CATEGORY ARCHIVE: Bubble (Or Not)
November 6, 2009
Half-Price Sale For (Mostly Vacant) Class A Commercial Continues
"Prudential Real Estate Investors is in contract to sell the [mostly vacant 188 Spear Street] to Shorenstein for $170 a square foot [$25 million], a 56 percent drop from the $385 a square foot or $56.9 million that the city assessed the...property for last fiscal year. The only other Class A financial district building to sell this year, 250 Montgomery St., traded for $172 a square foot — also a 56 percent drop from its previous sale in 2006."
∙ Shorensteins prevail in bid for S.F. building [San Francisco Business Times]
∙ A Half-Price Sale For Class A Commercial Real Estate In San Francisco [SocketSite]
Posted by socketadmin at 6:50 AM | Permalink | Comments (14) | (email story)
November 5, 2009
The Word On 56 South Park: Sold
From the peek to a poke to the sale of 54 South Park for a reported $3,375,000, we now have the word on 56 South Park, the roughly 2,000 square foot (plus 600 square feet of outdoor space) just closed escrow for a reported $2,300,000 (15% under asking).
∙ 54-58 South Park: The Inside Scoop (Both Literally And Figuratively) [SocketSite]
∙ From A Peek To A Poke For 54 And 56 South Park [SocketSite]
∙ 54 South Park Sells (And We Think Alpha Rather Than Beta) [SocketSite]
Posted by socketadmin at 12:30 PM | Permalink | Comments (9) | (email story)
Fannie Mae As The Largest Lender Landlord In All The Land?
Having taken back 57,000 properties through foreclosure in the first half of 2009, "bringing its total real-estate owned inventory to 63,000 properties valued at $6 billion," Fannie Mae is rolling out a "Deed for Lease Program" in the hopes of generating some cash from the non-performing assets and mitigating the near-term impact of so-called "shadow inventory" on the market.
The Deed for Lease Program, which Fannie plans to roll out on Thursday, will offer borrowers who fail to complete or don't qualify for a loan modification or other workout to deed their property to the lender in exchange for a lease. Borrowers-turned-tenants will be able to sign leases of up to 12 months and will pay market rents, which in most cases are lower than the cost of mortgage payments.
Borrowers who haven't missed any mortgage payments aren't eligible for the program, and the borrower's mortgage servicer would have to show that a borrower isn't eligible for a loan modification before the homeowner could apply for the Deed for Lease program.
Of course collecting rents from those who have already lost their homes to foreclosure might be a challenge. And while the tipster that first pointed out the story notes, "Good news for RE investors like me, that's fo' shore!", we’d argue it's the opposite.
∙ Fannie Mae to Rent Foreclosed Homes Back to Borrowers [WSJ]
Posted by socketadmin at 8:15 AM | Permalink | Comments (24) | (email story)
November 3, 2009
A Lower High Watermark For 501 Beale Penthouses (#PH2B Closes)
The sale of Watermark (501 Beale) penthouse #2B closed escrow on 10/19/09 with a reported contract price of $950,000. While still "not cheap" at $932 per square foot, it is 31 percent cheaper than its "buy, sell, repeat, retire" resale price of $1,375,000 in December of 2006, 24 percent cheaper than its purchase price of $1,250,000 in October of 2006.
It's also 27 percent cheaper than the identical "penthouse" unit a floor below (#PH1B) that sold for $1,300,000 in October of 2006 and was likley a supporting comp for the flip of #PH2B. And so on. And so forth.
No word on whether or not it was our plugged-in reader who had offered $950,000 in cash to the bank for #PH2B prior to its last list price reduction (at which time they wouldn’t "even take a look at it") who ended up with the condo. If so, one word: housewarming.
∙ A Pair Of Bank-Owned Penthouses Atop The Watermark (501 Beale) [SocketSite]
∙ From Flippy To Floppy For Watermark (501 Beale) Penthouse #2B [SocketSite]
Posted by socketadmin at 7:45 AM | Permalink | Comments (6) | (email story)
October 29, 2009
Lembi's Fear And Loathing In Las Vegas
"According to the Clark County, Nev., district attorney's office, there is a warrant out for Walter Lembi, managing director of the financially troubled Lembi Group, for allegedly passing $298,500 worth of bad checks earlier this year at Caesar's Palace in Las Vegas."
UPDATE: "Under [a] deal, Lembi has agreed to pay the full amount, plus fees, for a total of $328,450, in a payment plan beginning Friday..."
∙ Real estate leader's name on bad-check warrant [SFGate]
∙ Lembi's markers met [SFGate]
∙ The Chronicle Reports "Dozens," A Plugged-In Source Says Over 100 [SocketSite]
Posted by socketadmin at 8:10 AM | Permalink | Comments (10) | (email story)
October 28, 2009
From Flippy To Floppy And A Cliché For 2011 Golden Gate Avenue
The sale of 2011 Golden Gate Avenue closed escrow on 10/15/09 with a reported contract price of $1,800,000 ($413 per square foot). Purchased for $1,350,000 in July of 2007 but then remodeled and expanded (adding legal bathrooms and square feet), 2011 Golden Gate returned to the market in October of 2008 asking $2,395,000.
It was subsequently reduced and relisted a number of times, most recently for $1,799,000 this past September. And while not exactly apples to apples on account of the remodeling, call it a likely six-figure loss on the investment when all is said and done.
In terms of industry statistics, however, the sale will be officially recorded and reported as "over asking" with less than 40 days on the market.
And while we generally eschew real estate industry clichés, it’s a good reminder of one which we don’t: "You make money when you buy, not when you sell."
∙ Not To Be Flip, But If It Wasn’t A "Flip" It Looks Like One Now [SocketSite]
∙ Tis’ The Season (September) To Return: 2011 Golden Gate Ave Edition [SocketSite]
Posted by socketadmin at 10:30 AM | Permalink | Comments (25) | (email story)
October 27, 2009
The 2151 Green Street Scoop: Wait For It…
Still listed on the San Francisco Association of Realtors' MLS last week as an "active listing" despite a plugged-in reader's report that it had actually sold at foreclosure auction two weeks ago, today the MLS listing for 2151 Green Street was...withdrawn.
And if our reader’s source is correct, the buyer at $3,066,001 was...the person who sold it to the foreclosed upon party along with the adjoining empty lot for $9,000,000 in 2007.
Oh, and the listing for said lot now known as 2157 Green Street just went pending (last asking $4,200,000).
Did someone just effectively short the vaunted District 7 residential real estate market in San Francisco and pocket a few million by doing so?
∙ Reader Versus Realtor: Did 2151 Green Street Just Sell At Auction? [SocketSite]
∙ But Hey, $550,000 Is Simply A Rounding Error To A Proper Industrialist [SocketSite]
∙ Another District Seven Mansion Heads For Foreclosure (2151 Green) [SocketSite]
∙ The Scoop On 2157 Green Street (Could You See The Foreshadowing?) [SocketSite]
∙ San Francisco Real Estate Districts: Maps And Neighborhoods [SocketSite]
Posted by socketadmin at 5:00 PM | Permalink | Comments (25) | (email story)
October 19, 2009
Looking Back And Out Over South Park Via 10 South Park #1 (And #3)
Purchased for $760,100 in November of 2004 but then taken back by the bank in July, the sale of 10 South Park #1 closed escrow on 10/16/09 with a reported contract price of $611,300 ($511 per square foot). That’s 3% "over asking" but 20% under its '04 value.
As a couple of plugged-in readers noted previously, 10 South Park #3 which is 267 square feet smaller but likely offered better views, and perhaps even a better layout, sold for $925,000 ($996 per square foot) in July of 2007.
∙ A Bank Owned 10 South Park #1 (Insert Underpants Quotes Here) [SocketSite]
Posted by socketadmin at 10:30 AM | Permalink | Comments (2) | (email story)
October 15, 2009
U.S. Foreclosure Filings Jump With Prime And Alt-A Leading The Way
Foreclosure filings in the U.S. increased 29 percent on a year-over-year basis in September, but fell 4 percent as compared to August (a record high month).
Mounting foreclosures mean U.S. home prices probably will resume falling, analysts from Amherst Securities Group LP in New York said Sept. 23. A “shadow inventory” of 7 million properties are in the foreclosure process or likely to be seized, up from 1.27 million in 2005, they said.
The pace of prime and so-called alt-A loan defaults is accelerating as subprime defaults slow, Standard & Poor’s analysts led by Diane Westerback said yesterday in a report. Prime loans are those made to borrowers with the best credit records while alt-A loans are considered riskier because they were often granted without documenting the borrower’s income.
For the third quarter U.S. foreclosure filings jumped 23 percent year-over-year.
∙ U.S. Foreclosure Filings Jump 23% to Record in Third Quarter [Bloomberg]
∙ Subprime And Alt-A Statistics By County: The Feds Mortgage Map [SocketSite]
Posted by socketadmin at 9:15 AM | Permalink | Comments (3) | (email story)
October 14, 2009
Another Bank-Owned Multi-Million Dollar (In 2005) Noe Valley House
Purchased for $2,100,000 at the end of August 2005, a plugged-in reader noted 111 Hoffman over in Noe Valley was scheduled to hit the courthouse steps last month.
In a follow-up comment yesterday, said reader also notes that 111 Hoffman was in fact taken back by the bank (officially on September 28).
∙ June S&P/Case-Shiller: San Francisco MSA Up MOM Across All Tiers [SocketSite]
Posted by socketadmin at 7:45 AM | Permalink | Comments (8) | (email story)
October 5, 2009
A 25.7% Drop In Assessed Value For A Plugged-In Reader In 2009/10
So a year late and quite a few dollars short the Assessor's office granted my informal request for review and lowered my 09/10 assessed value by 25.7% from the "Prop 13 Base Year Value". So after saying my place gained value from Feb 2007 to January 2008 they now say it dropped at least 25% from January 08 to January 09 (and 22.7% from when I purchased it).
Once again, the average granted reduction for 2008/09 was 11.5%. And the San Francisco Tax Assessor’s tally for 2009/10 adjustments should be out soon. Tipsters?
UPDATE: Additional history with respect to the subject property, a 2/1 condo in District 6.
∙ Average Granted Assessed Value Reduction In San Francisco: 11.5% [SocketSite]
Posted by socketadmin at 10:45 AM | Permalink | Comments (57) | (email story)
October 1, 2009
Another Muhawieh 2007 Noe Comp Heads For The Courthouse Steps
On the market and featured on SocketSite in February of 2007, 207 Clipper closed escrow with a reported contract price of $987,000 that March. From a plugged-in "EBGuy" today:
Well, for those who missed it last time, it looks like 207 Clipper will be hitting the auction block [on October 13] with an unpaid balance of $458,970...And the owner, one Issac Muhawieh...
Keep in mind that if Issac simply "overpaid" in 2007 so did anyone else who relied on the sale of 207 Clipper (or a derivative sale) as a legitimate Noe neighborhood comp.
∙ Beauty Is In The Eye Of The Beholder [SocketSite]
∙ Two More Muhawieh Comps Of Yore Head For The Courthouse Steps [SocketSite]
Posted by socketadmin at 12:15 PM | Permalink | Comments (7) | (email story)
September 28, 2009
A Fifty Percent Off Sale For The Bank Owned 767 Bryant #204
Purchased for $944,500 in March 2007, the 1,607 square foot two-bedroom loft #204 at 767 Bryant was "bought" back by the bank for $745,784 in December 2008 adding to a growing inventory of bank owned units in the building.
On September 17, 2009 the resale of 767 Bryant #204 closed escrow with a reported contract price of $475,000, $295 per square foot and 49.7% under its value in 2007.
UPDATE: A quick reminder that in August the 2,041 square foot 767 Bryant #210 closed escrow with a recorded sale price of $665,000 ($326 per square foot and 44.6% under its 2006 asking).
∙ Thirty Percent Of 767 Bryant Returns As REO (But Not Speedwagon) [SocketSite]
∙ 767 Bryant #210 Comes In For A 767 Comp Crash Landing [SocketSite]
Posted by socketadmin at 11:40 AM | Permalink | Comments (19) | (email story)
September 25, 2009
Another "Diabase LLC" Debacle As 1417 15th Street Returns?
Asking $3,750,000 for the one bedroom but 8,200 square foot BIG HOUSE studio in early 2007, but then subsequently reduced to $3,250,000, an off-the-MLS sale of 1417 15th Street was recorded in the amount of $3,065,000 to "Diabase LLC" at the end of that year.
Re-listed in November for $3,295,000 ("Buy, Sell, Repeat, Retire"), but it failed to sell. Back on the market in the Mission today and asking $2,750,000.
And perhaps it’s purely coincidence, but as a plugged-in reader notes, a "Diabase LLC" purchased 1756 North Point down in the Marina for $1,920,000 in April of 2007. It sold again for $1,575,000 in May of 2009.
∙ Listing: 1417 15th Street (1/2.5) - $2,750,000 [MLS]
∙ Picture This: One Big One-Bedroom [SocketSite]
∙ Two Relatively Big Reductions (Two Absolutely Big Properties) [SocketSite]
∙ Another "Real" Apple Closes Escrow In The Marina: 1756 North Point [SocketSite]
∙ A Rather "Real" Apple On The Tree In The Marina: 1756 North Point [SocketSite]
Posted by socketadmin at 11:00 AM | Permalink | Comments (5) | (email story)
September 24, 2009
Foreclosure (And Market) Realities Overcome Legislative Externalities
As we wrote a year ago with respect to the Perata Mortgage Relief Bill:
Unfortunately, we doubt the new law will have any meaningful impact on foreclosure rates throughout California other than to delay the inevitable. The only real impact we expect: making properties that have been foreclosed upon more palatable to the public.
As we wrote this past July:
Expect San Francisco foreclosures to rise dramatically over the next few of quarters as moratorium delayed NODs work their way through the system.
And the Chronicle’s headline today: "Foreclosure-mediation laws not much help."
∙ Govenor Schwarzenegger Signs The Perata Mortgage Relief Bill [SocketSite]
∙ Actual San Francisco Foreclosures Up 34.7% QOQ (Down 3.5% YOY) [SocketSite]
∙ Foreclosure-mediation laws not much help [SFGate]
Posted by socketadmin at 5:00 AM | Permalink | Comments (14) | (email story)
September 18, 2009
You’ve Gotta Have Shouldn’t Have Had Faith: The Follow-Up
The short sale of 110 Faith Street has closed escrow with a reported contract price of $550,000 or 24% under its purchase price in October of 2005 ($720,000).
From the listing in 2009 (which probably wasn't all that different than the sales pitch back in 2005): "Come see this before you miss out on owning in Bernal Heights."
∙ You’ve Gotta Have Shouldn’t Have Had Faith? (110 Faith Street) [SocketSite]
Posted by socketadmin at 1:45 PM | Permalink | Comments (13) | (email story)
September 9, 2009
The Chronicle Reports "Dozens," A Plugged-In Source Says Over 100
While the Chronicle reports "dozens more Lembi properties are in play" in addition to the 75 ex-Lembi-owned apartment buildings that have already been given or taken back by the banks, according to our sources the number of Lembi properties still at risk is over a hundred. As in up to 200 of the 300 properties once owned by the Lembi’s could be lost once all is said and done.
∙ Debt swamping Lembi Group, big S.F. landlord [SFGate]
∙ Cash Flows Catch Up To The Lembi Group [SocketSite]
∙ From At Risk To Lost For Another 24 Lembi Properties [SocketSite]
Posted by socketadmin at 9:00 AM | Permalink | Comments (35) | (email story)
August 27, 2009
767 Bryant #210 Comes In For A 767 Comp Crash Landing
As we wrote in May:
In August of 2006 twenty apartments at 767 Bryant hit the market as condos. At the time list prices ranged from $676,920 to $1,850,000 including 767 Bryant #409 at $676,920 and 767 Bryant #210 at $1,200,000.
Despite a subsequent remodeling, reductions and incentives (including a free Prius or Mini Cooper), at least six of the units failed to sell and were lost to foreclosure.
On Friday 767 Bryant #409 returned to the market as a bank owned property (REO) asking $525,000 (23% less than in 2006) and 767 Bryant #210 returned to the market as an REO property asking $799,000 (33% less than in 2006).
Yesterday the sale of the 2,041 square foot 767 Bryant #210 closed escrow with a recorded sale price of $665,000 ($326 per square foot and 44.6% under its 2006 asking).
∙ Thirty Percent Of 767 Bryant Returns As REO (But Not Speedwagon) [SocketSite]
∙ 767 Bryant: The Apartments Condominiums [SocketSite]
∙ Buy A Condo Get A Car At 767 Bryant [SocketSite]
Posted by socketadmin at 7:00 AM | Permalink | Comments (20) | (email story)
August 14, 2009
From The Top Of Noe To The Courthouse Steps: 647 Grand View #1
From the agent’s website for 647 Grand View Avenue #1 back in 2007:
With a large, open plan design, unusually high ceilings and the highest quality finishes it is unique to Noe Valley. Encompassing the lower three levels of 647 Grand View, it is very private and quiet with a house-like feel.
Sweeping views of the Valley and Bay are offered from multiple vantage points throughout the home. A total renovation of the entire property was completed in April 2007.
Asking $1,875,000 at the time, or a little over $800 a square foot, 647 Grand View Avenue #1 appears to have sold been refinanced in October of 2007 for $1,870,000 with nothing down and two variable rate loans, one for $1,500,000 and the other for $370,000.
Unit #3 appears to have been refinanced around the same time as well, but 647 Grand View #2 and #4 appear to have sold in October of 2007 for $1,100 and $764 a square foot respectively.
And a plugged-in and on the foreclosure ball "EBGuy" notes on our update on 601 Grand View down the block, 647 Grand View #1 now has (or perhaps had) a date with the courthouse steps. Seeking an opening bid of $1,500,000.
UPDATE: From a plugged-in reader:
This property originally came on the market in spring of '07 for $2.4 million. I toured it in late July of '07 at which point it had already been on the market for about 4 months. They hadn't received any offers and I was told the price was very negotiable.
UPDATE: It appears as though 647 Grand View Avenue #1 and #3 were actually refinanced without a sale (#1 to the tune of $1,870,000). Our apologies for the early confusion and corrected above.
∙ 2007 Listing: 647 Grand View #1 (3/3) 2,316 sqft - $1,875,000 [647grandview1.com]
∙ Apples To Apples 601 Grand View Is Down After A Five Year Hold [SocketSite]
Posted by socketadmin at 7:00 AM | Permalink | Comments (103) | (email story)
August 13, 2009
A Banked Owned White Picket Fence And Dream (126 Chester Ave)
Purchased for $750,000 in December 2004 with what appears to have been $25,000 down, 126 Chester Avenue was bought back by the bank in November of 2008, white picket fence and all. Back on the market and asking $447,000 in 2009.
With a sale for $360,000 in March of 1999, a sale at asking would represent average annual appreciation (CAGR) of 2.1% over the past ten years, but a 40% drop in value over the past five.
∙ Listing: 126 Chester (4/2) - $447,000 [MLS]
Posted by socketadmin at 11:00 AM | Permalink | Comments (19) | (email story)
August 11, 2009
On The Steps Of The San Francisco Courthouse 399 Leland Sells
While 2550 Webster Street's date with the courthouse steps was postponed once again (along with two dozen or so other San Francisco properties), and a half-dozen or so properties failed to generate an opening bid, a Visitacion Valley property sold at auction yesterday.
Purchased for $720,000 in September 2005, the bidding for 399 Leland Avenue opened at $306,000 and generated one bid. It sold for $306,000.01 which represents a 57% haircut from its previous sale price, but also average annual appreciation of 2.4% since its sale for $240,000 in 1999 for this single-family in an up and coming neighborhood.
∙ The Eccentric Arden Van Upp Might Be Feeling A Bit Antsy These Days [SocketSite]
∙ Unlocking The Potential Of Visitacion Valley: The Former Schlage Site [SocketSite]
Posted by socketadmin at 11:45 AM | Permalink | Comments (32) | (email story)
Two More Muhawieh Comps Of Yore Head For The Courthouse Steps
A plugged-in reader turns up two more Muhawieh comps of yore headed for the courthouse steps: 1036 Jackson and 619 Diamond. Additional background (such as a lawsuit from 619 Diamond’s neighbor) and discussion on the 1130 Cole thread.
UPDATE: From a plugged-in legal reader:
This guy is facing a lot of lawsuits, including some brought by his own family (and some in which family members are included as co-defendants). I count 21 lawsuits, almost all filed within the last year....And I've learned one easy way to get rid of a protected tenant -- just sign a contract agreeing to pay him/her ridiculously high sums to move out, then don't pay!
∙ An Ex-Comp Now Contractors Special Closes Escrow On Cole (1130) [SocketSite]
Posted by socketadmin at 9:30 AM | Permalink | Comments (38) | (email story)
August 7, 2009
Apples To Apples (And Seeking A Short Sale) For 4114 20th Street
Purchased for $1,513,000 in October of 2007, 4114 20th Street returned to the market in Eureka Valley this past January asking $1,695,000 but was withdrawn in February after reducing its price to $1,598,000.
Back on the market today and asking an enticing $1,150,000 as a short sale. There’s a hearsay story behind the sale that we’re not going to tell, but let’s just say a tipster told us to be on the lookout for the house as a foreclosure almost four months ago.
