December 13, 2012
Recorded San Francisco Sales Volume Hits Six-Year Seasonal High
Recorded home sales volume in San Francisco rose 24.2% on a year-over-year basis last month (524 recorded sales in November 2012 versus 422 sales in 2011), down 8.4% compared to the month prior, a slightly higher seasonal drop than the average drop of 7.0% from October to November since 2004. An average of 507 San Francisco homes have sold in November since 2004 when recorded sales volume hit at 682.
San Francisco's median sales price in November was $728,000, up 13.0% on a year-over-year basis, down 8.4% as compared to October in which the median was up 25.1% year-over-year.
For the greater Bay Area, recorded sales volume in November was up 15.5% on a year-over-year basis, down 6.4% from the month prior (7,296 recorded sales in November '12 versus 6,317 in November ’11 and 7,795 this past October). The recorded median sales price was up 20.8% year-over-year, up 5.3% month-over-month.
Last month’s sales count was the highest for any November since 8,042 homes were sold in 2006. November sales have varied from 5,127 in 2007 to 11,906 in 2004. The average for all months of November since 1988, when DataQuick’s statistics start, is 7,873.
Foreclosure resales – homes that had been foreclosed on in the prior 12 months – accounted for 11.5 percent of resales in November, down from a revised 11.7 percent in October, and down from 25.2 percent a year ago. Last month was the lowest since 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 23.0 percent of Bay Area resales last month. That was down from an estimated 23.5 percent in October and down from 24.9 percent a year earlier. While short sales’ share of the overall market does not appear to have changed much, the number of short sales in November was about 6 percent higher than a year ago.
At the extremes, Napa recorded a 34.3% increase in sales volume (a gain of 34 transactions) and a 21.2% increase in median sales price while Solano recorded an 11.9% increase in sales (a gain of 62 transactions) and a 16.6% increase in median sales price. The median sales price increased 26.3% in Contra Costa and 8.4% in Marin.
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).
∙ Further Gains for Bay Area Home Sales and Prices [DQNews]
∙ San Francisco Sales Volume Up 27.7% And Above Average In October [SocketSite]
∙ Recorded San Francisco Activity Up 2.9% In November, Median Falls [SocketSite]
First Published: December 13, 2012 1:15 PM
Comments from "Plugged In" Readers
as we start having multiple quarters of sustained price gains, look for the banks to start loosening lending requirements as their risk models ease up, which will further sustain the recovery.
That could happen even as soon as early next quarter - though I'm just guessing about that.
Posted by: BigV at December 13, 2012 1:32 PM
Double digit increases for sales and prices for all areas, except Marin's 8.6% median (come on Marin, catch up...). I'm calling bottom!
would be great to see more apples on here though, for some reason they've fallen off a cliff, not seen one for over 3 weeks I think.
The reverse law of socketsite - the higher the sales, and the stronger the market, the less apples appear on the tree!
Posted by: REpornaddict at December 13, 2012 1:58 PM
Things are kinda ticking up! I just bought two short sales this week ... one is already in escrow the same day my loan funded.
Posted by: Jimmy (No Longer Bitter) at December 13, 2012 1:58 PM
Glad to see seasonality into play. Gravity still applies even in this market.
About banks relaxing their rules, the past 3 years were a bit over-cautious. By principle it's when markets have crashed that risks is lowest, right? It's as if banks were waiting for the market to be overbought to go all cylinders and load up on risky mortgages...
Posted by: lol at December 13, 2012 2:02 PM
Does make you wonder how much "mix" comes into play in the median price when you see a MOM decline, meaning that in most of SF, inventory levels are so low at this point that you're seeing a lot of lower end fixers or overpriced SFH's hitting the market and being sold 'cause there ain't nothin else left to buy and expanding families that need a home usually need it now. Probably hopelessly complicated analysis to perform, but interesting to think about.
Posted by: no_ vally at December 13, 2012 3:33 PM
Here's an apple that's up a heckuva lot year over year (not cherry picked, it' just came in this AM with my daily redfin neighborhood update), http://www.redfin.com/CA/San-Francisco/300-Valley-St-94131/unit-5/home/2009315?utm_source=myredfin&utm_medium=email&utm_campaign=listings_update.
Posted by: observant neighbor at December 13, 2012 3:55 PM
Great apple showing price increase of just over 30% in just over a year!
