According to the S&P/Case-Shiller Home Price Index, single-family home values in the San Francisco MSA ticked up 0.5% from December 2013 to January 2014. Up 22.1% on a year-over-year basis, the San Francisco Index remains 16.9% below a May 2006 peak.

For the broader 10-City composite, home values were unchanged from December to January and are up 13.5% year-over-year but remain 20.4% below a June 2006 peak.

The Sun Belt showed the five highest monthly returns. Las Vegas was the leader with an increase of 1.1% followed by Miami at +0.7%. San Diego showed its best January performance of 0.6% since 2004. San Francisco and Tampa trailed closely at +0.5% and +0.4%. Elsewhere, New York and Washington D.C. stood out as they continued to improve and posted their highest year-over-year returns since 2006. Dallas and Denver are the only cities to have reached new record peaks while Detroit remains the only city with home prices below those of 14 years ago.

While home values ticked up for the top and bottom thirds of the San Francisco market, they slipped for the middle tier, the third consecutive decline for the middle of the market which hasn’t happened since the third quarter of 2011.

S&P/Case-Shiller Index San Francisco Price Tiers: January 2014 (www.SocketSite.com)

The bottom third (under $488,183 at the time of acquisition) gained 0.6% from December to January (up 32.8% YOY); the middle third dropped 0.5% from December to January (up 21.9% YOY); and the top third (over $788,312 at the time of acquisition) gained 1.0% from December to January, up 20.0% year-over-year.

According to the Index, single-family home values for the bottom third of the market in the San Francisco MSA are back above August 2003 levels (37% below an August 2006 peak); the middle third slipped back to August 2004 levels (18% below a May 2006 peak); and the top third is just below July 2005 levels and within 4% of an August 2007 peak.

Condo values in the San Francisco MSA slipped 0.3% from December to January 2014, the fourth month in a row without any gains. That being said, condo values are up 23.9% year-over-year and within 5.1% of their December 2005 peak.

S&P/Case-Shiller Condo Price Changes: January 2014 (www.SocketSite.com)

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).

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Comments from “Plugged-In” Readers

  1. Posted by eddy

    Not sure what you’re seeing in the market but I’m in a state of disbelief with where homes are trading right now. Some really mind bendingly obscene deals.
    3318 California St #4: $2.2M for a condo top floor no real view on a busy street. Over 1k psf.
    2708 Greenwich St: $2.61M (700k over asking) and no square footage listed; but it does have views. This one is a head scratcher.
    2044 Green St: $3.329 (330k over asking) for top floor condo with great views and well done; but $1157/psf for part of a house and no yard?
    Pretty much everything is selling quick and over asking. Even homes in Parkside, Excelsior, Visitacion Valley, Golden Gate Heights, Inner Parkside, West Portal…
    I want real estate to hold strong but this is really something to behold / observe. Will be interesting to keep a watch on this market. Hard to believe that we’re still not near peak pricing across the board. But I would say we’re pretty darn close at the top end. I can’t imaging there is much more room for growth. I was thinking that we’d move sideways for a few years but I was certainly wrong. But even if we come off these highs we may still very well be above average on the top end. I don’t see inventory catching up with demand any time soon.
    There are still some good buys out there. Someone picked up a really nice home at 329 6th Ave for $1.8 and almost 3k sq ft. Buyers need to be smart. Sellers should be aggressive. Good luck out there.

  2. Posted by spencer

    i think the current economy supports these prices. the 2004-2008 economy did not.
    the 15 year appreciation still not more than 4% per year from 1999 to 2014. i dont think this is a bubble 2004-2008 was a bubble. if we have 2 more yrs of growth like this, then we are back to bubble

  3. Posted by mission

    This market is on fire right now. Looks to me a lot like 2005 but the difference is everyone is bidding with real money. Multiple offers, prices way over asking, etc… 20% down buyers are struggling to compete. I’m selling now and lots of others I know are selling soon. There is so much demand.

  4. Posted by eddy

    The key here is that the upper end of the market is fueled with real money. The lack of bubble era pricing at the mid/low tiers demonstrates how much better the market is reacting to the stricter lending standards. Still, I’m fairly shocked at some of the home prices on the market right now and certainly think that buyers in 2014 are at great risk of losing a lot of money if the markets get soft. 2009-2011 buyers at the high end appear to have caught a bit of a break that may not again be seen assuming this run continues for another 12-24 months.