And perhaps we shouldn't be surprised that the listing doesn't mention it's agent owned.
UPDATE: A plugged-in reader notes:
The MLS listing does include the following in the agent [i.e., non-public] remarks: "Lender has already approved short sale price but is requesting COE on or before 8/27/09. Seller is a licensed CA real estate agent."
∙ Listing: 4114 20th Street (4/3) - $1,150,000 [MLS]
Posted by socketadmin at 1:30 PM | Permalink | Comments (68) | (email story)
August 6, 2009
Noe Renovation Goes For A Penny Over Foreclosure Auction Minimum
From the MLS listing for 4251-4253 23rd Street:
Gorgeous new remodel of large Edwardian in the heart of Noe! This stunning home features 4BR and 3.5BA, with 3BR/ 2BA on the top floor and add'l BR/ BA plus media/ play room on ground floor.
Includes a fully equipped, vacant, legal studio cottage with sep. entrance (built in 2002) at the rear of the property. No expense was spared in the home's thoughtful design and execution.
Huge open plan chef's kitchen overlooks a big rear yard. Only 3 blocks to 24th Street shopping - this home has it all!
Purchased pre-renovation for $1,450,000 in February of 2007; listed post-renovation for $2,450,000 in October of 2008; reduced to $2,275,000 in January of 2009.
From a plugged-in tipster yesterday:
[4251-4253 23rd Street] went to foreclosure sale today on the steps of City Hall. With an outstanding debt of $2,220,821.39, the bank reduced the opening bid to $1,742,500. The only party to bid did so at a penny over the opening bid. The property sold to a fellow who got a $532,500 discount from the last listing price and appeared to be an end user.
Call it 22% under what was owed, 29% under original list, and congratulations to the bidder. No word on why the MLS listing shows as "contingent" (or whether as such the $1,742,500.01 sale price will be reported as an auction "comp").
∙ Listing: 4251-4253 23rd Street (5/4.5) - $2,450,000 [4251-23rdstreet.com]
Posted by socketadmin at 7:00 AM | Permalink | Comments (213) | (email story)
August 4, 2009
9% Of HAMP Eligible Delinquent Loans Modified, 91% To Go
Out of an estimated 2,705,302 sixty plus day delinquent loans currently eligible for modification under the government’s Home Affordable Modification Program (HAMP), offers for 406,542 trial modifications have been extended (15%) and 235,247 modifications have been started (9%) over the past five months.
∙ Making Home Affordable Program Report: August 4, 2009 [treas.gov]
Posted by socketadmin at 8:00 AM | Permalink | Comments (13) | (email story)
July 27, 2009
SocketSite’s Straight Scoop On The Collapse Of Cubix (766 Harrison)
As a plugged-in reader noted this morning, the sales office at Cubix (766 Harrison) never managed to re-organize and re-open and a trustee sale of the unsold condos is scheduled for the courthouse steps this afternoon at 2 p.m. The outstanding developer's loan balance on the building is $21,050,440.
According to our sources the loan balance is split roughly two-thirds ($14M) on a first and one-third ($7M) on a second, today's trustee sale is likely a move to simply wipe out the second, and the unsold inventory includes 80 of the 98 residential units and the commercial space (i.e., 18 of the condos, including 7 BMRs, actually sold).
We know of at least one pre-emptive offer that was made and rejected for the units. And as an aside, Temecula Valley Bank which holds the first has been taken over by the FDIC.
As always, we’ll keep you posted and plugged-in.
UPDATE: With an opening bid of $5,000,000 but no bidders, the auction of Cubix likely played out as planned (as written above "today's trustee sale is likely a move to simply wipe out the second"). And as a plugged-in reader correctly notes:
As I suspected, you could not have bought it for 5 million as the trustee had instructions to check back with the lender if any bidders came to the the starting price. BTW, my source says George Hauser (developer) made an appearance at the steps.
Let the real bids begin.
∙ Cubix (766 Harrison) Sales Office Currently Closed But Not Sold Out [SocketSite]
Posted by socketadmin at 11:00 AM | Permalink | Comments (87) | (email story)
July 22, 2009
Fighting "Blight" By Adding Art In San Francisco Storefronts
From the San Francisco Examiner:
Taking a cue from cities such as New York, San Diego and San Jose, [a San Francisco] pilot program will temporarily place original art installations in [19] vacant storefront windows. The first to be filled will be in the mid-Market Street area, followed by Taylor Street in the Tenderloin, Third Street in the Bayview district and 24th Street in the Mission district.
No word on when said program might make its way to Union Street, or on any plans to fill some of the never leased (or at least never opened) new development restaurant/retail spaces about town.
∙ Art installations will help city fight blight [San Francisco Examiner]
∙ San Francisco Retail Space Update: Vacancy Rate Up Four-ish Fold [SocketSite]
Posted by socketadmin at 8:00 AM | Permalink | Comments (44) | (email story)
July 14, 2009
Ten Below Over Freezing. Except For That One At Twenty-Nine...
If you read Bloomberg yesterday you learned that the past three Decorator Showcase homes in San Francisco are on the market, and that this year’s showcase (2830 Pacific) "was listed at $12.9 million in April and the price was reduced in May."
“Things reached a fever pitch two years ago when people thought they could do no wrong in real estate,” said Malin Giddings, co-listing agent for this year’s seven-bedroom, six- bathroom home. “Now the game is over.”
You were also told that the "last time a house in San Francisco fetched at least $10 million was in June 2008, according to the city assessor-recorder office."
Of course plugged-in people know that 2830 Pacific was actually asking $15,500,000 before being listed in April (and then reduced in May), and that it’s more like six out of the past ten showcase homes that are struggling to find buyers.
Oh, and 2799 Broadway (A.K.A. 37 Raycliff Terrace) sold for $29 million in September 2008. But hey, who are we to quibble with Bloomberg.
∙ Mansion Glut in Pelosi’s San Francisco Neighborhood Slows Sales [Bloomberg]
∙ Another Ex-Decorator Showcase Is Officially Listed: 2500 Divisadero [SocketSite]
∙ 2009 Decorator Showcase (2830 Pacific) Opens Its Doors And Kimono [SocketSite]
∙ Showcasing A Designer Price Cut: 2830 Pacific Sheds Another 29% [SocketSite]
∙ The SocketSite Scoop On 37 Raycliff Terrace (A.K.A. 2799 Broadway) [SocketSite]
Posted by socketadmin at 11:30 AM | Permalink | Comments (4) | (email story)
July 10, 2009
Note to Short Sellers (And Their Agents): Read The Fine Print
From the San Francisco Business Times:
The rising tide of “short sales” by troubled home owners facing foreclosure is prompting lenders to become more aggressive in their attempts to pursue former homeowners for their loan losses in a short sale. In a short sale, a house is sold, with a lender’s approval, for an amount that won’t pay off the mortgages on the property.
Often, the troubled home owner assumes the loss will be eaten by the lender. But Bank of America and Chase have quietly added language in their short-sale agreements that require the borrower to sign a promissory notefor the shortfall.
A spokesman for the American Bankers Association said this week that he wasn’t aware of the practice, suggesting how little attention has been paid so far to collection of these notes from troubled borrowers.
BofA says its intention is to protect investors holding the mortgages.
Damn those greedy lenders.
∙ Sellers owe balances after short sales [San Francisco Business Times]
Posted by socketadmin at 12:30 PM | Permalink | Comments (54) | (email story)
July 6, 2009
QuickLinks: Thank Goodness That Foreclosure Crisis Is Over…
∙ New Evidence on the Foreclosure Crisis [WSJ]
∙ Another wave of foreclosures is poised to strike [LA Times]
∙ A New All-Time High (Or Rather Low) For U.S. Prime Delinquencies [SocketSite]
Posted by socketadmin at 11:00 AM | Permalink | Comments (6) | (email story)
July 2, 2009
A Half-Price Sale For Class A Commercial Real Estate In San Francisco
"An undisclosed U.S. private-equity firm bought the $40.8 million note on 250 Montgomery St. for about half its face value, according to industry sources. The sale was about 60 percent below the cost of the building, considering the previous price plus improvements."
UPDATE: Details from J.K. Dineen:
A private equity fund controlled by an unidentified “domestic billionaire” has paid $19.9 million [$172 a square foot] for 250 Montgomery St., a 116,000-square-foot building on the corner of Pine Street that Lincoln Property Co. bought for $46 million in 2006. Technically, the buyer bought the note on the building, rather than the property itself. Under the sales agreement the lender on the property, Finance Realty Corp., will deed 250 Montgomery St. to the buyer in lieu of foreclosure. Lincoln Property was in default on the property.
The sale, at a price that represents about 25 percent of replacement cost, represents the first San Francisco office building sale in a year. It is also the first “round trip” transaction where a property went from being sold at the peak of the market to deed in lieu of foreclosure to a new owner. Colliers International Executive Vice President Tony Crossley said the price “gives the market a data point it has been lacking.”
“This gives a benchmark that other owners and lenders can point to as saying this is what real estate is now worth in San Francisco and can adjust to accordingly. People can now look at their own building and say with more certainty what it is worth. It takes the nonsense out of it,” he said.
Kind of like one of our apples. Apparently there were "a dozen offers with some well below $100 a square foot." (That's right, "Multiple Offers!"). All that being said, however, and as noted by a plugged-in reader yesterday:
The low sale price was partly driven by the building’s high vacancy rate — it is less than 50 percent occupied — as well as some deferred maintenance. Crossley estimated that it could cost an additional $70 a square foot — about $8 million — to make the building attractive to tenants.
∙ S.F. has recession's 1st distressed office sale [SFGate]
∙ Sale shows San Francisco property values in free fall [San Francisco Business Times]
Posted by socketadmin at 9:15 AM | Permalink | Comments (7) | (email story)
June 29, 2009
Past Performance Recoveries Are No Guarantee Of Future Results
"The residential real estate market improved ahead of the end of the past seven contractions, with home construction starts beginning to climb an average of seven months before gross domestic product picked up and sales gaining about four months in advance, according to data compiled by David Berson, chief economist of PMI Group, a mortgage insurer in Walnut Creek, California."
∙ Housing in Peril as Obama Fails to Get Financing Breakthrough [Bloomberg]
Posted by socketadmin at 8:00 AM | Permalink | Comments (2) | (email story)
June 22, 2009
Calling All Contractors That Still Have Cash...
From the listing for 324 Day over in Noe Valley:
Contractor special! Construction stopped during renovation and was foreclosed. Seller/lender anxious to sell, very motivated. Bring your best offer, don't worry about the listing price. Seller/lender will finance with reasonable down payment.
No recorded previous sales price that we can find, but tax records would suggest a purchase at a little under around a million in September 2007.
∙ Listing: 324 Day Street (3/1.5) - $760,000 [ERA Golden Gate Properties Via Pacific Union]
Posted by socketadmin at 1:00 PM | Permalink | Comments (22) | (email story)
April 8, 2009
A Non-Planning Related Shadow Study: Unaccounted For Foreclosures
Carolyn Said takes a stab a calculating the Bay Area's "shadow inventory" of foreclosure homes - propeties that have already been foreclosed upon but have not yet been registered in county records as having been resold.
For the 26 months from January 2007 through February 2009, banks repossessed 51,602 homes and condos in the nine-county Bay Area, according to DataQuick. Yet in the same period, only 30,823 foreclosures were resold, leaving about 20,000 bank repos unaccounted for.
The county with the highest percentage of unaccounted for foreclosures? According to the Chronicle that would be San Francisco with 50.2% unsold versus an average of 34.5% for the Bay Area as a whole.
UPDATE: As noted, according to the Chronicle’s analysis 50.2% of properties that have been foreclosed upon in San Francisco from January of 2007 through February of 2009 remain unsold and constitute "shadow inventory."
Based on our back of the envelope calculations, roughly 750 properties in San Francisco County became bank owned during that 26 month stretch. And as such, the Chronicle’s methodology would suggest around 375 bank owned units are unaccounted for.
At least 69 of those bank owned properties, however, are accounted for and currently listed for sale in San Francisco. And while 69 is not 375, it is a swing of roughly nine percentage points in terms of the percentage San Francisco foreclosure inventory that's out in the open versus possibly lurking behind. No update for the Bay Area as a whole.
∙ Banks aren't reselling many foreclosed homes [SocketSite]
Posted by socketadmin at 7:30 AM | Permalink | Comments (39) | (email story)
March 16, 2009
The SocketSite Reality Check For CBS’s Infamous "42 Offer" Home
While we’ve already debunked the CBS report that a recent uptick in home sales activity is a sign of a "serious real estate rebound" in San Francisco (we’ll call it seasonality and note that San Francisco sales activity continues to fall on a year-over-year basis), we now turn our attention to their infamous "42 offer" home.
Presented by CBS and their cast of "real estate experts" as another "hard fact" to back their report of a rebounding San Francisco real estate market (also touted as a "mini-boom"), we dug up some of our own facts on the Excelsior home. The address is 555 Edinburgh and it was listed for sale at $459,000.
At a reported 1,250 square feet (plus a full basement “with room to expand”) that’s a list price of $367 per square foot. At the same time, according to PropertyShark the median price per square foot for 2009 home sales in 555 Edinburgh’s zip code (94112) currently weighs in at $426. In 2008 the median sales price per square foot was $490, in 2007 it was $542, and in 2006 it was $580.
In other words, 555 Edinburgh was listed at 14% under the 2009 median, 25% below the 2008 median, 32% below the 2007 median, and 37% below the 2006 median. In fact, it was priced right around the 2002 median ($372 per square foot). Even a sale at $100,000 over asking suggests a closing price around the 2004 median ($450 per square foot).
Were the 42 offers on 555 Edinburgh a sign of a "serious real estate rebound" in San Francisco? Once again we’ll say no, it was commentary on pricing. And it's frightening that any industry expert would suggest otherwise.
∙ Listing: 555 Edinburgh (2/1) 1,250 sqft - $459,000 (pending) [MLS]
∙ SocketSite Sees Seasonality (Versus Signs Of A Rebound) [SocketSite]
∙ SocketSite's San Francisco Listed Housing Update: 3/16/09 [SocketSite]
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March 13, 2009
Landlord Foreclosure Concerns: Not Just For Residential These Days
"With downtown commercial property values down 30 percent from their highs in the summer of 2007, highly leveraged owners who bought at the peak are up against huge debt payments that will be extremely difficult to refinance. That is creating a situation where tenants are avoiding some “upside down” buildings altogether and taking extra steps to protect themselves against landlord foreclosure."
∙ Invasion of the ‘zombie buildings’ [San Francsico Business Times]
Posted by socketadmin at 10:00 AM | Permalink | Comments (6) | (email story)
March 12, 2009
CBS Calls It A "Real Estate Rebound In San Francisco"
Remember when we promised to point out the bullish signs for the San Francisco real estate market based on good buy side analysis? Well, this isn’t it.
Multiple offers on properties listed below current market? Amazing! Sales up on significant price cuts and seasonality? Shocking! A rebound from the bottom? We'll say no.
UPDATE: And in related news: SocketSite Sees Seasonality (Versus Signs Of A Rebound).
∙ Signs Of Real Estate Rebound In San Francisco [cbs5]
∙ Infinity Sales Update: New Contracts Up But Driven By Discounts [SocketSite]
∙ San Francisco Recorded Sales Activity In January: Down 21.8% YOY [SocketSite]
Posted by socketadmin at 10:30 AM | Permalink | Comments (108) | (email story)
March 4, 2009
JustQuotes: Profiting From (Their Own) Poor Underwriting Skills
"Stanford L. Kurland, Countrywide’s former president, and his team have been buying up delinquent home mortgages that the government took over from other failed banks, sometimes for pennies on the dollar. They get a piece of what they can collect."
∙ Ex-Leaders of Countrywide Profit From Bad Loans [New York Times]
Posted by socketadmin at 10:30 AM | Permalink | Comments (18) | (email story)
March 2, 2009
Buffet Calls Shenanigans Shambles (And The Dow Dips Below 7,000)
The Dow Jones Industrial Average has fallen below 7,000 for the first time since 1997 and Warren Buffet has eloquently predicted our economy will remain in "shambles" throughout 2009 (and "probably well beyond"). Now about our outlook...
∙ Buffett Says Economy ‘In Shambles,’ Promises Best Days Ahead [Bloomberg]
∙ SocketSite’s Residential Real Estate Outlook For 2009 [SocketSite]
Posted by socketadmin at 7:30 AM | Permalink | Comments (37) | (email story)
February 25, 2009
A Plugged-In Reader Calls Shenanigans And Sets The Record Straight
From a plugged-in agent with regard to the auction of 3731 Fillmore #2:
I had clients who were interested in showing up to the auction today, but who could not pull it together by this afternoon. Good thing we did not waste our time! Read on...
I have been going back-and-forth with the listing agent/auctioneer over the past few days. I also exchanged e-mails with the previous listing agents at Brown & Co. Turns out that this is just a decision that the Seller made in an effort to [sell it fast].
Well, it turns out after all that there was a confidential "reserve price" (i.e., minimum accepted bid price) set by the Seller, which the auctioneer was aware of, of course.
Apparently this price was $550k and tons of people showed up today but nobody went up that high, and therefore nobody walked away owning 1/6 of this building today w/the exclusive right to occupy #2 or any unit for that matter.
The listing agent told me this morning prior to the auction that the other 4 vacant units may very well go up for auction today as well if things went in the right direction; but OF COURSE nobody wanted to offer anything above $550k. Duhhh! [Editor's Note: As you might recall 3731 Fillmore #2 failed to sell for $549,000 when last listed on the MLS.]
I told the listing agent to let me know when his Seller gets back in touch with reality and the current economy/market. What a frickin...waste of time!
Our apologies for any unwitting role we played. That being said, we now have another data point: a high bid of $410,000. Now about all that "pent-up demand"…
∙ Now Up For Auction In The Marina (And Originally Asking $699,000) [SocketSite]
Posted by socketadmin at 6:00 AM | Permalink | Comments (69) | (email story)
February 20, 2009
Now Up For Auction In The Marina (And Originally Asking $699,000)
Asking $699,000 when originally marketed by Brown & Co. but then re-listed, reduced and withdrawn at $549,000 last month, 3731 Fillmore Street #2 is back on the MLS with a "list price" of $295,888 (from the listing: "Must sell by tuesday, february 24th. Auctioned to the highest bidder at the property.”).
Keep in mind it’s one of six units in a TIC building and the parking is leased. And do let us know if you go (or figure out at what time).
UPDATE: Additional insight from a plugged-in agent:
5 of the 6 are vacant, so expect 4 more to hit the market soon. #6 sold for $710k in Oct '08.
My guess is they are about 800 SqFt, maybe a bit more. Definitely could be sold as a 2BR since the dining room has a closet and window. Also has laundry hook ups in each apartment, and there is a garage, but they are selling spots separately. Roof deck is spectacular, small shared yard is just OK.
Not great news for the buyers of number six (who might share the last name of Brown).
∙ Listing: 3731 Fillmore #2 (1/1) – $295,888 (auction) [MLS]
Posted by socketadmin at 10:00 AM | Permalink | Comments (101) | (email story)
February 17, 2009
SocketSite's San Francisco Listed Housing Update: 2/17/09
Inventory of Active listed single-family homes, condos, and TICs in San Francisco rose 13% over the past two weeks (versus an average of 1.7% for the same two weeks over the previous three years) and is now running 29.5% higher on a year-over-year basis (up 14.3% for single-family homes and 40.5% for condos/TICs).
Overall listed inventory is up 83% versus February of 2006 while listed sales have continued to trend down (a 49% drop in January versus 2006). Keep in mind that "listed" (or MLS based) inventory counts do not include the vast majority of units in new developments about town and neither do "listed" sales.
The standard SocketSite Listed Inventory footnote: Keep in mind that our listed inventory count does not include listings in any stage of contract (even those which are simply contingent) nor does it include listings for multi-family properties (unless the units are individually listed).
∙ SocketSite's San Francisco Listed Housing Update: 2/02/09 [SocketSite]
∙ Early January Listed Sales Results For San Francisco: Down 34% [SocketSite]
Posted by socketadmin at 10:30 AM | Permalink | Comments (81) | (email story)
January 30, 2009
Eviction Moratorium Extended And Freddie Becomes A Landlord
"Freddie Mac and Fannie Mae, the mortgage-finance companies under federal control, are extending by one month a freeze on evictions for homeowners in foreclosure as delinquencies soar in a slumping economy.
Freddie, the second-largest source of U.S. home loan money, said it will now allow renters in homes the company has repossessed to remain using monthly leases at market rates. Homeowners who have lost their houses to foreclosure can also rent the properties back from the company at market rates, McLean, Virginia-based Freddie said today in a statement."
∙ Freddie, Fannie Extend Eviction Freeze Until March [Bloomberg]
∙ Actual San Francisco Foreclosures Down 42% QOQ (Up 70% YOY) [SocketSite]
Posted by socketadmin at 9:15 AM | Permalink | Comments (23) | (email story)
January 27, 2009
SocketSite’s Residential Real Estate Outlook For 2009
We currently see across the board weakness in San Francisco’s residential real estate market throughout 2009 as economic woes compound the impact of tighter credit markets and a shift in market psychology.
