Category Archives: Economy

Buy Now or Suffer 8,000 Consequences?

Today I got this email from a friendly neighborhood Realtor:

Hello everyone,

I wanted to send out a friendly reminder about the deadline to take advantage of the first time home buyer tax credit.  The tax credit expires on Novemeber 30th, 2009.  However, assuming a 45 day escrow period from the time you buy to the time you close and get the keys, you would need to find a house, negotiate a purchase price, and have mutual acceptance by October 15th to take advantage. There are some income restrictions, it must be for your primary residence, and you must not have owned a home in the last 3 years.  If you or anyone you know would like more information about the tax credit, please email me and I will follow up.

Arg! Less than a month to find a house and close escrow?

On the other hand, I heard a rumor that this tax credit may be extended. Hard to imagine we have the money to do so in this country, but still, that’s the gossip from my broker. Nick Timiraos of the WSJ blog writes:

Not only are some legislators (and real-estate industry lobbyists) already pushing hard for an extension of the tax credit, which will expire Nov. 30, but they’re also arguing that it should be increased, to $15,000, and expanded to all buyers, and not just those who are first-timers. The current $8,000 tax credit emerged in the stimulus legislation that Congress passed in February, replacing an existing $7,500 credit that had to be repaid over 15 years.

The questions are not just whether the country has this money available, but whether other issues, such as health care, will push the homebuyer’s plight to the back burner.

In the meantime, we first-time buyers have about a week to buy our homes, people. No pressure.

Generous Uncle Sam, Via Coldwell Banker

“Unexpected Jump In Home Sales in February”

Unexpected Jump in Home Sales in February:

-Sales of existing homes rose from January to February in an unexpected lift for the slumping housing market as buyers took advantage of deep discounts on foreclosures.

The National Association of Realtors said Monday that sales of existing homes increased 5.1 percent to an annual rate of 4.72 million last month, from 4.49 million units in January. It was the largest sales jump since July 2003.

-That was great news for buyers, who are paying the most attractive prices in years. Plus, interest rates have sunk to historic lows.

You’ll have to click through to the article to read the fine print. ;-) Regardless, it’s good to see a positive spin in the national media instead of the oh so beaten dead horse that is the negative.

Daily Depression: “Bank Stocks Sink On Renewed Worries”

From the San Francisco Business Times:

Investors’ growing nervousness about the depths of the banking crisis hit shares of major banks that were seen as weathering the financial storm better than most.

San Francisco-based Wells Fargo (NYSE:WFC) saw its shares hit a new 52-week low, closing at $13.69, down $2.07 or 13 percent.

U.S. Bank (NYSE:USB), with a large Bay Area branch network, also hit a new 52-week low, closing at $10.73, down $1.67 or 13.5 percent.

J.P. Morgan Chase (NYSE:JPM) closed at $21.65, down $3.04 or 12 percent.

Bank of America (NYSE:BAC) closed at $4.90, down $0.67 or 12 percent.

Citigroup (NYSE:C) closed at $3.06, down $0.43 or 12 percent.

The declines reflect growing concern on Wall Street that the economic downturn may worsen even further than previously expected. The nation’s financial system could be swamped by cascading bad debts from credit cards and auto loans to commmercial real estate mortgages as the recession deepens and unemployment rises.

Adding to the day’s worries was General Motors (NYSE: GM) and Chrysler going back with hat in hand to Washington, D.C., seeking billions more from the government. Also not helping matters was the worst showing for the Japanese economy in 35 years in the fourth quarter and concern that the U.S. federal stimulus package might not be enough to spur growth here at home.

Word from Moody’s Investors Service (NYSE: MCO) that some Central and Eastern European countries “have now entered a deep and long economic downturn” sparked concerns about the outlook for European banks with heavy exposure to countries such as Poland, Hungary and the Czech Republic.

At least the sun is supposed to come out tomorrow…

-Bank stock sink on renewed worries -SF Business Times

Can California Keep Her Bling?

 

I used to look at houses in Portland, OR like this 2/2 SFH in one of the most gorgeous neighborhoods, Sellwood, listed at $440K.

