Making a long story short:
We had lunch recently with an individual that has a very real interest in today’s San Francisco real estate market (he’s selling a home, but no he’s not our client). We talked about the kids, we talked about the weather, then of course the inevitable “how’s the market”. After getting through how we thought the market was, he informed us that he recently had lunch with a “business friend” of his that kindly informed him the only people looking at open houses at the moment are those people looking to preview homes that will soon be sold at foreclosure! And apparently this “friend” had the data to back it up. Are you f*ing kidding!
That is quite possibly the most ridiculous thing we’ve heard in a while and you can rest assured we’ve heard our share of silly real estate tales.
So who’s got the data to back that ridiculous statement up? Something like that might apply to places in the greater Bay Area, but San Francisco proper? Come on!
While it isn’t accurate, calling it “the most ridiculous thing” is equally false. Most realtors and SF homeowners seem to be in denial claiming that property values are barely down 10-15% from their peaks. There isn’t much clearing the market right now and there is at least another 10-15% to go in the next six months. And yes, I think foreclosures will rise significantly due to job paring across the board. Further, potential home buyers are now concerned if they will have a job in six months. If there is any doubt there, the last thing they are going to do is put 25% down (if you are lucky enough to be able to borrow, it’s what lenders require on average) to buy a home. So all said, I think there is going to be a supply wave hitting the market, with little demand push back. Cash is king for now!
I was out yesterday, and haven’t talked to any foreclosure hunter. Quite the opposite. There was a lot of normal people back on the market – with the difference of not feeling pressured – and off course, simply talking about how much under asking they could go.
And none of the properties was a pre-foreclosure either.
Now of course, it depends with street you’re looking at. I guess if you visit every single open homes on lisbon, london etc … we can guess what you are at. But if you bring your Realtor and parents (personal piggy bank) to new or top of the line properties … then your story is flawed.
Last – there has been some move this very past week. Call it the inauguration effect or whatever, but some unlikely-to-move properties MOVED! let’s wait to see.
On that. Alex, your sold report reflects the date of closing. if there any way to count properties according to the day it went a.c. or pending? that would give a nice graph of RE. ACTIVITY vs RE paperwork. (example: an offer might need 7 weeks to get a loan and close, making the property sell in march while the buyers went off the market in january)
My experience hosting open houses throughout this entire thing has shown me different behavior. I’m sure you’ve seen the same. There are a surprising number of people out and about right now. As to 10 to 15% …. hard to put a fine point on it.
For example, a potential client gave me some marching orders. “Find a house in Silver Terrace for under 400K.” I was skeptical there would be any, but there are three or four. I’m pretty sure that didn’t exist six months ago. I’d say the market there is down more like 25%. Look in most neighborhoods, tho. Do the list prices look like 10 to 15% off-peak? No, they don’t. But listing is one thing, and selling another.
“But listing is one thing, and selling another.” Exactly my point. You might see the occasional home being lifted for near asking, but I don’t think that will be the norm over the next 6 months. As potential buyers making the rounds, there is always interest especially when scouting for a deal :) It’s going to be very interesting to see how much actually clears the market though.
Sophie,
“Last – there has been some move this very past week”
what are you basing this on?
I understand that very few properties moved as compared to the same time period in past years?
love the way you infer foreclosure hunters aren’t “normal” also..
The way layoffs are accelerating I would expect a faster drop off in house prices in the next 6 months as both buyers and sellers are laid off.
Tech sales in some sectors have dropped 60-70% YoY, a lot of sales managers have underestimated the size of cut backs in their enterprise customer base so bonuses and commission checks are going to start suffering.
There are a lot of different opinions, I was told by an economist professor that this was a great time to buy and if he wasn’t buying a house he’d be heavily investing in stocks, another one said the next 10 years are going to be the biggest downturn in the history of the US and he’s going to hold onto all of his cash.
DoTheMath
there are some properties around the city that I follow closely. And frankly I didn’t expect stalefish without a drop in price move that past week – however, some did.
you would understand that when I know the buyer or the seller, I wont disclose the address until it’s SOLD. But you are welcome to search the MLS for act.cont. properties – and compare to the stalefish list – and feel happy that some properties are moving.
(I don’t believe in the yoy digits. it’s not enough. I would however welcome some meaningful numbers such as DOM between day one and day of OFFER [not of closing, the day of offer IS the day the house is out of market – or say day of act.cont. or day of pending. But day of closing is somewhat extremely detrimental to this market and scares sellers away in a city with hundreds of buyers looking for a home])
((should I mention that with less properties to sell, it snowballs, create less comp for the appraisal, then drops the number of closed contract, then drops the values etc etc?))
re “normal” buyers. Someone hunting foreclosures is immune to many factors such as staging, marketing, etc. They are somehow emotionally immune too, the same way that you can buy some Malboro stock even if you can’t stand smokers in your house – because it’s an INVESTMENT (with risks and hopefully cash as reward).
very different from the HOMEbuyer who’s mortaging his/her family roof, might consider ROI very very long term, or ditch the math altogether, and because of emotional factor, will use more family assets such as dad and mom piggy bank, or Aunt Ellie’s inheritance.