Downturns in residential real estate have traditionally been triggered by a downturn in either the local or national economy. The reality which we’ve foreshadowed for quite some time is that the majority of the current market weakness in San Francisco, the Bay Area, and beyond has been driven by a contraction in the credit markets (the deflation of a credit bubble) and a recent shift in market psychology (the deflation of a speculative bubble). The real impact of a weakening economy is yet to come.
With an economy that generally lags the financial markets by nine to twelve months, the full brunt of October’s melt-down won’t be felt for at least another six months. And we expect to see continued weakness in both consumer and corporate spending over at least the next couple of quarters which will further depress corporate earnings and likely lead to additional layoffs and stoke the real real estate killer, unemployment.
With no discernable recovery in sight, we expect the financial market’s destruction of wealth both real (investments) and potential (options) to continue to drag down the San Francisco residential market throughout 2009, and to weigh particularly heavy on the luxury market.
Historically low interest rates will continue to benefit those who buy, but we don’t see rates alone significantly driving demand in San Francisco, or at least not offsetting the decrease in demand due to stricter lending standards and the loss in wealth. And the supply and absorption of new inventory will continue to put downward pressure on housing throughout the city, and not just District 9 as a limited number of active buyers are drawn from other parts of the city by unemotional (well, for the most part...) developer price cuts.
We believe the real estate flight to quality we called two years ago, and up until recently provided support to the upper end of the market, is waning. And value (versus growth) is the new darling of the ball. Oh, and that rents in San Francisco will fall (further challenging values on a fundamental basis).
Our outlook has nothing to do with emotion (other than with respect to acknowledging the psychological shift in the market). And it’s not to suggest that we don’t see any opportunities, especially when it comes to adding real value. It’s simply perspective to help manage expectations and actions (be it in buying, selling, renting or staying put).
And yes, while we are currently bearish on the market in the near-term, we’ll be the first to point out the real bullish signs. As defined by analysts, not sales agents or the industry.
Posted by socketadmin at 7:30 AM | Permalink | Comments (89) | (email story)
January 13, 2009
It’s Double Entendre Time For 46 Tingley Once Again: Go Bears!
Purchased for $620,000 in September of 2004, 46 Tingely returned to the market in December of 2007 as a potential short sale asking $599,000. In September of 2008 the single-family home in Mission Terrace was bought back by the bank for $442,717. And yesterday it returned to the market asking $472,500.
Be sure not to miss those year-old but still quite relevant (some might even say prescient) plugged-in readers' comments, especially missionite’s worksheet (just don’t forget to update those assumptions with regard to purchase price and appreciation).
∙ Listing: 46 Tingley (4/2) - $472,500 [MLS]
∙ Another Chance To Be A Hero (Or Show Your Support For The Bears) [SocketSite]
Posted by socketadmin at 7:30 AM | Permalink | Comments (54) | (email story)
January 7, 2009
San Francisco’s “2008 Luxury Tour” Scorecard To Date: No Sales
From ABC's Nightline last night: "Herding the ‘White Elephants': A look at how hard unloading a mega-mansion has become in today’s economy." Shockers. At least to those who aren't plugged-in...
Posted by socketadmin at 7:15 AM | Permalink | Comments (58) | (email story)
Bay Area Notices Of Default: Another Source, The Same Story
"Notices of defaults (the first step in the foreclosure process) and notices of trustee sales (which often but don't always lead to actual foreclosures) reached 525,356 in 15 California counties last year, reported [Default Research Inc]. In the Bay Area counties of Alameda, Contra Costa, San Francisco and Solano, the annual total climbed 180 percent to 85,381."
∙ Report says foreclosures, defaults up in 2008 [SFGate]
Posted by socketadmin at 6:15 AM | Permalink | Comments (4) | (email story)
January 5, 2009
A Sign Of The Times And A Comp In 2005, So How About In 2009?
Purchased for $550,000 in June of 2004, this Outer Sunset single-family home was flipped eight and one-half months later for $680,000 (an increase of $130,000/23.6%) and established a new neighborhood comparable sale (“comp”) that we can’t recall being dismissed on account of the short holding period or location.
Bought back by the bank this past September for $535,075 this past September, 3004 Ortega is currently listed for $589,900.
∙ Listing: 3004 Ortega (2/1) - $589,900 [MLS]
Posted by socketadmin at 6:30 AM | Permalink | Comments (40) | (email story)
December 29, 2008
Flash Back Forward To Beacon Two-Bedrooms Asking Under $600,000
A tax assed value of just over $750,000; a recorded sale back to the bank three weeks ago for $629,142; and a two-bedroom/bath condo at the beacon that’s now asking $599,900 (and touting “Offers anytime!”). Yes, it's 250 King Street #266 and almost the end of 2008.
∙ Listing: 250 King #266 (2/2) - $599,900 [MLS]
Posted by socketadmin at 8:30 AM | Permalink | Comments (39) | (email story)
December 19, 2008
Another Non-Comp Comp On The Market At 246 2nd Street (#1003)
In October of 2005 246 2nd Street #1003 sold for a reported $950,000. In April of 2008 the unit was bought back by the bank for $835,783. And yesterday it hit the market asking $689,900.
Previously purchased and owned by the same party that had owned and lost #502. And as plugged-in people know, but industry stats wouldn’t reflect, both condos were purchased with a significant amount of cash back at closing. Let’s hope nobody relied on that sale back in 2005 as a “comp.”
First purchased for $734,500 in the year 2000 when the building was built.
∙ Listing: 246 2nd Street #1003 (2/2) - $689,900 [MLS]
∙ Can Bank Owned Comps Kill (Values)? 246 2nd Street #502 Returns [SocketSite]
Posted by socketadmin at 5:00 AM | Permalink | Comments (95) | (email story)
December 17, 2008
QuickLinks: Lower Rates Will Save San Francisco! Oh, Wait A Minute…
∙ The FOMC Speaks (And Not In Tongues): It Ain't Pretty Out There [SocketSite]
∙ U.S. Stocks Fall on Concern Fed Is Running Out of Ammunition [Bloomberg]
∙ Banks Show No Signs of Easing in Step With Fed’s Cuts [Bloomberg]
∙ Mortgage Rates Left in Dust by Treasuries, Failures [Bloomberg]
Posted by socketadmin at 8:15 AM | Permalink | Comments (16) | (email story)
December 8, 2008
JustQuotes: Why Simply Reducing Rates Won't Cure The Market's Ills
"Almost 53 percent of borrowers whose loans were modified in the first quarter of this year re-defaulted by being more than 30 days overdue..."
∙ Majority of Modified Loans Fail Again, Regulator Says [Bloomberg]
Posted by socketadmin at 9:45 AM | Permalink | Comments (46) | (email story)
November 25, 2008
As Lenders (And Consumers) Hoard, The Fed Commits Another $800B
As lenders and consumers continue to hoard, the Fed announces a $800B spending spree:
The central bank will purchase as much as $600 billion in debt issued or backed by government-chartered housing-finance companies. It will also set up a $200 billion program to support consumer and small-business loans, the Fed said in statements today in Washington.
Yet across the pond Libor continues to rise:
Libor’s declines are stalling on concern the U.S. government’s attempts to contain the financial crisis won’t be sufficient to revive bank lending.
And not included in that $800B is the $230B of taxpayer funds the Fed has put at risk with the bailout of Citigroup this week.
∙ Fed Commits $800 Billion More to Unfreeze Lending [Bloomberg]
∙ Libor Drop Stalls as Bailout Concern Fuels Bank-Cash Hoarding [Bloomberg]
∙ Citigroup gets a monetary lifeline from feds [SFGate]
Posted by socketadmin at 7:30 AM | Permalink | Comments (4) | (email story)
November 19, 2008
U.S. Homebuilder Confidence: At Least It Can't Go Too Much Lower...
The bad news:
Confidence among U.S. homebuilders in November dropped to the lowest level since record-keeping began in 1985, a sign that the deepening credit crisis is preventing prospective buyers from purchasing new homes.
The good news:
The National Association of Home Builders/Wells Fargo index of builder confidence decreased to 9, lower than forecast, from 14 in October, the Washington-based association said [yesterday]. A reading less than 50 means most respondents view conditions as poor.
How's that the good news? It can only fall another nine points...
∙ Homebuilder Confidence in U.S. Drops to Record Low [Bloomberg]
Posted by socketadmin at 7:30 AM | Permalink | Comments (15) | (email story)
November 14, 2008
And Speaking Of Being Plugged-In To Bay Area Employment Trends…
"Of course, if this was limited to Sun, it probably would not have a huge impact on anything concerning this site. But Sun is obviously just one of many going through this. You can't believe how swamped our labor & employment group is right now with work managing large tech layoffs, most of which are still in the planning stage (the lawyers get involved early on)."
∙ From Underwater To Unemployed (And Sorry, But It’s Just Starting) [SocketSite]
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November 13, 2008
TIC Troubles Via The WSJ (But We Wouldn't Discount That Downturn)
The Wall Street Journal article: Residential-TIC Tack Hits Snags.
The Quote:
The problems facing residential TICs, which are found mainly in San Francisco, are different and reflect tighter mortgage underwriting standards. Banks across the country have pulled back from all types of mortgage lending, but especially for nontraditional types of mortgages. As a result, borrowing costs for TICs have shot up, causing home buyers to avoid the structure.
Sterling Bank & Trust FSB recently raised its rate for TIC loans to 7.75% -- a loan for a similarly priced condo would require only 6% to 6.25% interest -- and now requires a down payment of at least 20% of the purchase price. Other banks are now requiring 30% down. In the past, lenders required buyers to put 10% down.
The listing: 158 Laidley ("Price REDUCED. Cut-rate financing! Stunning eco-modern...").
∙ Residential-TIC Tack Hits Snags [Wall Street Journal]
∙ Listing: 158 Laidley (5 TIC units) - $359,000 to $699,000 [158laidley.com]
Posted by socketadmin at 7:30 AM | Permalink | Comments (47) | (email story)
November 7, 2008
Brugnara Properties Headquarters Headed For Foreclosure?
From a plugged-in tipster today:
351 California is one of the Dollar buildings (forgot which one), later the Pacific Bank Building, and currently the HQ [of] Brugnara Properties. Luke Brugnara is one of the most storied characters in the commercial real estate scene. The building is scheduled for the courthouse steps 14 November with an outstanding loan balance of $33,377,682 per PropertyShark.
From Brugnara seven months ago: "I own 351 California and am not in default."
∙ S.F. real estate player Brugnara indicted [San Francisco Business Times]
Posted by socketadmin at 2:30 PM | Permalink | Comments (30) | (email story)
JustQuotes: Proposing To Change The Terms To Protect The Principal
"[Governor Arnold Schwarzenegger has proposed] imposing a 90-day stay for the foreclosure process for owner-occupied homes [in California] that have received notices of default. Lenders could be exempted from the stay by proving they have an "aggressive modification program" to keep borrowers in their homes.
The loan modifications would be modeled on the approach used by the Federal Deposit Insurance Corp. to help borrowers of the failed IndyMac Bank. New monthly payments would have to be 38 percent of borrowers' incomes. To reach that level, lenders could reduce the interest rate, increase the loan length up to 40 years and/or defer some of the principal balance until the home is sold or refinanced. The governor's office said such modifications could cut payments by 25 to 30 percent."
∙ Governor proposes plan to avert foreclosures [SFGate]
Posted by socketadmin at 1:00 AM | Permalink | Comments (21) | (email story)
November 4, 2008
Extremely Creative (But Not Particularly PC): Real Estate Downfall
If your comment starts with the phrase “I know this is off topic…”, then please don’t. Consider sending us a tip instead. Especially when it involves an extremely creative, but not so PC, parody of employing the film Downfall...
Posted by socketadmin at 9:45 AM | Permalink | Comments (14) | (email story)
JustQuotes: The State (Or At Least Budget) Of San Francisco
"San Francisco's budget shortfall is much worse than originally projected, making this year's financial outlook comparable to the city's fiscal condition after the 2000 dot-com bust and the Sept. 11 terrorist attacks, Controller Ben Rosenfield said Monday.
Rosenfield's office projects a shortfall in this year's budget of $90 million to $125 million, up significantly from the $70 million it had projected weeks ago. Just months ago, the Board of Supervisors approved this year's $6.6 billion budget, which already included $350 million in cuts to jobs and services.
The situation is so dire that city workers almost certainly will face layoffs, health programs are likely to be downsized even more and parking meters could be erected in city parks.
There's simply not enough money coming in to pay for everything, largely because fewer sales of large office buildings means fewer tax dollars and fewer shoppers means less sales tax money for the city."
∙ S.F. budget faces larger shortfall than thought [SFGate]
Posted by socketadmin at 4:00 AM | Permalink | Comments (45) | (email story)
November 3, 2008
Some Scary Numbers Behind The Bankruptcy Of "La Casa Verde"
It was three months ago we noted a Notice of Default (NOD) had been filed for “La Casa Verde" (a.k.a. Sunset’s San Francisco Idea House). And now as a plugged-in tipster notes, the developer has declared bankruptcy. Let's focus on the property (not the personal).
A couple of things from the filing that stuck out: A claimed value of $1,400,000 for the duplex with secured claims of $3,070,880 (and unsecured of $353,970); a gross rent from the smaller unit of $3,000 per month (with operating expenses of $1,389); and an "electricity and heating fuel expense" of $1,200 per month.
UPDATE: And if a reader is correct, "The reason the power bills are so high is because she never paid the consultant their final payment to have all the green technology hooked up. The windmill is spinning away, making electricity that goes nowhere. The new owner will be able to hook up all the energy saving features that are filling up the utility room that are currently doing nothing."
∙ It's Not That Easy Being Green For “La Casa Verde” (3027-3029 25th) [SocketSite]
∙ Sunset’s 2007 San Francisco Idea House: 3027 25th Street [SocketSite]
∙ The SocketSite Scoop: Half Of The Sunset Idea House Hits The Market [SocketSite]
Posted by socketadmin at 1:00 PM | Permalink | Comments (33) | (email story)
October 29, 2008
The Fed Cuts Rates To One Percent To Avert "Prolonged" Recession
A year ago Friday the Federal Reserve cut its benchmark interest rate to 4.5% and signaled that further cuts were unlikely. The thought at the time:
"Today's action, combined with the policy action taken in September, should help forestall some of the adverse effects on the broader economy that might otherwise arise from the disruptions in financial markets," the Federal Open Market Committee said in a statement after meeting today in Washington. "After this action, the upside risks to inflation roughly balance the downside risks to growth."
This morning, the Federal Reserve cut its benchmark interest rate to 1 percent, “matching a half-century low, in an effort to avert the worst U.S. economic downturn in the postwar era." And with that, the rate kegs have nearly run dry.
∙ Fed Cuts Rate to 1% to Avert Prolonged Recession [Bloomberg]
∙ The Federal Reserve Cuts Benchmark/Discount Rates By 0.25% [SocketSite]
Posted by socketadmin at 12:00 PM | Permalink | Comments (32) | (email story)
October 25, 2008
Price Cuts Of Up To 30% At Symphony Towers (750 Van Ness)
Plugged-in people knew the cuts were coming. And as one reports, they’re here. Prices at Symphony Towers (750 Van Ness) have been reduced by up to 30% or $136,000. A few examples:
∙ 750 Van Ness #T-405 (1/1) - $399,000 (was $535,000)
∙ 750 Van Ness #T-601 (1/1) - $459,000 (was $577,000)
∙ 750 Van Ness #T-602 (1/1) - $449,000 (was $565,000)
∙ 750 Van Ness #T-804 (0/1) - $295,000 (was $420,000)
∙ 750 Van Ness #T-806 (0/1) - $319,000 (was $455,000)
∙ 750 Van Ness #T-907 (0/1) - $419,000 (was $515,000)
Once again, currently around 55% sold. And with The Hayes cutting prices by up to 21%, the race for buyers in San Francisco is on. And it's plugged-in people that will win.
∙ Symphony Towers (750 Van Ness): Announcing Additional Cuts [SocketSite]
∙ Symphony Towers Update: Buying Love (But Dropping Prices Too) [SocketSite]
∙ New Development “Closeout” Sales: The Potrero And 170 Off Third [SocketSite]
Posted by socketadmin at 10:30 AM | Permalink | Comments (68) | (email story)
October 24, 2008
The Google Chart Of The Day (And A Bit More Foreshadowing)
Click to enlarge. And once again, a bit of foreshadowing. Yes, with regard to local housing.
Posted by socketadmin at 8:30 AM | Permalink | Comments (52) | (email story)
September 19, 2008
QuickLinks: A Bloomberg Bailout Trio (And We'll Go With Worst)
∙ Paulson, Bernanke Expand U.S. Power to Rescue Markets [Bloomberg]
∙ Stocks Soar Worldwide on Bank Bailout, Curb on Short Sales [Bloomberg]
∙ Paulson Bailout Plan Is Either `Worst' Approach or `Giant Step' [Bloomberg]
Posted by socketadmin at 4:45 PM | Permalink | Comments (63) | (email story)
September 5, 2008
U.S. Foreclosure Rates For Prime Loans Continues To Accelerate
According to the latest report from the Mortgage Bankers Association, the pace of new U.S. home foreclosures "increased to 1.19 percent, rising above 1 percent for the first time in the survey's 29 years."
Tumbling home prices are making it difficult for even the most creditworthy owners with adjustable-rate mortgages to sell or get a new loan as their financing costs rise, said Jay Brinkmann, MBA's chief economist. Prime ARMs accounted for 23 percent of new foreclosures and subprime ARMs were 36 percent, he said.
"People chose the lowest payment option to get into some of the very expensive housing markets and now that prices are coming way down, they can't sell and they can't afford the higher payments," Brinkmann said in an interview.
Also noted, while the rate of new foreclosures on subprime loans rose from 4.06 percent to 4.7 percent over the past year, the rate of new foreclosures for prime ARMs jumped from 0.58 percent to 1.82 percent and "the share of seriously delinquent prime ARMs was 6.78 percent, rising from 2.02 percent a year ago."
And on that note, we do a quick flashback to 2005: An ARM (And Quite Possibly A Leg).
∙ U.S. Mortgage Foreclosures, Delinquencies Reach Highs [Bloomberg]
∙ An ARM (And Quite Possibly A Leg) [SocketSite]
Posted by socketadmin at 10:00 AM | Permalink | Comments (46) | (email story)
September 4, 2008
QuickLinks: A Luxury Market Triptych
∙ Some Extra Bread To Go With That Cake At 2090 Vallejo [SocketSite 8/07]
∙ Mansion Price Drops $7 Million; Bentley Offered on Luxury Homes [Bloomberg 9/08]
∙ Not The Best “Investment” For Agassi In Tiburon [SocketSite 11/06]
Posted by socketadmin at 8:00 AM | Permalink | Comments (2) | (email story)
August 26, 2008
It's Like A Little Slice Of Upscale Sacramento Right Here At Home
Last month 166 Yerba Buena Avenue (a.k.a. "Solaria") appeared in the Chronicle’s “sold” list with a reported price of a $1,980,000 (7/1/08). From the MLS via a tipster today:
Spectacular Solaria Mansion inspired by 18th century French chateau architecture - final phase of construction unfinished - major price reduction, subject to trustee and lender approval. Short sale.
Asking $2,995,000. Don’t ask us, but we shall ask out tipsters. And with the overgrown sign, it's like a little slice of upscale Sacramento right here at home.
∙ Listing: 166 Yerba Buena Avenue - $2,995,000 [MLS]
∙ Solaria Sells For About As Much As The Rendered Bugatti In Its Garage [SocketSite]
∙ The SocketSite Scoop On “Solaria” (166 Yerba Buena Ave) [SocketSite]
∙ It’s Not Always Fun And Games At The Top (166-68 Yerba Buena) [SocketSite]
Posted by socketadmin at 4:00 AM | Permalink | Comments (2) | (email story)
July 24, 2008
Bill Gross Goes Mooooooo! (And That Graph Should Look Familiar)
An excerpt from Bill Gross’ August investment outlook (simply titled "Mooooooo!"):
Here is one asset [homes] that all observers can agree is going down in price for justifiable reasons. Maybe not Donald Trump’s Palm Beach mansion at $95 million big ones – thank you very much – but everybody else’s. They’re going down because quite simply, they went up too much and were financed with excessive debt. The housing bubble was well inflated by low interest rates, easy, and in some cases fraudulent credit, a lack of federal and state regulation, and a gullible public who read the history books for the past half century and knew full well that home prices never, ever go down. Not much of an enigma there. No riddle to be solved it would seem. It was simply a fairy tale too good to be true.
