Having ticked up 1.1 percent in February to an all-time high, the S&P CoreLogic Case-Shiller Index for single-family home values within the San Francisco Metropolitan Area – which includes the East Bay, North Bay and Peninsula – gained another 1.0 percent in March and the index for area condos gained 1.1 percent as well.

The overall index for single-family home values is now running 5.1 percent higher on a year-over-year basis, which is the smallest year-over-year gain since July of 2012 and versus 8.5 percent higher on a year-over-year basis at the same time last year, led by gains in the bottom third of the market.

Having jumped 1.9 percent in March, the index for the bottom third of the Bay Area market is now running 10.4 higher versus the same time last year.

At the same time, the index for the middle third of the market is running 5.9 percent higher versus the same time last year having ticked up 1.0 percent in March.

And having gained 1.3 percent in March, the index for the top third of the market is running 3.1 percent higher on a year-over-year basis, which is the smallest year-over-year gain since the second quarter of 2012.

The index for the top third of the market is now running 21.5 percent above its previous 2007-era peak while the index for the bottom third of the market remains 8.2 percent below the peak it hit in 2006.

And while the index for Bay Area condos ticked up 1.1 percent in March and is running 22.1 percent above its previous cycle peak in October 2005, the year-over-year gain, which has been trending down since the third quarter of 2015, dropped to a nominal 0.6 percent, the smallest year-over-year gain in five years.

Across the 20 major cities tracked by the home price index, Seattle, Portland and Dallas reported the highest year-over-year gains, up 12.3 percent, 9.2 percent and 8.6 percent respectively versus a 20-city average of 5.8 percent.

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 Oaklandlover

    Interesting to see the bottom 3rd now climbing faster. I think we know what that indicates….

  2. Posted by anon

    This shows that houses continue to gain, albeit more modestly than a couple of years ago. And condos have basically plateaued. Pretty much what a bunch of commenters here have been saying for a number of months. The “we’ve already started crashing!” observations simply have not borne out.

    • Posted by Freeloader

      This shows home prices overall still eking out gains. As new homes (and remodeled homes) and condos sell for more than older homes, it implies that individual home prices are decreasing even if the average prices of homes is increasing.

      • Posted by anon

        That’s not how the case schiller index works. They control for the effect you posit.

    • Posted by oakland lover

      I see no crash based on everything I look at, but I just find it suspect that the bottom third is decoupling and moving up faster now, just like last time (& in general I think) it will peak out higher (relatively speaking), then fall harder once things really do soften.

      it’s the usual [cycle:] people consider more marginal areas as they throw in the towel on the core/desirable areas, pushing the demand further out, driving the boom in the furthest out areas to lag behind the core, just as things start plateauing & softening in the core (less new projects set to or already breaking ground in central SF as the TBD is now very much built / hitting the latter stages).

      come to think of it I saw a few new cranes in DTO this weekend and I hope to see a lot more based on all the projects approved / set to start this year, but when DTO starts seeing a lot of activity it is a sure sign to me that the end of the cycle is near.

      • Posted by Pero

        I couldn’t disagree more when it comes to the ‘usual cycle’. Just because the patterns look familiar, it doesn’t mean the drivers are the same.

        1) The mid 2000s Real Estate crisis was driven by a loosening of mortgage lending standards that inflated real estate prices all across the US. Prices rose most in low income areas with little access to jobs. Look up NINJA loans and you will get an idea what the market looked like.

        2) The current real estate boom is much more closely tied to the productivity boosting and job creating centers of the country (in particularly the Bay Area). Credit standards are much more stringent (for the most part). The reason why the bottom-tier prices in BA are increasing now is that most working professionals (making 80k-130k per year) are almost completely priced out of the city and the Peninsula. With little new supply coming to the market, they are bidding up the East Bay and other areas that still allow them to commute to jobs on a daily basis.

        Bottom line, the buyers today are very different from the buyers 10 years ago. While economic downswings will come and some borrowers will go belly-up, today’s borrowers have better incomes, better jobs and more assets to withstand an economic downturn.

        • Posted by Sabbie

          Productivity is much weaker today than during the dot com or housing bubbles.

          This is just another Fed Bubble. Instead of loose bank loans to homeowners we got loose VC funding of lame startups (like Sprig that just went under), plus loose auto and student loans.