I don’t underestimate/denigrate either type. I’m myself both. But then, I don’t buy the same, and don’t bargain/over/underbid the same way.
“But listing is one thing, and selling another.”
Yeah, Sammy, we agree there.
There are a lot of weird things happening right now. An 825K 3/2 in Bernal on Peralta just got overbids last week. People see that and they scratch their heads. Because it’s a fact that the lending shakeup has created a stalemate. The trend is down, but by how much? I honestly think if lending somehow turned around we would see a spring bounce of sorts. February doesn’t feel like it’s going to be as bleak as December, which was better than November.
I agree with tFS: there’s plenty of activity going on out there.
I just published a post on my blog that looked at Absorption Rates (basically available listings inventory divided by sales) for SF single family homes over the last 2 years and the results are really surprising. First, despite the doom and gloom, it really doesn’t look like inventory/sales rate has slowed AT ALL. In fact the contrary is true. Secondly, there doesn’t appear to be ANY correlation between absorption rate and price. Even when there’s a lot of stuff on the market relative to sales rates, it doesn’t appear to result in softening prices. I have various theories about why this might be. The post, including a chart, is here: http://www.pegasusventures.net
Bottom line for me is that SF is such a constrained market in terms of relative supply that there are “enough” people looking to buy to keep the market relatively sound.
fluj, i agree with you on the one-off cases…those will always be there and make people wonder if its all about to turn. But the general trend is that people are getting/going to get laid off, they aren’t getting paid as much, and banks aren’t lending, and all of this will not change without strong government intervention. And even with Uncle Sam stepping in (and they already have to some extent in the mortgage market when you saw 30Y fixed at 4.75% a month ago), the effects will take a while to manifest. So if the market is thin and very little inventory comes this spring, it really could be a boon for headline real estate values. But if that isn’t the case (and i don’t want to sound like a downer), it’s going to be a stampede…get out of the way.
Could be re: spring. Because layoffs + lending + huge inventory would probably slay the beast. That’s IF within that huge inventory there is included a great many who have to sell. Tons of internet posters have called for the stampede to be Alt-A and ARM resets. Clearly the USG is trying to prevent that eventuality.
But the last week or two has appeared different to my eyes. Maybe it was the Obama bounce! Maybe it will be short lived. I really don’t know. Then again, these layoff announcements today don’t seem to bode well at all for the short term.
That has not been my experience at all.
People that have been coming through my open houses are upbeat and hopeful. Hopeful because for the first time in a long time home prices are coming within their reach.
Here is a link to a city-by-city chart of the market that I serve:
http://www.kelleyeling.com/Nav.aspx/Page=%2fPageManager%2fDefault.aspx%2fPageID%3d977686
And here is a link to recent historical sales including the average sales price and number of homes sold:
http://kelleyeling.wordpress.com/2009/01/17/marin-county-ca-home-sales-chart-2001-2008/
I will have average sales price and number of homes sold from 1965-2008 soon, so check back.
Kelley- Those numbers don’t look too bad, but I would be careful about chronology. I think there was a significant leg down in the economy that started in September/October in financial markets that probably only hit general consumer sentiment in Nov/Dec. So I would like to see similar numbers for closings in the months of Jan and Feb and those going forward, where the bids would probably be made 30-60 days prior. National unemployment surveys came in at 7.2% this month and are projected to go up to 8.5% in a few months. California is typically 1.5% over the national average. I don’t think that bodes well for home prices. I don’t think people buy homes if they’re fearful of not having a job. All of this said, I am in the market for a home :)
I want to correct myself on the unemployment numbers. The 7.2% unemployment rate was for the month of Dec, release in Jan. For that same month, the unemployment rate in Cali was 9.3%!
Misha..that graph…
you have an absoroption rate for dec 2008 as below that for 2007 and 2006.
I find that very surprising, given that
a) inventory is higher in 2008 than 07 and 06 and
b) sales are lower in 2008.
care to share the data behind the graph, and your assertion that
“it really doesn’t look like inventory/sales rate has slowed AT ALL. In fact the contrary is true”
Thanks
Do the math: yes, I’ll be happy to share the numbers with you. Send me your email address to [email protected]. I was surprised by the numbers too. They were pulled, laboriously, month by month from MLS monthly published data. The major drop-off in Absorption Rate in December is, I believe, primarily a recurring seasonal phenomenon as opposed to indicating any real strengthening in the market, plus the fact beginning and end of chart are not averaged over several months to account for seasonal fluctuations as the middle of the chart is. Overall, the chart does in fact show that absorption rate (measured in weeks) in 2008 is higher than in 2007, which is consistent with your observations on more listings and less sales (though the net differences are not huge).
wow! the folks at socketsite lifted my market views! “SocketSite’s Residential Real Estate Outlook For 2009”