CATEGORY ARCHIVE: Editorial
April 9, 2012
The 280 Seventh Street Scoop (And Evolving Neighborhood Editorial)
A little while back the owners and operators of the Café in the Castro purchased the Rawhide II club building at 280 Seventh Street, once "the largest and…only Country Western Dancing club in San Francisco."
As proposed, the existing building will be razed and a four-story building with a club featuring an "entertainment area with stage for live performances, seating and a dance floor," a restaurant "in the style of a locally owned and sourced 'Cheesecake Factory' style eatery," a roof top garden, and two residential apartments facing Langton Alley will rise.
From the owners with respect to their plans:
We will be a neighborhood-serving restaurant while still recognizing the importance of visitors to the city coming to such places as Moscone Center. Our nighttime focus will be on the diversity you find at an LGBT entertainment venue with the inclusiveness found at Café duNord or Slim’s. Yes, that means we will have a stage and will be featuring performance as well as dance events. We envision the mix of entertainment as diverse as possible and are planning for a small but well equipped stage for live performances.
From Lodging in Public with respect to mixed feelings on a disappearing barrier dividing SoMa, a "[defense] against the good and bad effects of encroaching prosperity":
The Sixth Street skid-row corridor down the middle of SoMa served for the past three decades as a dangerous-looking (sometimes actually dangerous) buffer that prevented boring or timid people in the convention and financial zones to the east of us from walking very far at all west of the Yerba Buena complex around Third that includes Moscone Center. (Yerba Buena, of course, replaced San Francisco's former Skid Row in the hard-fought 1970s urban renewal rip-out. A lot of the people and functions it displaced moved over to Sixth.)
So even through the Web 1.0 boom, those of us living South of Market and west of Sixth were spared the glass-front high-rises, the loud after-work joints full of junior stock traders in mating plumage, and the restaurants and night spots catering to Midwestern conventioneers venturing out from Moscone Center -- that's all in the alien territory, confusingly also called SoMa, that stretches from Fifth east to the Embarcadero by the Bay Bridge. Over here, things have managed to stay a little more alternative.
Sixth Street, however, is losing its fear factor. It's going hipster. Its function as a containment zone for vice and dysfunction is fading as its property values rise. I think its future really is what a younger-generation SRO landlord predicted to me more than ten years ago: to provide hostel-type accommodations and entertainment for young people who want to go somewhere a bit different, but not perhaps too different.
Assuming Planning’s approval, the developers hope to host a grand opening in 2014.
∙ 280 Seventh Street [280seventh.com]
∙ Western SoMa: here come the conventionaleers [lodginginpublic]
Posted by socketadmin at 11:45 AM | Permalink | Comments (29) | (email story)
April 5, 2012
Art Agnos’ Open Opposition To The Development Of 8 Washington
Former San Francisco Mayor Art Agnos came out swinging today against the proposed and Planning approved 8 Washington Street development. From Agnos' open forum letter published in the Chronicle:
City leaders have been lamenting recently the continuing flight of families from San Francisco. Chronicle stories state a family earning $111,000 a year could afford only 23 percent of the houses for sale primarily in the city’s southern neighborhoods. Each year it gets worse. The response is civic hand wringing.
8 Washington, a project that combines public and private land, is a perfect place to begin a new policy by insisting that any residential development involving public land include middle-class family housing on the site. The current proposal is for a vertical gated community of luxury condos selling at $2.5 million to $7.5 million each. To get the best views, the developer is asking for the first height increase on northern waterfront in more than 40 years, from the current limit of 84 feet to 136 feet, as well as doubling the allowed bulk to make the project as wide as a football field.
The developer claims the project will meet the city requirement to fund 27 units of affordable housing — but somewhere else in the city, not on this partially city-owned lot. This deal also requires the city to continue to turn a blind eye to the loss of more than 100 rental apartments that have been converted to hotel use as corporate and vacation rentals. Those units are part of the Golden Gateway apartment complex, which is providing 80 percent of the 8 Washington site as a partner in the project. The result is that we accept an ongoing loss of affordable housing in order to aid in the development of luxury housing on the waterfront.
