It just doesn’t make sense…our market

Quite often I’m forced to pull from our readers’ comments because I couldn’t possibly say it better myself. This from yesterday’s post titled “Rents Rising.

“I don’t think this [observation] makes sense in San Francisco. From where I’m standing as a potential buyer – the San Francisco market is on freaking fire. We’ve been overbidding and losing on houses for the last year. In the year we’ve been seriously looking, we’ve gone from being able to barely afford what we want, to being priced out. Rents aren’t rising because people don’t want to buy – I think in San Francisco rents are rising because people can’t buy. We rent a lovely stand alone house that if marketed for sale would be called a [3 bed, 1.5 bath] on a great block. If we wanted to own it with a traditional mortgage – with 20% down we would increase our monthly payment by about 3X. We just can’t make that make sense.”

Shawna, you are not alone and this is what we’re trying to make crystal clear to the readers out there. There are many pockets and micro-markets in this city. If one is booming, another might be lagging and “national” reports just don’t capture that.

Shanendoah deals with large multi-unit buildings, and rents are in fact rising in many of them, as is demand for those sized properties, and many of those renters are indeed waiting to buy. But in your world, the market shows zero signs of slowing, and unfortunately you are not alone. In fact, this is the case in most of San Francisco, but we’re forced to read countless reports about doom and gloom that eventually will trick everyone into thinking the market on your street has tanked too, even though it has not.

Rising interest rates are a different story as that means people will not only be out-bid, but no longer able to afford the homes they were previously bidding on, and essentially dropped into a lower competitive price bracket…and that is serious. The point being, the competition is still out there and it is still fierce.

Your comment is one of the most accurate assessments as to the state of the market I have heard in a long time.

Thank you! I owe you coffee, at least.

30 thoughts on “It just doesn’t make sense…our market

  1. As an individual that lived in and loved San Francisco, I understand the alure of the city. However, at some point you need to decide what is important to you in life. The city or a normal life. I ultimately decided owning my own home and quality of life were important. I looked at the typical locations Californians are moving to and ultimately, decided that Seattle offered me the best quality of life with the ability to own a decent home. I live in what would be considered one of the best close in neighborhoods about 2 blocks from a happpening streat filled with restaurants, coffee shops, boutiques and a couple of bars. I am less that 2.5 miles from downtown Seattle. San FRancisco seems like a distant memory now although, I left less than 12 months ago. However, every time I go back and deal with the traffic, obnoxious SUV driving cell phone abusing people that seem to dominate the city, I wonder why it took me so long to leave.

    If you have $1.8m plus to spend on a flat, are happy buying an overpriced cookie cutter condo or renting for the rest of your life San Francisco is for you. If you want to live like a normal person you can do far better than San Francisco.

  2. I am personally somewhat irked by this sort of fake evenhandedness. What starts off as an honest assessment has twice devolved into a kind of diatribe. Do you really expect us to believe that Seattleites don’t use cell phones while driving SUVs? Please! I’m going to Seattle tomorrow morning, for four days. And unfortunately, I have to rent a car (why? because public trans is not particularly good in Seattle — Belltown to Ballard, by bus? No thanks!). I’ll happily count SUV cell phoners for ya. There will be many.

    Don’t get me wrong. I do think there is a level of “going for yours” that infects drivers in San Francisco. What that has to do with folks being rich or poor, I don’t know. I see the same sort of selfish driving behavior in Bayview that I do on Union street.

    Seattle is a great place. So is San Francisco. Seattle is expensive. San Francisco is more expensive. Leave it at that, please. Some guy in Raleigh, N.C., is saying the same thing, about Seattle.

  3. Diatribe? Give me a break. The bottom line is I am living in a great craftsman built in the early 1900’s in a very good neighborhood in Seattle. I could only dream about owning anything close to an equivalent home in San FRancisco unless I was willing to spend three millions dollars plus. As to the driving. I agree bad / selfish driving is not limited to San FRancisco. It is endemic in California. Try crossing a busy street anywhere in California and drivers speed up to make sure they get by before you cross. In Seattle, people generally stop and wait for you to cross. Does this happen every time? No, but the patterns are significant enough to draw conclusions. After you live in San FRancisco or Los Angeles for a while you tend to forget what good manners and basic civility are. It is akin to the tradgety of the commons. There is no consequence to being a dick because the only time you encounter people are in your airconditioned SUV so there is no upside to being decent.