          The big companies bought back their own stock instead of investing in new technology or workers.

          And the usual shenanigans when hot money from all over the globe has no risk free rate of return and so chases inflated assets.

          The last bubble was probably a once in a lifetime buying opportunity. That doesn’t mean we won’t have healthy losses this time around.

          • Posted by SFRealist

            Sprig just closed. It burned through $58 million. Today google went up about half a percent. It’s market cap increased by $3 billion. In one day.

            There is no evidence this is a bubble and it is foolish to base any sort of policy on the expectation that we are in one.

          • Posted by SFRealist

            And it’s not as if Sprig’s employees are going to lose their homes. They’ll find work at a different company.

        • Posted by Dave

          Yes and no. Sure, folks priced out of the Peninsula/SF/SV can buy in Concord or San Leandro and have a home – but also a longer commute. As the inner BA prices rise these people get pushed out further. Commute times and costs increase. This is not a viable long term solution for the region.

          Anecdotal, a friend moved from Oakland to Seattle recently. His rent in Seattle (for a nicer place) is a little less than it was in Oakland (factoring in he pays no state income tax) and, instead of an hours drive to work, his commute is 15 minutes – and that is by bike and assuming it’s not raining.

          The issue is the lack of a wide distribution of jobs across the BA. Everyone can’t commute to SV or SF. In Seattle’s case jobs are spread more evenly throughout the region. Hence my friend does not work downtown, has a tech job paying the same as he made in the SV and a shamelessly short commute.

          The SV and SF job centers need to encourage job creation and growth in other areas of the BA – even if it means they don’t get as much job growth. Short of that, the quality of life issues will overwhelm the BA and many of those millennials who said they planned on moving out of the region in the next 5 or so years will indeed do so.

          • Posted by Pero

            Dave,

            You are right on this. Living in Concord or San Leandro and commuting 1.5 hours each way are not sustainable solutions for most people. My guess is that most people that buy there hope to make progress in their careers and move closer to work once they land a promotion. On the other hand, some large employers are moving to the East Bay (e.g. Blue Cross). One of their reasons must be to allow employees to live in a cheaper place than SF. This might increase the long term attractiveness of the Concords and San Leandros.

            Seattle has a very bright future. Not only are they building at a pace necessary to moderate real estate prices, but they also have a deeply rooted tech scene (Amazon, Microsoft) that calls the city a home and will continue to provide high paying jobs.

            The Bay Area will continue to outsource jobs, but similar to the finance industry in NY, the jobs that leave will be lower-paying support roles. The top paying positions will be where the talent wants to be and this is the Bay Area for now and the near future.

          • Posted by Dave

            @Pero, You noted the rapid pace of residential construction in Seattle which has been almost double that of SF and will possibly be more than double in the coming years if a significant amount of the pipeline projects are delayed – if not abandoned. That is key – that city’s PTB want to insure, as best they can, that the children of today’s tech workers will be able to afford a home in Seattle in 25 years. Their affordable program is (and has been) a 40% target of affordable units. Despite claims by some that affordable programs slow construction, it has not happened in Seattle.

            I agree about lower paying tech jobs being outsourced from the BA. My LinkedIn buddies are waiting for that day with baited breath. I partially disagree that the BA is where top talent wants to be. Some of that talent yes; but Seattle, Atlanta and the dreaded LA are increasingly a draw for the up and comers.

          • Posted by spencer

            i dont know anyone who wants to be in atlanta

      • Posted by spencer

        the last time that happened was in 2002, and there was 6 more years of bubble after that. I hope thats the case this time

    • Posted by Sabbie

      When you hear people say “we’ve already started crashing” then it’s already too late, you’ve taken a huge hit on your equity. Trust me, I’ve lived it. Lucky for you nobody has said that quite yet.

      • Posted by anon

        The editor of this web site has been saying that for months.

      • Posted by Sabbie

        You folks don’t know what a bubble is. Picture a kid blowing a bubble with gum. It gets bigger and bigger then it pops. You can’t use rising prices to disprove a bubble, because that’s what prices do in a bubble, they keep going up. You also can’t talk about it popping because it happens in a flash. You can only try to gauge when the bubble is getting too big, and to do that you look at history for signs and leading indicators.

        • Posted by SFRealist

          You’ve been predicting that a crash for years. I’d suggest you should change indicators.

