If this new law should pass (raising the conforming loan limit to around $725,000), you can expect a bit of a buying spree in San Francisco, for three main reasons (among many others):
1) Buyers are out there (in droves), and this is just what they needed to get them motivated again.
2) If this is a “limited time offer” as the powers that be are suggesting, many buyers will want to get it while the getting is good, and word on the street right now is that this “proposal” would be good for only one year.
3) San Francisco is, and always will be (barring a major disaster), a solid long term investment. Any short term dips (2-3 years) will be surpassed by long term gains (10-25 years). Ask some folks that bought their homes in Pacific Heights 25 years ago if they’re happy with their “investment”.
This is all, of course, assuming our our nation avoids a major recession (we believe we’re already in a little one), and our market sees an increase in sellers listing their homes (and accepting offers) at reasonable prices.
Flame away. Just don’t tell the foreigners, and don’t hate us for not conforming to all the same bull shit and rhetoric you hear on a daily basis on all the “other” real estate blogs (Curbed not included), because we’re not buying and it’s not because we’re in this for commission.
What’s the logic of making it temporary?
To all the naysayers who circuitously talk about how this will actually raise rates and stuff of that nature, I’d ask them to think locally. Do you realize how many buyers are in the 650 to $1M range in SF? I was talking with a colleague about this yesterday. We thought that as much as 80% of the buyers in the city are probably in that range. This could really be huge.
Foreigners buying? Realtor’s will be rushing out to learn Russian, French, Chinese and I’m sure there will be a ‘Canadian’ class for the geographically challenged Realtors…..who cares..exclamation marks are the Universal Language!!!! How do you say ‘buy now or be priced out forever in Chinese?
Hmm – so perhaps all of you hiding your listings on your own websites and spamming the living hell out of Craigslist will sack up and start playing the game by the appropriate rules – Put your listings in the MLS! It’s more than a “days on market” tracker — it serves a huge role in allowing Realtors and buyers and sellers a central place to identify inventory and to give all of us accurate market knowledge.
That said – if ya wanna play the pocket listing game – so be it. Just stop putting the pocket listings in the MLS after you sell them — that’s complete manipulation of the system. You pocket list for 4 months – then sell the unit – then put it in the MLS as sold – then market the sale to the other people in the building / neighborhood using the MLS days on market. That’s complete bullshit and it’s manipulation at it’s finest.
OK – that’s off my chest – yeah I got a case of the Monday’s but look how mature I am — didn’t mention 1 person by name!
I also think that blogs and web sites who contantly use the MLS should have to pay usage fees, particularly if they are profitable.
I have just started blogging, inspired, in part, by sites like yours. The issue of raising the conforming loan limits is HUGE. I am a loan officer who has been trying to get support for this, especially in the Bay Area counties that can sustain. I want to ask you and your readers to pay attention to this development, write and talk about how it will help us here in the Bay Area. ll the nonsense against it is just what one of your commenters said, a circular argument, the thing is that we in the San Francisco, Marin and San Mateo, Santa Clara, can afford it and we need to have it be permanent.
I’ll let you know when I finish my post on this – should be later in the day.
great post greg. you are my kind of realtor. i think craigslist should start charging for real estate ads, just like jobs. that will squash all the posers out there pretending to be agents.
Quote: “Do you realize how many buyers are in the 650 to $1M range in SF? ”
They are commonly refereed to as “renters” in san francisco. :-) And it’s more like 650 to $1.25M
Greg, what does not listing it on MLS do for the agent other an avoid DOM ticks? The idea of pocket listing has been discussed numerous times here, but with no mention of MLS manipulation.
Paying to promote properties on the MLS? Are you kidding me? That said, I’d gladly pay for full search access.
Alex, I applaud your bullish nature — but the rate cut and one-time jumbo adjustment (which I suspect will become permanent) is the governments reaction to a very real crisis that it sees in the marketplace. If people don’t pay their mortgagees and stop buying homes — which is exactly what these incentives are designed to induce — the whole market could implode. Some are forecasting that this is a foregone conclusion and that we are delaying the inevitable since it is an election year (and recessions are bad for politics). If you can benefit from a refi than you should jump all over it. If you need to sell or need to buy than jump in and take advantage of these benefits. But there was a lot of irrational purchases over the past five or six years and I honestly feel it is somewhat irresponsible to advise ‘customers’
to buy at any time.