Yet housing, unlike other asset classes, carries with it an aura more like a bad dream than a fairy tale. Unlike the frog that when kissed turns into a handsome prince, housing can morph a froglike economy into something resembling Godzilla. That is because it is the most levered asset class and the one held by more “investor” citizens than any other. U.S. homes are market valued at over 20 trillion dollars with nearly half of the value supported by mortgage finance of one sort or another. At first blush that appears to be reasonably levered, but at the margin, homes purchased in 2004 and beyond are now at risk of turning upside down – negative equity – and there are some 25 million or so of those. The “upsidedownness” in many cases results in foreclosures, or outright abandonment and most certainly serves as an example of what not to do for millions of twenty-somethings or new citizens choosing between homeownership and renting. The dominoes fall month-by-month, forcing prices ever lower as shown in Chart 1 provided by Case-Shiller. An asset deflation in turn becomes a debt deflation, as subprimes, alt-As, and finally prime mortgages surrender to the seemingly inevitable tide. PIMCO estimates a total of 5 trillion dollars of mortgage loans are in risky asset categories and that nearly 1 trillion dollars of cumulative losses will finally mark the gravestone of this housing bubble. The problem with writing off 1 trillion dollars from the finance industry’s cumulative balance sheet is that if not matched by capital raising, it necessitates a sale of assets, a reduction in lending or both that in turn begins to affect economic growth, creating what Mohamed El-Erian fears as a “negative feedback loop.”
That one trillion sounds familiar. And that graph should look familiar as well. Then again, what would the head of a $830 billion investment management company that’s all about the bond know about debt? And it's bound to be different here. Just look at all those mansions in Pacific Heights.
∙ Bill Gross' Investment Outlook: August 2008 [PIMCO]
∙ They're Betting Against Us (San Francisco) On The CME [SocketSite]
Posted by socketadmin at 9:30 AM | Permalink | Comments (33) | (email story)
July 10, 2008
JustQuotes: U.S. Foreclosure Filings Up 53% YOY, Down 3% MOM
“California had seven of the 10 U.S. metro areas with the highest [foreclosure rates in June], including the top three. Stockton, in the state's central valley, was first with one in every 72 households in a stage of foreclosure, followed by Merced, about 110 miles east of San Francisco, with one in 77 households, and Modesto, near the Sierra Nevada mountains, with one in 86 households. Riverside-San Bernardino ranked fifth, Vallejo-Fairfield was seventh, Bakersfield was eighth and Salinas-Monterey was tenth."
∙ Foreclosures Rose 53% in June, Bank Seizures Triple [Bloomberg]
Posted by socketadmin at 7:15 AM | Permalink | Comments (0) | (email story)
July 9, 2008
Let's See, Drop The K And Carry The S...
We're not about to jump the pond fulltime (at least not yet). But it is a bit eerie, or to some perhaps comforting, to see the parallels in the U.K. market as mortgage rates rise (now at 6.63 percent for the equivalent of a two-year ARM).
The U.K. is skirting a recession as house prices fall, oil costs rise to a record and lenders refuse to pass on the Bank of England's three interest-rate cuts since December. Policy makers, who make a rate decision tomorrow, said last month that they considered increasing borrowing costs after inflation accelerated to the fastest in a decade.
"This is doom and gloom," said Alan Clarke, an economist at BNP Paribas SA in London. "The housing market is in freefall and unemployment is rising. The Bank of England's credibility is in question with the worst peak in inflation in its history, but there are a lot of reasons not to hike now."
And now back to the "Supercities" discussion...
∙ U.K. Mortgage Rates Surge, Consumer Confidence Slumps [Bloomberg]
∙ Supercities Are Immune To Declines (At Least Until They’re Not) [SocketSite]
Posted by socketadmin at 4:00 AM | Permalink | Comments (17) | (email story)
June 20, 2008
Operation Malicious Mortgage: Now In The Bay Area (But Yet To Act)
While "Operation Malicious Mortgage" has nabbed over 400 individuals over the past three months, none of the mortgage-fraud related arrests have occured in the Bay Area. Then again, it has only been a month since the U.S. attorney's office established their Bay Area mortgage fraud task force.
From Joseph Russoniello, the U.S. attorney for the Northern District of California: "We have dozens of matters under investigation" [ranging from individual instances of fraud to broader schemes involving brokers, appraisers and lenders].
∙ 2 former Bear Stearns execs indicted, arrested [SFGate]
Posted by socketadmin at 7:45 AM | Permalink | Comments (4) | (email story)
May 15, 2008
Damn Those Maintenance Fees (Especially If Neighbors Don’t Pay)
While we’ve been more concerned with the impact of foreclosures on neighborhood comps, the New York Times explores the impact on the HOA, building maintenance, and owners in a few of the more troubled markets. From our plugged-in tipster:
[A]lthough it may be obvious to others, it came as a rude reminder to me how dependent condo owners are on others they share a building with. Might be worth a discussion…given how many new condo buildings are going up in San Francisco...
And from the Times (and perhaps a bit “closer to home”):
Those who fear a downturn remember that Manhattan co-op prices suffered so much during the housing downturn of 1989 to 1993 that buildings had a hard time luring buyers. This financial instability hurt New Yorkers at all economic levels. Some recall neighbors handing over their Fifth Avenue apartments for $1 because they could not afford the maintenance fees.
∙ Collateral Foreclosure Damage for Condo Owners [New York Times]
Posted by socketadmin at 11:19 AM | Permalink | Comments (34) | (email story)
April 7, 2008
Forget About Foreshadowing, We Served Up the Forewarning
Two months ago we let you know to be prepared. Others are now learning the harder way.
[Brent Meyers] owns a substantial investment portfolio and a million-dollar house in Moraga. He pays his bills on time and has no credit card debt. His credit score, he says, is around 800, a rating more or less in the stratosphere. But in mid-March, Bank of America cut off his home equity credit line of a little more than $180,000, citing a decline in the value of his property.
∙ When Hell HELOCs Freeze Over... [SocketSite]
∙ Lenders retreat as housing market plummets [SFGate]
Posted by socketadmin at 8:30 AM | Permalink | Comments (18) | (email story)
April 4, 2008
JustQuotes: Food For Foreclosure Thoughts (Including Data Lag)
"Borrowers in California who fight foreclosure can stretch the process to 18 months, said Cameron Pannabecker, chapter president of the California Association of Mortgage Brokers and president of Cal-Pro Mortgage Inc. in Stockton.
That doesn't take into account the woman he knows who hasn't made a mortgage payment in eight months and hasn't heard from her lender, Pannabecker said.
'Now she's afraid to mail in a payment for fear it'll come to somebody's attention,' he said."
∙ Lenders Swamped By Foreclosures Let Homeowners Stay [Bloomberg]
Posted by socketadmin at 10:14 AM | Permalink | Comments (8) | (email story)
March 27, 2008
Are We Detached From More Than Simply The Fundamentals?
An interesting chart of California MSA home price appreciation as measured by the OFHEO*, put together by the Public Policy Institute of California (pdf), and by way of a plugged-in tipster. And an important observation which shouldn’t catch any plugged-in readers by surprise:
While California’s previous housing crisis (southern California in the early and mid‐1990s) was part of a broader economic slowdown, the relationship between housing and economic conditions today is less clear‐cut. In 2007, employment in Merced and Stockton grew more than 2%, despite crashing housing prices, whereas employment grew only 0.6% in California overall and even fell in Los Angeles, Orange County, Ventura County, and Riverside-San Bernardino – where home prices are holding up better than in the Central Valley.
*Note: For those who are unfamiliar, the OFHEO Home Price Index (HPI) is based on data from repeat single-family home sales, or refinancings, that involve conforming mortgages. Data from transactions involving either condominiums or non-conforming loans (two major components of the San Francisco market) are excluded from the Index.
∙ The California Economy: Crisis In The Housing Market (pdf) [ppic.org]
∙ OFHEO: U.S. House Prices Don't Fall (But Do In CA And The SF MSA) [SocketSite]
Posted by socketadmin at 9:38 AM | Permalink | Comments (60) | (email story)
March 26, 2008
Going Once, Going Twice...“Sold” For $700,000 (41 Federal #42)
With around sixty people in the room, but only a few active bidders, the high bid at today’s auction for 41 Federal #42 was $700,000 (and apparently it wasn’t “outbid”). As a plugged-in ex SF-er correctly surmised, however, the bank now has seven days to decide whether or not to accept the bid (which we’d be surprised if they didn’t).
A recorded sale at $700,000 would represent a drop of $180,000 (20.5%) from the original purchase price in December of 2006, and would also establish a new building “comp” at $760 per square foot.
That being said, keep in mind that the unit looked like it had never been occupied, and the reported sale price of $880,000 in 2006 was $5,000 over the original list price of $875,000 which had subsequently been reduced down to $825,000 prior to going into contract (i.e., something’s not quite right with respect to the original sale).
And tip of the hat to ex SF-er ("I think this sells for $700k+ or not at all"), Lance ("$685K"), and Nicole ("$679,000") who were all on record with their pre-auction predictions and within 3% of the highest bid (as well as to FSBO for filling in a few holes with respect to #42's official MLS history).
∙ Going Once, Going Twice (For Real?*) At Shore|Line: 41 Federal #42 [SocketSite]
Posted by socketadmin at 5:53 PM | Permalink | Comments (39) | (email story)
March 10, 2008
And What Happened Seven And One Half Years Ago In San Francisco?
As we’ve often pointed out, sales volumes and home price appreciation have been falling in San Francisco over the past couple of years despite the fact that that by most accounts our local economy remains strong, employment and wages are up, and the cost of borrowing remains near historic lows. And this has been in marked contrast to our last real estate decline (2001-2002) which directly coincided with a local economic meltdown (a.k.a. The Internet Bubble).
And now, both the national economy and Bay Area Business Confidence Index are faltering and Federal rate cuts are failing to spark sales (but are doing a great job of weakening the dollar). In fact, The Bay Area Business Confidence Index “tumbled to its lowest level in its 7 1/2-year history, based on results of a survey conducted in late January and early February.”
Let’s see, 7 1/2-years ago would be right around...
∙ Record low Bay Area business confidence [SFGate]
∙ U.S. Economy: Payrolls Unexpectedly Decline for Second Month [Bloomberg]
∙ Bay Area “Notices Of Default” Heading North? (So To Speak) [SocketSite]
∙ February S&P/Case-Shiller Index Decline Continues For SF MSA [SocketSite 4/07]
Posted by socketadmin at 9:55 AM | Permalink | Comments (14) | (email story)
March 6, 2008
JustQuotes: Might It Draw Demand From Way Over In San Francisco?
"The developer of the recently opened Eight Orchids condominium mid-rise in Oakland hopes to auction off nearly a third of the units, with some starting bids $300,000 below prior asking prices, as builders struggle to unload new properties in the current housing climate."
"The auction of 41 units is scheduled for March 30....The minimum bid for one-bedrooms is $245,000, down from as high as $520,888; two-bedrooms will start at $325,000, down from as high as $630,888; and three-bedrooms will begin at $475,000, discounted from as much as $805,888. There is no "secret reserve," meaning any unit that receives at least the minimum offer will go to the bidder."
∙ Prices cut for Oakland condo auction [SFGate]
∙ 8 Orchids (Oakland) [8-orchids.com]
Posted by socketadmin at 10:00 AM | Permalink | Comments (38) | (email story)
February 12, 2008
Paulson Sets The Stage As "Project Lifeline" Details Start To Emerge
The question we posed five months ago: “Forget Subprime, Will That Apply To Alt-A As Well?” The answer today (in short): Yes (and prime too).
∙ JustQuotes: Forget Subprime, Will That Apply To Alt-A As Well? [SocketSite]
∙ JustQuotes: Consider The Why, Not Just The What ("Project Lifeline") [SocketSite]
∙ Paulson, U.S. Banks Forge Foreclosure-Freeze Deal [Bloomberg]
Posted by socketadmin at 5:01 PM | Permalink | Comments (3) | (email story)
February 1, 2008
JustQuotes: Crunch Goes The Construction Captial For Condominiums
"While a dozen amenity-packed deluxe condo projects have vied for attention over the past three years, financing for new construction has dried up in recent months. Instead of the 10 to 15 percent equity common in past few years, lenders now look for developers to put in 40 percent of construction costs, and few banks are willing to lend more than $50 million for new condo projects, according to Michael Joseph of Kearny Street Capital, a commercial mortgage broker who worked with Jackson Pacific on [One Hawthorne].
'A lot of banks are licking their wounds right now and they are not interested in more speculative development,' said Joseph."
∙ New S.F. condo project will be a rarity in 2008 [Business Times]
∙ One Hawthorne: The Design (And Some Details) Of What’s On The Way [SocketSite]
Posted by socketadmin at 3:15 AM | Permalink | Comments (4) | (email story)
December 28, 2007
JustQuotes: National New Home Sales Drop To 12-Year Low
"Sales of new homes in the U.S. fell to a 12-year low in November, pointing to bigger declines in construction that will hobble economic growth throughout 2008."
"Purchases fell in three of four regions, led by a 28 percent plunge in the Midwest. Sales dropped 19 percent in the Northeast and 6.4 percent in the South. They rose 4 percent in the West."
∙ Sales of New Homes in U.S. Dropped 9% to 12-Year Low [Bloomberg]
Posted by socketadmin at 7:45 AM | Permalink | Comments (2) | (email story)
December 20, 2007
Their Mascot Might Be A Bull, But Merrill Lynch Is Anything But
The title of yesterday’s Economic Commentary from Merrill Lynch: “Housing deflation could be a multi-year process.” And the executive summary:
Both the near-term and longer-run outlooks for the housing market remain clouded in what is a severe downturn in starts, sales and prices that has become national in scope. As we saw in the November housing starts data, the builders are now frantically cutting production.
But with the sales backdrop still softening, they may have to slice their construction plans by another 30% before we hit bottom on a cyclical basis. And, that bottom could be as long as a year away. Beyond that, weak demographic fundamentals point to years of sluggish real estate activity, particularly in terms of the “price”. The looming dominance of the “move down” buyer suggests that home values will continue to soften long after the building industry mops up the current excess supply. In fact, real estate pricing in general can be expected to be in the doldrums through 2012.
The need to save for retirement will have to increasingly come “organically” in the form of setting aside an extra nickel or dime from every dollar earned in after-tax wages and salaries as opposed to what we as a society have been doing for the better part of the past decade, in essence, blurring the distinction between real estate as a “consumption good” (place to live) and real estate as part of the “portfolio” (investment) that was going to experience sustained double-digit appreciation and emerge as a fountain of cash-flow in the future.
Expectations are already in the process of being deflated and we are at the early stages of a savings revival in the traditional sense of the word, and this will (i) be deflationary for the aggregate demand curve; (ii) be bullish for Treasury bonds; (iii) act as an underpinning for the dollar insofar as this process continues to foster an improvement in the current account deficit (which, excluding energy, is down to a six-year low).
See the chart [above] – at the height of the bubble, almost one in four households who were contemplating a move into real estate based their decisions on future price appreciation. This “investor class” that dominated the housing market for so long has now seen its share dwindle to a record low of 4%. This is a very big deal as it illustrates just how far the speculation has been expunged, and it also heralds a major (and healthy) shift in how the public now perceives real estate.
And while the report is national by nature, there are obviously themes that might resonate right here at home. And of course, there’s the punch line:
Here is what we really “do not get”. There are still economists out there talking about how the housing recession is still local and not regionally broad based. We have no idea who their data vendors are. In our view, this clearly goes down as the most national real estate downturn since the 1930s.
Posted by socketadmin at 2:00 AM | Permalink | Comments (13) | (email story)
December 17, 2007
JustQuotes: We’re Equally As Interested In The Other Four-Fifths
"The Chronicle analyzed ownership information for 6,557 Bay Area homes and condos repossessed by lenders in the first nine months of this year. Those represented 94 percent of all Bay Area foreclosures during the time period; full records of past ownership were not available for the remaining foreclosures.
Of these, just under 1,000 were owned by 439 people who had multiple properties foreclosed upon from January to September. An additional 349 foreclosures were owned by people who listed mailing ZIP codes different from their property's address at the time of purchase - suggesting the properties were an investment, not a primary residence.
The vast majority of these properties were bought with little or no money down, according to an analysis of DataQuick's loan information. About 69 percent of the investors got 100 percent financing, meaning they did not put down a dime of their own money toward the purchase prices. An additional 12 percent made down payments that were less than 5 percent of the purchase price. Only 10 percent of investors put down the standard 20 percent.
Some 80 percent of the investor-owned Bay Area foreclosures were purchased at the height of the real estate market in 2005 and 2006, public records show."
[Editor’s Note: “Investment” properties are often undercounted due to buyers self identifying their purchases as being owner-occupied in order to benefit from more favorable mortgage rates/terms.]
∙ Investors own about one-fifth of Bay Area homes in foreclosure [SFGate]
Posted by socketadmin at 2:50 AM | Permalink | Comments (13) | (email story)
December 6, 2007
JustQuotes: A Preview Of The Federal Subprime Freeze To Come
“President George W. Bush today will announce a [five year] freeze on some subprime mortgage rates in an effort to stop a wave of foreclosures undoing the six-year expansion.”
“The agreement addresses homeowners unable to afford higher interest rates once starter rates increase, and offers help in one of three ways, a White House official said. The options are freezing rates or refinancing into either a new private mortgage or a Federal Housing Administration-backed loan, he said on condition of anonymity.”
“The freeze will apply to mortgages issued between January 2005 and July 2007 that are scheduled to reset between January 2008 and July 2010, said the people familiar with the plan. To be eligible, borrowers must not be more than 60 days behind in their payments, have less than 3 percent equity in their property [and have a FICO score below 660].”
∙ Bush Aims to Prolong Expansion With Subprime Freeze [Bloomberg]
Posted by socketadmin at 8:00 AM | Permalink | Comments (36) | (email story)
November 26, 2007
JustQuotes: It’s That “Other” That We’re Really Keeping Our Eyes On
“While many accounts portray resetting rates as the big factor behind the surge in home-loan defaults and foreclosures this year, that isn't quite the case. Many of the subprime mortgages that have driven up the default rate went bad in their first year or so, well before their interest rate had a chance to go higher. Some of these mortgages went to speculators who planned to flip their houses, others to borrowers who had stretched too far to make their payments, and still others had some element of fraud.
Now the real crest of the reset wave is coming, and that promises more pain for borrowers, lenders and Wall Street. Already, many subprime lenders, who focused on people with poor credit, have gone bust. Big banks and investors who made subprime loans or bought securities backed by them are reporting billions of dollars in losses.”
“Besides the $362 billion of subprime ARMs that are scheduled to reset during 2008, $152 billion of other loans with adjustable rates are set to reset, according to Banc of America Securities. The other resetting loans include "jumbo" mortgages of more than $417,000 and Alt-A loans, a category between prime and subprime. The latter category is the riskier, in part because it includes borrowers who provided little or no documentation of their income or assets.
The number of borrowers facing higher payments isn't growing merely because the amount of loans with resets is higher. Another factor is that those with a looming reset now have a tougher time sidestepping it by refinancing or selling their home. "There is a large amount of borrowers who are in products that either no longer exist or that they no longer qualify for," says Banc of America Securities analyst Robert Lacoursiere.”
[Editor's Note: Keep in mind that in 2002 less than 20% of property purchases in San Francisco utilized interest-only mortgages [which are typically adjustable rate]. In 2005? Nearly 70%.]
∙ Rising Rates to Worsen Subprime Mess [Wall Street Journal]
∙ Interest-only loans meteoric rise in the Bay Area (May 2005) [SocketSite]
Posted by socketadmin at 10:00 AM | Permalink | Comments (35) | (email story)
November 12, 2007
S&P/Case-Shiller Home Price Index For San Francisco By Price Tier
While it’s still not the county level detail we’d all love to get our analytic little hand on, Standard & Poor’s has started publishing its S&P/Case-Shiller Home Price Indices by price tiers.
Each tier represents approximately one-third of the number of sales transactions recorded in each respective market. For example, for each market, Standard & Poor’s defines low, medium and high by defining breakpoints in one- third intervals for all sales found at each point in time. The methodology looks at the first sale in a given sale pair to define the price level.
Two things that caught our attention: the divergence in the performance of properties between price tiers in general (which shouldn't catch anybody that's plugged-in by surprise); and the time at which the divergence occurred in specific (easy money anyone?).
And while tempting, we wouldn't go so far as to assume the top third is a better proxy for San Francisco as a whole.
UPDATE: And we somehow managed to forget our standard S&P/Case-Shiller footnote: The HPI only tracks single-family homes (not condominiums which represent half the transactions in San Francisco), is imperfect in factoring out changes in property values due to improvements versus actual market appreciation (although they try their best), and includes San Francisco, San Mateo, Marin, Contra Costa, and Alameda in the “San Francisco” index (i.e., the greater MSA).
∙ S&P Publishes Low-, Mid- and High Price Homes Indices (pdf) [S&P]
Posted by socketadmin at 8:11 AM | Permalink | Comments (38) | (email story)
November 9, 2007
JustQuotes: Sometimes It's Simply About The Readers' Comments
"From the mortgage crisis to the plunge in home sales, dark clouds continue to threaten San Francisco's seemingly endless real estate summer. And yet remarkably, local Realtors I know seem as cheery as ever."
∙ What's happening now in the reportedly stormy San Francisco housing market? [SFGate]
Posted by socketadmin at 8:00 AM | Permalink | Comments (32) | (email story)
November 5, 2007
The Fortune Forecast For Where Home Prices (And Rents) Are Headed
As a plugged-in reader notes, Fortune Magazine looks at historic Price to Rent ratios (pages 76-88) across 54 major metropolitan areas in an attempt to forecast where home prices are headed.