          Sometimes price increases are not indicative of a bubble.

        • Posted by anon

          And you’ve still never provided anything concrete at all to explain the mechanisms causing the so-called bubble. During the housing bubble, it was funneling trillions of dollars in home loans to people with nothing down and no means of ever repaying the loans, all AAA-rated and securitized so the lenders had no incentive not to continue with this. Many spotted this in real-time and some figured out a way to make enormous profits shorting it. And it did not “pop in a flash” but unwound over a period of about 5 years.

          So far, all I’ve heard the last few years are “the Fed (mumble, mumble), China (mumble, mumble), VC funny money (mumble, mumble) . . . bubble.”

          Lending standards remain tight, so this is clearly not a repeat of the last bubble. S&P 500 PE ratios are indeed high, but not extraordinarily so, and corporate earnings are high, so this is not a repeat of the dot-com bubble. Interest rates remain low. Housing prices in SF are higher, but so are incomes. There may be a bubble (in something – Housing? Stocks?), but if you’re going to make that case, you need to provide something more than saying “it’s a bubble just because prices went up.”

          • Posted by Sabbie

            It’s the Everything Bubble, the mechanism is ZIRP. Plenty of people have spotted it, from the most successful people in finance to nobody bloggers, you’re just not listening.

            Those who spotted the last bubble were ridiculed by 99.9% of people while Alan Greenspan was saying in 2005 “lenders are now able to quite efficiently judge the risk posed by individual applicants and to price that risk appropriately” but now in hindsight everyone is a genius and totally knew it was a bubble, yeah right.

          • Posted by SFRealist

            Right, the Everything Bubble.

            You’ve cried a lot of wolf over the years. Give us some details. Are you still shorting the stock market? (Obviously you’ve been shorting it since you are so certain we are in a bubble, right? Right?) How far will SF home prices drop? When?

          • Posted by anon

            Yeah, “ZIRP (mumble mumble) . . . bubble” is the same as “Fed (mumble mumble) . . . bubble” I mentioned above. I.e. nothing.

            The last bubble certainly was not something that escaped all but a few whispering gadflies. Robert Shiller had a best selling 2005 book about it. Paul Krugman was writing about it in the NY Times. Calculated Risk was all over it. (It is true that only a handful figured out how to become very rich from it.) All of the above described in real time the precise mechanisms behind the bubble to show that this wasn’t just prices going up — which can happen — but something else. Financial bubbles don’t just hide until they’ve popped and taken everyone by surprise. All I’m asking for is some explanation of the underlying cause of the purported bubble. Pointing to low interest rates during a time of very low inflation doesn’t even start to cut it. Rates were super low during the 30s and 40s – no bubble and just the opposite.

          • Posted by SocketSite

            All the way back in 2005? Inconceivable! What’s even more amazing is that as late as 2008 most people in the industry were still convinced, or at least professing, that the San Francisco market would survive unscathed while others outlined some rather divergent views.

            Now about the denominator in that Housing P/E

          • Posted by Markets_arent_panacea

            Well the cape ratio is pretty high.

            I dont think that bc one hasn’t pinpointed when things will pop doesnt mean there isn’t a bubble. Interest rates are really low and that money has to go somewhere. I’m not saying there is going to be a pop at a certain time, but its also not inconceivable that the cape moves down to its historic mean and there is quite an equities shock combined with a recession which usually occurs by now. And i think that if someone says these things are indicators of major corrections, they have a point even if the run up has gone on longer than expected.

            Where does the burden of proof lie? Bubbbles are only labeled as such after the fact so its kind of hard to disprove. But there is some data out there showing things are over valued.

          • Posted by Sabbie

            I’ve given you plenty of details. It’s always the same, global pool of money desperate for yield has no benchmark for risk free rate of return, central banks printing money out of thin air with stated intention of debt orgy, big sharks front running mom and pop in and out of asset bubbles, taxpayer bails everyone out, rinse and repeat. We got a second wind this time from Trump being elected but that reflation trade is almost dead now too.

            If you can’t wrap your mind around it then use your nose, strippers owning four houses = 25 year olds buying multi million dollar Mission condos with Tesla charging station, something stinks.

            And you’d have to be an idiot to short this market when the central banks fire up the printing press at first sign of real weakness. But that doesn’t mean their magic powers have no limits.