    Is Seattle cheaper than NC or TX?. Hell no. But then you are not living in Austin or Charlotte. Is Seattle significantly cheaper than San Francisco?. If you have any doubts, I question your intelligence and objectivity. Are Seattlites better people than San FRanciscans? I don’t know but I could make the argument that they are far more grounded, less concerned about outward appearances of prosperity than people in San Franciso.

    I’m glad you’re happy in San Francisco but your attitude indicates you view San FRancisco is the only decent place in the universe. Good luck to you. I find it over rated myself. Bottom line: My quality of life is far superior here than it could ever be in San Francisco. Believe me or not, I couldn’t care less.

  4. I agree with Kenny here. This whole ‘My place is better then yours’ thing with Seattle is pretty dumb. Anybody can say ‘My place is better’ and like Kenny said somebody somewhere could be saying both our cities suck. Ask my friends who are farmers in the middle states where I grew up and they will say we all suck on the west coast.

    And yes. Saying that people here are obnoxious compared to Seattle is plain crazy. There are obnoxious people in every city and there are probably just as many SUV drivers per capita there then there are here. And also, come on now. Everybody from here to Albuquerque abuse cell phones.

    There should be no hatred towards SF because you can not afford a 1.8 million dollar flat. I sure can not afford that but I also do not gloat on it either . If people have the money and can afford it then who cares. It maybe ‘overpriced’ to you or I but if it is not to the buyer then oh well, they are just in a better place or got lucky somehow. SF sure has a lot of rich people but there is also a lot of culture here and many communities/cultures that are not nearly as strong as other areas. So you must weigh it all.

    Lets try to have constructive comments here instead of ‘San Fran sucks’ diatribes. If you hate it so much then why are you lurking on a SF related web site?

  5. ….and stepping in. Keep it civil. No personal attacks. Oliver said it well, “Lets try to have constructive comments here instead of ‘San Fran sucks’ diatribes.”

    …I will add you are free to attack SF all you want, just don’t attack the people commenting on this site.

    As much as I’d like all commenting to go perfectly, it is impossible, but we can all make an effort not to attack each other.



  6. Wow, a lot of sensitive San Franciscans around. When did you all become so sensitive? I don’t recall making any comment that could be construed that San Francisco sucks. In fact if you read my post you will see I stated that I loved San Francisco. My point is that housing prices are out of this world in San Francisco. Pulling in $200k plus in insufficient to afford any decent kind of home there. So if you want to own a decent home, you are SOL. If you are happy renting…GREAT…live in and enjoy San Francisco. If you want to buy and live in a decent home, move to a different city. if I was the original poster quoted in the article making and being outbid for a year and now being priced out, I would have moved a long time ago or resigned myself to renting for the rest of my life. Either choice is valid. Life is full of choices. Make one and live with the consequences.

    [Editor’s note: Phil, thanks for clarifying. I really appreciate you stating it in a very professional manner, and keeping a cool head.]

  7. My god! this little blog seems to be getting out of hand. I thought it was more about SF real estate than about “my life is better than yours”.

    I have to say that the above comments, ,mostly by one individual, come off as simply angry…and very judgmental…and, well, it makes me laugh. to quote: “the city or a NORMAL life…”

    We all make our choices in life that relate to our particular values and goals. Other choices are never “wrong”, or “abnormal”…they are just choices made by others. I agree completely with Kenny, and Oliver and the Front Steps.

    Mr Seattle needs to chill.

    [Editor’s note: Mr. Seattle has chilled. Please see his comments. This little blog is growing and reaching a wider audience and that is good. Adds to perspective and flavor. I’m sure Phil is voicing an opinion many, many people echo. Let’s please not attack him directly. Cocktails anyone!?]

  8. I’m afraid I will have to agree with Phil on this one. All he was saying was that people must decide what is important to them. As Shawna started off the converstation saying she would have to pay 3 times the amount in a mortgage and related costs by owning a home, than she pays in rent now (she did not say if her unit was under rent control), my first thought was, “Maybe San Francisco is not the place for you to buy.” Which is essentially what Phil was saying.

    That is not to say there aren’t areas of San Francisco where deals can still be had, and sometimes settling for less just to get in the door is necessary. If a person must stay in San Francisco for a job or family or some other reason, and it’s for the short term, it is probably best just to continue renting. But a lot of people have made do with less to at least get in the market only to move up when the economy or their situations changed. Others have moved to Seattle where their dollar goes a lot further!

