Dude

    Sparky, as your realtor friends have repeatedly told us, you can’t live in a stock! Nobody has to own stocks, but we all have to live somewhere…

  28. Posted by sparky-b

    You can’t rent your 401K or your IRA.

  29. Posted by R

    [Editor’s Note: Our bad. We didn’t understand that when you wrote trends in the financial markets offer “at best a very tenuous relationship to SF real estate” you actually meant “trends in markets certainly affect real estate.”]
    No, I said daily ups and downs have a tenuous relationship, arguing against your little daily dose. I’ve never (and will never) argue that longer term (six months, year, multiple years) have no relationship.
    One day is not a trend.

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