Conventional wisdom holds that if you plan to live somewhere longer than 5 years, can put 20% down and can afford the monthly payments even on a moderate ARM re-set than it makes good financial sense to purchase a home. Sure, these variables may no longer be the ‘norm’ when factoring a home purchase, but I’d argue strongly that any significant deviation from these 3 pillars of home buying guidelines is putting yourself in a leveraged risk category that is probably disproportionate to your ‘real
risk tolerance. I personally believe that there are a lot of people in homes in San Francisco that cannot (a) afford the current 5 year forecast (b) afford to take even a 1% loss in value over purchase price (c) afford to break-even on sale price factoring in transaction costs (~6-7%). I suspect that the number of people that fall into these categories is not some statistically insignificant percentage — but rather a large number of home buyers over the past 2-3 years. Fortunately for many, if you bought in a pre 3-5 year window the run up in prices has provided you with a nice equity shelter and housing prices aren’t going to fall so hard, so fast that it would wipe out gains from those years, but there is NO certainty that housing prices will increase and the near-term future of real estate is very uncertain and hasn’t been this uncertain for a long time. So while I personally think that SanFran is probably a safer than average real estate investment — we should all make well informed and responsible financial decisions. Buffet always says: Price is what you pay, Value is what you get. So, just because the fed lowered rates and the government made it easier to get a conforming loan — this doesn’t mean that Value got any better. All it means is that Price is more attainable.
Eddy
James — GREAT idea. Charge $50 bucks and limit people from posting every 2 days. It’s insane right now – the same 40 properties posted every 3 days. When you post a job advertisment on there – you pay a 1 time fee and it stays up ther 30 days (I think). People that use Craiglist are savvy enough to scroll down – they don’t need to be reminded every day about the same properties.
In my opinion – people are trolling for buyers, not advertising properties. Charging money to post real estate ad’s would limit this or at least force these people to pay for leads on Craigslist instead of the non stop spamming. I’ll suggest this to the folks at Craigslist!
To clarify my comment above, regarding (a) — it is refering to the 5 year forecast on mortgage payments.
Also, in NYC, craigslist does charge for real estate posting — at least for rentals. I wish they would do the same here!
Frankly, I kind of like all the bullshit on craigslist. It keeps people away. I’ve found a bunch of great deals on there. And for every real craigslist buyer there are 50 flaky time wasters. (That’s not just for real estate, and that’s just from my own personal experience.)
“eddy” — your question: Greg, what does not listing it on MLS do for the agent other an avoid DOM ticks? The idea of pocket listing has been discussed numerous times here, but with no mention of MLS manipulation.
1 – As a Reatlor and a Broker I have an opinion as to why folks play the pocket listing game – I believe it’s done in an attempt to double end the deal. If I list a property only on my personal website or my brokerage website, it limits who actually views the listing. I’d love to think that every buyer in the city is looking at Home-SanFrancisco.com, but that’s not the case. I also can’t realistically expect every Realtor representing buyers to check my website everyday to find new inventory. Imagine how difficult it would be if you had to check every Realtor website to find new listings. The people that generally are checking my site everyday, are my clients or buyers without representation. Listing only on my website would increase my chances of finding the buyer – hence double ending the deal.
Some say it’s to “test the market” — to this I say, test the market in the MLS. Put the property in the MLS and leave it there for 30 days – If you don’t get interest – pull the property off the market and the MLS. How can you tell your seller you are testing the market for them if you only list the property on your own website. It’s not a true “test” of the market – it’s a test of your websites audience.
I’m not going to be able to change the pocket listing environemnt –It’s existed for years. But you can take it to the bank that I’m going to get our Association to stop allowing agents to put pocket listings in the MLS. I just saw one the other day – Zero days on the market, sales price higher than the list price and it shows up in the MLS. How is that legit? Now that listing agent is able to tell the other people in that complex the he/she sold a listing for over asking in zero days – come on — that’s complete bullshit.