In most markets people won’t lay out much more in monthly costs to own a house or condo than they would to rent a similar property unless they expect a huge profit when they sell. Indeed, speculators chasing quick profits did a lot to inflate the recent bubble. But once the fervor fades, prices must fall to restore their normal, long-term relationship with rents. Rents exercise a kind of inevitable gravitational pull on prices. The ratio of prices to rents “behave much like price/earning rations for stocks,” says Yale economist Robert Shiller. “Like P/Es, price-to-rent ratios are mean-reverting.” In other words, while prices soar from time to time, sending the ration to exceptional heights, sooner or later the relationship is bound to return to its historical average.
Of course, rather than prices falling rents can rise. And while Fortune forecasts a 28.3% correction in the Price to Rent ratio over the next five years for the San Francisco MSA, they’re forecasting it's derived from a 10% drop in prices along with an 18% increase in rents. Over in the East Bay, however, the Fortune forecast is a bit more grim as they're calling for a 38.1% correction driven mainly by price declines of >30%.
And of course, the concept of a housing P/E (and rising rents) shouldn't catch any plugged-in readers by surprise.
∙ Real Estate: Buy, Sell, or Hold? (Pages 76-88) [Fortune Magazine]
∙ Not The “P” But The “E” [SocketSite]
Posted by socketadmin at 3:48 PM | Permalink | Comments (179) | (email story)
September 17, 2007
Alan Greenspan Flip Flops On A National Bubble (But Not Local Froth)
According to the Financial Times, Alan Greenspan (as in the former chairman of the Federal Reserve) now acknowledges a national housing “bubble”; that price declines will be “larger than most people expect” (good thing you’re not most people); and that “froth” was a euphemism for a bubble (no kidding).
He said he still thought froth – a collection of bubbles – was a better description, because of the variation in house price appreciation in different local housing markets. But he said “all the froth bubbles add up to an aggregate bubble”.
As some might recall (or could find by searching SocketSite), it was a little over two years ago that Greenspan acknowledged local housing bubbles but dismissed the idea of a national one. And it was soon thereafter that his testimony on “exotic forms of adjustable rate mortgages” caught our eye.
UPDATE: And speaking of British news, the conversation quickly turns to the run on Northern Rock (the UK's fourth-largest mortgage company) and LIBOR (a bit closer to home).
∙ Greenspan alert on US house prices [Financial Times]
∙ Greenspan Sees Local Housing Bubbles [SocketSite]
∙ Greenspan Speaks [SocketSite]
∙ Northern Rock Stock Tumbles Further Amid Run on Bank [Bloomberg]
Posted by socketadmin at 2:00 AM | Permalink | Comments (19) | (email story)
August 22, 2007
JustQuotes: Is This A Blip, A Bump, Or More In The Mortgage Market?
“FBR Research said on Wednesday that $150 billion to $250 billion of permanent capital is needed to normalize pricing in the depressed market for mortgage-backed securities.
However, in a note to clients, the research arm of securities firm Friedman, Billings, Ramsey & Co Inc said the process would take up to a year and will be painful for mortgage investors and originators. FBR Research said the new capital is needed to compensate for the massive "deleveraging" underway among companies that hold mortgages.
More than $20 billion worth of mortgage bonds not backed by mortgage finance companies Fannie Mae and Freddie Mac [Editor’s Note: think Jumbo] have been offered for sale in the past few days.
Mortgage investors increasingly question the underlying value of mortgage-backed securities given that orginators' lax lending standards which led to a jump in defaults. Also, many economists expect weak home prices to drop further."
∙ Mortgage mkt needs up to $250 bln of capital [Reuters]
Posted by socketadmin at 1:20 PM | Permalink | Comments (23) | (email story)
August 9, 2007
Housing And Credit Concerns Abound (Here And Abroad)
While credit concerns once again rocked the equities market ("All the things that had been denied up until this point are unraveling. On top of this, retail sales were mediocre, which shows that indeed, the housing collapse is affecting the consumer.”), President Bush spoke out against federal bailouts for individual homeowners that have some concerns of their own (i.e., foreclosure). We note, however, a careful choice of words: "If you mean direct grants to homeowners, the answer would be `No, I don't support that.'"
UPDATE (8/10): And no, we weren't being flippant about "abroad."
∙ Stocks Fall; Dow Down 300 Points [SFGate]
∙ Bush: No Bailout for Pinched Homeowners [SFGate]
∙ U.S., European central banks step in to contain mortgage crisis [SFGate]
Posted by socketadmin at 1:47 PM | Permalink | Comments (60) | (email story)
July 30, 2007
Eyes Wide Open: Looking For Lessons In Other’s Unfortunate Mistakes
SocketSite has never been about schadenfreude. At the same time, we've never shied away from asking and addressing the tough (and sometimes uncomfortable) questions. And yes, there are often lessons to be learned (or trends to be spotted) by observing other’s unfortunate mistakes.
Some observers say that many of those facing foreclosure should never have bought a house. To be sure, many consumers were seduced by the American dream of homeownership and so financially unsophisticated that they didn't apply due diligence. For Bay Area residents, more than a decade of consistently rising home prices may have led to a mob mentality of people overeager to jump into the real estate market, confident they would quickly gain equity.
Words we like: due diligence and financial sophistication (okay, and possibly seduction). Words we don't: mob mentality.
UPDATE: And not too surprisingly, the conversation quickly turns to borrower bailouts.
∙ Living The American Nightmare: Foreclosures On The Rise [SFGate]
∙ We Know You Can, But Will They? (Actually Accept It That Is) [SocketSite]
Posted by socketadmin at 2:30 AM | Permalink | Comments (55) | (email story)
July 25, 2007
San Francisco Notices Of Default/Foreclosures Are Way Up (Sort Of)
We’re just going to pretty much parrot what we wrote three months ago: While a 102.4% year-over-year increase in San Francisco Q2 “Notice of Default” activity sounds quite dramatic, in absolute terms it still represents relatively few properties (257). Within the greater Bay Area, however, Contra Costa hit a record level of Q2 default activity (2,316 notices, up 219.4% year-over-year) as did Sacramento (3,840 notices, up 184.0% year-over-year). And Alameda isn’t too far behind (1,612 notices, up 148.4%).
According to DataQuick, “[m]ost of the loans that went into default last quarter were originated between July 2005 and August 2006. The median age was 16 months. Loan originations peaked in August 2005. The use of adjustable-rate mortgages for primary purchase home loans peaked at 77.8% in May 2005 and has since fallen.”
And while the actual number of foreclosed upon homes in San Francisco jumped a whopping 444.4% last quarter (on a year-over-year basis), that represents a total of 49 properties (versus 9 in the second quarter of 2006). In Contra Costa, however, 778 homes were foreclosed upon last quarter (versus 62 in the second quarter of 2006).
Keep in mind that long-term interest rates remain near historic lows, and according to most, the Bay Area economy and stock market remain strong (and incomes are up).
UPDATE: As a reader notes below, some great perspective from the Chronicle with regard to the relative number of Bay Area defaults/foreclosures over the past twenty (or so) years. In summary: we’ve already surpassed the early 90’s.
∙ Bay Area “Notices Of Default” Heading North? (So To Speak) [SocketSite]
∙ California Foreclosure Activity Continues to Rise [DQNews]
Posted by socketadmin at 3:00 AM | Permalink | Comments (101) | (email story)
June 27, 2007
National Inventory Numbers Out - Highest In 15 Years
The National Association of Realtors reported on Monday that the national supply of previously owned homes with respect to sales has reached a 15-year high. The last time the inventory numbers were this high was in 1992 at the end of the last big real estate bust.
While median prices have declined somewhat over the past 10 months, the large excess inventory suggests that maybe they haven't declined enough. This could be especially true with mortgage rates continuing to climb and a potential credit crunch [from a tipster] resulting from the collapse of the sub-prime mortgage market. Is this sellers denial? Is the big price plunge finally coming? Does this matter in San Francisco?
∙ May Existing-Home Sales Show Market is Under Performing [NAR]
∙ Inventory of Homes for Sale Hits 15-year High [MarketWatch]
∙ San Francisco Housing Inventory Update: 6/18/07 [SocketSite]
∙ From ‘Bubble-Proof’ To ‘Bubble Territory’ In Six Short Months [SocketSite]
∙ Report: U.S. Banks To Curb Lending, Call in Existing Loans [The New York Sun]
Posted by SFEditor at 6:16 AM | Permalink | Comments (45) | (email story)
April 24, 2007
JustQuotes: What’s Perception And What’s Reality In Realty?
"Buyers come to us and are obviously very distressed when we tell them they're going to have to compete against quite a few people to purchase any property that is exceptional," [agent Peter Goss] said. "That's not the perception that one has. The perception that one has is very different.
"Last year's big story was the housing bubble. People finally got to the point here of realizing, 'You know what? This isn't happening here.' Now you pick up the paper and what's the story? It's the subprime market problems. That's this year's story. Here again, there are so few subprime loans in San Francisco -- it's a very different situation here than in other Bay Area cities." (Picking Up Steam)
∙ Picking Up Steam [SFGate]
Posted by socketadmin at 4:00 AM | Permalink | Comments (14) | (email story)
April 23, 2007
JustQuotes: Investment Bankers And Their Wacky "Fundamentals"
“Median California home prices are still creeping up, and the state's strong employment trends should support the real estate market. But Goldman [Sachs] is worried that surging prices in the state in recent years weren't driven by traditional factors such as strong employment and income growth. Instead, the bank reckons an increase in ARM mortgages offered to borrowers who were already stretching to buy high-priced homes fueled the boom.” [Editor's Note: Inconceivable!]
∙ California home prices to weaken further: Goldman says [MarketWatch]
Posted by socketadmin at 3:41 PM | Permalink | Comments (13) | (email story)
April 17, 2007
Bay Area “Notices Of Default” Heading North? (So To Speak)
While a 67.4% year-over-year increase in San Francisco Q1 “Notice of Default” activity sounds dramatic, in absolute terms it still represents relatively few properties (216). Within the greater Bay Area, however, Contra Costa hit a record level of Q1 default activity (1,969 notices, up 225.5% year-over-year) as did Sacramento (3,234 notices, up 184.7% year-over-year). And Alameda isn’t too far behind (1,578 notices, up 179.8%).
According to DataQuick, “[t]he number of default notices sent to California homeowners last quarter increased to its highest level in almost ten years, the result of flat appreciation, slow sales, and post teaser-rate mortgage resets,” and “[m]ost of the loans that went into default last quarter were originated between April 2005 and May 2006.”
And while most homeowners “emerge from the foreclosure process by bringing their payments current, refinancing, or selling the home and paying off what they owe…about 40 percent of homeowners who found themselves in default last year actually lost their homes to foreclosure in the first quarter.” That’s up from nine percent at the same time last year.
Keep in mind that long-term interest rates remain near historic lows, and according to most, the Bay Area economy remains strong (and incomes are up).
∙ California Foreclosure Activity Jumps Again [DQNews]
Posted by socketadmin at 7:35 AM | Permalink | Comments (57) | (email story)
February 22, 2007
Just Quotes: The Downside Of Getting Aggressive
“Aggressive lending allowed people to buy homes who otherwise could not have, and that increase in demand is part of the reason home prices soared in the first half of the decade. In a December 2006 paper, "Aggressive Lending and Real Estate Markets," Wachter and co-author Andrey Pavlov of Simon Fraser University concluded that neighborhoods and cities that had high concentrations of aggressive lending suffered the largest home-price declines after the market cooled.
They focused on neighborhoods in which disproportionate shares of loans were ARMs -- adjustable-rate mortgages. "For each one-percent higher share of ARMs in 1990, the price decline increases by 1.3% for that neighborhood," they write.”
∙ Could Tremors in the Subprime Mortgage Market be [a Sign] [Knowledge@Wharton]
Posted by socketadmin at 12:10 AM | Permalink | Comments (4) | (email story)
January 16, 2007
The Economics Of Apartments Versus Condominiums In Washington
The New York Times looks at the struggling new condo development market in Washington D.C. and the impact of developers changing course from sales to rentals.
“After six weeks of failing to lure more than a couple of dozen buyers, Mr. Franco and his partner, Jeff Blum, joined the builders of nearly 6,000 condominium units in the Washington metropolitan area who have decided in the last three months to recast their projects as rental apartment buildings.”
“The latest salvage operation on the part of condo developers is far from a sure bet, however. Condominium buildings generally cost more to build and operate than those built for apartments from scratch. And while rents are high and rising in most cities, in many cases they still are not sufficient to turn a profit.
Industry analysts also point out that rents may start sagging if too many condos are converted into apartments too quickly.”
And while we’re not suggesting that Washington is the best barometer for the San Francisco condominium market, with 188 King reverting to rentals for their unsold inventory, and rumors of The Palms and a number of other higher profile buildings considering following suit, it’s simply additional insight into the impact and implications of local developers changing course.
∙ Buyers Scarce, Many Condos Are for Rent [NYTimes]
∙ 188 King Street: The Rents [SocketSite]
∙ The Palms: Financing Incentives And Inventory Update [SocketSite]
Posted by socketadmin at 7:44 AM | Permalink | Comments (11) | (email story)
December 22, 2006
It’s Not Only The Leaves That Appear To Be Falling In San Francisco
A “plugged in” tipster forwards an autumn to autumn comparison of listed (MLS) condo/coop/TIC/loft sales in San Francisco. Yes, they’re averages. Yes, seasonality is in full effect. And no, the majority of new construction isn’t included.
That being said, we do find the year-over-year drops in average sales price – down ~4% for resales – noteworthy. Or as our tipster writes, “[e]ven though those of us in SF arrogantly talk about the local market as one that doesn't see dropping values (but rather diminished appreciation), this data says otherwise.”
And it begs the question, is this “the drop” sidelined buyers have been waiting for, or is it simply the start of a longer, and larger, fall? (And yes, pun intended.)
UPDATE (12/27): The chart we originally received was incorrectly labeled “condos” as opposed to “condos, coops, TICs, and lofts,” but the data is correct (compiled by SFARMLS). We are, however, attaching an additional “mix” disclaimer.
Also, keep in mind that “sold” data only includes properties that actually closed escrow in the given month (as opposed to entering into contract). Adding pending sales to the mix (below) is probably a more accurate reflection of the market and brings the average change closer to -0.5%. We’d attach a “timing” disclaimer, but this is starting to get ridiculous…
Posted by socketadmin at 2:50 PM | Permalink | Comments (29) | (email story)
December 18, 2006
Just Ignore The Word “Bust”
“Bust” or not, we think Fortune’s “6 strategies” are generally sound advice:
1. Lower your expectations
2. Drive a hard bargain
3. Consider renting
4. Step away from the exotic mortgage
5. Shop for a rate drop
6. Keep an eye on your equity
∙ 6 strategies to survive the real estate bust [CNNMoney]
Posted by socketadmin at 12:15 AM | Permalink | Comments (0) | (email story)
We’re Losing Faith (And Not Necessarily In The Market)
We asked the obvious two months ago when Economy.com predicted 3.6% home price gains for San Francisco, San Mateo, and Marin over the next two years despite analysis that suggested “prices in the three counties were…7.5 percent higher than Economy.com predicted they should be based on historical comparisons.”
This week, Fortune “asked Moody's Economy.com and Fiserv Lending Solutions to crunch the numbers for the top 100 markets in the United States.” Their forecast for home prices in San Francisco-San Mateo? Down 0.2% in 2007 and up 1% in 2008. That’s still no “crash,” but that is an effective two year swing of -6.5% as compared to the Economy.com prediction of just two months ago. We’re losing faith (and not necessarily in the market).
∙ Economy.com Weighs In On San Francisco [SocketSite]
∙ Hot spots, cold spots: Chill on the coast [CNNMoney]
Posted by socketadmin at 12:10 AM | Permalink | Comments (4) | (email story)
November 28, 2006
Expectation Setting: San Francisco Appreciation
It’s not the “bubble-proof” moniker that caught our attention, but the measure of San Francisco’s long-term (1949-2006) average annual home price appreciation (4.2%).
∙ Business 2.0: Bubble-proof markets [CNNMoney]
Posted by socketadmin at 1:18 PM | Permalink | Comments (3) | (email story)
Existing Home Prices Fall Nationally (And In The West)
While it's the local housing market that you really need to "plug in" to, it's worth keeping an eye on the broader market trends as well.
The National Association of Realtors said Tuesday that [U.S.] existing home sales edged up 0.5 percent to a seasonally adjusted annual rate of 6.24 million last month. It was the first increase after seven consecutive monthly declines.
However, the median price for a home sold dropped to $221,000 in October, a decline of 3.5 percent from a year ago. That was the biggest year-over-year price decline on record.
It marked the third straight month that median prices have fallen compared with the same period a year ago, the longest stretch of such declines on record. The median is the point where half the homes sold for more and half for less.
David Lereah, chief economist for the Realtors, said he expected home prices to continue falling for the rest of the year as sellers, accustomed to the booming market conditions of previous years, reluctantly cut their prices.
"Many buyers remain on the sidelines," Lereah said. "After a period of price adjustment, we'll see more confidence in the market and a lift to home sales should be apparent in the first quarter of 2007."
It's also worth noting that U.S. housing inventory is up 34.4% as compared to October 2005 which puts “months of available supply” at 7.4 (up 51% year over year).
And we have to wonder, will falling home prices actually buoy buyer confidence? While a downward price trend might aid in affordability, we can’t imagine it will inspire too much near-term confidence in terms of housing as an “investment.”
∙ Existing Home Sales Rise, Prices Fall [SFGate]
∙ Existing Home Sales Rise in October, Market Stabilizing [realtor.org]
Posted by socketadmin at 12:25 PM | Permalink | Comments (4) | (email story)
November 13, 2006
Just Quotes: So Is San Francisco Hot Or Not?
"Do not be afraid of falling prices. It's sales that are important," [David] Lereah said. "We needed prices to fall. We had a balloon and we are deflating it. It got to the point where homes were unaffordable and we reached a breaking point. That's the reason we are in this contraction."
"It's the hot boom cities -- that is where the problem is," Lereah said. "But these were the boom markets because they had good economic fundamentals, and for the most part that is still true. This is a temporary correction in these hot markets -- but how you define temporary I just don't know."
Forget temporary, how do you define “correction?”
∙ Housing Market Showing 'signs Of Recovery' [Morningstar]
Posted by socketadmin at 12:07 AM | Permalink | Comments (5) | (email story)
October 31, 2006
San Francisco's One Thumb Up
BusinessWeek gives San Francisco real estate a “thumbs up” in terms of "Value for the Long Run." And while we agree, the jury is still out with regard to the near term. From BusinessWeek:
Housing has gone from a sure thing to a complete muddle. Median prices fell nationwide for a second straight month in September, the first time that has happened since 1990, according to a report on Oct. 25. Homeowners don't know whether to sit tight or bail. They have no idea whether they're experiencing the beginnings of a deep bust that will leave a permanent hole in their wealth, or a small hiccup.How do you know if your own local market is the kind that will snap back or the kind that will languish indefinitely? One key factor is the ease or difficulty of building new homes. Places where new home construction is a long and expensive process, such as Boston and San Francisco, tend to experience big price movements, both up and down. "Restricted supply leads to more volatility in prices," says Edward L. Glaeser, a Harvard University economist who has studied big-city housing markets.
Key word: volatility. And then there’s that second to last paragraph: “Sure, [restricting housing supply] can make current owners richer by increasing the scarcity value of their homes. But it's murder on first-time buyers. And in the long run, it's bad for the local economy. As Glaeser notes, companies tend to migrate away from areas with costly housing to avoid paying the higher salaries needed to compensate employees for their home costs.”
∙ Boom! Bust! Boom? [BusinessWeek]
Posted by socketadmin at 12:25 AM | Permalink | Comments (12) | (email story)
September 13, 2006
The President Of N.A.R. Goes To Washington
A couple of quotes from the testimony (pdf) of Tom Stevens, the President of the National Association of REALTORS, at today’s U.S. Senate hearing on “The Housing Bubble and Its Implications for the Economy” (emphasis added):
"Sales are down significantly in Florida, California, Arizona, Nevada, Virginia, and Maryland. These regions experienced the greatest rise in home prices in recent years and affordability has become a major issue. The sharp decline in sales have resulted in a much higher housing inventory (tripling and quadrupling in some cases) and these areas are vulnerable to outright price declines, particularly if interest rates were to rise further."
"Contrary to many reports, there is not a “national housing bubble.” All real estate is local. For example, the housing market in California is extremely different from Oklahoma. Home price-to-income ratio, home price-to-rent ratio, and more importantly, mortgage debt servicing cost-to-income ratio have greatly increased in some markets to worrisome levels. Markets in Florida, California, Arizona, Nevada, Virginia, and Maryland exhibit trends far above the local historical norm, thus it would not be surprising for these markets to experience a price adjustment."
"Due to very high home prices, interest-only, adjustable rate, and/or option-ARMS became the only way to enter the housing market for some homebuyers. In essence, the homebuyers in the coastal markets are at their financial capacity. With rising mortgage rates, homebuyers are becoming exhausted financially, which explains why sales have tumbled in high priced regions of the country."
