December 26, 2012
While The US Index Slips, San Francisco Home Prices Gain
According to the October 2012 S&P/Case-Shiller Home Price Index, single-family home prices in the San Francisco MSA rose 0.7% from September to October and are up 8.9% year-over-year but remain 34.0% below their May 2006 peak.
For the broader 10-City composite (CSXR), home values fell a nominal 0.1% from September to October, up 3.0% year-over-year, down 29.8% from a June 2006 peak.
The October monthly numbers were weaker than September as 12 cities saw prices drop compared to seven the month before. The five which turned down in October but not in September, were Atlanta, Dallas, Miami, Minneapolis and Seattle. Among all 20 cities, Chicago was the weakest with prices dropping 1.5%, followed by Boston where prices fell 1.4%. Las Vegas saw the strongest one-month gain with prices up 2.8%.
Annual rates of change in home prices are a better indicator of the performance of the housing market than the month-over-month changes because home prices tend to be lower in fall and winter than in spring and summer. Both the 10- and 20-City Composites and 19 of 20 cities recorded higher annual returns in October 2012 than in September. The impact of the seasons can also be seen in the seasonally adjusted data where only three cities declined month-to-month.
On a month-over-month basis, prices rose across all three San Francisco price tiers.
The bottom third (under $375,355 at the time of acquisition) rose 1.6% from September to October, up 15.0% year-over-year; the middle third rose 0.2% from September to October, up 10.7% YOY; and the top third (over $675,352 at the time of acquisition) rose 0.9% from September to October, up 6.2% YOY.
According to the Index, single-family home values for the bottom third of the market in the San Francisco MSA have returned to November 2000 levels (55% below an August 2006 peak), the middle third has returned to February 2003 levels (35% below a May 2006 peak), and the top third remains at May 2004 levels (20% below an August 2007 peak).
Condo values in the San Francisco MSA gained 0.9% from September to October and are up 17.5% year-over-year but remain 24.3% below their December 2005 peak.
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: Home Prices Rise for the Sixth Straight Month [Standard & Poor's]
∙ San Francisco Home And Condos Values Continue To Climb [SocketSite]
First Published: December 26, 2012 7:45 AM
Comments from "Plugged In" Readers
Thirty four percent down from May 2006? So bogus. Prices are as high as any time ever in SF if not higher. Overbidding, frenzied open houses, the whole thing.
Posted by: Anon at December 26, 2012 11:08 AM
Incorrect for SF..............my home is back to the value of 2006-2007.
I am in Glen Park and it is booming here. Who knew 15 years ago that being in the southern end of SF and easy access to the freeway could be so desirable.
Posted by: radar at December 26, 2012 11:13 AM
I own a junior-suite condo (mortgage-free) in an up-scale building located near MOMA. Has been cash-flow positive since Day-One (2004). From recent comps, it appears the value of our unit has increased nearly 30%. I'm not seeing many straight sales currently posted on the MLS. I'm not totally convinced we've hit RE bottom yet. Is the recent RE price spike due to the Fed's temporary interest-rate suppression? What happens when the rate does go back up?. Is NOW a good time to sell? ...And jump back in with cash when the rates do go up as hinted by the Fed (2015)?
Posted by: Charlie at December 26, 2012 12:34 PM
isn't there a big bet related to C-S levels settling in 5 days? something involving donuts?
Posted by: steve at December 26, 2012 1:18 PM
Yes, as has been explained here many times, the vast majority of single family homes in the SF MSA index are in surrounding counties. The SF MSA is much more reflective of Alameda and Contra Costa single family home prices.
Posted by: Dan at December 26, 2012 2:32 PM
I know it's unrelated to this topic, but someone needs to update your Madrone ad. "Be the first to own....." I don't think so. Maybe the 161st.
Posted by: MoneyMan at December 26, 2012 4:56 PM
Charlie, first of all, it can't be too hard to have a positive cash flow when there is no mortgage debt, but I'm happy for you. But no, don't sell now because you think prices will drop. It will be a while before rates go up enough to suppress prices and by then the market will have gone up too much to overcome your premature selling.
We hit rock bottom in SF awhile back and I've seen two bedroom condos in South Beach go up as much as $100K in the past year and 1/2.
Posted by: MoneyMan at December 26, 2012 5:05 PM
The usual historical consensus on SS has been that SF mimics the top tier.
2 things to consider:
1 - SF's most appreciating area is a rectangle starting from the Presidio down to Glenn Park, east to BH and the DogPatch and everything NE of these. That's roughly 40% of SF surface-wise. I like the Zillow Zestimates that are becoming more and more a correct reflection of the market. They show these areas at or higher than the 2007 top. The rest is doing ok too, but a bit less so.
2 - There's very little inventory to get any kind of clear idea of SF. Mix matters a lot. If there's no inventory in the area I described above, then there will be little sales, and the desirable SF will not show in the median.
