November 14, 2012
San Francisco Sales Volume Up 27.7% And Above Average In October
Recorded home sales volume in San Francisco rose 27.7% on a year-over-year basis last month (572 recorded sales in October 2012 versus 448 sales in October 2011), up 16.3% as compared to the month prior and versus an average September to October increase of 1.6% over the past eight years. Since 2004, an average of 543 San Francisco homes have changed hands in the month of October.
San Francisco's median sales price in October was $794,500, up 25.1% on a year-over-year basis, up 6.6% as compared to September.
For the greater Bay Area, recorded sales volume in October was up 21.0% on a year-over-year basis, up 13.8% from the month prior (7,795 recorded sales in October '12 versus 6,444 in October ’11 and 6,650 this past September) with a recorded median sales price which was up 18.9% year-over-year, down 3.0% month-over-month.
In the words of DataQuick President John Walsh, "it’s unclear exactly much of today’s apparent price increase reflects actual growth, and how much reflects a change in market characteristics," (i.e., mix).
Last month distressed property sales – the combination of foreclosure resales and "short sales" – made up about 33 percent of the resale market. That was down from about 38 percent in September and down from about 63 percent in October 2011.
Foreclosure resales – homes that had been foreclosed on in the prior 12 months – accounted for 12.0 percent of resales in October, down from a revised 14.1 percent in September, and down from 25.3 percent a year ago. Last month was the lowest since foreclosure resales were 10.1 percent in November 2007. Foreclosure resales peaked at 52.0 percent in February 2009. The monthly average for foreclosure resales over the past 17 years is about 10 percent.
Short sales – transactions where the sale price fell short of what was owed on the property – made up an estimated 21.4 percent of Bay Area resales last month. That was down from an estimated 23.5 percent in September and down from 24.9 percent a year earlier.
All nine Bay Area counties recorded sales volume gains in October with Napa leading the pack on a percentage basis (a gain of 50 transactions, up 49.0 percent) and Alameda in terms of transactions (a gain of 310, up 23.7 percent).
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 Home Sales and Prices Up [DQNews]
∙ San Francisco Home Sales Slip Seasonally But Spike Year-Over-Year [SocketSite]
First Published: November 14, 2012 5:30 PM
Comments from "Plugged In" Readers
My goodness, that's a dramatic price rise.
Loan rates in the 3's are mighty attractive and can contribute to this bull market but most folks don't qualify for those. Those are for people who meet FNMA's very narrow qualifications. So if you're a fireman making 150k a year and want to buy a 300k house, you're all set. But if you want to buy a second house for investment, forget about it. If rates rise it shouldn't dampen prices if loans than become more available. That is, if rates go to 7 but you can get one, that's better than rates at 3 but the bank won't give you a loan.
Posted by: unwarrantedinlaw at November 15, 2012 8:16 AM
This goes against seasonality. October should be a quiet season. Mix could explain it. But volume tells a story of story of a recovery going a bit too fast.
I am starting to feel quite uncomfortable with this bounce. I suspect there are many investors who haven't learned the lesson of 2007-2011 and are taking the same path than the last bubble. Bidding up not to miss out is not a rational attitude. And housing should be a rational picture.
This is what happens when a crash is not being given its full pound of flesh. People do not learn from horror stories that strike too close to home.
I'll get my bear costume from the mothballs if things go on the same way around the same time next year.
Posted by: lol at November 15, 2012 9:03 AM
The upcoming tax and regulatory increases won't be good for the makers, but I'm uncertain of the effect on real estate.
Plenty of really nasty places - Damascus, Moscow - have sky high real estate prices, and it's a cash market, no loans. Paris real estate is just as expensive as SF, yet they've just moved to 75% marginal tax rates. I haven't been able to figure it out. The best answer I've heard is that in troubled times there is nowhere else to put money, the only safe place is in one's home.
What could happen is places with great weather and lots of cool things to do such as SF will hold their value, but places like Stockton will dry up and blow away.
Posted by: unwarrantedinlaw at November 15, 2012 9:37 AM
This was for October though,
before the E-L-E-C-T-I-O-N.
Next month will be a D-I-S-A-S-T-E-R.
Anyone who bought last year was a complete idiot.
Posted by: REpornaddict at November 15, 2012 9:51 AM
lol = Oct is a high season in SF.
REP - I assume you're joking. If not, fyi that the market is still hot. Follow the stock market as a leading indicator - down for 2 months, but really just the past few days. If it crashes, it will impact SF real estate. If the fiscal cliff is resolves i'm guessing both equities and SF RE will be off to the races again.
Posted by: hangemhi at November 15, 2012 9:56 AM
Sorry, yes, really bad sarcasm/satire. I was joking. I hoped the capitalized spelling of words would be sometihng of a shibboleth.
Wondering if the median is at an all time high for October, looks close to 07 level.