And then I would look for somthing similar in SF. And then I would need a very large martini. We all know, even after the martini, that a comparable home is SF (in a comparable lovely neighborhood) would go for twice or three times that price.

Experts in the field offer myriad explanations: SF has limited homes, limited land, high demand, good jobs, California property is worth more… etc., etc.

I am curious though how many of those factors still exist, or can continue to exist as the economic climate changes.

The Chron estimates that Bay Area homes lost $202 billion in value in 2008. Agreed, the Bay Area includes areas much harder hit by the slump than SF, but SF is not impervious to these problems. Maybe they aren’t horrible yet, but conditions aren’t as crazy-good as they used to be (right? We can agree on that at least?); could they get worse?

It seems that California itself is losing value. The S & P has already lowered her credit rating , tying her with Louisiana,  and may lower this rating again if the budget crisis can’t be solved– a phenomenon we have no real optimism to witness, unless we relish our tax refunds being issued as IOUs as part of the solution. From the LA Times:

“Should the state not enact timely midyear budget gap closing measures by February 2009, or should the state’s cash position weaken significantly compared with recently revised state cash flow projections,” the rating firm warns, the ratings on California’s long-term debt could be lowered, S&P said.

That could drive more investors away from California bonds, forcing the state to pay higher interest rates to borrow. Municipal bond yields in California and elsewhere have been surging in recent weeks as state budget troubles have deepened.

As for the prospect of borrowing to plug budget gaps, S&P warned that without “meaningful budget adjustments on the revenue or expenditure side,” California may face “constrained investor appetite” for its short-term notes.

In the meantime, Prop 13, once meant to protect the housing consumer, is now a very big part of the problem.

So my question is, can Californians expect to see deals like those in Portland, OR anytime in the near future in San Francisco? (And I pick Portland for its many similarities, physically and politically, to SF.) Ironically, though this would be a nightmare to some people, it would be a dream come true to the vast majority of renters who are currently priced out.  And if this untapped pool of buyers could actually buy, well…  we’d see that scary-good rush to buy again, like before the dot.com and current economy bust when people offered children and unneeded organs along with 50% over asking— but with distinctly post-bust differences.

U.S. Pending Home Sales Up 6.3%

Some good news in an otherwise gloomy picture:

The number of new sales contracts on existing homes jumped a seasonally adjusted 6.3% in December as buyers took advantage of lower mortgage rates and falling prices, a real estate trade group said Tuesday.The pending home sales index rose 6.3% in December and is now up 2.1% compared with a year earlier, the National Association of Realtors said. The increase points to a healthy gain in existing-home sales in January and February. The index is based on signed sales contracts, which usually occur a month or two before the sale is closed, when sales are reported in the NAR’s existing-home sales report.

-U.S. Pending Home Sales Up 6.3%: Realtors Say [MarketWatch]

Obama Says: Go Buy A House (In So Many Words)

We’re going to take the liberty of pulling a few quotes from this recent New York Times article about President-elect Obama’s call to action and urge our fellow San Franciscans to go out and buy a house.

-’I don’t believe it’s too late to change course, but it will be if we don’t take dramatic action as soon as possible,’ Mr. Obama plans to say, according to advance excerpts of the text released by his office. ‘If nothing is done, this recession could linger for years. The unemployment rate could reach double digits.’

-Mr. Obama’s message is stark, warning not just of short-term pain from a recession that is already the longest in a quarter-century, but also of deep and systemic longer-term costs that could threaten American economic leadership if too little is done.

‘We could lose a generation of potential and promise, as more young Americans are forced to forgo dreams of college or the chance to train for the jobs of the future,’ Mr. Obama plans to say. ‘And our nation could lose the competitive edge that has served as a foundation for our strength and standing in the world.’

‘In short, a bad situation could become dramatically worse.’

-’For every day we wait or point fingers or drag our feet, more Americans will lose their jobs,’ Mr. Obama plans to warn in his speech. ‘More families will lose their savings. More dreams will be deferred and denied.’

…and as one of our frequent commenters will surely say, “More 40 year old renters will become 41 year old renters, and rents keep going up!”

Take a stand. Buy a house!