One datapoint: a house on my street in the 94114 was priced at a pretty high ask. It's a decent house, but the asking was set at the top price any house has ever sold for on that block. Some TLC and updated kitchen/bath needed. It sold in less than a week after a crazy open house. Price not official yet but I expect at least a 10%+ overbid. People were siting on my front steps waiting for the crowd to thin out. From the speed of the sale, I suppose no contingencies or mortgage.
Posted by: lol at December 26, 2012 6:36 PM
So good places to own: glen park and 94114. Agreed. Is it the right time to sell these areas or will they keep going up? Sounds like you saw a pretty big crowd of buyers who didn't get to a house recently so that sounds like the market will keep moving up for a while.
Posted by: sparky*b at December 26, 2012 7:37 PM
Dunno if it's a good time to sell. It sure was a good time to buy up to last year.
My oh my this market has flipped in just a few months. It happened about a year ago. No more great deals now from a landlord prospective.
Exactly a year ago, the building housing the Castro Country Club with 3388sf was sold for - get ready - $1.00M. Even with all the challenges of having a not-for-profit community beacon (there was much drama, but then again, the Castro has to live up to its creds), this looks like a ridiculously low price today. That was the last real fire sale of the 2009-2011 bottom I saw in the 94114.
Posted by: lol at December 26, 2012 9:52 PM
I think prices will continue to climb in 2013 unless: we hit a double dipper recession (unlikely IMO, irrespective of fiscal cliff-schmiff politicking) or interest rates go up (also IMO unlikely in 2013 as the overall economy is still so-so.) it's sorta the best of both world for the Bay Area- our economy is doing well, and many of the most successful folks live in SF and want to own, with limited inventory.) personally I'm waiting for the TIC market to giddy-ap, as its still been a slow mover; maybe 2013 will awaken the TIC giant?
Posted by: 48yo hipster at December 26, 2012 10:01 PM
I think so too. 2013 will go up, hopefully at a slower pace. I think 2014 will also. Jobs and people are going to keep coming into the city and housing is going to continually lag behind. Meanwhile the government will work on helping the rest of the nation which isn't doing as well, so rates stay low.
Overheating and when, that is what I am thinking about. I am gunshy of the high priced fixer market where some marginal locations are getting top dollar and have a 2-3 buildout. I can see it for prime locations where $3M+ (prime-NOE) is going to happen, but some of these spots would only get that in hot markets with low rates. Plus construction costs keep going up. I think we may look sideways at a few purchases being made now when they come back to market. Selling a house for $2.5M and losing money can't feel good.
Posted by: sparky*b at December 27, 2012 8:54 AM
I think we are headed for another recession. This one will be shallower then the last one though. Europe and China are still having problems. The politicans in Washington are doing their best to live up to their horrible reputation and while the actual impact of the fiscal cliff is over-stated, it is draining any confidence that businesses and consumers had.
Even if there is a deal made early next year, there is still going to be a fiscal headwind against the economy from whatever that deal is. The payroll tax cut is going away hitting everyone with income from working with a 2% tax hike, so less money to spend. Unemployment will likely be extended at some point but is going to be limited for a bit causing some to cut back. The sequester is going to go into effect and while the cuts will be shifted in a deal (with some of the cuts being shifted to the out years) there are still likely to be cuts to current spending.
So for lots of reasons I expect a short, shallow recession in spring or summer 2013. SF housing prices will hold up better then some other markets but I'm not expecting them to keep rising for too much longer before the market softening a bit. Also the lower end of the SF market is not doing as well as prime areas referenced above. First time home buyers are not buying little condos or SFR's in marginal neighborhoods and a lot of the people that bought those places in years past are unable to trade up.
Posted by: Rillion at December 27, 2012 9:12 AM
I for one think the current economic growth rate will go on in the next few quarters. SF prices could stay stable or still grow a bit more while the rest of CA catches up.
I think SF benefited from a "spend it forward" effect. The BA economy has led the way and grown ahead of the country. Locals see that on a daily basis and are hopeful for their own futures. RE closely follows that sentiment. If a house sold today for 1.2 and sold last year for 1.0, then paying 1.3 in a few months doesn't seem that crazy. This is a bubble cycle but with some real money behind.
I still think SF RE will respect the laws of physics. Incomes finance mortgages for a big chunk of the market and limits will be reached at some point. A big big push in rent prices helped propel the current market for income-bound purchasers. This loop is closing itself now I think and rents could stabilize, slowing the cycle.
I hope 2013 will be just as good as 2012.
Posted by: lol at December 28, 2012 9:48 AM
Glen Park is spelled with ONE n.
Always has been.
Posted by: futurist at December 28, 2012 2:03 PM
…while the actual impact of the fiscal cliff is over-stated, it is draining any confidence that businesses and consumers had.