  5. Posted by mission

    In SF it’s more than just the upper end fueled with real money. People buying sub $1M condos are frequently paying cash and putting down at least 20%. That was quite rare in the 2003-2006 market. SS features a lot of multi-million dollar Noe houses but to me what’s happending in the sub $1M market is crazy too.

  6. Posted by anon

    Well, if you call shares of tech/biotech companies that don’t have any profits “Real Money”…

  7. Posted by Rillion

    Yep, I’d given up on my condo getting back above water, purchased in 2007 with funny money (just 5% down) and saw it drop from $485k to $325k by 2011. In the last few months two almost identical units have sold, the first was in contract within a week of going on the market and sold for $490k and the second was listed at $499k and went into contract in two weeks (still waiting to see what the final sales price on that one is). Seems today’s buyers aren’t having to rely on the exotic financing from pre-2008 in order to support the 2007 era prices, even in the “low end” of the SF market.

  8. Posted by Moto mayhem

    “Well, if you call shares of tech/biotech companies that don’t have any profits “Real Money”…”
    It’s definitely real money if you can sell shares. Twitter lockup expires in 6 weeks and all employees pre-ipo can sell at least a portion of their options. That’s billions of dollars put in local
    Economy in 1 day. That’s real money.
    By the way, box.com just filed an s1 yesterday with plans to IPO in next 3 months

  9. Posted by Truth

    I purchased my north slope Bernal Heights 2-3 unit in 2006 off market, seller took a note for a while, paid her back with an equity line, so 100 percent financed for just under 800. I’ve since paid off the HELOC. Now it is worth 1.3m at least and I haven’t even gotten around to completely fixing it up yet. I was ridiculed on SS and am enjoying my schadenfreude at the short sighted internet spirits who never were going to do a thing anyway.

  10. Posted by soccermom

    Without the prevalence of newly IPO’d public tech companies like the 90’s boom, the pricing manifestations of the current boom are more difficult to discern to the non-participant. The bay area is still the global leader in creating new valuable tech ideas. That importance (and inertia) gets lost as we kvetch about bike lanes and rent control. Every country in the world (well, Asia at least) is working on emulating Silicon Valley. They find it difficult.
    It seems like higher-end home price increases in SF are one of the few public data points for the newest wave of money.
    I think the story changes somewhat when mortgage rates get back above 6% but until then, a nice house seems like a good bet in SF.

  11. Posted by anon

    Fluj (aka “Truth”) is back, I see. So now you know that the bubble is back!
    to recap, bought at the peak, stuck for 8 years, put money into it and now have about a 5% annual return (not counting financing costs and property taxes — maybe 2% after all costs). Time to gloat, fluj!

  12. Posted by anon

    Prices really went on an epic tear from about January – September 2013 after a pretty solid 2012. Been basically flat since them. That’s a good thing. Stability is good. Bubbles can be catastrophic, as we’ve seen in the not too distant past.

  13. Posted by Truth

    I have no earthly idea what you’re talking about from dissing the still improving neighborhood recently called “Amerca’s Hottest” that I loved from the start, to the I fabricated home improve my project you allude to, to the bizarre math takeaway. But I really don’t care.

  14. Posted by Louis

    @eddy make sense to me on this subject.
    A question for the ‘this time if different” crowd?
    What is real-money versus not-real-money?
    Yes, i do understand that goog and fb have income.
    The squishiness of durable valuation, income, employment is the tier or 2 below that.

  15. Posted by lol

    The first dot com bubble was built on the belief of instant revenue based on technology. Most of it was collective insanity but this insanity came from the novelty of the technology and misunderstanding of basic economics.
    Now technology is more mature, more integrated, better suited to people’s needs. Our live have forever been changed.
    Is this current frenzy a bubble? Who knows what will pay off in the long term. But there is certainly a lot of hype. But consider that Apple was in the single digits in 1997. Then in the 30s at the top of the bubble. How much today? Some of the hype was justified.
    I believe much of the current hype is justified, even if there will be some disappointment in store for quite a few instant billionaires of late.