The alternative plan supported by Agnos and others, "a mix of hotels, restaurants, retail and a Downtown Transit & Bicycle Center on the Port of San Francisco’s remaining seawall lots, including 8 Washington."
With respect to "the loss of more than 100 rental apartments that have been converted to hotel use as corporate and vacation rentals," as we first reported earlier this week, an amendment to San Francisco Administrative Code Chapter 41 sponsored by Supervisor Chiu would "extend the restrictions against converting apartment units to short-term occupancies to tenants or guests of corporate entities that rent such apartments."
∙ Planning Approves 8 Washington Street Development As Proposed [SocketSite]
∙ We tore down the Embarcadero Freeway for this? [SFGate]
∙ Airbnb: A Potential Civil And Criminal Penalty Hit List? [SocketSite]
Posted by socketadmin at 11:15 AM | Permalink | Comments (41) | (email story)
December 21, 2011
It Would Have Been 50 Percent Over Had They Priced At A Million...
Listed for $1,100,000 last month, the 1,810 square foot Albert Lanier designed home at 4378 Cesar Chavez quickly went into contract. As a plugged-in reader soon reported, "The sign in the Herth window says…22 offers received," and as another reader soon followed:
That's lame. Those guys missed the price point and they were the first to admit it during showings.
They wasted a lot of people's time. Yet there they are, touting how badly they gauged the market. Great.
The sale of 4378 Cesar Chavez closed escrow yesterday with a reported contract price of $1,540,000. And yes, that’s 40 percent "over asking" which could have been 50 percent over had they listed it for a million.
∙ Channeling Mid-Century Modern Flair At 4378 Cesar Chavez [SocketSite]
Posted by socketadmin at 4:45 PM | Permalink | Comments (25) | (email story)
August 10, 2011
Simply Lip Service For Green Landscaping In San Francisco?
It’s time for a (slightly edited) guest editorial from a plugged-in reader:
I am a homeowner in SF's 11th political district. The neighborhoods in my district have the potential to be charming, but unfortunately many people think it's OK to pave over their front yards to then use the space to park their cars on the sidewalk illegally.
Almost every month I see a new front yard disappearing to make space to park cars on the sidewalk. The result is blighted, dire looking neighborhoods, lower property prices, and an unsafe environment for pedestrians who have to navigate around cars parked on the sidewalk.
In addition to laws against sidewalk parking (which is not enforced by the city, only upon complaint), to my knowledge, the city of San Francisco has laws against paving over front yards, as well as the "Green Landscaping Ordinance" which stipulates that a certain percentage in front of every building has to be devoted to landscaping. Yet I have been unable to get the city to enforce the law in my district, even though I made repeated attempts to do so.
There are three cases I can mention, each of which I have filed a complaint for with the city authorities:
1. 730 Huron Ave: has their front yard paved over. The complaint can be tracked here. The case has been "abated", but I wonder how that came about, since the building clearly is not in compliance with the code. Thanks to the City "abating this case", in the space of the former front yard now often one or two cars are parked, blocking the entirety of the sidewalk, forcing pedestrians into the street. I do sometimes call this in to the DPT, but I do have a day job and it would be nice if instead the City authorities could do their job.
2. 40 Sears Street: had a very large front yard paved over on which now a pickup truck regularly parks. I have filed a complaint with the DBI and am awaiting the results.
3. 901 Huron Ave: a house that was one of the best looking on our street, a corner house with beautiful lawn all around it. It recently sold and yesterday my wife and I noticed that a part of the lawn was already paved over, with a pickup parked on the sidewalk and former site of the lawn.
My questions are these: are we simply we wasting taxpayer dollars on making ordinances and printing colorful brochures about sidewalk greening, since we don't actually take them seriously and enforce them? Or will these laws be ever enforced to prevent further blighting of the City's neighborhoods?
San Francisco is said to be a beautiful city, but once you look beyond the parks and beaches, City Hall, Russian Hill and Valencia Street, the neighborhoods where actual families live look more and more terrible by the day.
Good questions. Let's see if we can't drum up some equally good answers.
