October 15, 2012
San Francisco Home Sales Slip Seasonally But Spike Year-Over-Year
Recorded home sales volume in San Francisco rose 23.3% on a year-over-year basis last month (492 recorded sales in September 2012 versus 399 sales in September 2011) but fell 21.3% as compared to the month prior, twice the average August to September seasonal drop of 9.8% recorded over the past eight years.
An average of 532 San Francisco homes have sold in September since 2004 when recorded sales volume hit at 763. And while sales volume in San Francisco this past August was the strongest since 2006, September sales volume was eight percent less than in 2009.
San Francisco's median sales price in September was $745,000, up 21.4% on a year-over-year basis, up 6.4% as compared to August.
For the greater Bay Area, recorded sales volume in September was up 1.5% on a year-over-year basis, down 20.2% from the month prior (6,850 recorded sales in September '12 versus 6,749 in September ’11 and 8,579 in August '12) with a recorded median sales price which was up 17.5% year-over-year, up 4.6% month-over-month.
An August-to-September sales decline is normal for the season, although last month’s drop was exaggerated because the month started and ended with a weekend and had fewer business days. Sales for the month of September have varied from 5,014 in 2007 to 13,343 in 2003, while the average for all months of September since 1988, when DataQuick’s statistics start, is 8,572.
Home flipping has picked up this year. The number of Bay Area homes that sold twice on the open market within a six-month period rose to 3.9 percent of all homes sold in September. That was up from a flipping rate of 3.6 percent in August and up from 2.7 percent a year earlier.
At the extremes, San Francisco recorded the greatest increase in Bay Area sales volume while Solano recorded an 11.4% decrease (a loss of 69 transactions) on a 2.6% increase in median sales price, the lowest in the Bay Area. The median sales price increased 27.0% in Contra Costa with a nominal 0.6% increase in sales volume.
As always, keep in mind that DataQuick reports recorded sales which not only includes activity in new developments, but contracts that were signed ("sold") many months or even years prior and are just now closing escrow (or being recorded).
∙ Bay Area Median Highest in Four Years [DQNews]
∙ August San Francisco Home Sales Highest Since 2006 [SocketSite]
∙ Medians Are Up, But Don’t Confuse That With Increasing "Prices" [SocketSite]
First Published: October 15, 2012 11:00 AM
Comments from "Plugged In" Readers
I hope seasonality will cool off this market a bit this winter. These price increases are starting to look like "too much too fast".
Posted by: lol at October 15, 2012 12:47 PM
All the bears are gone.
Posted by: unwarrantedinlaw at October 15, 2012 4:08 PM
^^^ Can we consider this to be a bearish signal? ;)
Posted by: lol at October 15, 2012 4:22 PM
"All the bears are gone."
Can we quote Debbie Gibson?: "Only In My Dreams"
Posted by: GoodBuyBadTimes at October 15, 2012 4:24 PM
The market is going to do what the market is going to do. I'm in agreement that the too much too fast sensation does appear to be in effect. But what are you going to do? The market could easily cool off and the bears will come out of hibernation. The problem with these mini cycles is that the long term trends gets obfuscated. But the bear argument still has some legs. I still think that the growth in SF SFH will largely be stable / flat in the 2009-2019 decade with some ups and downs depending on when exactly you got on the roller coaster ride. Late 09 and 2010 buyers may do ok; late 11/12 buyers could struggle. My advice: be smart and buy the best home at the lowest price possible and stay there for more than 6 years. Or rent. Or don't complain if you pay a premium and take a loss in 36 months.
Posted by: eddy at October 15, 2012 6:31 PM
A lot will depend on who gets elected and whether or not he has a mandate.
Romney could do a combination of tax cuts / spending cuts and we would be back to the Bush years of trickle-down voodoo without the massive debt inflation part. Good luck with that.
Obama would continue his current policy. Tepid growth with rock bottom rates for another couple of years, moderate RE recovery overall with pockets of strength. Not very exciting or radical. A bit boring and vanilla, but compared with 2009 vanilla sounds pretty good.