          • Posted by anon2

            “And you’ve still never provided anything concrete at all to explain the mechanisms causing the so-called bubble.”

            Momentum.
            Demand skyrockets when an asset price is rising strongly (or at least perceived to be rising strongly) and buyers believe that they can easily profit by selling to some greater fool later on.

            This increased demand feeds back and further fuels price increases.

            When prices falter, momentum based demand drops and the drop in demand puts further downward pressure on prices.

            When fundamentals are stretched (P/E, CAPE, cap rate, price/income,…) more of pricing is based on momentum so you get bigger booms and busts. i.e. Who wants to buy a piece of a tech company burning through cash if you also expect a capital loss.

            Billions of dollars of tech market cap have been created and destroyed purely on momentum. Housing is much more “affordable” to many more buyers in a strongly rising market.

            Correlation.
            Some product development works, some fails. People get bonuses, people get laid off. People start families, people get divorced. Good and bad things happen all the time, and when this is essentially happening randomly it doesn’t move markets because you have a number of small uncorrelated events.

            But when you have a few factors, such as interest rates or the willingness of investors to fund momentum plays, with far reaching effects changes in these factors can cause significant market movements.

            When tech busts, startups close, big companies trim staff, this weakens commercial RE, people leave, rents drop,… These correlated effects are far different than the general ups and downs of life.

            But why did so many tech start-ups fail all at once around 2000? Why did housing boom and bust nationally if not globally in the last boom/bust?

            Momentum & Correlation are the key mechanisms of a bubble. Leverage and lending are enablers. Lending has been curtailed for the lower and lower middle classes, but these groups have not been players in the SF market for a while. The Fast Food worker can no longer lie about his income and get in on the momentum game, but HENRY tech workers look very good to lenders. Tech compensation tends to have a heavy stock component which adds to the correlation effect. And tech compensation is front loaded from a life cycle point of view (Rare to have pensions or retirement medical), so it’s easier for tech workers to “borrow from their future selves” by under-saving for retirement/later-life. Works great if housing prices go up, not so great if they drop, which adds to the momentum effect.

          • Posted by SFRealist

            Stil, of course, not actual facts about why this is a bubble. Let me know when there’s a third relevant mobile operating system. Apple and Google are the two most important companies in the world and they are driving our real estate prices.

          • Posted by anon

            anon2, all you’ve said is “bubbles feed on themselves, and then they end.” You’ve provided only circular reasoning. Were your premise accepted, every time the price of anything ever went up, “momentum” would kick in and a bubble would form in everything every time. Clearly wrong as asset bubbles are quite rare, although they do happen (see dot-com 1.0).

            Even if one accepts your premises, SF is not in a housing bubble because home prices (esp. condos) have plateaued. Thus, “momentum” is not feeding back and fueling anything. (ftr, you have it backwards: when prices rise, demand slows – simple law of supply and demand. Illustrated well in the SF real estate numbers).

            We have an alternative explanation for SF housing prices. The population of SF has significantly risen in the last 6 years. Incomes in SF have significantly risen. Interest rates are low. New housing has not nearly kept up. Way more demand, basically the same supply. Prices rose. Then they rose enough so that demand slackened. Not complicated.

            I’m still waiting some something more than “it’s a bubble because, just because it obviously is” to demonstrate why this simple explanation must be wrong.

          • Posted by anon2

            @SFRealist: “anon” asked for a mechanism. All you can do is look at the data and form an opinion. You’re going to have a hard time proving that something is or isn’t a bubble. Try finding “facts” that correlate the rise and fall of the Case Shiller graph above to the rising and falling fortunes of Apple & Google.

            @anon: The reasoning isn’t circular, but the price -> demand -> price feedback loop is. Try holding a microphone right in front of a speaker to see the concrete effects of feedback.

            “SF is not in a housing bubble because home prices (esp. condos) have plateaued”

            You’re making an assumption about how quickly market participants (i.e. home buyers and sellers) react to changing market conditions. Look at the last cycle, there was a 2-2.5 year flat period before the burst.

            “ftr, you have it backwards: when prices rise, demand slows – simple law of supply and demand.”