∙ Guide To San Francisco's Green Landscaping Ordinance [SocketSite]
∙ Coming Soon: Guidelines For Tending Concrete Gardens Out Front [SocketSite]
Posted by socketadmin at 3:00 PM | Permalink | Comments (54) | (email story)
June 24, 2011
For The Love (And Hate) Of Palm Trees In San Francisco
They’ve been called names. And the planting of palm trees in San Francisco can be a polarizing issue. An issue that might be short lived, for as a plugged-in reader editorializes and educates:
The palms won't be there much longer. The city has fired all their educated arborists. Those who are left trim them to that odd pineapple shape while the fronds are still green and alive. A fusarium-type wilt then infects the palm and it slowly dies. At least 3 have died since the last trimming - that's what killed the dead palms around Justin Herman Plaza.
∙ A Most Unfortunate Quote [SocketSite]
∙ A Plugged-In Reader's Report: Third Street Sprouts Some Trees [SocketSite]
∙ The Impact Of 8 Washington [SocketSite]
Posted by socketadmin at 8:00 AM | Permalink | Comments (11) | (email story)
April 14, 2010
Guest Editorial: Redonkulous Rincon Hill Development Fees?
It’s a guest editorial from Rincon Hill resident Jamie Whitaker related to yesterday’s Board of Supervisors’ approval of $1,844,273 in grants from the SOMA Community Stabilization Fund (funded by way of fees for developing within the Rincon Hill Plan Area):
The SOMA Community Stabilization Fund has collected $6.6 million from developments within the 14-block portion of South of Market that falls within the Rincon Hill Plan Area – that amount is from the single development that actually got built, One Rincon Hill.
Nearly five years after the Rincon Hill Plan was written into Section 318 of the San Francisco Planning Code, the justification for the adding the $14 per square foot fee for the SOMA Community Stabilization Fund (on top of the anticipated development fees paid for affordable housing and infrastructure) seems ridiculous. The justification was that exceeding the former height limits and allowing high-density housing near our mass transit and jobs hub in the downtown would destabilize the residents and businesses in South of Market.
There was never a nexus study conducted by the Planning Department to affirm that only high-rise developments between Folsom and Bryant and Second and Steuart Streets have a destabilizing impact on the rest of SOMA. The fee was born in the Board of Supervisor chambers after Planning had already gone through the process of meeting with Rincon Hill residents and creating the Plan.
While many of us living in Rincon Hill appreciate the public benefits of services provided by the 19 non-profits awarded the nearly $2 million yesterday, the very existence and rationale without a nexus study of the fee leaves a bad taste in our mouths. It is hard to believe that high-rise buildings east of 2nd Street and between Folsom and the Bay Bridge cause any greater impact on SOMA residents and businesses than those high-rises constructed west of 2nd Street.
If there is an impact, why shouldn’t the fee be applicable to all developments that create the impact instead of discriminating against just the 14 blocks within the Rincon Hill Plan Area?
There are several high-rise buildings, some right around the corner from the alleys of residents supposedly impacted by such tall residential buildings. If there is no impact, as could be proven by a legitimate nexus study, why impede the redevelopment of the Rincon Hill area with this additional $14 per square foot fee?
It is a shame that these fees were collected to provide one-time payments to non-profits instead of possibly funding the first public green open spaces in Rincon Hill that can be enjoyed by many for years to come. Instead, the Rincon Hill Plan Area does not have a single park, only lots of land awaiting more infrastructure fees to pay for Guy Place Pocket Park’s development and possibly state grant money to pay for the Harrison Street Park at Fremont (fronting 333 Harrison as proposed).
Again, this isn’t frustration with the non-profits benefitting from the nearly $2 million, but a frustration with fees and taxes that have no justification and should not be allowed to continue to exist without such a basis.
Our angle, recognizing we’re in a radically different market as compared to 2005, might not incentives for developers to invest in San Francisco, add residences and residents to a neighborhood still in search of its critical mass, and increase recurring tax revenues from the Rincon Hill area pay greater dividends than any one-time fee?
Now extend that thinking beyond simply Rincon Hill.