By the same theory – if you pocket list a property for 4 months and then put it in the MLS – 1 of 2 things should happen:
1. You should put the property in the MLS with the real “listing date” – the day you actually signed an agreement and started to market the property on your own website. You can’t tell the general public it’s brand new on the market after you’ve parked it on your website for 4 months – that’s not honest.
2. Enter the property in the MLS as “new” – but go in and enter the real property history. Let everyone know it was listed for 120 days and was withdrawn and then put in the MLS.
i’m a giant craigslist fan. from what i understand, mr. newmark is currently trying to figure out the best way to handle the real estate section as paying for such listings is something on the table for them. in true cL fashion however, they are exploring all the options before rolling out a feature.
well the jerk off realtors have ruined it for the rest of you. i stopped reading craigslist long before socketsite, since they have about an equal about of credible information.
;)
Greg, thanks. the double sided transaction theory makes a lot of sense.
Amazing how little of the commentary relates to listing and craigslist opposed to the topic of raising the conforming loan limit. The impact on affordability is huge in markets like SF, but my question still stands, what’s the point of raising the loan limit temporarily?
i think the temporary status makes it an easier sell by the republicans to their democratic colleagues across the aisle that don’t really care if you can or cannot afford to buy a house.
Wow! What a day skiing, and no I’m not RSC…who we all know and love and would love to see use one name.
Totally agree on the Craigslist thing, would LOVE to get my pocket listings on the market, but for reasons I’ve already mentioned, no can do. Putting it on MLS is the way to go, but sometimes clients just don’t want to do it. Nothing you can do about that, except post it to MLS so everyone knows a good/new comp after it sells.
Eddy, I don’t recall this post advising people to buy (I’ve been “blogging” long enough to be very careful with my choices of words.) I’ve learned to watch out for magnifying glasses like you. ;-) And you’re right. If our economy really crashes, we’re all bumming, but this could very well lead to a shopping spree, which gets back to Dede and the question of “what’s the point of raising the loan limit temporarily?”. Exactly! What is the point? There is none. Raise it and leave it. The shorter the time frame they allow it, the larger the urgency felt to buy…for some.
Yeah, so you raise the loan limit for a year, there’s a bit of a rush for property affected by these loans, pushing prices up, or keeping them from falling as far. But then after that year, the limit goes down, decreasing affordability, so what happens? If you have to sell and your at that level, prices go down, because my money is now more expensive so I can only offer less. I have only so much to work with in my budget, you know?
So what’s the net effect of a temporary rise in the conforming loan limit?Propping up the current market by borrowing from future sales. Doesn’t sound like a solution to me, though one could argue future dollars might be cheaper…even if they are more expensive.
Now if the rise were permanent, that might be a solution I could get behind. After all, why should Alaska and Hawaii have the high limits and no one else? Simply doesn’t make sense to me.
Alex – the occasional pocket listing is fine – it happens from time to time. When it’s done as a rule – as a consistent means to market property – it’s questionable at best – unethical in my opinion.
I have no problem with pocket listings being put in the MLS – just put them in as Unlisted Sold properties – or give us the actual marketing time. The issues I have are with the folks who pocket list every property – spam the shit out of Craigslist everyday with these properties and then have the audacity to enter them in the MLS months later as “new listings” or even worse – enter them in the MLS once they are already pending or sold. That’s manipulation and it’s going to stop!
Greg,
Totally agree.
Dede,
Also agree. It’s a short term solution at best. It makes absolutely no sense to do it for a short period of time, then take it away. Lawmakers if you’re listening….(as if).
Assuming it stays a short period thing, who’s to say what the market will be doing in a year? But one thing I am almost certain of, is that this could…I emphasize could, have a significant short term impact on our market. I say this knowing how many buyers I, personally, am working with that have zero “good” properties to choose from, read all the papers, all the blogs and still are not deterred in their quest, literally a quest, to find a home in San Francisco.
Hawaii has the higher limits because the weather is perfect and our politicians love to vacation there. Alaska because of oil! ;-)
Glad you’re enjoying the snow Alex! It’s awesome ain’t it? :)
The reason why I’d let an agent do a pocket listing b/c you are not a motivated seller, but wouldn’t mind selling fo the right price. Just like your salary, you don’t want everybody knowing your business, only those who really matter.
I CAN’T WAIT for the new jumbo limit to take in effect! I got one more refi to do, and then it’s just more cash flow in the bank every month. Bernanke, you rock!