            That’s a line out of an econ 101 textbook and while many times people act that way, sometimes they don’t. In my opinion, seeing a “backwards” demand response to price changes is a key indicator of unstable market conditions. That’s why bubbles don’t happen in everything every time. Do people perceive rapidly rising prices as a sign of a hot stock or hot market and show increased interest? Or do they view rising prices as a sign of a worse deal and lose interest?

            There are clearly plenty of market participants, home buyers & investors & option compensated employees, that display this “backwards” price/demand response. It’s even obvious that the real estate industry knows this and gears their marketing towards showing how hot a home or area is via under-listing and then touting high over-asking amounts.

          • Posted by Sabbie

            The population boom was largely driven by a VC startup funding bubble (it’s Easy Credit that is to blame for every bubble, one way or another, so there’s your mechanism). There was also huge speculator demand due to high rents (which have now fallen), Airbnb proliferation (crack down in progress), and loose enforcement of housing codes (three in law units per house in some areas) plus safe haven demand from foreign buyers.

            However, demand is now falling due to startup deflation, affordability constraints, and reduced quality of life (as our so called leaders fail to leverage this tax windfall into public improvements, choosing instead to focus on grocery bags and soda pop, but I digress). At the same time, housing supply is finally increasing.

            There are quite a few signs that the larger economy is not so great, like the yield curve for example, or reduced labor force. This will translate to pain even for the very few mega caps actually selling widgets. Meanwhile Bloomberg reports that the smart money (hedge funds and banks) have already reduced their exposure to FAANG stocks while pension funds continue to pile in, can you say “bag holder”?

          • Posted by SFRealist

            My facts are that Apple and Google have an absolute duopoly right now on what is arguably the most important product in the world. They are generating inconceivable amounts of cash. Unless you think we’re all about to stop using smartphones, that gusher of cash will continue to flow largely to the Bay Area, where it will continue to support real estate prices.

          • Posted by anon

            Meanwhile, NASDAQ is at yet another all time high. I know, “VC funny money” (whatever that means). But, of course, the result is real money in the pockets of Bay Area residents. Which has fueled the higher incomes, higher demand, and higher prices given the limited supply. And I know, it will all end in a pop soon because, well, you know, just look around, it’s obvious.

            Not saying prices will rise forever. They won’t. But your attempts to explain the causes of the inevitable bubble burst have been nothing but “I know it when I see it.”

          • Posted by Dave

            @Sabbie – the population “boom” is a factor and there are signs it is over. Out-migration numbers, slower job growth than many other metros. Some people were projecting perhaps a million residents in SF by 2035. I never believed that would happen (it would be a disaster if it did) and indeed the current 860K or so in SF may turn out to be the peak with numbers falling somewhat over the next decade.

          • Posted by SFRealist

            There is no population drain. San Francisco is still gaining residents.

          • Posted by anon2

            “Meanwhile, NASDAQ is at yet another all time high. ”
            @anon- Weren’t the NASDAQ and Case Shiller at or near all time highs before the last crashes?
            You keep going back to your favorite strawman that people are arguing that the crash has already occurred.

            @SFRealist — But you see that Apple and Google didn’t stop the case shiller from crashing post 2007. FYI, the iPhone was introduced in 2007 and undoubtedly both companies were staffing up a storm to build the very duopoly of which you speak. You obviously feel that this time around they’ve hit some critical point to save the entire housing market. But you haven’t shown any sort of proof that this is the case, nor even provided a plausible mechanism that has the relatively small number of un-housed employees of two South Bay based companies saving the wider market from a downturn.

          • Posted by anon

            Yes, NASDAQ has been hitting new highs for a year. S&P 500 for 5 years. Every time something hits a new high, a crash is imminent? Not borne out by the data. Sometimes a crash follows a new high? Sure, albeit rarely. But so far, all you’ve given me is “this is one of those times because, well, I can just tell it will be.”

            My point is, high tech stock prices (heck, even if caused by a bubble) put lots of real dollars into the pockets of bay area residents, which are then spent on housing and other things.

          • Posted by anon2

            You could look at the CAPE posted above to see that valuations are at a very stretched level compared to historical averages.

            Or look at SF’s housing price/income ratio to see that the price/income ratio has been shooting up as it did in the last bubble.