∙ SF BOS Resolution: SOMA Community Stabilization Fund Expenditures [www.sfbos.org]
∙ Rincon Hill Plan [sf-planning.org]
∙ Michael Kriozere (ORH) Responds: We're Planning To Pay, Damn It! [SocketSite]
∙ Putting Some Green On Guy Place: A Rincon Mini Park In The Works [SocketSite]
∙ Harrison Street Park [harrisonstreetpark.com]
∙ A Plugged-In Reader's 12 Notes On The "PC" Approved 333 Harrison [SocketSite]
Posted by socketadmin at 3:00 PM | Permalink | Comments (17) | (email story)
January 15, 2010
We’re Still At A Loss For Words (Unfortunately The Attorney Wasn't)
In the words of a tipster: "I happened to see this on the news last night -- and was so deeply offended by the haughty attorney..." Ditto.
∙ SF Low Income Seniors May Soon Be Evicted [CBS]
Posted by socketadmin at 3:30 PM | Permalink | Comments (60) | (email story)
February 20, 2009
Entitlement Extensions? We Say Yes, But With A Green Twist…
From J.K. Dineen with respect to many of those recently cleared but undeveloped lots now dotting the landscape in San Francisco:
With residential and commercial construction stuck in a deep freeze, the San Francisco Planning Department wants to allow developers of some high-profile projects to hold off on building until the economic climate warms up — without losing their coveted city entitlements.
The extensions would apply to downtown office tower developers, who are now legally required to begin construction within 18 months of winning approvals. It would also cover Rincon Hill condo developers, who are normally given 24 months to start building. Finally, the proposed extension covers a more general group of projects across the city, including residential projects of 20 or more dwellings, 100 percent affordable projects and sustainable buildings designed to meet standards set by the U.S. Green Building Council.
The proposed extension would offer some relief to developers like Lincoln Property Co., which has fully entitled office projects ready to go at 350 Bush St. and 500 Pine St. On the residential side, the law would extend approved condo developments ranging from Crescent Heights’ two-tower, 720-unit project at 10th and Market streets to Turnberry Associates’ 227-unit deluxe skyscraper planned for 45 Lansing St. Altogether, developers of more than 12,000 units of approved housing would get a grace period under the proposal.
Our suggestion, grant the extensions but in exchange for turning undeveloped lots into public parks and maintaining them as such until construction is underway.
∙ S.F. planners may put entitlements on hold [San Francisco Business Times]
∙ Argenta Rises While Buildings For Crescent Heights Are Razed [SocketSite]
∙ The Turnberry (45 Lansing) Scoop: Construction Starting Early 2009? [SocketSite]
Posted by socketadmin at 8:30 AM | Permalink | Comments (17) | (email story)
October 6, 2008
From ‘Sticky’ To ‘Slippery’ Revisted: The SocketSite Original
[First published on SocketSite over two years ago, for obvious reasons it's time to revist the concept (From ‘Sticky’ To ‘Slippery’: A Fundamental Change In The Housing Market?)]
Technical traders and analysts often talk about support levels or a floor price. In the housing market, real estate agents talk about “stickiness.”
Previous downturns in the housing market have left homeowners owing more that their homes were worth (i.e. “underwater”) and unable, or unwilling, to sell or move. Those who were forced to sell (think job transfer, an unexpected medical expense, or perhaps a new baby in a one bedroom condo) did so at a loss. But the vast majority of owners just stayed put and waited it out – three, five, or even ten years until the market turned around.
And while the housing market might take a turn for the worse, it rarely plummeted. Homeowners sitting on the sidelines made sure of that. These owners kept the market from being flooded with inventory, provided natural resistance to depreciating housing prices, and kept the market out of an associated “crash.”
As Celia Chen writes for the Dismal Scientist, “There is an inherent downward stickiness in home prices, as many homeowners can simply take their product off the market rather than sell at a price lower than they desire." Or according to Kelly Zito of the Chronicle, “even in a slackening market, sellers often resist losing money on a property or simply not making as much as the Joneses next door. Sometimes that can mean sales volumes will decline, but prices will stay resilient . . . . ”
Historically, the vast majority of homeowners could afford to wait as long-term fixed-rate mortgages kept expenses in line with budgets. Month after month, or year after year, homeowners would simply continue to make their mortgage payments and wait patiently for the market, and their equity, to return.