  9. thank you alex for stepping in as a moderator and making this a more peaceful place, or at least trying to :-)

    seattle/sf – who cares which city is better. i’ve lived in both and say there is a better city out their in the universe. what phil described is all of the US. let’s think international for true living but that’s a whole different subject matter.

    i don’t think it’s as black or white as – if you want to live in SF you have to rent and if you want own move to a different city. I totally disagree with Phil on that one. the house you’d want to live in would be equivalent to 3M – you’ve got some fancy taste there Phil! But leads me to my point…

    Shawna, not knowing your price range or neighborhoods you are looking in makes it hard to be helpful, but i can only speak from what my own experiences. It took my husband and I almost a year of committing every weekend to open houses before we found something we were happy with. We learned after a few months of house hunting, that if we wanted to live in sf and own we would have to make sacrifices on the neighborhood we lived in if we wanted a SFR or opt for a condo or TIC. We couldn’t afford nor wanted to stretch ourselves financially to have the ideal place in the ideal neighborhood. But those were the sacrifices we were willing to make. Buying isn’t the end all be all of where you live. We will continue to enjoy living in SF and slowly “move up” to bigger and better places. And then when we’re ready, if we reach that point, we’ll move somewhere else. anyway, good luck and hope you find something that works for you soon. Don’t give up!

    [Editor’s note: Lily, glad to see you back.]

  10. I think you are all probably correct – San Francisco may not be the place for us to buy. We love it here – but if we’re going to put such a large part of our financial lives into a place to live – we aren’t willing to do much compromising “just to get in”. House poverty, especially in a house we didn’t love, seems a fate much worse than renting.

    We’re a double (healthy) income family with one kid looking in Noe/Mission Dolores/Bernal/Glen Park. We’d like 2+ bedrooms and a garage for less than a million dollars. The ultra crowded 750-900 range has been our stomping grounds. There are a lot of other people with us at open houses.

    Thanks Alex for highlighting my comment. I’ll take you up on that coffee any time..

    [Editor’s note: Coffee? Email me directly and we’ll set it up. On a different note, have you thought of renting here, and buying investment property elsewhere in order to “get in the game”?]

  11. It’s a fair comment to question whether it’s worth it to endure the high cost of living in San Francisco when there are other attractive alternatives like, say, Seattle. But the original post stated: “If you want to live like a normal person you can do far better than San Francisco.” It’s one thing to talk in terms of priorities, but talking in terms of normality is meant to incite – by suggesting that there is something abnormal about (a) renting or (b) owning in San Francisco and enjoying it despite the high cost of ownership.

    Then came this follow-up comment. “Wow, a lot of sensitive San Franciscans around. When did you all become so sensitive?” This was in response to 2 posts from people who disagreed with certain aspects of the original post, including, by my reading, the tone. San Francisco has a population of around 777,000, so these two people represent 0.000257% of the population of San Francisco. I don’t think that qualifies as “a lot of sensitive San Franciscans” … indeed, even assuming for the sake of argument that both people are sensitive, I think that qualifies as, well, “two” sensitive San Franciscans.

    “I don’t recall making any comment that could be construed that San Francisco sucks.” I think it was reasonable that the following comments could be construed that San Francisco sucks:

    – “I find it over rated myself.”

    – “However, every time I go back and deal with the traffic, obnoxious SUV driving cell phone abusing people that seem to dominate the city, I wonder why it took me so long to leave.”

    – “After you live in San FRancisco or Los Angeles for a while you tend to forget what good manners and basic civility are.”

    Maybe this wasn’t meant to be construed as San Francisco sucks, but it’s not exactly unreasonable for a normal person to construe it that way, no? I mean, those aren’t exactly neutral comments, right?

    Here’s the problem: the original post alludes to some decent points, but expresses so much frustration and hostility that it drowns itself out. To me, the reasonable point is that some people who love San Franciscans can lose perspective on the trade offs they incur by living there, and might not realize that they could actually be happier in another place where they can more readily afford to own a home. I think that’s true. I do believe that many people think that San Francisco is the only place on earth they want to live, but maybe they’d find more happiness if they lived somewhere else for a bit (and realized just what they could do with an extra $1-2K per month in discretionary income).

    On the other hand, for some people, they like San Francisco and its beauty, diversity, and proximity to so many things that they are quite correct that for them, it is the best place on earth. Nothing wrong with that, right?

    The silly point to me is the stuff about SUV drivers on cell phone and rude drivers. I have lived in Austin but not Charlotte, and I can tell you that the main difference between Austin and SF in terms of cell phones and SUVs is that the SUVs are on average bigger in Austin (it is Texas after all). That’s really a completely different point from real estate prices and the high cost of living; it’s more an issue of population, which is certainly related, but complaining about rude SUV drivers isn’t exactly the most compelling argument in favor of Seattle, Austin, Charlotte, or any other major metropolitan city for that matter.