          • Posted by Sabbie

            The cause of the bubble pop is always the same too, it’s when companies and/or consumers borrow too much and can no longer pay it back, and the defaults begin. In 2000 it was dot coms and public funding, in 2005 it was homeowners and lender funding, and in 2017 it’s “D: All of the Above” plus more. Many companies and households are running on fumes right now, again the data is out there but you’re ignoring it. The first signs we are seeing are auto, student loan, and credit card delinquency, startups folding, a retail implosion (no it’s not Amazon, e-commerce is less than 9% of retail sales, and much of that is simply old mail catalogs moving online), declining home sales volume, declining personal savings rate, and even the first uptick in mortgage delinquencies, I could go on. The jobs report today showed a big drop in labor force and mostly increases in part time work.

            Yes, Apple and Google will never run out of money, but sorry that cannot prop up the local housing market, not by a long shot. Both of those companies were going gangbusters in 2009 and look what happened anyways.

          • Posted by SFRealist

            Market cap, 2007 and today:

            Apple: $100B $800B
            Google: $170B $680B

            Apple and Google are much, much different companies then they were in 2007. Throw in Facebook, which has gone from $0 to $445B.

          • Posted by Sabbie

            You’ve still never told us the exact mechanism by which Google, Apple, and Facebook would be able to single-handedly prop up local housing prices. They are not the largest employers by a long shot and market cap has nothing to do with housing. And like I’ve said before, the Nasdaq is still down around 25% from the dot com peak when adjusted for CPI, and CPI is not even close to true inflation.

          • Posted by SFRealist

            It’s not only those three firms. You should read up on the ‘app economy’. It’s interesting stuff.

            Even though you did not see any difference between Facebook and Friendster, many other people do.

          • Posted by Sabbie

            The app economy is a lot like the dot com economy, falls short in the business plan department. The vast majority are giving away their product for free or at a loss, while the business plan is typically either Lotto (get bought by Google, Facebook, Apple) or Ponzi (cash out after passing the bag to late round or IPO investors). Neither are good for long term stability.

            Meanwhile Apple is really innovating these days, just came out with the HomePod that copies what Amazon and Google put out years ago, but at twice the price.

            And in the milestone department, we just hit record high net worth/personal consumption, lowest velocity of money since 1949, and record highs for the S&P but less than 50% of NYSE stocks are above their 200 day moving average. All of these show a huge disconnect between asset prices and the underlying strength of the economy.

          • Posted by anon

            Press release from a few days ago: “Apple today announced that its global developer community has earned over $70 billion since the App Store launched in 2008.” Way more app earnings, of course, from Apple itself. And Google. And Android developers. And Facebook.

            This is not dot-com 1.0. Lots of stupid apps out there, sure. But lots of money-making ones. And even apps that aren’t profitable still funnel money into the pockets of Bay Area residents both directly and indirectly. I suppose it’s possible we all go back to playing board games and reading print newspapers and using landline phones. But I’d bet the app world is here to stay (and whatever replaces it is more than likely going to be developed and marketed right here). And, of course, the app world is just a small percentage of the overall local tech economy. If you think the local economy is pets.com and webvan, you are terribly misinformed.

        • Posted by F Spediacci

          Thank you! I was starting to think I was the only one who sees this. It is going to happen. This is how it happens. This time around I’m good. No stakes this time. Once is enough for me. I will say this, I’m waiting with a good arm chair and bag of popcorn this time!

  3. Posted by Pero

    @Socketsite: how do you tie the S&P Case Shiller Index for condos with the Mark Company’s estimate for new construction condo pricing?

    The first is suggesting a year over year appreciation in the condo market while the latter is suggesting a 10% drop. It doesn’t sound plausible that new construction condos are falling while prices for existing condos are still on the rise. I know that the Shiller-Case index represents a 3 month average, but this shouldn’t explain such wide variations.

    • Posted by SocketSite

      As noted above: “The S&P/Case-Shiller…indices include San Francisco, San Mateo, Marin, Contra Costa and Alameda in the “San Francisco” index (i.e., greater MSA)” (while the Mark Company’s index is for San Francisco proper).

      As we first reported earlier this year: Demand Really Dropped in San Francisco but Not Around the Bay.

      And even though they’re based on data for single-family homes, we’d suggest thinking a bit more about the relative performance of the tiers above while keeping mind the blended gain for the index tracking the performance of San Francisco, San Mateo, Marin, Contra Costa and Alameda condos is 0.6 percent over the past year.