Unlike the Internet’s “new economy,” however, this time it really might be different. While short-term adjustable, interest-only, and negative amortization mortgages have quite literally opened the doors to a whole host of new homeowners, combined with cash flow negative “investment” properties, and highly leveraged buyers without sufficient reserves, they have also created a more volatile housing market.
Instead of not being able to sell in a downturn, many new homeowners might find that they can’t afford to hold (or wait). Mortgage payments will increase faster than incomes, rental income won’t offset an investment property’s carrying costs, and a high loan to value mortgage will constrain an owner's ability to tap into equity to help weather any storm.
And for the first time in history, might we find that the “stickiness” that has traditionally kept the housing market from being flooded with inventory in a downturn, and prices from plummeting, has actually turned quite “slippery?”
∙ From ‘Sticky’ To ‘Slippery’: A Fundamental Change In The Housing Market? [SocketSite]
Posted by socketadmin at 9:15 AM | Permalink | Comments (134) | (email story)
June 23, 2008
When Friia Ruled San Francisco Real Estate (A Reader’s Recollection)
Our piece on 1001 California resurrected the name Vincent Friia, a flamboyant fixture of a bygone era in San Francisco (and its real estate). A reader recollects (slightly edited for republication):
Whatever happened to Vincent Friia?
Indeed! For those who have lived in this city for less than ten years, you cannot imagine what a different place used to be. Vincent Friia's parties and other "activities" are part of what was a city you would not recognize.
Melvin Belli running naked from his mansion (outer Broadway) firing a pistol at his wife who hosted a real estate show for the highest priced properties on television, Noe Valley was an affordable neighborhood that a school teacher could buy a home in. The Castro and Soma were actually neighborhoods that had REAL nightlife with clubs staying open till 7am, not places where homes could be flipped and condos could have an "edge".
What I miss most is that it was a city that wanted to have fun, instead of a city that produces another IPO or Dwell Victorians. I am 43 years old, but am really feeling nostalgic for a city that I cannot even describe to people who move here now. Thank goodness I bought my home when this city was affordable (and it WAS!).
And speaking of affordable San Francisco real estate, from a 1995 Herb Caen column (in which Friia is referenced earlier in the piece):
At 1 a.m. Sunday, Beth (Mrs. Jim) Dunbar handed $3 to a Gate Bridge tollkeeper, who let out a noisy yawn. "Am I keeping you up?" inquired Beth. "No," said the guardian of the gate, "but my mortgage is."
And in terms of actually answering the question of whatever happened to Vincent Friia, unfortunately we don't have the scoop (but perhaps a plugged-in reader or two might).
∙ One Expensive One-Bedroom In A Beaux Arts Building We Love [SocketSite]
∙ San Franciscaena [SFGate]
Posted by socketadmin at 8:00 AM | Permalink | Comments (20) | (email story)
December 19, 2007
Promoted From Comment To Post: Satchel Does Deflation
We’re not sure whether to call it a guest editorial or a soapbox, but in either case we’re handing plugged-in reader Satchel the mike.
Thanks for the questions regarding how I can be predicting deflation when everyone else seems to be saying inflation (and some price measures are pointing that way). It does seem contradictory, but it's really pretty straightforward when you take it step by step. Apologies to anyone who finds this pedantic or useless. And of course for some of you this will be very obvious. But maybe some of you would find this interesting? As usual, it is long…
First, real wealth is not the same as monetary value (prices). Real wealth (sometimes called real assets) consists of things like real estate, useful goods (like, say, a nice handmade guitar or maybe a store of grain) and control of the factors of production (people typically think equities, but it's really much broader - intellectual capital, the ability of a mother to teach her young children in their earliest years, small unlisted businesses, etc.). Most real assets are assigned a monetary value or price, especially if they are to be exchanged. This is obvious with real estate or equity prices. But think out of the box. Think about how people sometimes say, "I need to monetize my idea" or "monetize my time". Wealth is a pretty broad concept.