Much better indicator than median price, remember medians are not prices!!
Posted by: REpornaddict at December 13, 2012 4:21 PM
God, I've been waiting since 2008 for the f'ing banks to loosen up lending requirements for the self employed or those seeking equity based loans (like me.) I'm watching cash heavy investors get in in the SF market, while I can't pull any money out from the substantial equity I have in my SF investments. It's totally frustrating. You'd think these idiot bankers would realize that there are people with solid assets to lend to. But banking is a heard mentality; once the floodgates open for equity based loans, low doc and other alternative loan types will return quickly as every bank jumps in. But somebody needs to take the first step!
Posted by: 48yo hipster at December 13, 2012 4:54 PM
Hi Hipster, How's life treating ya?
Hmmm. Hard to be a rentier if the banks won't give you free money to play with. How many years of profits from your current buildings would it take to buy another one?
Posted by: diemos at December 13, 2012 7:24 PM
I stepped into the hot tub last night and woke up in 2004.... if true that means we're going to keep seeing a "top" only to see it taken out thanks to a new loan product or new looser loan guidelines.
There are a TON of potential buyers on the sidelines who can't get loans. Meanwhile, all the bears have to do is wait 4 years to be right again.
Posted by: hangemhi at December 14, 2012 9:56 AM
I've always found it more satisfying to have less debt even if it means having less "cash" on hand. But I am always over-careful.
A HELOC or a cash-out refi are made on an instant (some would say fleeting) valuation. If you can to make a cash out to make another investment, it's a really great opportunity.
One reason I have never done it is that you're doing something akin to re-purchasing your own property at current market value. And you're giving up the proceeds towards another purchase, also at market value. You have to really trust the market as well as your capacity to go through bumps on the road. You can be stuck in one deal for 10 years because of a wrong move. I have seen it close to me... My friend is a one-man cautionary tale.
Posted by: lol at December 14, 2012 10:01 AM
"Meanwhile, all the bears have to do is wait 4 years to be right again."
Or maybe longer - this is SF after all, which tends to be Last In, First Out of any trouble.
Just hope they last long enough to keep the rest of our feet on the ground, like the more bullish among us stuck it out the last 4 years.
Not sure though, most seem to have scarpered off pretty fast at the first signs of solid recovery.
A classic case of, as British soccer fans would say, "Only singing when you're winning"
Posted by: REpornaddict at December 14, 2012 10:05 AM
@lol: I'll give you a real-world example of why your conjecture is wrong. This week, I bought a house for $270,000 (single-family on the Peninsula). The loan funded on Thursday (yesterday). Today, Friday, I opened escrow at a sales price of $325,000 with all contingencies waived with a pre-qualified buyer. For all intents and purposes, I made $45,000 in one day.
(In reality, the profit is split between my and my hard-working realtor who negotiated the short sale and the re-sale).
By bringing liquidity (cash, income, credit) to the housing market, I am being rewarded with a profit. So your conjecture that there is no net profit to be made in the market is not true.
Posted by: Jimmy (No Longer Bitter) at December 14, 2012 10:07 AM
Please find me the place in my post where I am saying there's no money to be made. Au contraire.
If you can to make a cash out to make another investment, it's a really great opportunity.
Just saying this is a play, with its own rewards as well as its own risk.
I am not too much the flipping type. Call me lazy. But the property I have bought and sold were done over a period of 6 to 10 years with 200 to 400% profits thanks to a great market.
Quick flipping always works, until it doesn't.
Posted by: lol at December 14, 2012 10:56 AM
I have one long-term hold (going on 10 years now) and I just wish I could get rid of it and free up that capital. Getting $800/mo in profit just doesn't get me excited anymore.
Posted by: Jimmy (No Longer Bitter) at December 14, 2012 11:20 AM
Diemos, my situation is actually pretty sweet. I am and have been a "rentier" (nice word btw :) since 2005. From 05 to 08 it was from buying, renovating and refying, in addition to some rental income. Since 2008 I sold a couple of highly leveraged condos and kept my other SF properties, all producing rental income. The crazy rent increases in the last 3 years have been the icing on the cake.
Guess I'm just getting a wee bit bored these days, and would like to invest some of my equity in another project. I'm waiting for loan options. For the time being I've taken up the hobby of street photography (I'm getting quite good) and exploring new lunch spots in the mission. Oh, and I also blow out of the country twice a year for 6 week excursions to the home country and usually a stop over or two in Europe (I mean its right there en route.)