  12. I’m always wary of anyone using the word “normal” in chat or written communication. The word is fraught with judgmental, and, from my point of view, narrow-minded thinking.

    The word “natural” is so much more even handed, open minded and respectful of other opinions.

    I mean, normally, that’s how I feel. :) know, I’m just saying.

  13. “My point is that housing prices are out of this world in San Francisco.”

    When was the last time SF wasn’t one of the most expensive cities in the US? 1906?

    Corollary: when was the last time a homebuyer didn’t have to make more sacrifices to buy in SF than (most) anyplace else?

    I do agree the drivers are mellower in Puget Sound, especially when considering the traffic is a nightmare. Note I said ‘mellower’, not ‘mellow’. Puget Sound kind of blew it: building up the big fancy freeway system first, and then light-rail. But at least they are getting the light-rail in, slowly but surely.

    Now Phil, I’m assuming you don’t still have your Californicator license plates, or post on Seattle websites about your bargain Craftsman that would cost 3mil in CA, do you? You might see a different side to the kinder, gentler Seattle-ites…

  14. Yeah, I used to be an editor for Web. Certain words are loaded. “Normal” is one. (What is normal? Normal for NYC is a one or two bedroom rental.) “SUV” around these parts connotes the annoyingly unaware. And “Cookie cutter” was a dig too, among others. I think it was a bit of a slam, but not really a mean one.

    That’s why I said, “somewhat irked” and responded with a degree of humor. ‘Cauuse one thing I’m not is sensitive. My camp is pretty much permanently set up over on the moderately insensitive side of the Web.

  15. bogusaurus, I agree with your points. I agree with you that SF has always been one of the more es pensive cities but its rate of housing increase has well outstripped the rate in salary increase. This is common with big cities like ny and such but it has really skyrocketed here in SF. housing prices have like tripled in the last ten years and salaries sure have not. I think that people always had to make sacrifices but the class of people that made sacrifices has narrowed. These days the people who buy a house and make sacrafices are usually DINKS who sacrafice buying a new BMW that year. Fifty years ago a cabbie or garbage man could make some sacrifices and buy a starter home. Now a days a lot of those people could not afford it. So it has always been expensive but much more so now, when compared to salary and such. Afford ability is at an all time low and inventory just dries up, thus the squeeze we have here.

    I have toured the Pacific northwest, from Portland to Seattle and spent many weeks up there at a time. I swear., people looked at my like I was a freak of nature when they saw my California plates. And if I said I was from California they thought I was as arrogant as some 22 year old dot com millionaire right off the bat. It was like ‘ you are from California, why don’t you go back’. Not very friendly, I found it odd because I am a pretty friendly and open person. Maybe nobody in the world like California?

  16. …stepping in again. Attack San Francisco all you want. Attack Seattle all you want. Make stereotypes about both. There is nothing I can do about it, but please try and refrain from attacking each other. I know it’s not easy and we can all get a little heated, even protective of our cities and cultures, but as far as I can tell none of you know each other personally, so don’t make it personal.


    alex (the editor)

  17. shawna,

    i can understand not finding anything in noe for that price range and maybe even the other neighborhoods you mentioned as i’m not that familiar with housing prices in those areas, but bernal!?!? 750-900K range isn’t all that common of a stomping ground and you should find yourself a place with some ease. i have a co-worker who is married with a baby and his limit is 650K, looking in bernal, now that’s SOL. We are on our 2nd home in bernal and bought both places very well below your price range – our 2nd home in the timeframe you’ve said you started looking. so we’ve looked at tons of homes in bernal that fit your requirement that have sold well within your price range…the bottom half actually….nevada st (alex posted an article about) being just one of many! maybe you don’t have a good realtor. i’m not a realtor but dammit i’ll find you a place if need be! :-)

    [Editor’s note: Lily said it, I didn’t, but I’ll second it. Maybe you need a new Realtor. Loyalty is a great thing when working with one, and I can definitely appreciate if you are sticking to your agent, but damnit if we aren’t disposable. I know a few good Realtors that might be able to help. ;-) ]

  18. Shawna – I really think you should just keep on renting. The 700-900 price range is indeed super competitive for anything decent. Two people making 80K who’ve saved for 10 years are in that price range, and there are tons of people like that.