[Editor's Note: There is sarcasm in our post. We understand it may not be a good time for you to buy, but it is a good time to be a buyer (assuming financial stability in your household).]

Predictions for ’09 Reveal There Are No Experts

zoltar-1
So, one hell of an ugly year is coming to a close. As usual, this event cues panels of “leaders” in various fields to opine about the coming 365 days. What will become of Tom and Katie? Will Cher remove another rib? Will the Celtics top the NBA again?

These days the doings of celebrities and (forgive me, Celtics) national sports are no longer as relevant as the economy, however. Luckily America has myriad experts on this last issue, and we need only to look at current conditions, both in California and the country as a whole, to judge these specialists’ true qualifications– or rather, lack thereof.

No one should be surprised then that as newspapers and blogs roll out the obligatory predictions  for ’09 articles, no consensus can be found. For instance, USA Today (that rag!) predicts a ray of sunshine:

“It may come as a surprise, given all the bad news of late, but the U.S. economy is expected to emerge from the recession sometime around mid-2009.” We’ll have some bad times, yes. “However, once the massive amount of fiscal stimulus currently being crafted by lawmakers and aggressive action by the Federal Reserve kicks in, the economy is expected to improve, according to several economists and business owners.”

Meanwhile, John Cassidy of Conde Nast’s “Portfolio” writes “Most economists predict a recovery late next year. Don’t bet on it.”  He’s not the only one who predicts bad times ahead for housing, jobs, retail, and even the entire world economy. Every media outlet– from the San Francisco Chronicle to the BBC online to the cheapest weekly you find on the street corner– has predictions; some are rosier and some are darker. In short, no one knows.

Still, an interesting point that Cassidy makes deserves attention. He writes:

Among noneconomists, there is much more concern about what lies ahead. In October, a CNN poll found that 59 percent of Americans believe another 1930s-style depression is very or somewhat likely. Dismissing feel-good suggestions that the turmoil on Wall Street won’t have much impact on the rest of the economy, 55 percent of the respondents said the financial crisis would affect them personally within the next year. A separate poll for Condé Nast Portfolio shows that people working in the finance business are even gloomier: 77 percent of them say their industry is in a state of crisis, and 50 percent say the economy is the worst it has been in their careers.

So who are we to believe: the experts who failed to predict the current crisis or the great American public?

Indeed, what do you predict, public? Time to go on record now. Clearly, we need some actual experts.

Zoltar photo via TheGreenHead (also a source of 2009 predictions!)

Road to Real Estate Recovery

When I was working at C__________, my boss was a big coke-head. As a result, the atmosphere was, to understate, lax. Everyone drank and ate copiously (never paying for it), sat down and/or danced randomly in the middle of the restaurant, swore, and slept with one another. All of the aforementioned took place during open-for-business hours. None of us were very surprised when an accountant appeared to “audit the situation” since the owners were confounded, and not at all pleased, that such a busy place could simply not turn a profit. The list of solutions thus generated included: uniforms, Michael Bolton CDs, crafting our famed sangria with boxed (as opposed to bottled) wine, and a NO DRINKING ON THE JOB POLICY.” Nowhere was it suggested that coke-head boss might… cut back, abstain, cease, or desist. And so ended my tenure at C_______.

The relevant thread here is that ailing businesses oft must look within to cure what ails. In the case of real estate, a national convalescent, such introspection cannot come too soon. Perhaps this is why Inman is sponsoring a “Roadmap to Recovery” program, part of which includes an essay contest, with prizes such as $500 and a free pass to the upcoming Real Estate Connect conference.

One recent essay asks how Realtors can redefine “full service.” The author, Jack Harper, has a thesis that what’s missing in real estate is transparency: a term he defines as the client having full understanding of what the agent does for his/her commission. He laments not only a lack of clear communication regarding those services, but also a lack of agreement by the industry as a whole as to what those services entail.

Commenters have opinions aplenty on this essay. Most turn out to be thinly veiled ads for the agents commenting, masturbatory “I am so good at this and that as well as that and this; and by the way, here is my contact information and website!” type stuff. But most of the ideas echo Harper’s.

As a potential client to any realtor, I would like to add that “transparency” also implies a level of honesty and freeness with information your industry is not famed for. We need to trust you again. Bringing that trust back to real estate could be one very important step on the road to recovery.