Either way, we will probably go on recovering. Who will benefit most will be the big difference. For SF, we'll probably keep on being on the good side of the recovery.
Posted by: lol at October 15, 2012 11:56 PM
The Presidential election will have next to no impact on the housing market.
Posted by: Helmut at October 16, 2012 10:08 AM
^ I tend to agree.
Posted by: eddy at October 16, 2012 11:22 AM
Re the seasonality, comparisons with 2009 - looking at sales in isloation is very misleading given the differing inventory positions that existed then and now.
In fact, around 2009 bears repeatedly said that it was inventory expressed as months of sales that was the key indicator. A view much less expressed now!
It would be really, really useful to see an update of the inventory chart though, used to be bi-monthly but was stopped around the time inventory started its rapid decline.
Also, not sure what the purpose of linking the third link 'medians are up. but don't confuse that with rising prices' is.
Is that claim really that prices currently aren'r rising?
It would appear to be, but mix would have to have changed drastically to explain a 21% increase in prices!
Posted by: REpornaddict at October 16, 2012 1:59 PM
Well, I disagree.
1 ) What would happen to the housing market if rates were at 7% and inflation at 5%? same thing with 3% and 2%? 15% and 12%?
2 ) Also, regulation does matter a lot. Re: the 2002-2007 bubble: credit supply due to lack of oversight over the packaging of mortgages into CDOs. Lack of lending standards on the other end with deadbeats borrowing 500K with fake income.
Those 2 elements alone are a direct consequence of Government policy.
And what if the government decides to stop saving banks who get overextended? This would force these banks to be more cautious.
Posted by: lol at October 16, 2012 2:01 PM
The Presidential election will have next to no impact on the housing market.
Here's your scenario for the presidential election having a significant effect on the housing market.
Romney gets elected and dies one way or another during the first year in office. Paul Ryan, a known acolyte of Ayn Rand, becomes the 46th president of the U.S..
President Ryan sends Ben Bernanke back to academia when his term is up in 2014, and nominates a fire-breathing hard money advocate, inflation hawk and failed U.S. Senatorial candidate from Connecticut named Peter Schiff to be Chairman of the Board of Governors of the Federal Reserve System. Ryan follows up this nomination by filling the other seats on the Board of Governors with similar-thinking advocates of Austrian economics or Objectivism, or both.
After giving a speech to the commonwealth club decrying the Bernanke-era Fed's easy money policies and rounds of quantitative easing as "inevitably leading to massive inflation", even though the CPI had never been above 2.5% in the preceding eight years, Ryan and Schiff convince congress to pass legislation returning the U.S. to the gold standard.
Do I really need to spell out what happens next? The entire U.S. economy, including the housing market, becomes subject to the vicissitudes of the gold index.
The price of gold spikes rapidly due to increased demand, and the Fed then has to raise interest rates in response, which leads to overwhelmingly tighter credit. The mortgage market tanks due to lack of demand, because lenders aren't approving anybody for a mortgage except full members of the top 1% with a FICO score of 790 or above. Sellers stop being able to sell except to well-heeled buyers, and the median price level rapidly declines.
Of course, this initiates a recession. And when the economy is contacting, the price of gold increases due to increased demand. So the Fed winds up tightening credit just when people need credit most. This produces a deflationary spiral stronger and longer lasting than any in U.S. economic history that drives the economy even deeper into recession.
By 2016, The C/S index has dropped 60% since 2012. That would constitute a significant impact.
Posted by: Brahma (incensed renter) at October 16, 2012 4:43 PM
If Romney> if Romney dies > then Ryan > then Ryan has the clout to follow through on everything he has said?
Posted by: Ano.0n at October 16, 2012 5:28 PM
Obama crushed Romney tonight, and fortunately, Brahma's nightmare will remain dystopian fantasy.