Inventory, or the lack of it, is of course a major factor. Too much money chasing too few properties,. resulting in double digit price inflation swooping back into town.
Posted by: REpornaddict at November 15, 2012 10:04 AM
^ I think you nailed it. Low supply and a moderate amount of buyers with $200K+ income who are taking advantage of rates in the low 3% range. I really don't think this is being driven by investors as much as people who have been sitting on the fence and keep seeing their rents increase.
Posted by: Lance at November 15, 2012 10:14 AM
That would explain maybe a 10% or 15% increase. I think there's a bit of irrational behavior here.
Posted by: lol at November 15, 2012 10:36 AM
Posted by: futurist at November 15, 2012 10:53 AM
That would explain maybe a 10% or 15% increase. I think there's a bit of irrational behavior here."
I think the real price increase probably is only around 10-15% (see recent apple condo for example..). The rest is probably mix, but I'm sure there are some properties where money is being thrown at to get, just like 07, whose price has increased by more than that, although their value certainly hasn't....
Posted by: REpornaddict at November 15, 2012 11:03 AM
Acknowledging that SF is its own ecosystem, there are plenty of signs now that we are moving into a new leg up in SFR sales in other hard-hit areas in Northern California and nationwide.
Bloomberg reports the participation of Blackstone and others with institutional money wading into single family real estate. This puts a floor into the low end of the market, starts a trend, etc.
If you doubt the impact of this buying, look at SFR inventory in Sacramento:
Inventory has all but disappeared, and pricing is starting to climb fairly dramatically.
Spillover is a real thing, and if prices in peripheral areas are going up enough that people begin to feel okay about buying again, then housing becomes part of the solution instead of part of the problem.
Yes, the challenge is enough people having jobs who can afford the mortgage, but there is also a self-reinforcing loop in home buying. The fed wants people to buy, institutional money is buying, I think we are supposed to be buying...
We can dislike a 'bubble' and debate what the market, the fed 'should' do. Either way, people make money on the way up.
Posted by: soccermom at November 15, 2012 11:12 AM
I watched the prices go down with the hope that someday buying a home will make financial sense for us. But, as the years progress, I'm realizing that rent control is warping the economics. I have a decent three-bed in a decent neighborhood. I pay *significantly* below market rent. Buying a comparable place in my neighborhood would, at a minimum, double my monthly payments (even after considering tax savings). For us, it's not a "rent-or-buy" decision. It's a "leave-ridiculously-low-rent-control-or-buy" decision.
Granted, it's a good problem to have; I'm glad my rent is so low. But, I wonder how many people are in similar situations in SF.
Posted by: Q at November 15, 2012 11:20 AM
Yes, it is important not to underestimate mix. I'm guessing it represented about half of the drop on the way down, and it will represent close to that on the way back up. The decrease in distressed sales year over year (also a type of mix) would have an impact as well. It sounds like from the DQ release that distressed sales have dropped close to 50% since last year.
Posted by: Lance at November 15, 2012 11:20 AM
I just find it interesting that inventory remains at record lows. It's down over 60% from 2010 if you look at Redfin's total for SFRs and Condos. You would think a boom (however brief) would encourage a few more sellers to test the waters. I'm guessing that home owners are just as stuck as Q. I could sell my house and cash in, but where would I go? Based on recent sales, I'm pretty much priced out of my neighborhood. Here in D7, it's almost as though you have to wait for someone to die in order to score a great property.
Posted by: Denis at November 15, 2012 3:58 PM
But Q, I'm not quite sure I'm following your thought.
Does your statement mean you would NOT consider or buy in different neighborhood other than the one you are currently in?
If that neighborhood is too expensive now for you to buy, then what about other not so expensive areas?
Depending on your age and long term prospects to stay in SF, wouldn't you still be better off in say 20 years by owning something now?
Posted by: futurist at November 15, 2012 4:17 PM
All depends on what you think your life will be in 20 years.
If you are underpaying, either a rent or a mortgage, you certainly have extra disposable income that you can invest. If you rent and grossly underpay, as what Q's situation seems to be, then it can make sense to take that extra cash and find another investment.
The ratio of median home vs median family income is roughly at 8 today. I was roughly 6 at the trough.
How much higher do you think this could be? 10? 12? If SF gentrifies, then incomes could go up some more and prices could go on climbing even more. But if you want safety over speculation, staying put in a cheap rental makes sense. Just always have a plan B for when the landlord decides to legally end the lease.
Posted by: lol at November 15, 2012 5:52 PM
For us, it's not a "rent-or-buy" decision. It's a "leave-ridiculously-low-rent-control-or-buy" decision.
This is a good financial decision until suddenly one day when it isn't. I avoided moving out of my shared communal house until I bought my own place specifically because I could see friends getting stuck in the same spot and I didn't want to be one of them.