So ARMs and affordability are pressing problems, sales are slowing, and we're "vulnerable to outright price declines" and “adjustments”? Who could have possibly seen that coming (last November)…
∙ Witness Testimony: Mr. Tom Stevens, President N.A.R. (pdf) [senate.gov]
∙ The Housing Bubble and Its Implications for the Economy [senate.gov]
∙ Top O’ The Market To You! [SocketSite]
Posted by socketadmin at 3:11 PM | Permalink | Comments (18) | (email story)
August 11, 2006
A Sign (Quite Literally) Of The Times
File this under lagging indicators. Apparently Trump has been dumped and shock is in. And just to be clear, we’re definitely not advocating attending. (That is until the Learning Annex starts throwing a bit of that “Wealth” our way - at least we learned something from The Donald.)
∙ Oh! Donald! [Curbed]
Posted by socketadmin at 12:01 PM | Permalink | Comments (2) | (email story)
August 4, 2006
One Free Pass
If you seek insight into what’s really happening in the local real estate market (and not just the same old industry rhetoric); if you value the inside scoop on new developments, interesting new listings and opportunities, and intriguing (or abhorrent) architecture and design; and if you actually want to make an informed decision about buying or selling a house, condo, or property in San Francisco, then we hope that you’ll continue to “plug in” (and contribute) to SocketSite.
If, however, you simply feel the need to single-mindedly debate (and we use that word loosely) the merits (or “superiority”) of buying versus renting (or vice versa), or the impending crash (or boom) of the local real estate market, then you’re probably wasting your time here. (Might we suggest the real estate forum on craigslist?)
That being said, this is your one free pass. And to get things started, we’ve moved the thread that started with an off-topic comment on our follow-up post on 2760 Sacramento to the comments section below. So have at it. Rant and rave or call each other (or us) names (within reason). Hell, this is the one time we really won’t care whether you’re on-topic or off. Just try to get it out of your system.
Posted by socketadmin at 12:04 PM | Permalink | Comments (18) | (email story)
June 22, 2006
How Will It Read In 2007?
The Bubble Meter provides a side-by-side comparison between the 2005 and 2006 book covers for David Lereah’s “Real Estate Boom.” It just begs the question: how will it read in 2007?
∙ David Lereah's Book: How the Cover Changed [Bubble Meter]
Posted by socketadmin at 12:00 AM | Permalink | Comments (1) | (email story)
June 14, 2006
Bottoming Out In 2009?
According to a study by Global Insight/National City, San Francisco has gone from being “fairly valued” in 2001 (well okay, 4.8% overvalued) to being over-valued by 40.8% in 2006. Interestingly enough, that doesn’t even put us in the “Top 50” of “over-valued” metro areas (Naples, Florida leads the nation at 102.6%). And it's nothing we haven’t heard before.
One new twist, however, is that based on a “historical examination of 66 actual metro area price corrections” (including a drop of 11% in San Francisco from 1990-1994), the study suggests that when/if "prices do fall from overvalued levels, they typically fall by about half the overvaluation” but that a “correction usually takes three and a half years.”
∙ Global Insight/National City Study: House Prices in America – pdf [globalinsight.com]
∙ More housing markets overvalued [MarketWatch]
Posted by socketadmin at 11:27 AM | Permalink | Comments (1) | (email story)
June 12, 2006
Those Damn Fools
The Motley Fool pounces on the National Association of Realtors (NAR), the press, and housing as an “investment”:
These are people who want us all to believe in housing as an investment, and they just happen to take a cut on the deals. Of course, housing, over the long run, is not a good investment, except for a very savvy few. It's a roof over your head that tends to keep pace with inflation, but not in a straight line. But if you can't afford your place because you made a bad deal based on reports of the never-ending happy housing story, that cozy home could be a personal finance time-bomb waiting to explode.
Damn Fools.
∙ I Want My Bubble Back! [Motley Fool]
Posted by socketadmin at 12:00 AM | Permalink | Comments (0) | (email story)
May 30, 2006
No Pop (But No Appreciation?)
While it’s an "old” speech (February ’06), it’s still a good one.
Christopher Thornburg, senior economist at UCLA's Anderson School of Management, offers his perspective on whether the recent cooling trend in residential real estate indicates an imminent bubble burst or just a lull in California's otherwise booming housing market in this edition of the Economics Roundtable at the University of California, San Diego.
Our favorite quote and topic: “People don’t think about fundamentals, they think about trends” (minute 37:08). A couple of other key segments in the 58 minute speech: California real estate (21:11); The bubble (30:15); When is it going to end? (45:15); What does this mean to you? (49:37); The punch line (51:48). (A tip of our hat to the Bubble Meter for the link)
∙ Economics Roundtable: The California Economy -- Housing Boom or Bubble? [Google]
∙ Google Video: "The California Economy: Housing Boom or Bubble?" [Bubble Meter]
Posted by socketadmin at 11:26 AM | Permalink | Comments (0) | (email story)
May 25, 2006
From Bull To Bear?
You could actually hear the collective nodding of heads when Christopher Mayer, an economics professor at Columbia University, referred to San Francisco as a “superstar” city and argued that “land shortages and rising populations would translate into ever-rising prices.” Well, now Mr. Mayer is changing his tune.
Yes, we’re still the a superstar city, but Mr. Mayer is conceding that “prices in the most expensive markets could drop 15 percent in the next year” (that’s us). He’s obviously never been in San Francisco on a day like today.
∙ Can you still get rich in real estate? [CNNMoney]
Posted by socketadmin at 8:47 AM | Permalink | Comments (0) | (email story)
May 11, 2006
Uhh...
Not too sure what to say about this one. (Other than we didn’t sign up…)
Posted by socketadmin at 1:28 PM | Permalink | Comments (1) | (email story)
May 9, 2006
New York Times Not Fact Checking?
The New York Times pronounces “A Chill Is in the Air for Sellers,” especially in San Rafael. In principle we agree, but based on what we know about the market, something just didn’t jibe with at least one part their article. So we did some quick fact checking. From the Times:
A house at 57 Marina Boulevard in San Rafael, across the bay from San Francisco, was originally listed at $1.45 million. The owner recently dropped the price to $949,000 when a competing house on the same street lowered its price to $959,000, from $989,000.
It’s true, the list price of the house at 57 Marina Boulevard has been reduced (in fact, twice). But the original listing price, back in March, was $1,045,000 (not $1,450,000). After a month on the market it was reduced 4.5% to $997,500, and then again by 4.9% to $949,000 last week (for a total reduction of about 9%).
And yes, a 9% reduction is noteworthy, but it’s a far cry from the 34% drop the New York Times is reporting. As far as the rest of the article, it seems right, but we're still checking...
[Update: Rest assured, the principal in charge of proof reading for SocketSite will be reprimanded for not catching that 'principle' blunder...]
∙ A Chill Is in the Air for Sellers [NYT]
Posted by socketadmin at 5:28 PM | Permalink | Comments (4) | (email story)
May 6, 2006
What’s This Guy Know About Investing?
Another one of those crazy investor types spouts off about the real estate market this weekend:
"What we see in our residential brokerage business [HomeServices of America, the nation's second-largest realtor] is a slowdown everyplace, most dramatically in the formerly hottest markets. . . . We've had a real bubble to some degree. I would be surprised if there aren't some significant downward adjustments, especially in the higher end of the housing market." (Warren Buffett)
And yes, it’s a general statement. And no, he didn’t mention the Bay Area specifically.
∙ Buffett: Real estate slowdown ahead [CNNMoney]
Posted by socketadmin at 12:53 PM | Permalink | Comments (0) | (email story)
May 4, 2006
Fortune’s Real Estate Survival Guide
Fortune rides the bubble wave this afternoon with their self described real estate survival guide. The three chapters: ‘Welcome to the dead zone’, ‘Unmaking the myths of the housing boom’, and ‘Who will be hurt the most?’.
The timely quote from ‘Who will be hurt the most?’: “The most troubled sector of the housing market, the one that will fall first and fastest, is the condominium market.” Must...build...faster.
∙ Real estate survival guide [CNNMoney]
Posted by socketadmin at 10:42 PM | Permalink | Comments (1) | (email story)
April 6, 2006
Heads You Win,Tails You Lose
Perhaps we’re just getting soft in our old age (we didn’t make a big deal about it, but SocketSite recently turned one). We had access to the much ballyhooed PMI report on Tuesday and chose to ignore it this time around (we must admit, however, that we came very close to posting it under the title “San Francisco Breaks Into The Top 10!”).
Why did we choose to ignore it? An email from a reader provides some insight:
My favorite line [from the Chronicle coverage]: “The chance that real estate values in the region's three major metropolitan areas will fall during the next two years stands at 55 percent or greater…”Personally, I think the market will go either up or down…thus there is a 50 percent chance it will go up, 50 percent chance it will go down. This doesn’t say anything!
Great point, but not entirely true. What this does say is that there is uncertainty in the market. And with uncertainty comes increased risk.
∙ Study: Home prices more likely to drop [SFGate]
∙ Here We Go Again [SocketSite]
Posted by socketadmin at 11:12 AM | Permalink | Comments (2) | (email story)
April 4, 2006
There Is No Bubble! (Unless You Live In San Mateo)
Gary and Margaret Hwang Smith, two economics professors at Pomona College, recently concluded that there is no national housing bubble ("Bubble, Bubble, Where's the Housing Bubble?"). In fact, they suggest that numerous cities across the nation are actually undervalued.
“They argued that the value of a home is determined by the rent it could fetch. Calculate the future rents, subtract mortgage payments, taxes and other costs, factor in a good annual rate of return of 6 percent or more, and one should be looking at the proper price of a house or condo.”
Before you take too much comfort, however, realize that their study was based on data from ten (10) US cities. And out of the ten, only one Bay Area city (San Mateo) was included in the study. And out of the ten, only one city (San Mateo) was determined to be overvalued. And based on their calculations, this one city (San Mateo) is overvalued by between 42 and 54 percent. No word on San Francisco.
∙ Some New Math on Homes [NYT]
∙ Bubble, Bubble, Where’s the Housing Bubble? (pdf)
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March 14, 2006
Bubble (Not Baby) Sitting
Bankrate “talked to experts, studied public and private databases, analyzed market trends and examined the analyses of many others” in order to arrive at their list of ten "bubble blowers" (appreciation should continue to grow), "bubble sitters" (appreciation may have peaked), and "bubble busters" (values expected to decline).
San Francisco? Deemed to be one of the ten bubble sitters:
“With a median home price of nearly $720,000 at the end of 2005, according to the NAR, San Francisco remains one of the country's most expensive cities to live in, outpacing even Honolulu and New York City. Housing prices are unlikely to decline because of short supply -- surrounded by hills and its famed bay -- there's just nowhere else to build anything less expensive in the city. But realistically, there aren't that many people who can afford to buy at those prices, which should keep prices from going much higher.”
Our big question: what’s the impact on buyer behavior should the market flatten out? At a minimum it will be much hard to justify a new investment, or to rationalize an interest only or short-term mortgage product (which will only compound the affordability problem).
∙ Going up, down and sideways: Top 30 cities to watch [Yahoo!]
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March 13, 2006
The Bull
Okay, so who’s the genius at NAR that decided that a “balloon is a much better image” to represent the strength of the real estate market?
Are we the only ones who remember week-old birthday balloons lying shriveled on the floor? Or popping balloon after balloon in failed attempts to overfill those little water balloons? Regardless, David Lereah, chief economist of the National Association of Realtors, seems to be firmly on board.
“His prediction for the housing market's future is, with a few exceptions, a remarkably sunny one: low interest rates, continued annual appreciation, a lean supply accompanied by demographics guaranteed to produce a strong demand.”
"The factors that have some real estate economists worried, which include a decline in sales and appreciation, higher interest rates and reduced affordability, Lereah says, are merely signs that some air is slipping out of the balloon.”"More air will come out in some areas than others," says Lereah. "But you can't sustain double-digit price increases forever. You need a cooling-down period. It's healthy for the market. It's still a sound balloon."
"The fundamentals haven't changed," Lereah says. "It's still a great time to invest in real estate."
We agree, air is slipping out of the balloon and double-digit price increases are not sustainable. We do, however, disagree that the “fundamentals haven’t changed.”
The fact that the majority of new Bay Area housing “investments” would lose money on an income producing basis challenges a basic fundamental of investing. And widespread speculation (i.e. banking on asset appreciation) in the housing market signals a fundamental shift in "investor" behavior (and risk).
∙ A BULL, A BEAR AND THE BUBBLE [SFGate]
∙ Why the Real Estate Boom Will Not Bust
Posted by socketadmin at 12:15 AM | Permalink | Comments (2) | (email story)
The Bear
A loud "Amen!" with regard to reducing your exposure to "variable-rate or interest-only loans”, but damn, even we’re not as bearish as financial consultant, and author (Sell Now! : The End of the Housing Bubble), John Talbott:
“According to San Francisco's LoanPerformance.com, half of all Bay Area home buyers used interest-only loans to make their purchases last year. With so much of their income already relegated to their mortgage payment, says Talbott, even a small rise in interest rates will push many to -- and beyond -- their limit. For others, a divorce or job loss will spell financial ruin.”
“The problem, he says, is that home prices are way overvalued -- just as Internet stocks were during the 1990s before that sky collapsed. As evidence, he points to the growing discrepancy between Bay Area home prices and rents, an indicator commonly used by economists to determine a property's true value.”
“People should protect themselves, Talbott says, by divesting themselves of any investments in real estate, including stock. They should sell their vacation homes. They should get out of any variable-rate or interest-only loans. They might even consider selling their primary residence, investing that money in something other than real estate, and renting for awhile.”
Here’s what we say: if you won’t be able to afford your “investment” (i.e. property) should interest rates rise and/or the market turns, then now might be a good time to either consider selling, or to reconsider any irrationally driven (e.g. “prices always go up” or “if you don’t buy now, you’ll be left behind forever”) urges to buy.
Otherwise, just don’t worry about it (too much).
∙ A BULL, A BEAR AND THE BUBBLE [SFGate]
∙ Don’t Fear The Bubble [SocketSite]
∙ Sell Now! : The End of the Housing Bubble
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March 10, 2006
Weekend Update: Sales Follow-Up
Lots of questions with regard to sales activity for three of the New Developments we’ve recently profiled, so let’s do a quick rundown to kickoff the weekend (and help you plan your open house stops this Sunday):
1. 1725 Washington: Three (#3, #9, #14) of the fourteen units we profiled a month ago have sold, eight units remain active in the MLS, and three units (#4,#7,#12) have yet to be added to the MLS. (And yes, #2 and #6 remain "Sold" BMR units.)
2. 1625 California: Of the seven “2ND Release now available! Going fast!” units we featured two weeks ago, one (#55) has gone pending, while the other six remain available (a couple after 3+ months).
3. 1551 Filbert: After 45 days, one (#1) of the three “truly special & will not last” TICs has garnered an offer (#2 and #4 remain Active).
And no, we're not implying that the market has "popped", "crashed", or "tanked". Just that it has changed. And that "if you build it they will buy it (regardless of the design, price, or marketing)" thinking might just be a thing of the recent past (along with "guaranteed” double-digit appreciation).
∙ Update: 1725 Washington Street [SocketSite]
∙ 1635 California Street [SocketSite]
∙ For Sale By Owner Listed! [SocketSite]
∙ San Francisco Sales/Prices Trend Down [SocketSite]
Posted by socketadmin at 12:56 PM | Permalink | Comments (1) | (email story)
March 2, 2006
Don’t Fear The Bubble
As one of the New York Times “Most E-Mailed Articles”, chances are you’ve already read David Leonhardt’s Don't Fear the Bubble That Bursts. But if not…
…instead of panicking, most homeowners should be taking a deep breath. The real estate slump of 2006 offers a fresh chance to puncture the No. 1 myth about the nation's No. 1 topic of conversation: the idea that we should all be rooting for high house prices. The myth is good for real estate agents, but it creates needless anxiety for everyone else. It's time that most of us learned to stop worrying and love the bursting bubble."Even in the most vulnerable markets, most people just have to look through it and ignore it," said Mark Zandi, the chief economist of Moody's Economy.com, "because it's of very little relevance to them."
Amen. Now read the rest of the article (especially if you plan to comment).
∙ Don't Fear the Bubble That Bursts [NYT]
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February 19, 2006
Fiserv Says San Francisco Home Prices To Drop 1.9%
Fiserv Lending Solutions (a provider of mortgage and consumer lending services) is forecasting a 1.9% drop in home prices for the San Francisco MSA in 2006.
Unfortunately we’ve never heard of Fiserv Lending Solutions, have no insight into their methodology, and have no idea how accurate any of their forecasts have been in the past (or if they even have a “past”). It’s just another data point (but from within the industry).
∙ Price forecasts for 379 metro areas for 2006 [CNN/Money]
Posted by socketadmin at 7:29 PM | Permalink | Comments (2) | (email story)
And We Definitely Agree With Sir Issac Newton
An evenly balanced follow-up from the Chronicle with regard to the their coverage of the most recent DataQuick report:
This spring, Bay Area homeowners are likely to know whether the housing market has merely paused before resuming its upward climb or has truly downshifted to the slow lane and, if so, how dramatically.Last month, the number of homes sold declined for the 10th month in a row and hit its lowest level since 2001, and price gains slowed markedly as well.
Now, the question is, will the market simply cool or will it dive into negative territory?
Each housing cycle in the past has had its own set of twists and turns in which a multitude of factors comes in to play.
As the current housing frenzy exhausts itself, variables ranging from interest rates and employment growth to affordability, new home supply and sellers' willingness to part with their No. 1 asset will help determine the swiftness and magnitude of any downshift.
"Making this cycle more unique ... is that there's been a big increase in homeownership since the early 1990s," said Celia Chen, director of housing economics at Moody's Economy.com. "We've brought a lot more people into the market, and it's uncertain how these people will react in a down cycle."
Here’s where we definitely agree with Sir Issac: “I can calculate the motions of heavenly bodies, but not the madness of people.” (Sir Issac Newton having lost his shirt in the South Sea bubble, 1721)
∙ HOUSING -- JUST COOL OR GOING COLD? [SFGate]
∙ Rates Cheap. Houses Not Cheap. [SocketSite]
∙ Real Estate Vs. Real Behavior [SocketSite]
Posted by socketadmin at 1:22 PM | Permalink | Comments (0) | (email story)
February 16, 2006
Rates Cheap. Houses Not Cheap.
According to the most recent DataQuick report, Bay Area home sales plunged last month while prices held steady. From the Chronicle:
Bay Area home sales tumbled to their lowest level in five years last month, and prices hovered well below record territory, further evidence that the region's seemingly unstoppable housing boom may have peaked with the blistering market of 2005.What remains to be seen is whether the new figures amount to a hiccup or the beginning of prolonged slowdown.
Rising interest rates, and tighter lender standards, seem to be taking a lot of the blame. A quote from the director of the Center for the Continuing Study of the California Economy in Palo Alto: "People chose to bet on future appreciation by choosing loans where they knew payments would go up by a lot -- but they got in cheap…There are no cheap loans now."
The scariest thing? Current mortgage rates are still well below historical averages (second to last graph).
∙ Home sales falter, hinting at slowdown [SFGate]
∙ Interest Rate Trends [Mortgage-X]
Posted by socketadmin at 11:07 PM | Permalink | (email story)
February 14, 2006
“Marin Home Sales and Prices Plunge”
Ron Parks of Vision Real Estate, and publisher of The Marin Report, definitely caught our attention with that headline. The first three paragraphs of his most recent monthly market trends report:
“What a way to start the year. Home sales in Marin County, while not at their lowest level ever, are certainly close to it. With only 114 homes sold in January, sales were off 28% from December and 24% from January 2005. This is the third lowest number of sales in any one month since we've been keeping records: January 1998.
The median price of single-family homes in Marin County also took a nose-dive in January, falling 8.6% from December to $877,500, and, gasp, down 5.7% from January 2005. This is the first year-over-year drop since June 2003. Also, it's the first time the median price has been below $900,000 since December 2004.The question becomes, is this an aberration, or the start of a new trend? On one hand, the depth of the plunge in January is an aberration. On the other hand, the trend is towards a buyers' market. Looking at pending sales, we see an increase of 13% for homes and 29.6% for condos this month. This portends increasing sales in the month's ahead.”
Foreshadowing, or simple red herring for the San Francisco real estate market? The next CAR report is due out on 2/28/06, so be sure to stay tuned...
∙ The Marin Report [website]
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February 10, 2006
Learning From Past Mistakes
A tipster passed along some interesting Friday afternoon reading. A couple of excerpts from a New York Times story published in 1984:
“My pal Jerry P. just bought a condominium in Century City, in Beverly Hills, for 60 percent of what it sold for in 1980. Down the street from me here in the Hollywood hills, four houses have been on the market since 1981. The asking prices now are about one-third less than they were three years ago. Up and down Sunset Boulevard in West Hollywood, apartment houses that were converted to condos lie empty, boarded up, not one unit sold, in bankruptcy, with banks holding title.”