Posted by: Dan at October 16, 2012 10:01 PM
Brahama sounds like Glenn Beck. A bunch of wild conjecture built on the foundation of some unlikely premise.
Posted by: taco taco at October 16, 2012 10:36 PM
Brahma's comment was funny. Not sure how sarcastic humor with an economic slant missed the mark with the hecklers. Oh well, I laughed out loud myself.
Posted by: hangemhi at October 16, 2012 11:09 PM
Do you think GWB's 2 terms had nothing to do with the housing bubble?
When confronted with a recession in 1990-1991 we licked our wounds, shed some extra weight, went through a jobless recovery then really came back strong. For housing, the 1991-1997 years were pretty underwhelming, even as the economy recovered. Housing trailed the economy by 2 years.
GWB did something else in 2002: he attempted to get us out of the bubble by propelling the housing market sky-high. Housing led the economy through fake growth.
Yes, presidents and their policies DO HAVE a major influence over the housing markets. Looking back only 10 years shows that. But our memories are very short.
We just can't guess what these differences will be 4 years from now and whether we will realize it or not. After all, everyone cheered GWB in 2002-2004 when he allowed more people to purchase/refi/cash out... It's his legacy.
Posted by: lol at October 17, 2012 9:56 AM
I'm going to put the sarcasm and satire of my previous post aside for a minute.
My answer is that I can't point to a specific one or two of dubya's executive branch policies that contributed all that much to the housing bubble, even though it happened on his watch.
I think most of the heavy lifting on the front came from the Alan Greenspan (another acolyte of Ayn Rand, btw) —era Federal Reserve. They held interest rates a little too low for a little too long, and that provided more than enough catalyst for the bubble to start expanding. You're of course correct that this was in response to the jobless recovery from the previous recession.
The Fed isn't directly under executive branch control.
The "originate to distribute" model of mortgage lending was well under way before W was elected, but of course it really took off when he was in office.
I also can't point to a single executive branch policy that lead to the absurd amount of demand for home mortgages to be securitized, to the point where anyone with a pulse could get a several hundred thousand dollar loan. I don't see how W's policies contributed to banks running out of actual mortgages to the point where they were re-securitizing already securitized loans.
By the time Fannie and Freddie started delving into subprime, the bubble was already well developed, and of course those two firms weren't directly under executive branch control.
I agree with you that housing led the economy into a somewhat recovered state via what Austrian economists call "malinvestment"; I also agree that Bush did a lot of cheerleading by saying in public that cash-out refinances, HELOCs and reverse mortgages were good for American consumers. I don't see that rhetoric having much of an effect, however.
So I'd love to be corrected if someone has a concrete Bush-era policy that contributed to the bubble (the tax cuts?). I don't see it.
Posted by: Brahma (incensed renter) at October 17, 2012 2:28 PM
True, tax cuts come to mind when thinking of secondary causes created under W.
2 ways the tax cuts played a direct or indirect role:
1 - Increased liquidity caused accelerated demand on the high end. People were skittish to put all their fresh new tax cut money into the stock market.
2 - The tax cuts had to be financed (especially at a time of war) and a housing bubble was a very convenient way to collect more taxes.
W also embraced deregulation enacted right before he came to power. Along with Buddy Greenspan they watched as the bubble formed. This bubble was convenient and they did nothing to stop it, both cheering it or throwing more fuel on it.
But Greenspan wouldn't have acted the way he did if he hadn't had approval from all higher levels of government. It was general policy on the top of deregulation that mostly caused this bubble.
Posted by: lol at October 17, 2012 2:57 PM
The housing bubble's seeds were planted long before GWB, although he certainly helped it grow.
Repubs and Dems are both doing their best to re blow a bubble.
Nothing of any great importance will be different whether Romney or Obama wins. We will have unnecessary wars, an unstable economy based on failing policies, high unemployment, skyrocketing debt and deficit, and continued destruction of the middle class.
Neither party is looking out for you or me.
Posted by: lyqwyd at October 17, 2012 3:05 PM