So, things have been good and SF RE has been a great investment for me. Although I'd love to get back in the game, I'll also play it safe. My wife would kill me if I screw up what we have.
Posted by: 48yo hipster at December 14, 2012 11:55 AM
@hipster: Just incorporate and pay yourself some W-2 income for "property management" or whatever. Then the banks will happily underwrite whatever you want assuming your income is high enough. Tell them you're an employee ...
Posted by: Jimmy (No Longer Bitter) at December 14, 2012 12:40 PM
I don't think that will make a difference, as I have a solid schedule E income stream. The problem is that it's not high enough for me to pull a lot of equity out, which i will need to buy and rehab a small bldg. in SF.
The issue is that I have 2-4 unit bldgs, and they are qualified on income alone. If I owned commercial property, they would use the LTV and let me pull cash out. They don't qualify based on your personal income.
Posted by: 48yo hipster at December 14, 2012 2:14 PM
I am in the middle of a refinance, and my place just got appraised at 15 pct above the purchase price in 2006. This is based on a five other sales (some that were originally purchased at the same time), so it is a good appraisal.
This is all paper money at this point,and I have no plans on selling soon, but it does make me feel better -- especially since I plan on owning it outright in 15 years. The SF market really strong right now, and I don't see a catalyst for it slowing down soon. I just hope it doesn't overheat like it did in '07 into '08.
Posted by: Lance at December 15, 2012 7:28 AM
it is already over heated.
Posted by: hangemhi at December 15, 2012 9:18 AM
not every market, but some SF markets are overheated for sure.
Posted by: sparky*b at December 15, 2012 1:50 PM
Which ones do you think are overheated?
Posted by: NoeValleyJim at December 17, 2012 5:01 PM
Well I know one that is not overheated, the western addition. I've been keeping an eye on my 'hood and it has not seen price increases that the above charts indicate.
Posted by: Rillion at December 18, 2012 8:13 AM
NOPA and Hayes Valley used to be the western addition, now they are their own hot markets. That is a difficult area to judge because of that.
Noe fixers of course.
Lots of bernal:
That quick flip at 655 27th street for $1.7M. If 2 beds up master down places like that are worth $1.7M I see a bubble.
NOPA as I noted above.
I will think about it some more later and come up with a better list if I have the time.
Posted by: sparky*b at December 18, 2012 9:32 AM
That's depressing. :-)
I guess it's time to sit on the sidelines and start accumulating funds for the next 2009-2010 cycle.
Posted by: jack at December 18, 2012 2:39 PM
Be aware that the last cycle went from the 1994-1997 trough to the 2007 top. If the cycle is 10 years like last time, the next chance at cheap enough property could be 7 years from now.
Then again, this market is everything but typical. The next bottom could be closer, or it could not.
Posted by: lol at December 18, 2012 2:46 PM
Is a bubble that will deflate or at least lose some froth better or worse than the new normal?
Hopefully some of these sales are bubbles.
Also, unlike last time around the bubble are area specific. There are still some areas that haven't shot back up (and beyond) which is good
Posted by: sparky*b at December 18, 2012 3:12 PM
I'm almost tempted to hang on to my cashflow positive rentals after reading this thread. I'm thinking the next 5 years could be really good for owners.
Posted by: Jimmy (No Longer Bitter) at December 18, 2012 4:39 PM
Glen park is getting more expensive as well. I am not sure how much that is bubble vs. Noe adjacent + Bart station and southern hood. But these stand out:
Posted by: sparky*b at December 19, 2012 9:28 AM
@lol: This market doesn't appear typical, does it. I'm thinking that history shall repeat itself, and that it's jagged boom-bust cycle for us, compounded by shorter time-frame. Nope, no technical analysis to back that up, just guessing.
@sparky: Agreed that it's more area-specific this time around. I'm finding though that unlike the previous couple of years, there isn't really "good" deals to be had during this time of the year. Spring should be interesting.
Posted by: jack at December 19, 2012 11:20 AM
Sparky, I was referring to the Real Western Addition, the parts that can't pretend they are part of some other newer trendier neighborhood.
Posted by: Rillion at December 19, 2012 4:03 PM
Jimmy- are they in SF? Cash flow positive? Why the hell would you want to sell them. Cash flow positive properties in SF are golden. Most likely your rent will increase above average, and you should see equity growth, especially in 5-10 years.