“The Southern California residential real estate boom began in about 1974. It was not just a boom. It was a superboom, with miserable bungalows in Santa Monica running up from $40,000 in 1974 to $400,000 by 1980. Two-story colonials in Beverly Hills went from $200,000 to $800,000 and then over a million. One-bedroom condos in Hollywood were built and sold for $100,000 - what a house in Beverly Hills had been five years before. Every day, home buyers would look at the prices and say, ''It can't go on.'' But every day, for five years, it did go on. Middle-class families were priced out of the market, and the brokers said, ''But the rich will always be able to buy.'' Ordinary rich people were squeezed out of the market in some areas, but the brokers said, ''Never mind, the music business people will buy anything.'' The music business fell into a depression in 1979, and the brokers said, ''The foreigners are buying. Compared with Paris or Teheran, real estate in Holmby Hills is a bargain.''Everyone wanted to get in to the game, get the down payment on a house, somehow struggle with the payments for a year, then sell out and get rich quick. Inflation pushed housing prices into the stratosphere. But even when inflation stopped, brokers said, ''The prices have nothing to do with inflation. Everyone on earth wants to live in L.A. The price will go up forever here, no matter what else happens in the rest of the country.''
Then the music stopped, some afternoon in 1980. As if a spell had fallen over the city, suddenly things began to stay on the market for three months, six months, a year, two years. Buyers disappeared. Asking prices stayed high, but nothing sold.
The great Southern California real estate boom was over. Prices had gotten so high that they could no longer be justified by inflationary expectations, or the influx of foreigners, or the climate, or for any other reason.
Now, four years later, those brokers who are still in the game tell sellers to expect that their houses will be on the market for two years. Other brokers have sold their BMW's and are now working as ''financial planners'' or public-relations people, dreaming of the days when they worked for 6 percent of infinity.”
At least we learn from our mistakes (right?). Now get outside and take full advantage of a beautiful afternoon/evening in this amazing city. It is days like today that justify paying through the nose to live here.
∙ THE DAY LOS ANGELES'S BUBBLE BURST [NYT]
Posted by socketadmin at 3:23 PM | Permalink | Comments (4) | (email story)
January 25, 2006
Not A List We Really Wanted To Make
Business 2.0 has just released their list of 101 Dumbest Moments in Business for 2005. And we’re not too thrilled to report that the San Francisco Bay Area real estate market made the list. Coming in at number 67:
67. Can't keep up with the Joneses? Heck, it's bad enough just trying to keep up with the appreciation on their dilapidated Victorians. In March the median price of a single-family detached home in the San Francisco Bay Area rises more than $1,000 per day. By month's end, it swells to $106,000 above the previous year's median -- 43 percent more than the area's estimated average household income of about $74,000.
Well, when you put it that way...
∙ 101 dumbest moments in business: Real estate [Money/CNN]
Posted by socketadmin at 8:23 AM | Permalink | (email story)
January 9, 2006
Soros Speaks
Last November we called the top of the San Francisco housing market. Two months later George Soros calls the top of the US housing bubble.
"Soros said he believed the U.S. housing bubble, a major factor behind strong U.S. consumption, had reached its peak and was in the process of being deflated."
Perhaps we should start trading currencies...
∙ Soros: U.S. recession may occur in '07 [CNN/Money]
∙ Top O’ The Market To You! [SocketSite]
Posted by socketadmin at 12:36 PM | Permalink | (email story)
January 4, 2006
Bubble History Repeating?
We have often looked at real estate bubbles in other countries for insight into our local market, so we're a big fan of the New York Times feature on Japan's real estate woes.
Japan suffered one of the biggest property market collapses in modern history. At the market's peak in 1991, all the land in Japan, a country the size of California, was worth about $18 trillion, or almost four times the value of all property in the United States at the time.Now the land in Japan is worth less than half its 1991 peak, while property in the United States has more than tripled in value, to about $17 trillion.
Homeowners were among the biggest victims of the Japanese real estate bubble. In Japan's six largest cities, residential prices dropped 64 percent from 1991 to last year. By most estimates, millions of homebuyers took substantial losses on the largest purchase of their lives.
Their experiences contain many warnings. One is to shun the sort of temptations that appear in red-hot real estate markets, particularly the use of risky or exotic loans to borrow beyond one's means. Another is to avoid property that may be hard to unload when the market cools.
Most of all, economists say, Japan's experience teaches the need to be skeptical of that fundamental myth behind all asset bubbles: that prices will keep rising forever. Like their United States counterparts today, too many Japanese homebuyers overextended their debt, buying property that cost more than they could rationally afford because they assumed that values would only rise. When prices dropped, many buyers were financially battered or even wiped out.
"The biggest lesson from Japan is not to fall into the same state of denial that existed here," said Yukio Noguchi, a finance professor at Waseda University in Tokyo who is perhaps the leading authority on the Japanese bubble.
"During a bubble, people don't believe that prices will fall," he said. "This has been proven wrong so many times in the past. But there's something in human nature that makes us unable to learn from history."
Oh, and the last time we checked, they weren’t making any more land in Japan either...
∙ Take It From Japan: Bubbles Hurt [NYT]
Posted by socketadmin at 8:30 AM | Permalink | (email story)
Not Exactly A “Soft Landing”
Billing itself as “by far the leading Real Estate News site on the Internet” (whatever), the Realty Times analyzes Robert Campbell’s November edition of The Campbell Real Estate Timing Newsletter:
In his November, 2005 edition, Campbell writes, "Creative financing can be very dangerous when the price of the asset loses significance. People start believing that it doesn't matter whether a home sells for $200,000 or $400,000 because the monthly payment is the same. Sorry, but when mortgage loans are based on fictional values as opposed to true values that are supported by economic fundamentals, financial bubbles can develop that eventually implodes."If the market reverts to the mean, housing in California should cost about $314,000, which makes it susceptible to a stomach-lurching 42 percent drop.
"Pushed to extreme levels of overvaluation by greed and easy money," writes Campbell, the California real estate market is now a bubble. Housing prices have risen to a price/earnings ratio that is significantly out of balance with sustainable economic fundamentals. When a bubble bursts, history shows that, at a minimum, prices will retreat back to levels that are consistent with long-term norms.
That would represent a 44 percent decline from today's median home price of $544,000.
∙ California Market Timer Pessimistic [Realty Times]
Posted by socketadmin at 8:00 AM | Permalink | (email story)
January 3, 2006
Hardly A Bunch Of Hacks
Thanks to The Housing Bubble 2 for alerting us to the following:
Q: PIMCO is following the U.S. housing market very closely, forming a research team and sending people around the country to observe regional markets for signs of a slowdown. What did the team have to say at the December Forum?
A: At the December Forum, Scott Simon, our mortgage guru, gave a special presentation detailing the work of his group on the state of the housing market and the mortgage market. Their key conclusion is that the leading indicators of a slowdown in housing have clearly turned. Going back to September, the group identified the leading indicators but those indicators had not yet turned at that point. The leading indicators for the housing market have now turned and we anticipate that the market itself will be turning in the months immediately ahead.One key indicator is that the inventory of unsold homes is rising, as former buyers are becoming sellers, trying to monetize their speculative gains. Price discounting in selective markets is a second leading indicator. And probably the most important indicator that we are seeing is a severe slowdown in the affordability associated with exotic mortgages. In fact, we’re now seeing layoffs by mortgage brokers who specialized in exotic mortgage creation.
A key characteristic of the property market is that it’s very momentum-driven. This is sometimes called a "reflexive" market, meaning that people are more excited when prices go up even though there is less value, and less excited when prices go down even though there is more value.
Because of reflexivity, once momentum turns and home price appreciation slows, we should see a rather dramatic slowdown in volumes. Home prices don’t have to actually fall for you to have a sharp slowing in the volume of transactions. That is a key analytical aspect of our forecast that a slowdown in home price appreciation will have a bigger impact on the household’s ability to withdraw equity than the consensus probably thinks.
So even if you don’t want to listen to us, perhaps you’ll listen to a firm with over $500 billion under management (i.e. PIMCO).
∙ Paul McCulley Discusses PIMCO’s Cyclical Outlook and Investment Strategy [PIMCO]
∙ Top O’ The Market To You! [SocketSite]
Posted by socketadmin at 5:18 PM | Permalink | (email story)
Can You Say Speculative Bubble Froth?
"At the same time rental rates were dropping, we had housing prices totally skyrocketing". Credit Andrew Zacks, a “San Francisco lawyer who handles Ellis Act evictions and other land use cases” with that comment. A comment that points to a market driven by speculative froth rather than sound investing (i.e. banking on the appreciation of, rather than the income derived from, an asset).
∙ Renters getting deja vu to bad old dot-com days [SFGate]
Posted by socketadmin at 4:50 PM | Permalink | (email story)
December 15, 2005
QuickLinks: Housing Sales Slowdown
∙ Bay Area home sales dip, but prices remain strong [SFGate]
∙ Sales of new homes plunge [sacbee]
∙ Resale housing market continues to cool [Auburn Journal]
Posted by socketadmin at 7:12 PM | Permalink | (email story)
December 7, 2005
UCLA Anderson’s California Economic Forecast
The Chronicle highlights the most recent UCLA Anderson Forecast:
1. Slower job growth but no recession 2. Home prices flatten but don't plunge 3. A change at the Fed adds to uncertainty
∙ Sluggish growth seen for state; Experts say real estate boom will cool [Chronicle]
Posted by socketadmin at 9:33 AM | Permalink | (email story)
November 18, 2005
Top O’ The Market To You!
Inventories and interest rates are up, sales are down, and prices are either flat or falling. So we’re calling it: welcome to the top of the San Francisco housing market!
For sale signs are popping up left and right, and as one seasoned agent recently commented, “we’re going to wake up one morning and it’s going to be like it snowed ‘For Sale’ signs the night before.” In addition, thousands of new condominium units are either coming on the market, currently under construction, or have recently been funded.
Long-term rates continue to climb, but more importantly, short-term rates have climbed even more: one-year ARMs are at a three year high and are closing in on the 30-year fixed rate. This is extremely significant in a market where buyers have turned to short-term ARMs for affordability reasons rather than financial wherewithal.
The difference in monthly payments between a one-year ARM at 4% versus a one-year ARM at 5% is over 14% (that’s an extra $400 per month on a $600k loan). In other words, and from a cash flow perspective, prices would need to fall at least 14% in order to maintain the same level of affordability in the marketplace.
Year-over-year sales have declined for the seventh month in a row, and the median sales price has flattened over the past quarter. And while many agents are still quick to point out the year-over-year positive appreciation in prices, that number is meaningless if you purchased a home during the past couple of months over which the median sales price has actually fallen.
We’re not predicting, we’re just observing and calling a spade a spade (or a duck a duck). Welcome to the top of the market.
∙ Bay Area prices slow as mortgage rates rise [Chronicle]
∙ San Francisco Housing Inventory: Up, Up, And Away! [SocketSite]
∙ Bay Area Inventories Up, Agent’s Spirits Down [SocketSite]
∙ Median San Francisco Bay Area Home Prices Down $20k [SocketSite]
Posted by socketadmin at 8:43 AM | Permalink | (email story)
November 17, 2005
San Francisco's Home Sales Slump
Via Inman News: “San Francisco Bay Area home sales declined on a year-over-year basis for the seventh month in a row in October, according to DataQuick Information Systems, a real estate information company. The median home price in October was up 17.2 percent since October 2004 but slipped 0.3 percent from September 2005.”
Catch where we’re going with this?
Posted by socketadmin at 4:08 PM | Permalink | (email story)
Writing On The Wall
“U.S. housing starts fell 5.6 percent in October as construction of both single-family and multifamily homes slid, while a drop in permits for future groundbreaking was the largest in more than six years, the government said on Thursday.”
Granted, not Bay Area specific, but perhaps even more telling. And a perfect setup for our announcement tomorrow...
∙ Housing starts and jobless claims fall [Yahoo!]
Posted by socketadmin at 6:55 AM | Permalink | (email story)
November 7, 2005
San Francisco Housing Inventory: Up, Up, And Away!
According to the HousingTracker, San Francisco housing inventory is up over 36% over the past two months (based on active MLS listings). That’s a good statistic, but don’t pay too much attention to the HousingTracker “Median Price” number which represents median list/asking prices (as opposed to actual sales prices).
Posted by socketadmin at 3:32 PM | Permalink | (email story)
October 24, 2005
When Barrack Speaks, You Should Listen
Some choice quotes from Tom Barrack, head of Barrack's Colony Capital (one of the largest private equity firms devoted to real estate and having provided returns of 21 percent annually since 1990):
"I feel totally safe playing polo on a field full of pros," says the bronzed 58-year old. "But when amateurs are all over the field, someone can get killed. They have more guts than brains. They charge after every ball and don't know when to hold back."It's the same with U.S. real estate right now. "There's too much money chasing too few good deals, with too much debt and too few brains." The amateurs are going to get trampled, he explains, taking seasoned horsemen, who should get off the turf, down with them.
Says Barrack: "That's why I'm getting out."
Right now, Barrack's view of the U.S. market couldn't be clearer: It's a great time to sell, and a terrible time to buy.
∙ The king of real estate's cashing out [CNN/Money]
Posted by socketadmin at 10:27 AM | Permalink | (email story)
October 17, 2005
We’re Moving On Up!
According to a Global Insight study, the San Francisco real estate market is overvalued by approximately 36% (up from 30% at the beginning of the year). As such, San Francisco is considered to be “extremely overvalued”. What’s that mean?
“Study findings indicate that 53 metropolitan areas, representing 31 percent of the total value of the US housing market, "are extremely overvalued" and face a high risk of price correction. To be considered "extremely overvalued," markets had to have current prices exceeding the expected price by 30 percent or more, a threshold that was determined from the median degree of overvaluation that preceded 63 known local price drops over the past 20 years.”
So if you’re planning on making a 10% down payment, imagine losing 300% of your investment. Yes, the dark underbelly of “leverage” that most agents never talk about; you can lose more than you invest. Much more.
∙ Overvalued Housing Market? Depends Where You Live [Global Insight]
Posted by socketadmin at 4:57 PM | Permalink | (email story)
October 16, 2005
Bay Area Inventories Up, Agent’s Spirits Down
This should come as no surprise to any regular SocketSite readers, but if you haven’t been reading or are new to our community here’s a bit of insight: inventories are up, transactions and selling prices are down, and Bay Area real estate agents are actually having to sell. Some choice quotes from this mornings Chronicle:
“Amid a perceptible cooling in the housing market and a jump in the number of homes for sale, Bay Area real estate agents find they must do something they haven't done in years: sell.”"In the last few years, you put something on the market for two weeks, and you didn't have to do anything," said Falconio, an associate manager at Prudential in San Francisco. "Now you have to work for it a little bit more."
“The supply of condos offered through the Multiple Listing Service surged 57 percent between Oct. 1, 2004, and Oct. 1, 2005, while single-family home listings have soared 35 percent.”
“Sales, meanwhile, have slumped 26 percent and 14 percent for single-family homes and condos, respectively, between September 2004 and September 2005"...
“As the nearly decade-long housing boom appears to be losing steam, the balance of power is shifting noticeably toward buyers, according to agents, often among the first to see a turn in the market. Other reports based on federal data or local recorder-assessor filings tend to lag the market by a few months.”"We need to start marketing properties at listing prices (sellers) are willing to accept," said agent Roger Landry.
"Sellers are sometimes the last to know," said Bodnar. "They think they're still going to get 20 percent or 30 percent over (the asking price), but now they may find that offer dates are coming and going with no offers."
"The market has slowed, but not that much," said Calhoun, owner of Creekside Realty in San Jose. "I don't know anyone who's complaining about homes selling in three weeks."
We just couldn’t help but end on that optimistic note. Although kind of reminds us of that agent’s “Don't be fooled into thinking that this stockpile of inventory is a trend. It is a one-time occurrence. And you can quote me on that” boast that we’re busting...
∙ MARKET TILTING TOWARD NORMAL [Chronicle]
∙ Boast Busters (SocketSite Style) [SocketSite]
Posted by socketadmin at 11:40 AM | Permalink | (email story)
October 15, 2005
Forget Staging, It's Now About Posing
An instant classic! A reader forwards an email they recieved promoting a friend-of-a-friends open house this weekend. The classic excerpt:
"I have an open house this Sunday from 2-4 and would greatly appreciate if you stopped by and simply pretend to be interested buyers."
Brilliant. And yes, we have the address and listing details, but we’re protecting the (not so) innocent (for now). Suffice it to say, the open house with the disproportionate number of “interested” (and outwardly vocal) parties is probably the one. And please remember, don't always believe the hype.
Posted by socketadmin at 12:31 PM | Permalink | (email story)
Flippers (Not Strippers) Gone Wild
What happens when a venture capitalist and Wall Street executive get together to buy a Broadway producer’s house in the Hamptons for $14 million? According to the Wall Street Journal, they redo the landscaping, wait four months, and then re-list the property for $25 million. That's $11m in four months. Not bad (if they can actually sell it).
Only in New York? We doubt it. There have got to be some similar Bay Area stories. Now if there was only an easy way to capture, record, and share them...wait for it...yes...email: tips@socketsite.com.
Posted by socketadmin at 11:57 AM | Permalink | (email story)
October 12, 2005
The Times They Are A-Changin'
Inman echo’s our previous observations (and then some) concerning the abrupt slowdown in local open house traffic:
All the signs are there: no more double parking to get a sneak peek at an open house showing; no more buyers sweating it out to make the best offer among dozens, agreeing to feed the neighborhood squirrels or not to ever under any circumstances remove the old family curtains from the second-floor bedroom – just to get into that house...
The frenzy is over. Agents sit alone on Sundays waiting for a buyer to come and try the dip. Listings are piling up in some markets as buyers realize they're gaining back some leverage.This is the end of multiple offers as we know it. Gone are the days of desperate buyers paying $60,000 or $80,000 above asking price. Gone are the days of real estate agents shoving them aside on their way to the lucrative listings.
And damn, you'd think we'd at least get a nod for that "double parking" line we used three weeks ago...
∙ The end of multiple offers [Inman]
Posted by socketadmin at 1:34 PM | Permalink | (email story)
October 7, 2005
Not Only Fashion Trends Move East To West
For months we’ve been keeping our eyes on the steady uptick of San Francisco listings that have languished in the market and have finally succumbed to the dreaded scarlet “r” (i.e. reduced). We’ve seen nothing, however, to rival what’s starting to happen in New York. Can you believe a million dollar price drop on a $2.4m penthouse listing? Yes, a drop of over 37%.
So now that a 1.2% reduction at 199 New Montgomery doesn’t seem so interesting, perhaps some of our loyal readers would be so kind as to point us in the direction (i.e. email tips@socketsite.com) of any local listings that seem to be following in New York’s footsteps. Anonymity guaranteed for all agents. Really.
∙ PENTHOUSE HIT$ ROCK BOTTOM [NYPost]
∙ REDUCED!! OFFERS ANYTIME [SocketSite]
∙ The New New Pricing Thing? [SocketSite]
∙ Housing Prices Always Come Back [SocketSite]
Posted by socketadmin at 12:34 PM | Permalink | (email story)
October 4, 2005
San Francisco Inventories On The Rise
Although a 16% increase in the San Francisco for-sale listings is hardly substantial, it is directional (and important to note). According to the New York Times:
For-sale listings have also swelled throughout California, according to the California Association of Realtors. In the San Francisco Bay area, they have increased 16 percent in the last year, Coldwell Banker Residential Brokerage said...
"We are seeing a market in transition," Leslie Appleton-Young, the association's chief economist, said.Brokers said that some houses seemed to be on the market longer because sellers priced them too high, assuming that their value was still rising sharply. In other cases, people who otherwise would have waited a year or two to sell their homes - like empty nesters ready to move into smaller quarters - had listed them now out of fear that prices would soon fall.
Some economists and commentators have for years predicted the bursting of a real estate bubble, and previous slowdowns have turned out to be relatively brief pauses before prices started accelerating again.
But with mortgage rates now rising, the cost of gasoline hovering at or near $3 a gallon and house prices in some areas out of reach for many families, brokers and analysts said they thought that this slowdown could be the real thing.
Again, even with the 16% increase in inventories, the San Francisco market remains a “sellers” market (based on historic metrics). But if it’s a trend, and new developments continue to come online in SOMA, Mission Bay, and Bayview, then watch out. The tide could quickly turn.
∙ Slowing Is Seen in Housing Prices in Hot Markets [NYT]
Posted by socketadmin at 9:03 AM | Permalink | (email story)
September 28, 2005
Uppity Academics
It’s doom and gloom Wednesday. Not only are the economists at UCLA’s Anderson school calling the peak of the California real estate market, they’re putting 50/50 odds on a statewide recession by the end of 2007.
California's housing boom appears to be peaking, and the resultant slowdown is expected to produce "weak growth" in the state's economy during the next two years and a possible recession by the end of 2007.“There are some signs that the housing party is ending," said Christopher Thornberg, senior economist at the UCLA group and author of its California forecast.
Thornberg points to an almost doubling of homes on the market in the last six months, a flattening of sales activity and the increasing reliance on high-risk mortgages by buyers to acquire today's expensive homes. Property in California, he said, is now overvalued between 40% and 45%.
Although UCLA forecasters have consistently been more pessimistic about the housing boom and California's economy than many other analysts, their views are notable because they were among the first economists to predict the 2001 recession and to identify the current housing boom as a bubble.
Just remember, please don’t hate the player (or blame the messenger).