Real wealth grows slowly, and is correlated with productivity growth, which is a small number, and, although the tech guys will not like to hear this, is actually today lower than pre-WWII. Lots of debate, and no real reason to go into it here, but suffice it to say, we're talking gains of roughly 1-2% per year per capita. So, real wealth grows slowly, and if too much government gets in the way, it can turn negative (think USSR post- about 1980). (Please guys, don’t tell me about the recent uptrend in trend productivity. I’ve seen the NY Fed data – they’re wrong as far as I can tell, because they’re derived from a deflator that is understated; I guess this is arcane, but for those of you who understand this, you’ll also understand why the government has a systematic bias in favor of understating price inflation measures for obvious reasons.)
In a fiat system, money is debt. Simple as that. Money is literally borrowed into existence. Think about when you buy a house in SF in 1999. Its monetary value then was $1MM. In 2005, say, its monetary value is $2MM. The real value (or wealth) inherent in the house has not increased (technically, there is a slight increase or decrease, but people are already complaining about the bandwith I use, so forgive me if I skip that wrinkle) because it is the SAME house. Same utility. Same wealth. Same real value.
Now, if you borrow $500,000K against it, you get money. Where did that money come from? It was borrowed into existence. That's how it works. In the old days, before Dr. Greedscam, the amount of borrowing available was limited by reserve requirements, so that the Fed could control the rate of growth, at least somewhat (not that they really did). Following 1991, these limits gradually disappeared, as securitization took hold. In its most extreme and current iteration, one could literally create money out of nothing. All you needed was a willing investor (hello silly Asian savers and Eurosclerotics) in a SIV (or conduit, or ABS tranche, or CDO, or CLO, get the picture?), and you could always find a willing American Debt-Serf. By now the fed had basically relinquished all control over borrowing, especially as it was unwilling to disappoint the masses who were increasingly tricked into thinking debt was wealth (and this confusion was a very happy happenstance for the banks and corporations BTW). Nominal debt (and derivatives) EXPLODED – literally into the hundreds of trillions of dollars, although some of these net against each other. Wall Street siphoned off a little bit every time they created one of these things, then took a little more every time they traded, and for good measure even bought them and traded against the infinitely less sophisticated public officials, pension funds, money market funds and, yes, even homebuyers (through excessive fees siphoned off by brokers, re agents, etc). It was literally a slaughter.
Following the example, after you create the $500K of money, you are no more wealthy. This is important. You have exchanged your future earnings (with interest of course) for the newly-created money. In other words, you have exchanged part of your FUTURE wealth (your earnings power and productive capacity or your ability to consume in the future) for current wealth. (You might sometimes hear people throw around the term “Riccardian equivalence” which is basically this idea.) There is an illusion of increased wealth, because of all the money flying around, but wealth is the same on a net basis (across time), increasing slowly as it does. Actually, you take a hit to your wealth – LOL! That’s why all the hedge fund guys are buying yachts and mansions!! – but you won’t realize that until later, if ever. Where do you think Wall Street got all the hundreds of billions in bonuses in the last 6 years while equity markets returned approximately 0% (excluding the fraudulently small dividends received)? Now that return was for the broad S&P. If you happened to be invested in tech stocks generally…..well, you know it was a(nother) slaughter. Hmmm, BTW, where did all that money go?? I’ll let you figure that out, but I’ll give you a hint – drive around Atherton or, even better, Greenwich, Connecticut for some clues…..
Back to your questions now. I think your confusion about inflation is that you are only thinking about it as prices. Think of it as money (credit) supply. As the credit supply is expanded (through borrowing) it is inflated. As it contracts, it deflates. Inflation/deflation. That’s it. But think about the effect on monetary values (prices) of things when credit inflates. The extra money created “chases” some asset prices and goods/services up. Generally, these items are what amateur trader/economists call “houses and haircuts” – that is, fixed assets and services that cannot be arbitraged. You can’t get a haircut from China. You can’t get a house from China. And you can’t eat out at a restaurant in China on a Staurday night and still be home for bedtime. So that created money tends to flow here, raising prices for houses, haircuts and restaurant meals. For things that you can get from China, well, you know the story. Price deflation, which is what you would expect because as productivity rises things become cheaper to make (in real terms).