Posted by: 48yo hipster at December 19, 2012 5:58 PM
In SF, cash flow positive is a good thing to have except if you're a rent controlled landlord.
In general, cash flow positive doesn't mean it's the best way to use your net assets.
I have sold places around the top of the bubble (not in the US) that were decently cash positive but had more than tripled in value between 1997 and 2007. I put my money into boring liquid investments like CDs that were getting 3% net at the time. Even a bit of a gold ETF to diversify. The net cash flow I collected from these was more than twice what I would have collected in net rent. Without having to worry about leaky toilets...
Then in 2010 I jumped back into RE, though my current shopping spree has been interrupted by all the crazies jumping over themselves to purchase anything at any price. I used to be 90+% RE then went to 40%. I am back to 60% which is within my comfort zone. 75% is my goal but I'd hate to overpay.
Posted by: lol at December 20, 2012 8:49 AM
A sign of the current local "overheating" can be seen in the 94114. Zillow's index for 94114 is 10% higher than the mid-2007 top.
Posted by: lol at December 20, 2012 8:58 AM
Assuming you have control over who you rent to, all my tenants move out in 2-3 years. I only buy bldgs with low rent legacy tenants if I can buy them out, rehab, and rent back at market rates. So I'd rather keep my SF props than sell, pay commission + cap gain taxes, for a 3% paper return. I keep it simple, gaining in appreciation nicely this year as well. And when I can pull cash out, I may buy again. Successful leveraging like that is basically having your cake and eating it too. I'm realizing that several parameters have to be aligned just right, namely available financing, decent rates, and a somewhat upswing market. But I'd rather wait for that and pounce when I can. Otherwise I'll sit on the sidelines and live off current rents. I'm a strong believer in the 80/20 rule, especially when it comes to investing: 20% of your investments will make 80% of your profits. The rest is just hamster spinning in his wheel.
Posted by: 48yo hipster at December 20, 2012 9:42 AM
This caught my eyes: "...bldgs with low rent legacy tenants if I can buy them out."
How do you go about assessing the ability to buy the tenants out?
Posted by: jack at December 20, 2012 3:45 PM
Ancestral secret consisting of part charm, part trustworthiness, and part luck!
Posted by: 48yo hipster at December 20, 2012 4:34 PM
Yeah, the only time I actually made a worthwhile buck was selling after a large appreciation. Paper appreciation is never as nice as cash in the bank. The rental part was indeed a "hamster spinning in his wheel" with years in the black, others in the red, and the total being very unexciting. The best part for me of being a landlord: helping out friends and family with housing needs.
Landlording makes sense when appreciation is possible. You hold on an asset, it quietly lives on and when the time is right you bail out for an other venture.
Posted by: lol at December 20, 2012 11:36 PM
Actually 3 SFRs in San Bruno. Rents are rising everywhere (including the suburbs) as are prices... each property cashflows $800-$1100/mo. Its just that the net positive cashflow is not all that interesting compared to the money I can make flipping them (which will then be leveraged into bigger deals).
Posted by: Jimmy (No Longer Bitter) at December 21, 2012 8:33 AM
Thanks for sharing your experiences, jimmy and lol.
The interesting thing about investing, and particularly investing in RE, is that everyone's particular situation is different. I can see a case where buying an average small apartment building in SF gives marginal returns, if appreciation is not significant during the holding period.
In my case, I significantly changed the use of the properties- adding a unit, doing a lot split, adding a floor to another, which raises their value. I needed to vacate the properties, and was able to get market rents afterwards. Add in the recent rent increases in last two years, and I am still making 6-7% return on my equity (return was higher 6 months ago, as I just re-evaluated values due to rising property values.) so substancial more cash flow and appreciation is exactly what I'd hoped for. I am bullish on the next 2-3 years, as I think SF (and especially the mission) will do very well.
I do think San Bruno is a different scenario appreciation wise, and it took a much larger and longer fall during the 'great recession.' I also think a typical apartment bldg in SF will do less well if rents only increase marginally (but even with RC, plenty of LL's get a windfall when a tenant finally leaves- spend $20k to redo kitchen and bath, repaint, new floors, and you could be getting $1000+ extra per month.)
Posted by: 48yo hipster at December 22, 2012 2:01 PM