∙ Peak for Housing Said to Be Near [LA Times]
Posted by socketadmin at 11:30 AM | Permalink | (email story)
September 20, 2005
Dueling Academics
A new study by researchers at Columbia University and the University of Pennsylvania's Wharton School suggests that housing prices in San Francisco are NOT overvalued. The study, titled “Assessing High Housing Prices: Bubbles, Fundamentals and Misperceptions”, points to “basic economic factors, including low interest rates, strong income growth and abnormally low prices in the mid-1990s”, rather than a “speculative frenzy”, to explain the recent run-up in prices.
The report did not include data on condos or second homes and the researchers “acknowledged that higher interest rates could squeeze prices, particularly in expensive, volatile markets.”
On the flip side, and a bit closer to home, “Ken Rosen, an economist at UC Berkeley, estimates that speculation accounts for 10 to 20 percent of the market activity nationwide.” And “[w]hen mortgage interest rates increase -- as he expects them to do within 18 months or so -- as credit standards tighten and investors flee prices in the Bay Area could decline by as much as 15 percent in the market”.
Either way, perhaps our nohousingbubble.com domain name just became a bit more valuable...
· Bubble won't burst [Chronicle]
Posted by socketadmin at 9:27 AM | Permalink | (email story)
September 16, 2005
Sticks And Stones...
Nothing like being labeled a housing “Danger Zone” (as if earthquakes weren’t enough). CNN/Money confirms that the majority of buyers in San Francisco (and 49% of buyers in Oakland) are resorting to “non-traditional” loans. Not new news to our readers (other than the moniker), but the quote from the chief economist with the National Association of Realtors surprised us a bit. Looks like he’s starting to hedge his “we’re not in a bubble” bets:
At greatest risk, says David Lereah, chief economist with the National Association of Realtors, are markets where a majority of buyers are opting for nontraditional loans."There will be cases where lenders and borrowers will be caught with their financial pants down," he says.
· Crazy loans: Is this how the boom ends? [CNN/Money]
Posted by socketadmin at 12:34 PM | Permalink | (email story)
September 8, 2005
Start Listening To Those “Academics”
If you don't heed the warnings of the “academics”, at least take a lesson from the history books. Excerpts from a recent article in Knowledge@Wharton:
What's driving this [real estate] market? Most important: Are these [adjustable rate] loans ticking time bombs that could shock the financial markets and economy if rising interest rates or falling home values cause a rash of defaults? A flood of failed real estate loans torpedoed the Japanese economy in the early 1990s, and that country has yet to recover...
"The question is: Are we at that tipping point in the United States? And clearly we are not," says Wharton real estate professor Susan M. Wachter. Nonetheless, she says, these loans are contributing to soaring housing prices, setting the stage for a potentially rough pullback that could make the next recession far more severe than it otherwise would be. "Undoubtedly, these new instruments bring us into uncharted territory. This is unprecedented."Some experts argue that true home-price bubbles are rare, and usually confined to a few overheated pockets. Owners cannot sell homes with the click of a mouse, as they can stocks, so it's difficult for housing prices to cascade as stock prices do when a bubble bursts. Typically, a home-price run-up is followed by a period of flattening prices rather than a wide-ranging collapse.
But Wachter says some overheated markets in California and the Boston area did see home prices fall by 30 to 40% after the 1980s bubble burst. Prices tend to fall the most where they have previously gone up the most, and many, many markets have seen enormous gains in the past few years. Hence, many parts of the country could experience falling home prices, she argues. "We could have 30 or 40 of those areas instead of one or two." The risk of borrower defaults is clearly higher because of the heavy use of I-O and option loans, she adds.
· Could Risky Mortgage Lending Practices Prick the Housing Bubble? [Wharton]
Posted by socketadmin at 5:08 PM | Permalink | (email story)
August 24, 2005
Anti-Bubble Counterpoint
We’re feeling a bit worn out from all the recent housing doom and gloom, so we're serving up a couple of anti-bubble articles to add some pep in your step this morning. For example, according to Forbes writer Scott Reeves, “The booming real estate market is driven by historically low mortgage rates, solid employment growth and brisk demand--not wild speculation.”
We might argue that an abnormally low cost of capital (i.e. low mortgage rates) is actually contributing to "wild" speculation, but we really don't want to kill your buzz too soon...
· Don't Believe The Hype [Forbes]
· Why there is no housing bubble [MSN Money]
· Don't Buy Housing Bubble Propaganda [RealMoney]
· Experts see no housing bubble [Chronicle]
Posted by socketadmin at 9:02 AM | Permalink | (email story)
August 22, 2005
Now That’s A Chart!
(Chart from NYT article: Be Warned: Mr. Bubble's Worried Again)
Robert J. Shiller, the Yale economist who published "Irrational Exuberance" in the year 2000, is at it again. And with a vengeance.
Shiller argues that, “the housing craze is another bubble destined to end badly, just as every other real-estate boom on record has.” And he predicts that, “prices could fall 40 percent in inflation-adjusted terms over the next generation and that the end of the bubble will probably cause a recession at some point.” As usual, we’re memorized by his data (and chart).
· Be Warned: Mr. Bubble's Worried Again [NYT]
Posted by socketadmin at 2:27 PM | Permalink | (email story)
August 13, 2005
Weekend Update Special
We don’t usually update the site on weekends, but we have a feeling that tonight’s cocktail parties might be all atwitter over today’s New York Times bubble article, and we want to make sure our readers can intelligently participate in the conversations. Two dueling excerpts:
On Tuesday, David A. Lereah, the chief economist at the National Association of Realtors, said that the housing market was "probably close to a peak right now."John Karevoll, an analyst with DataQuick Information Systems, which provides real estate data to lenders, said: "We've been told for years that the peak is just around the corner. The economists have so much egg on their faces."
· Do Try This at Home: Assess Your Area's Real Estate Bubble [NYT]
Posted by socketadmin at 1:19 PM | Permalink | (email story)
August 11, 2005
A Clue From Down Under?
Ever been to Sydney, Australia? It’s beautiful on-the-bay living in a geographically constrained, internationally desirable, and damn expensive city. Sound familiar?
So when JPMorgan goes on record stating that house prices in Sydney are overvalued by 37%, and due for a correction, we sit up and take notice. For despite the fact that their surf is a hell of a lot warmer (and bigger), Sydney really reminds us of San Francisco.
From the Australian Financial Review:
Australian house prices remain 22 per cent overvalued despite the recent property downturn and Sydney is still the most inflated market, according to leading investment bank JPMorgan.The study, which employs a discounted cashflow model to assess property as an investment, is not good news for anyone, particularly those in Sydney and Melbourne, hoping that the market will stabilise.
"The significant overvaluation in national house prices relative to earlier cycles suggests the downside for house prices should be harder and more prolonged than the modest declines seen in earlier corrections," JPMorgan economists Jarrod Kerr and Stephen Walters said in the study.
"Investors ignored poor fundamentals, blinded by expectations of substantial capital gains, and piled into the market despite rising vacancy rates, record low rental yields, and new supply flooding key parts of the market."
· Houses still 22 pct overvalued - new study [AUS Financial Review]
Posted by socketadmin at 1:21 PM | Permalink | (email story)
August 10, 2005
We're Raising The “Bubble Alert” Level To Yellow
We’re wishing we hadn’t already used-up our “An ARM (And Quite Possibly A Leg)” headline. Considering how alarmed we’ve been with the explosion of ARM financing, we’re down right terrified with the adoption of “option ARMs”.
A couple of excerpts from today’s WSJ article “Sore ARMs? A Peek Inside Potential Mortgage Troubles”:
[California] has one of the frothiest housing markets, and banks have been enablers.A small Newport Beach, Calif., bank with a stock-market value of $2 billion, Downey writes option ARMs like Californian plumbers write screenplays.
As of June 30, $12 billion, or 87% of Downey's ARMs are option ARMs. Its customers have racked up $72 million in additional balances on those mortgages by choosing to make minimum monthly payments. That's called negative amortization.
Downey Finance Chief Tom Prince says concerns about option ARMs are exaggerated and that his bank previously has had even more exposure to them without problems. "I'm not particularly concerned about it," he says.
Maybe not, but we are (concerned that is).
· A peek inside potential mortgage troubles [WSJ via Post-Gazette]
· Option ARMs Fuel Bubble But Should We Worry? [RealEstateJournal]
Posted by socketadmin at 1:49 PM | Permalink | (email story)
August 9, 2005
Survey Says...
We need a bigger audience. SocketSite's first "Highly Scientific Real Estate Survey" garnered slightly fewer responses than we hoped (well okay, a lot fewer). Considering we’re tracking around 10,000 views a month, and doubling every 30 days, you’d think that we might get a little more love participation from our readers (not to be confused with a little love from NAR).
So we've decided not to completely embarrass ourselves by revealing the total number of completed surveys we received (suffice it to say that we needed more than just our fingers to tabulate the results, but that the super computer is sitting idle). We will, however, share a couple of survey results...
1. The majority of respondents (63%) predict an increase in housing prices through the end of 2007.2. Californians remain more positive about the San Francisco housing market than non-Californians.
3. Agents remain more positive about the housing market than non-agents.
4. Only one brave soul was willing to go on record and predict a “popping” of the “bubble” sometime over the next two years (and it wasn’t even us).
Thanks to all that participated.
Posted by socketadmin at 9:54 AM | Permalink | (email story)
August 5, 2005
Opinion Survey: Last Chance
Have an opinion about where the San Francisco real estate market is headed over the next two years? Willing to challenge the “Industry Experts”? Today’s your last chance to take SocketSite’s Highly Scientific Real Estate Survey (a whopping four multiple choice questions). Come on people, every vote opinion counts.
· SocketSite’s Highly Scientific Real Estate Survey [Zoomerang]
Posted by socketadmin at 9:24 AM | Permalink | (email story)
August 2, 2005
Real Estate Vs. Real Behavior
A great post (and quote) brought to our attention by Ben Jones’ The Housing Bubble 2 this afternoon:
First the quote:
'I can calculate the motions of heavenly bodies, but not the madness of people.’ (Sir Issac Newton having lost his shirt in the South Sea bubble, 1721)
And now a couple of choice excerpts from the post on Elliott Wave International:
It is universally presumed that the primary law of economics, i.e., that price is a function of supply and demand, also rules finance. However, human behavior with respect to prices of investments is, in a crucial way, the opposite of that with respect to prices of goods and services.
When the price of a good or service rises, fewer people buy it, and when its price falls, more people buy it. This response allows pricing to keep supply and demand in balance. In contrast, when the price of an investment rises, more people buy it, and when its price falls, fewer people buy it.Attempting to apply the law of supply and demand to investment markets is akin to attempting to apply the laws of physics to falling in love. They do not pertain.
Rather than become excited to buy as prices fall, as consumers of goods and services do, investors become excited to buy as prices rise. Since desire and hope are entirely on the side of price rise, only fear and despair can be on the side of price decline.
· Home Sales: Financial vs. Economic Behavior [Elliott Wave]
Posted by socketadmin at 1:28 PM | Permalink | (email story)
July 29, 2005
QuickLinks: Friday update (updated)
Home Depot Approved: Hope you brought that popcorn (and a chair).
· SF Commission OK's Home Depot Plans [KRON4]
· Heated meeting over Home Depot plan [Chronicle]
PMI Risk Report: Okay, this time SocketSite was only a day earlier in reporting.
· Home value declines seen as more likely [Chronicle]
SocketSite Survey: Damn those “Industry Experts”, we want to hear from YOU.
· SocketSite’s Highly Scientific Real Estate Survey [Zoomerang]
Posted by socketadmin at 10:34 AM | Permalink | (email story)
July 28, 2005
Calling All “Industry Experts”
Headlines coming out of the Inman News’ Real Estate Connect conference this afternoon: “Industry leaders predict slowing market”. To which we respond: no kidding, it’s about time, and how about some hard numbers from these so called “Experts”?
So instead of simply nodding our head at the vague predictions of six conference panelists, we decided to go out on a limb and generate some real "guidance". Now please take a couple of seconds to participate in SocketSite's first highly scientific real estate survey (seriously, it’s only four multiple choice questions).
Posted by socketadmin at 4:40 PM | Permalink | (email story)
July 26, 2005
To Sell, Or Not To Sell
The majority of San Franciscans are trying to figure out if (or how) they will ever buy a house in the current market, while a minority find themselves contemplating a sale of their primary residence in order to “cash out” on a bubble. CNN/Money weighs in with four options for those considering a sale of their home:
Option 1: Cash out and sit it out
Option 2: Cash out and invest
Option 3: Cash out and downsize
Option 4: Cash out and stay put
We’re partial to Option 3 and share a bit of advice: trying to “time the market” almost always underperforms a “buy and hold” strategy over the long-term. But be prepared for the long-term to be 10, 15, or 20 years...
· Should you cash out while you can? [CNN/Money]
Posted by socketadmin at 2:37 PM | Permalink | (email story)
July 11, 2005
Et Tu Brute?
The senior vice president and chief economist for the NATIONAL ASSOCIATION OF REALTORS® recently penned an article for Realtor® Magazine titled “Keep a cautious watch”. The three trends he suggests we keep a cautious eye on:
∙ Speculation: This form of investing can be risky when buyers go out on a limb with interest-only mortgages and other forms of financing that make sense only in a market of continuing strong price gains. If those gains ease this year, as we expect them to do in some markets as sales cool, investors are exposed to potential losses.∙ Soft underwriting: We’re seeing an upward swing in adjustable-rate loans and other forms of alternative financing at a time when 30-year fixed-rate financing remains at a historically low 5.75 percent. With long-term rates this low, we would expect to see adjustable-rate financing at 25 percent of the market, but instead we’re seeing it at 30 percent to 40 percent of the market. [editorial note: closer to 70% in San Francisco]
∙ High price-to-income ratio: Home prices are rising faster than household income, particularly in states with the hottest markets. In California the price-to-income ratio was 32 percent last year, up from 23 percent in 2003. The greater the gap, the harder it becomes for households to buy. [editorial note: San Francisco's affordability index now stands at 8% of households]
· Keep a cautious watch [Realtor®]
Posted by socketadmin at 9:40 AM | Permalink | (email story)
June 21, 2005
Trade School Versus Academia
Yes, once again it’s the academics squaring off against the Realtors®. Not too surprisingly, they offer two wildly different views. Play along and see if you can match the forecast to the group:
1. [M]edian home prices across the state will rise 15 percent year-over-year in 2005, down from 21 percent last year. In 2006, prices will probably increase less than 15 percent, but well above zero.2. Prices are not associated with reality...[they] are gambling on massive amounts of appreciation, and it's not worth the price compared to the rental value. It's a house of cards.
That’s right, the first is credited to Leslie Appleton-Young, economist at the California Association of Realtors. And number two? A pesky academic economist at UCLA named Christopher Thornberg.
· Housing market tumble forecast [Chronicle]
Posted by socketadmin at 9:42 AM | Permalink | (email story)
June 16, 2005
You Are Here (A)
Eric Jansen of Trident Capital waxes poetic on his “Seven Steps” in the boom-bust cycle of housing (not to be confused with the deadly sins or highly effective habits). Although it’s a bit dire, it’s well written and worth a read regardless of your bubble philosophy. And we just can’t stop staring at that damn chart...
· Housing Bubble Correction [Always On]
Posted by socketadmin at 8:00 AM | Permalink | (email story)
June 13, 2005
(No)HousingBubble.com Smackdown Dust Settles
It’s official, and the bubblemongers have loudly spoken. HousingBubble.com outsold NoHousingBubble.com by a margin of $2,250 $2,225! (and yes, HousingBubble.com sold for $2,250 $2,225 so you do the math)
We’re feeling a bit foolish for investing that $9.49 on the domain registration and eBay listing fees. It’s not an entire loss, however, as we did get one nice email that’s going to show us “how to use nohousingbubble.com...to make a serious income that will grow each month and come to you for years.” We’ll let you know how it turns out.
[Editors note: don't worry, we've fired our idiot copy editor]
Posted by socketadmin at 4:53 PM | Permalink | (email story)
HousingBubble Market Lacks Froth
After three bids, the HousingBubble.com domain name sold for $2,225 (slightly below the sellers “buy it now” price of $250,000). Apparently there’s not much “froth” in the HousingBubble domain name market.
Only seven hours left in the NoHousingBubble.com auction...
Posted by socketadmin at 9:24 AM | Permalink | (email story)
June 10, 2005
Update: Bubble Domain Smackdown
Realty Baron coined the phrase, we just borrowed stole it. In any case, here’s the auction update:
HousingBubble.com: one day left and only one bid of $1,000 (but over 900 gawkers and a couple of “encouraging” comments which kind offreakweird us out)NoHousingBubble.com: no bids, zip, zilch, nada (and a lowly 30 gawkers with no love from the community)
It’s not looking good for those housing bubble naysayers.
· HousingBubble.com domain name auction [eBay]
· NoHousingBubble.com domain name auction [eBay]
Posted by socketadmin at 10:09 AM | Permalink | (email story)
June 8, 2005
NoHousingBubble.com
No doubt you've heard that the HousingBubble.com domain name is up for auction. But what happens if a bubble fails to materialize?
Well here’s your opportunity to put all those bubblemongers in their place. That’s right, the NoHousingBubble.com domain name is now up for auction!
What better way for real estate agents and brokers nationwide to demonstrate their convictions in the market and provide their clients with peace of mind! Can you imagine the signal it will send to homeowners if HousingBubble.com sells for more than NoHousingBubble.com?
And yes, we own it. Just couldn't help ourselves.
· eBay Item #5780859198 [eBay]
· BubbleWatch™: HousingBubble.com Hits eBay [Curbed]
Posted by socketadmin at 12:50 PM | Permalink | (email story)
Investing In The Bubble
Entrepreneurs from coast to coast are creating investment funds and ancillary businesses to capitalize on any downturns in the real estate market.
One such “opportunity fund” has a stated plan of acquiring “new and converted condominium units purchased by speculators” and then holding them for “extended periods or shorter-term ownership followed by profitable resales”. Short-term ownership followed by profitable re-sales? Good old irony in the making.
In the meantime, perhaps they should just load up on some Hedgelets.
· Cleaning up when housing bubble bursts [Chronicle]
Posted by socketadmin at 8:10 AM | Permalink | (email story)
Greater Fool Theory Comes Home
Bubble buzz phrase of the week: ‘Greater Fool Theory'. Even National Public Radio joined the debate this weekend.
And like the old Saturday Night Live skit, it just begs the questions: who is this fool, just how much money does he have, and shouldn’t somebody warn him?
Posted by socketadmin at 8:06 AM | Permalink | (email story)
May 31, 2005
Great Advice For Buyers
James Stewart at SmartMoney hits the nail on the head. If you’re a first-time buyer looking to purchase a primary residence and you can easily afford the down payment, ongoing mortgage, taxes, and upkeep – just do it. Don’t try to time the market, just do it. Current mortgage rates are fantastic and even if a “bubble” does burst, over the long-term home values will rise.
Now if you’re anyone else, think twice. And if you’re stretching to afford the payments on an interest-only ARM, are banking on appreciation over the next couple of years, or are considering a property in which you really don’t want to live, think three times. In Stewart’s own words:
It's true that the real estate market isn't like the stock market: It moves in longer cycles, and it is less prone to sudden price shifts, let alone collapses. But once a negative market psychology sets in, the decline in real estate can be long and painful, as the 1991 recession made clear for many home owners. I believe that over time, real estate returns, like those of other asset classes, will revert to their historical norm, which is a markedly lower rate of return than stocks. That means the longer the current boom keeps going, the longer, and harder, the fall.
Now before you do anything crazy, or start spouting off to you bubble-thumping friends, please read the whole article.
· House Poor [SmartMoney]
Posted by socketadmin at 8:00 AM | Permalink | (email story)
May 27, 2005
Bet On A Bubble (Or Not)
We don’t know whether to be extremely terrified or slightly intrigued. Quite honestly, we’re a little bit of both.
Promoted as an opportunity to “Hedge, Speculate, and Invest” in specific real estate markets without actually buying property, HedgeStreet’s "Hedgelets" allow just about anyone to take a position on the median sales price of existing single-family homes in San Francisco. In other words, bet on its rise and fall.
Have a friend that swears the housing bubble is either about to burst or really doesn’t exist? Perhaps (s)he would be willing to "Speculate" with a bit of their hard earned money. Or better yet, see if you can find an agent that would be willing to “invest” their entire sales commission alongside your purchase or sale of a home (feel free to share their responses).
· A life hedged about [Economist]
Posted by socketadmin at 9:00 AM | Permalink | (email story)
May 23, 2005
Anti-Bubble Theory And The Seven Deadly Sins
In a self-described rant on Inman News, columnist Lou Barnes shares his perspective on the recent explosion of financial press coverage regarding a real estate “bubble”. In Lou’s own words:
There is no evidence whatever that home prices are unsustainable, nor any evidence of widespread default. The bubble is in commentary coming from the financial markets, and the gas inside is envy.
Theories based on lust, greed, pride, gluttony, and anger are sure to follow. But we’re not so sure about sloth...
· 'Envy' fuels real estate bubble talk [Inman]
Posted by socketadmin at 4:10 PM | Permalink | Comments (0) | (email story)