  16. Posted by eddy

    My definition of real money is quite simple. Essentially, I’m talking about homes being purchased with accumulated wealth in some form or another as opposed to highly levered loans. Sure, people may chose to take out a low interest loan for some portion of a purchase but the majority of homes over $1/2/3/4/5M are increasingly purchased with wealth.
    Justified hype is a bit of an oxymoron but I get your point @lol, the companies fueling the wealth creation are certainly more tangible than in past bubbles. Oh, and now we have a whole slew of wealth via FB due to this Oculus VR deal. Really quite the spectacle this whole episode.

  17. Posted by anon

    The fact is that very few people have a comprehensive insight to how profitable (or not) these hundreds of local startups are. If they are not profitable, sooner or later the equity will burn through.
    Many people will leave the region, new startups will have an incredibly difficult time finding funding. We’ve been through this before. Enjoy the ride while it lasts. The question is which projects will kick off and be completed before the next contraction and which projects will be scrapped.

  18. Posted by lol

    I think it will get crazier before it reaches its top. Zuckerberg has set the bar pretty high in terms of startup monetization.
    I am afraid that other big ego cash/stock-rich tech companies will follow suit. If someone tries and up the WhatsApp deal, I think this will mark the beginning of the rushing of the fools in the tech industry. That will be fun to watch.
    Well, as long as they can make the rent…

  19. Posted by curmudgeon

    Eddy.. Oculus is in Irvine, so this is the rare case that won’t add to our housing values. But all the wealth creation of instant millionaires at Facebook, Twitter, Nest, Square, Box, etc etc really does push the market.
    You can debate whether there is a bubble or not in the companies’ valuations or not, but so long as the folks with options cash out while the going is good there is a huge impact on the local real estate market. And a lot of these companies are making beaucoup bucks…so even their stock is bubblicious right now it’s clearly worth something. Unlike webvan and pets.com and other poster children of the last boom which were nothing but hype and went very quickly to zero.

  20. Posted by anon

    “And a lot of these companies are making beaucoup bucks.”
    Occulus barely has a product
    Twitter is losing money
    Box lost $169M last year and even the CEO/Founder has been crammed down to 4% equity
    Castlight only has $13M in revenue
    It might get crazier for a few years, but I don’t see how these companies are more real than last time.

  21. Posted by Moto mayhem

    Last time they had no REVENUE. This time they just have no profit. Business models more sound as well

  22. Posted by Jake

    Market fundamentals, e.g., Shiller PE, look more like the hopeful times of 1996-7 than the full bubble craze of 1999-2000.
    (disclaimer: my opinion is probably worth about what you paid for it)
    Notable Bay Area companies from that era with real revenue at IPO that outlived the bubble include:
    1996 Siebel, Yahoo, E*trade
    1997 BEA, Rambus
    1998 eBay, Broadcom
    1999 NVIDIA
    Since they have been mentioned in this thread:
    – pets.com was founded in 1998
    – webvan had $178 million in revenue the year before they went bankrupt
    In 1996 Amazon lost $6 million on less than $16 million in sales, but went public in 1997. And not everyone was an enthusiast even back then, from namelink:
    Analysts who’ve peeked at Amazon.com’s initial-public-offering documents wonder if the hype surrounding the Seattle bookseller and the hope surrounding electronic retailing are enough to overcome a skeptical market for Internet stocks.
    Some also wonder if Amazon, the 3-year-old company that has become the poster child for online commerce, can maintain its lead in the market at a time when bookstore giants are entering the field.
    “To date, Amazon has done an excellent job at distribution and they have a clear head start,” said Scott McAdams, senior analyst at Ragen MacKenzie Inc. in Seattle. “But 20 times sales is a big market cap,” he said, comparing Amazon’s $15 million in sales to the total market value of $300 million it would have after the stock offering.

  23. Posted by anon

    So Facebook lost $9B in market cap today off the Oculus news.
    -$9B here, +$2B in Irvine
    That’s real wealth for you!

  24. Posted by R

    @anon:
    Yet FB is still up ~13B for YTD. I think they can still afford a house or two in SF.

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