      • Posted by Pero

        Fair enough,
        I see that Case-Shiller includes the entire region, rather than SF on it’s own. However, I would expect SF to make up a large part of the condo inventory of the Bay Area (could it be >50%?). I understand that new construction condos in SF go into the top tier, but it would surprise me if the top is falling by 10% and the bottom is rising by +10% at the same time to produce a mildly appreciating overall index.

  4. Posted by Dave

    To reiterate what others have said – prices are not going to “crash” in SF.The big take-away is at the macro level. Price appreciation in the Bay Area is starting to track to the national average price appreciation – give or take. This month it’s a bit less at 5.1% vs 5.8%.

    Other markets – and more than just Seattle, Portland and Dallas – are significantly outperforming the Bay Area. IMO they will continue to do so over the coming decade as prices normalize between the Bay Area and other major metro areas.

    This is a good thing as affordability will slowly improve in the region. It also should tamp down the boom and bust (mostly boom) cycles that have lead not just to a furthering of the housing crisis but the approval of questionable developments as developers tried to quickly cash in on the appreciation.

    Big time corporate RE investors will find greener pastures in Seattle, Atlanta, Portland and Dallas as mid-term appreciation in those cities could significantly exceed that of the BA. The project approval window is generally shorter in other areas which makes them even more appealing to investors/developers – as in being able to catch the wave. The shift of some investor money out of the BA will further lessen upward pressure and, if job growth significantly underperforms places like Seattle and Atlanta, then a further easing is in store.

    This boom cycle has not been good and especially for housing. Pricey condos have gone up that are not affordable to most. Though called “luxury”, they are anything but. They have been mostly quick jobs meant to make the biggest buck. It’s only in the past few years SF has exceeded 3K new units of housing. That number is now falling and, IIRC, after 2018 it will drop below 3K again. Meanwhile, Seattle has been producing 5K units for the past 5 years and will do so through 2025 at least. Between now and 2025 Seattle could produce upwards of 40K new units. SF? Maybe 15K? Ironically only recently has the affordable housing program gained some strength. But when it would have mattered most, during the boom, it was basically a paper tiger.

    It’s still a good time to purchase a personal residence as long as one can legitimately cover the costs and is not banking on an erstwhile appreciation to save the day.

    • Posted by F Spediacci

      “It’s still a good time to purchase a personal residence as long as one can legitimately cover the costs and is not banking on an erstwhile appreciation to save the day.”

      Are you out of your mind? Or just among the others who easily come across money via some over paying tech job. On that note, one of the biggest problems here, and before? People do not work hard for money anymore. Easy come, easy go ! Wake up man. Don’t give crap advice like that.

      Any one who knows the value of the dollar as well as educated investing knows you buy low. What next, buy google stock?

  5. Posted by Mark

    Dave, I’m confused on what pressure the investors you refer to below apply to the market. If these investors are funding new development, are they not contributing to supply? Would that money leaving for better opportunities in other markets not result in increased prices (or propping up of existing high prices)?

    The project approval window is generally shorter in other areas which makes them even more appealing to investors/developers – as in being able to catch the wave. The shift of some investor money out of the BA will further lessen upward pressure

    • Posted by Dave

      Two factors regarding investors. There are those investors buying up existing SFHs and apartments in the hopes of turning them over for a big appreciation gain in a few years – and often ignoring the low to zero ROI in the interim. Cash offers over the asking price were fairly common in my area a year plus ago and throughout the BA. The result of this “tulip frenzy” was to add to the upward pressure in prices.

      As to new construction, the bottom line is that these units were uber expensive and largely not affordable. One of the reasons that, a little too late and more than a dollar short, Prop C came about. All that building in recent years did not lower prices and, it can be argued, pulled prices up further. One Tenderloin project IIRC paid almost luxury price per buildable unit for their land.

      Other factors are at play too as regards jobs and quality of life which makes me believe that the BA is in for an extended period of flat or slowly rising prices – even if a chunk of the pipeline projects are delayed or abandoned.

      • Posted by SFRealist

        “All that building in recent years did not lower prices and, it can be argued, pulled prices up further. ”

        That is not true. Prices have generally plateaued over the last couple of years. Which is the same time that thousands of new units have come on the market.

  6. Posted by @pablocela

    Well said Dave

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