If you have the financial discipline to sock away the difference you will be fine though. If you get used to a lifestyle higher than your salary can support that could be a bad thing.
Posted by: NoeValleyJim at November 15, 2012 7:00 PM
I am not sure if posters can actually influence a market that much. I think they can sometimes delay or speed a phenomenon by spreading information surrounding tangible facts, participating into the general gloom or giddiness. But some of it has its source in reality.
A market sentiment is the sum of all the perceptions taken together. Some are extreme, others more measured, while a few contradict reality. On average though this market sentiment does gives a good idea of the what happens with the market itself, when taken as a whole.
But when the average market sentiment resembles one extreme, it's time to take a solid step back.
In the late 1920s, having your shoeshiner giving you stock tips was a clear sign the bubble was close to the top.
In 2010 it was my friends who were totally previously uninterested with RE telling you what they had read on Patrick.net. This told me that this crash had probably run its course.
That and the longer and longer posts from Tipster... A clear sign the bear case was harder to defend by the day.
Posted by: lol at November 15, 2012 9:05 PM
I strongly discount any commentor that has a name that is unfamiliar to the board. At least tipster has maintained his persona and his m.o. Those who dance on graves....... The market is better than anyone predicts. Including myself and anyone who bought in the last 2 years. Denis is correct, where you going to move. The "middle class" is being redefined.
Posted by: Eddy at November 15, 2012 9:48 PM
My sample set is small, but friends (couples and small families) who have bid or are looking to buy have been very heavily influenced by the rate of rent increases over the last two years. They all either need to move or have a strong desire to move and are worried about rent increases continuing at anywhere near the pace of the last couple of years. In this light, for those who can get mortgages, it's easier to justify buying in this market. In general, this is in the 1 million to maybe the high 1's kind of price range.
I was at the gym yesterday and overheard three people talking about how they all disliked and have outgrown the places they currently rent, but can't afford to move because of rent control/rent increases. I would guess that probably the largest % of SF renters ever feels this way. When I moved here, I heard stories of people saying they they had a great deal in rent from ten+ years ago and could never move. Now, people can't afford to move who signed a lease two years ago or less. It is just locking up more and more of the rental supply and makes the problem recursive.
-what % of renters in SF could not afford to rent their apartments at current market rates.
-what % of owners could not afford to buy their places at current market rates.
I'm guessing these %'s are very very high and that is not healthy. But I don't really see what would break the cycle. And even though it leaves people frustrated, it's just a great place to live so . . . .deal with it or leave. Most people don't want to leave . . .
Posted by: nanon at November 16, 2012 8:01 AM
By the way, tipster is very discreet these days. Could it be a sign of market reversal?
Very true. A few years will put you into the camp of the entitled who will fight against change. Rent control and Prop 13 seem to have an extension on their leases...
Something I would never expect to happen to me: my 2010 purchase puts me now in the pool of homeowners who do benefit from proposition 13. After all the tirades I did on the injustice of this obsolete piece of self-serving legislation, I have the choice of either embracing prop 13 for my own interest, or be rational and still denounce it as generational theft. This market creates hypocrites every minute...
Posted by: lol at November 16, 2012 8:48 AM
"I have the choice of either embracing prop 13 for my own interest, or be rational and still denounce it as generational theft. "
And there's the rub.. as a homeowner and landlord with several garage spaces, I love rent control and Prop 13 and NIMBY's and all the limits put on parking etc.. but I also hate them and think they make this city significantly more expensive than it need be. But then, it does help me.. So confusing.
Posted by: R at November 16, 2012 9:29 AM
The choice of being a hypocrite is a privilege, I think.
Posted by: jack at November 16, 2012 11:30 AM
Q-the problem with being stuck (or lucky) to be in a rent control place is that your prorities change as you get older a place that works for a single or childless couple may not work for a family when schools ,parks and the area child peer group are start to come into play.
i recently read about mom ,dad and junior unable to afford to move out of a rent controlled one bedroom and getting more and more cramped
Posted by: meep at November 16, 2012 11:42 AM
25th comment, tipster mentioned a few times, no tipster. yup, something's change.
and, mix HAS to be in this #. There are some places that are up 25%, but overall we're up about 10%.
Posted by: hangemhi at November 16, 2012 4:07 PM
Not all neighborhoods are behaving equally. For instance Zillow has NV and the Castro going up ~20% in a year and close to 30% since the 2009-2010 bottom (for Zillow, the last #s are the highest recorded median in absolute $ for these 2 nabes). Bernal: 15% and 25%. The Inner Sunset is up "only" 12% from last year and the trough.
About tipster being AWOL, it's really a pity, because we need him more in the crazy run-ups than in the obvious collapses. It's not grave dancers that keep us grounded, it's people cooling off the craze.
Posted by: lol at November 17, 2012 7:29 AM