Photo credit: Active Rain.com

East Bay: Berkeley Named Top Spot For Selling Your Home

By Home Girl, aka real-estate blogger Tracey Taylor

If you are selling your home, Berkeley is the place to be doing it, according to a piece in Forbes which ranks the ten best suburbs to sell a home. (Suburb? Ouch that hurts.) This is how they put it:

Berkeley known sometimes as a hippie haven, is becoming a hotbed for home sales. Prices in the Bay Area suburb are up 9% this year, with homes selling for a median price of $790,986. Properties are sitting on the market for 73 days on average, the lowest of any area with positive price trends within the confines of the country’s 75 largest Census-defined metro areas. Only 37% of sellers have been forced to reduce their prices, one of the lowest rates in the country.

“Only 37%” of sellers reducing their prices? Shows just how bad it is. Other California spots to make it into the Top 10 include Encinitas and Venice.

The report draws on stats from Altos Research and the really interesting angle — and one Forbes fails to mention — is provided by Altos CEO Mike Simonsen on his blog. He says this was a difficult one to call:

Their editors called and asked, “Where are the best selling suburbs for sellers right now?” It’s a tough question because the answer, really, is nowhere… By our Market Action Index, there are essentially no markets with demand levels high enough to call them “Sellers’ Markets”. We settled on identifying ten suburbs whose demand trends … simply weren’t horrible.

Of course, a Forbes ranking of “10 suburbs to sell that simply aren’t horrible” doesn’t have quite the same ring to it.

[Photo credit: http://www.cityofberkeley.info

Reduction, Ad Nauseum

I’m not a Realtor, so I’ll tell something I’m more qualified to comment on: buyers’ perspectives. For instance, I can tell you how buyers looks at a property that’s been reduced more than twice. We feel sorry for them. They’re like awkward teenage boys at their first dance, pretending to be terribly busy with their shoe laces to avoid eye contact. We all know these boys can’t really be too picky; they have to take what they can get.

This analogy might not totally work for reduced priced properties. I’m just saying that as a buyer, we tend to feel a lot more powerful when we notice a home’s asking has come down not once, but twice– a feeling that multiplies with each subsequent reduction. That’s why, as a seller, I’d really hope my agent were savvy enough to price my home right. Of course, we can’t, unless we are Dione Warwick, know what the future holds, and some of the current meltdown has caught us by surprise. Still, the writing’s been on the wall awhile. Most literate people, I’d think, would have read it.

Case in point the next three properties, whose reduction history goes from bad to worse.

1. Studio TIC at 1059 Leavenworth St #5 San Francisco, CA 94109. Current price: $325,000. In over 120 days on the market, the list price has come down thrice:

Jul 02, 2008 $399,000
Jul 03, 2008 $329,000
Sep 09, 2008 $325,000 

2. 532 Clipper St #B San Francisco, CA 94114, currently at $539,000 is a 2 bed/1 bath TIC flat. In over 170 days on the market, it’s suffered 5 reductions, each one not very big, but the conglomeration of so many price cuts is pretty damning:

May 14, 2008 $679,000
Jun 11, 2008 $659,000
Aug 13, 2008 $639,000
Aug 28, 2008 $599,000
Sep 25, 2008 $570,000
Oct 28, 2008 $539,000

3. 3630 22nd St., San Francisco, CA.  A 2bed/1bath detached cottage TIC, this one I’ve saved for “worst” because though it has not been cut as often as the above property, the overall slash down is quite dramatic. In over 100 days on the market:

Jul 18, 2008 $749,000
Sep 05, 2008 $649,000
Oct 06, 2008 $589,000
Oct 29, 2008 $499,000

In this last case, the current price seems a lot more fair. I went to the open house yesterday and the listing agent informed me the place needed about $250K in repair and pest control. I have to wonder who would have ever, ever, ever paid the original list price.

I also wonder what other SF real estate agents or buyers or sellers think of these reductions overall, so I’m serving this blog up on the Front Steps for commentary. Take it easy on those awkward teen age boys though. Everyone, and everything, is fragile right now.