    Buying a place isn’t going to suddenly make you rich, or allow you to start a family. It sounds like you guys may be stretching, in which case I’d just wait to comfortably afford. I don’t think the market is going to runaway from you. Instead, i think the market worst case goes up 5%/yr until you are ready to buy, while your income goes up much more.

    Also, you should read all the other doom and gloom blogs. It’ll be good therapy while you wait! :) Unfortunately, I’m going to continue to feed examples of properties i see selling for new highs. I can’t wait to see what 1330 Chestnut goes for.


  19. boomtime, you can get more than just something decent in bernal for under 900K. it doesn’t sound like you know the area at all.

  20. I’ll rent ya my fab noe house for $6k a month….

    or sell it to ya for $2m…that is once I find another one as fab as mine in Noe.

    I’m just saying.

  21. …have you thought of renting here, and buying investment property elsewhere in order to “get in the game”?

    I, and several of my friends, have done this. Four years ago, I was working on a project that had me flying to Seattle every couple of weeks, so I bought a place there. After the project ended, I rented the place out. It has allowed me to live here (where I want to live) and yet still benefit from the runup in real estate. Based on comp sales up there, I’ve done quite well. Eventually, I’ll probably buy here and have a down payment ready to go – the combined equity from the Seattle house and the extra money saved and invested from renting here. Hell, things have gone pretty well for me on both counts, maybe I’ll end up buying cash in a few years :)

    [Editor’s note: That is what I like to hear! Nice work!]

  22. Shawna,

    You are in a crowded market indeed.

    Frankly I think you should give up on Noe, unless you’d like to enter more bidding wars or would like to buy a real fixer. Mission Dolores has very few homes starter homes, better luck in Castro or Duboce, which are less desirable by families but are much better than Glen park or Bernel. Trouble is that from resell standpoint, Bernel is becoming the new Noe, especially for young families.

    I expect some price correction in the next 12 months. It’s always cheaper to buy in the winter, just hang in there.

    [removed by editor…sorry. :-( ]

  23. Oliver, your story is exactly what I was referring to. The “Don’t Californicate Oregon” bumper stickers (or Colorado or Washington or wherever the California real estate refugees are moving to that month).

    It is easy for that other individual to boast to people in CA about their WA real estate exploits, but why not post the flamebait on a WA site like Rain City?

    Yes, you are right the working class squeeze is taking place. I read that even a large area like San Mateo County is having problems housing teachers and cops. I could see isolated resort towns like Telluride, but the entire San Mateo county.

    Of course, some sort of correction will come. It always does.

  24. Oops, perhaps it was bad advice to continue to invest the difference btwn your rent and potential mortgage.

    Ugly day! Wonder if money will just start fleeng the stock market and move into real estate, causing a bigger problem for potential buyers.

  25. Weren’t you the one who was talking about all of the 24 year old kids making six figure salaries who are filling up all the condos? Do you think the market dropping by hundreds of points in the space of a couple hours might make it a little harder for them to keep or get those jobs, and/or obtain a mortgage to obtain their million dollar one bedrooms?

    I mean I know the price of housing ALWAYS goes up in your view, but the market is funny how it tends to balance things out, and I suspect it would be wise to greet this news of mortgage industry implosion with something less then unbridled enthusiasm. Because, in a time when SF sales volume is at a 12 year low, this is not good news for the real estate industry.

    I’m looking forward to reading your rosy posts throught the winter into Spring. That should be fascinating.

  26. Good thing we aren’t in the real estate business then Ah boom :)

    Not 24, but 23 year old kids making $100-$120,000, 1 year out of school. 24 year old kids have 2 years experience and are making about 20-30K more than that.

    Days like Thursday really must make a lot of property owners happy they are in property, and not just investing the difference in the stock market. It frustrates me as a buyer that SF properties are still going higher and higher, but I will continue to patiently choose my opportunities.

    Despite all the pandemonium, people forget the Dow is still up 7%, and the S&P up 3.3%, and the Nasdaq up 6%.

    4Q is always the best time to buy. This is when i’ve taken advantage of motivated sellers on 5 seperate occassions. I would be all doom and gloom too if i didn’t diversify and had all my money invested in the stock market.

    Chin up Ah Boom. Everything will be alright.

  27. I was born and raised in Seattle. The only reason I can’t live there now is the weather. Drives me nuts.

  28. I love the and then. it’s moody. it’s very SF..

    It’s very Hitchcock.

    I’d rather have fog than all that damn rain that Seattle gets.

    I’m just saying.

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