Sorry Alex, I didn’t intend to manipulate your words and I wasn’t calling you out per se. But rather just trying to inject some reality into the situation that these gov’t stimulus packages are to stimulate the economy / markets — not further propel the markets into the stratosphere. Everyone seems anxious to pretend the housing market here is immune. Protected, insulated, safer than other areas — sure, totally agreed — but not immune. At some point all these variables have to come back into equilibrium.
For the record, I honestly don’t want or think that there will be some crash in the housing markets here — but I’m also not bullish on the market either for all the reasons stated above.
Enjoy the slopes!!!!!
Eddy,
Well said. I knew you weren’t calling me out, so no apology necessary. “Safer than other areas”…I like that phrase. The biggest reason I am so bullish is, like I said, what I know I’m working with (clients) and what my colleagues are working with. Together, with all the people in this industry I talk to, I’d have to say that I personally know of 200+ buyers that are ready, able, and willing to buy, but the right home is just not there. When the majority of those buyers drop off, then I’ll get a bit more worried about a major decline in our market.
No skiing today. That was yesterday. And yes, RSC, the snow was pretty darn good.
Hmmm. Lot’s of inventory hitting the market so I think the bigger issue is that there are widening expectations over ask price versus value from a buyer’s perspective. It seems to me that only the best places with “redone everything” are moving at premiums — which tells me that well funded buyers are willing to pay top dollar for finishes. But count me among the well funded buyers ‘ready to pounce’ but I’m telling you first hand that I’m waiting out the market and belive the ‘values’ will continue to get better. Unlike the stock market, which is diffuclt to ‘time’ — the housing market moves a lot slower.
The fact that there are so many well funded and qualified buyers here is the primary reason that SF is safer than other areas. Each percentage point drop in real prices bring in a new crop of buyers who decide now is the time to buy. Simple and pure ‘Supply and Demand’ at work. I’m still not convinced that these recent market events haven’t impacted buyers’ psyche and financial standings (let along the other class here – ‘owners’. I believe that that supply will increase due to natural sales, forced sales due to inability to meet mortgage obligations AND short sales on forclosed homes. It’s the market dynamics that face those three different sellers that will really impact the market IMO. Natural sellers (as defined by those people that justhave to sell due to relocation or other natural life events) will sell at market prices. Short sales will sell slightly below market and set a new floor and forced sales due to inability to pay will drive high DOMs and general lowering of prices. Meanwhile — demand could either stay constant or people could pull back to see what happens.
I’m not saying all of the above will happen, but some combination of these events are at least likely. The fact that I saw this coming in 2006 when I was very active in the market only reinforces my beliefs — and there were a lot more people espousing the ‘there is never a bad time to buy’ philosophy at that time. Obviously my risk profile is lower than many others, but I suspect that many buyers make huge housing (i.e., investment) decisions with little real insight. This was a heavily rewarded strategy from 1998 to 2005. It’s clear that strategy isn’t going to work in the next few years. But like the guy on here that a bought the foreclosed home, or the person who buys the right Noe fixer off-market, there are always deals out there. Just have to look and have a good agent giving sound ‘financial’ advice!!!
i’m starting to think that people should stop thinking about housing as a short term investment, just like stocks. if you aren’t planning on or needing to sell it day to day, don’t watch. we seem to be caught up in that mentality. i don’t know about you but i typically buy houses with a minimum of 7 years of intention of owning them. day to day fluctuations in value don’t mean shit to me.
What if the market merely levels off, and nothing more? I looked at the Sunset for ’07 versus ’08 January YoY today. It is basically the exact same. I, like many others, feel as if the Sunset would be an area to take a big hit if a sea change were to occur.
I’ve heard real estate markets change slowly. I’ve also heard they can change very, very quickly. The truth of it is that none of us really know what’s going to transpire. We realtors can look at what occurs day in and day out better than anybody. To be quite honest, RIGHT NOW, this week late January ’08, I’m seeing more exuberance in the market than fall ’07. There are a couple of apples to apples properties that have gotten into contract which were on the verge of being stalefish before they were pulled from the market for the holidays.