Even if there is a deal made early next year, there is still going to be a fiscal headwind against the economy from whatever that deal is. The payroll tax cut is going away hitting everyone with income from working with a 2% tax hike…[unemployment insurance payments] will likely be extended at some point but [are] going to be limited for a bit causing some to cut back. The sequester is going to go into effect and while the cuts will be shifted in a deal (with some of the cuts being shifted to the out years) there are still likely to be cuts to current spending.
Yep. I don't see the can kicking w.r.t. the sequester actually delaying any cutbacks at federal contractors.
I for one think we are going "over the fiscal cliff" and that we'll have at least a good 3% short-term drop in the S&P 500 shortly after it becomes clear that a deal before the deadline isn't going to be had.
Of course, just like the S&P 500 losing just over 8% after the House didn't pass the bankster bailout of 2008 on first attempt, the reaction will tend to concentrate the minds of the GOP's reps and we'll get an agreement shortly thereafter.
But even given that, Rillion's right that the onset of austerity is going to cause it's own problems, even if a deal is reached, and of course the payroll tax hike is already baked in the cake.
I don't have any coherent predictions for what will happen to S.F. real estate after the cliff dive happens. One reason is because most of the luxury, luxe and Überluxury properties like the ones you see featured on socketsite are being purchased by buyers who are pretty price insensitive and/or are non-residents.
I too hope that 2013 will be just as good as 2012, but I'm not betting on it.
Posted by: Brahma (incensed renter) at December 28, 2012 2:18 PM
i just purchased a home in the inner richmond for the same price paid in 2002, at just under $400/sq ft. completely remodeled and updated.
There are a lot of areas in SF that are still at 2002-2004 prices. I just went through a 9 month search and found most places under 2005-2006 prices
Posted by: jimbo at December 28, 2012 3:26 PM
You are lying about being able to get an updated single family home in the inner Richmond for 2002 prices. Sorry, but that is completely impossible. Where? What? When? How much? Because your vagueness rings very false when inner Richmond houses that ate updated can get 1.8 to low 2ms nowadays.
Posted by: Would be Inner Richmond buyer at December 28, 2012 9:03 PM
Charlie: deciding what to do with your money is just math. say you have 600k into your condo and you are cash flow positive at $1000 a month. that's 12k/600k or 5% a year. not bad. unless you think you can do better with your money leave it there. it doesn't matter a whit what the actual market price of your condo is.
Inner Richmond: both of you guys are a little off. 2MM in the inner richmond gets you most any place you want. and yes there are some sfh around 400/sf. I saw one around that price that was really big, over 2500 sf but the space was poorly utilized so the usable square footage was less (and thus the true ppsf is higher). it was "fully renovated" if you like ikea. also had no yard. decent sfh in the richmond right now with not many problems 500 psf would be a good deal
Posted by: fancy rental at December 29, 2012 8:58 PM
i just paid slightly under $400 /sq ft, and I can assure you I am not "lying". I am in contract now, so hopefully you can search it when it becomes public record. I'm not sure how long it takes after closing to show up. I am not comfortable posting the specific information. I will say it is east of 9th ave. I am in contract now, and the property never made it to the MLS. The property is updated and i bought it for pre-updated price. inventory in general is not there now, but in the spring and summer i saw quite a few places for under 2005 prices. I suspect you will see more in a few months, mayb spring and summer
Posted by: jimbo at December 30, 2012 9:56 AM
Meh, sorry but your answer isn't precise enough. I understand why. Now I am thinking you are right next to a busy grocery, a firehouse, and/or some other limiting factor such as no yard. But that's fine. Sorry about the lying thing.there arelotsof fakes on here. Clearly you are not one.
Posted by: Would Be Richmond at December 30, 2012 6:39 PM
@jimbo: I don't think you can use an off-market sale as an example of the market.
Posted by: R at January 2, 2013 10:21 AM
"@jimbo: I don't think you can use an off-market sale as an example of the market."
Why? there are a lot of properties sold that never make it to the MLS. I didn't know the person I am buying from. I just found out that he was selling a few weeks before he put on MLS.
Posted by: jimbo at January 2, 2013 11:21 AM
Thank you everyone who responded to my inquiry regarding sell/stay with our SOMA junior-suite condo (ie. spacious studio)- all good, sound advice. Current yearly return on rent is decent, netting a conservative 3% profit after HOA & taxes.
What concerns me is that all market fundamentals appear to be out of whack. As a commercial pilot, it's ingrained in me to think two-steps-ahead and consider all "what if" scenarios. Going forward, I can only sense higher HOAs, prop accessments, property taxes, not to mention the recently approved metered Sunday parking (good thing authorities can't record my rants on public transportation... Doh!). San Francisco is deservedly among the the Top Ten cities of the world, but with the frustration of higher living costs, it's probably "no city for old men."
Posted by: Charlie at January 3, 2013 8:22 PM