There’s no real reason prices should go up in the aggregate, absent credit creation. In fact, before we had a fiat money system (basically prior to 1913), you might be surprised to learn that a house in 1780 cost basically the same as it did in 1900! Imagine that. Real estate didn’t go up over a 120 year period!! Well, of course that makes sense, because the REAL VALUE doesn’t really change too much. It never does, not even today. (This is of course super oversimplified, but you get the idea.) Incidentally, over this period, living standards and real income increased dramatically, as many prices fell (through increased productivity), freeing people up to enjoy the fruits of their increased productivity.
Sometimes when credit is expanded recklessly, and under apparent mass psychology conditions that no one can really figure out, the public’s attention is turned to a particular asset or asset class. It could be tulips in Holland, could be land in Florida 1925-26, equities in the 1920s, railroad stocks in the 1840s, a crazy company that no one really could figure out what it was supposed to do (except somehow exchange stock for newly created government debt) in the 1720s England, the twin Japanese real estate and stock bubbles of the late 1980s, the NASDAQ in the late 1990s, or, most unfortunately for some of us, what looks to be the biggest bubble of them all, the (almost) global housing bubble. Although no one wants to admit that SF suffers from it, it would be strange for it to sit out the party, don’t you think, since it is usually on the cutting edge and all??
We’re getting to the good part. What happens when there is deflation? That is, when money/credit is destroyed? And what effects will this process likely have on asset prices, and can certain consumer prices (like food or oil, for instance) still rise in an environment like this, or its variant, what is often thought of as stagflation?
I’ll post more tomorrow. If anyone appreciates this at all, or wants me to absolutely stop, either way, put up a comment, and I’ll try to be a “people pleaser” – as I’m sure you can tell, something that does NOT come naturally to me!
Editor's Note: We're not all that interested in lowest common denominator thoughts, so please don't worry about trying to be a "people pleaser" on this post. And as always, thank you for plugging in (and provoking thought).
Posted by socketadmin at 9:46 AM | Permalink | Comments (40) | (email story)
April 24, 2006
From ‘Sticky’ To ‘Slippery’: A Fundamental Change In The Housing Market?
Technical traders and analysts often talk about support levels or a floor price. In the housing market, real estate agents talk about “stickiness.”
Previous downturns in the housing market have left homeowners owing more that their homes were worth (i.e. “underwater”) and unable, or unwilling, to sell or move. Those who were forced to sell (think job transfer, an unexpected medical expense, or perhaps a new baby in a one bedroom condo) did so at a loss. But the vast majority of owners just stayed put and waited it out – three, five, or even ten years until the market turned around.
And while the housing market might take a turn for the worse, it rarely plummeted. Homeowners sitting on the sidelines made sure of that. These owners kept the market from being flooded with inventory, provided natural resistance to depreciating housing prices, and kept the market out of an associated “crash.”
As Celia Chen writes for the Dismal Scientist, “There is an inherent downward stickiness in home prices, as many homeowners can simply take their product off the market rather than sell at a price lower than they desire." Or according to Kelly Zito of the Chronicle, “even in a slackening market, sellers often resist losing money on a property or simply not making as much as the Joneses next door. Sometimes that can mean sales volumes will decline, but prices will stay resilient . . . . ”
Historically, the vast majority of homeowners could afford to wait as long-term fixed-rate mortgages kept expenses in line with budgets. Month after month, or year after year, homeowners would simply continue to make their mortgage payments and wait patiently for the market, and their equity, to return.
Unlike the Internet’s “new economy,” however, this time it really might be different. While short-term adjustable, interest-only, and negative amortization mortgages have quite literally opened the doors to a whole host of new homeowners, combined with cash flow negative “investment” properties, and highly leveraged buyers without sufficient reserves, they have also created a more volatile housing market.
Instead of not being able to sell in a downturn, many new homeowners might find that they can’t afford to hold (or wait). Mortgage payments will increase faster than incomes, rental income won’t offset an investment property’s carrying costs, and a high loan to value mortgage will constrain an owner's ability to tap into equity to help weather any storm.
And for the first time in history, might we find that the “stickiness” that has traditionally kept the housing market from being flooded with inventory in a downturn, and prices from plummeting, has actually turned quite “slippery?”
Posted by adamkoval at 12:39 AM | Permalink | Comments (5) | (email story)