That’s merely anecdotal, of course. What is not anecdotal is the fact that much of the rest of the country has really gotten hit. And it has been nearly two years already. That’s nearly two whole years of us blithely sailing along … why is that fact so readily dismissed? Surely there is something to it. Eddy makes a good point about capital in the marketplace.
Has anybody looked around and seen how much our city has changed, very recently? The sheer dollars that have gone into putting a new face on SF? I’m talking about the UCSF campus in Mission Bay, the Federal building, the De Young, the California Academy of Sciences, Rincon, Infinity — all of these structures are pretty remarkable. And they are all basically brand spanking new. Think about it for a minute. This is not to mention the creation of an entirely new very well-heeled neighborhood, South Beach.
So obviously, capital abounds. But what if it all boils down to simply no further appreciation for several years? We’ll see. Quite honestly I think that that it is a real possibility. Population has increased. A wealthy population has gotten larger, and wealthier. Rents are up.
I don’t want to be all polyanna, at all. I’m wary. But I just don’t see any big change happening. Not right now.
i do think we’ll see continuing foreclosure activity in the more impoverished areas of town. silver terrace, bayview, etc. they are not really any different than the rest of the poor parts of the bay area. oakland, for example.
i don’t expect to see a statistical increase in that activity in any of the nicer parts of town however. just anecdotal stuff here and there.
@kenny – I think that if we see stagnant appreciation continue for a few years, people in the SF will panic. Why?
First, most people assumed that housing will appreciate and made “rational” financial choices around that assumption. What choices?
– Pay Option ARMS for affordability.
– Using their house as a way to “force” savings but becoming house poor in the process.
– Most importantly in my mind, used 4+% appreciation in their model to justify decisions!
The last one is important because housing in SF only makes money in the “hold 5 year” window when it appreciates. Look at the the person who spends $3000 per month to rent a condo and decides to buy it for a modest $725K since they plan to live their for 5 years. Let’s assume that they have the right LTV, can get a great interest rate (let’s say 5.25%) AND don’t reinvest the money they save by renting. Let’s also assume that the condo doesn’t appreciate like you suggest is likely AND rent goes up by 5% per year.
These aren’t made up btw. This is the situation that describes my landlord vs. my rent. What do the magical calculators tell us?
This one from NYTimes tell us that in 9 years, the buying will break even.
It’s important to note that all of these assumptions are pretty friendly to the buying side of the equation (except for the assumption of 0% appreciation).
But the point is if enough people start assuming 0% appreciation for a few years, then buyers dry up.
[Editor’s note: We’re thinking you tried to link to something where you say, “This one form NYTimes”. If you care to send us the link to the page you created and your calculations, we’d be happy to make the link live. email [email protected].]
davidc –
i totally am on point with what you say. the ‘hold for 5 or more things’ has not been the norm in ‘happy nothing goes wrong in’ san francisco. i mean for a number of years the mentality is ‘i must get in now to a starter so I can move up in the next few years’ along with the ‘i will be priced out forever’. a lot of first time home buyers could/can not afford thier dream house and then settle for a smaller place with the hopes of ‘trading up’ in the next few years with their magic equity. unfortunately when you have a number of years of 0 or even say 2-4% appreciation you end up having less money after those few years. true there are a lot of rich fools who can drop 500 grand of their parents money out there but then again there are a lot of people who bought a place say this year and in a few years might not be any better off then renting. I think that is a reality that some home buyers are dealing with. a lot of people do not stay here forever and bank/banked on that ‘automatic appreciation’ they were going to get here in sf. yeah the outlook is good but even in the last downtown from say 90-96 (or near there) people were actually buying places with conforming loans and 20% down. Lot different these days.
The hype over the last 5 years was not buying a home to live in but buying a home for the ‘guaranteed equity’.
@Kenny – good post- but I disagree that the market has been tanking for 2 years. Most of these problems just started midway through 2007 and have snowballed. It’s not fair to say that SF has been rolling along for 2 years despite broad market downturn. There is a 2 unit, SFH home on SS being discussed now that shows the scenario we are talking about. Sure there is a post here about the russian hill condo that sold fast and over asking — (fyi, previous owners paid $1.225M in 05 per property shark). But I think it is a recently new development to find short sales and other sub-prime-esqu problems here in san fran.