Thursday, January 17, 2008

Holy Crap! It's getting rough out there!

DataQuick reports today that Bay Area sales ended 2007 at a more-than-20-year low, with last month being the slowest December since DataQuick started their stats in 1988!

Sales have decreased on a YOY basis for 35 consecutive months, and according to DataQuick the city of San Francisco saw a 24.4% drop in sales volume versus last year, and a 1.9% drop in the median sale price.

Intriguingly, there are still people out there who think RE is the path to wealth:

Indicators of market distress continue to move in different directions. Foreclosure activity is at record levels, financing with adjustable-rate mortgages or with multiple mortgages has dropped sharply. Down payment sizes and flipping rates are stable, non-owner occupied buying activity is edging up, DataQuick reported.
I'm calling this how I see it: clearly we still have some very foolish investors out there. There wil be some who will make money regardless, because even a broken watch is right two times a day, but many, if not most, of them will suffer a great deal for the mistake of buying at the start of a down cycle. We have a lot of room for downward momentum, and once it kicks in (I'm not even considering it an "if" at this point) a feedback loop will be established where buyers will grow increasingly reluctant to buy as prices drop further, which of course will only exert more downward pressure on pricing. As we are all seeing, real estate prices move slowly. So this can literally take years to play out, and in some cases, decades. You aren't going to see the bottom of the market until the volume starts going up significantly, and right now it's been 35 months (three years!!!) since we have seen any sign of that as compared to prior years. We have a large number of option resets headed our way, and a possible recession to deal with. There is a storm gathering here and a lot of people are going to get hurt. Be careful out there!!

Wednesday, January 16, 2008

Realtor Massacre - SFH sales volume down 27.9%

The buzz this morning via is the new SFAR (San Francisco Association of Realtors) report which shows a stunning 27.9% drop in sales volume as compared to December of 2006.

This is catastrophic for realtors. As I pointed out in the comments in this post on The Front Steps, it is much better for realtors if prices decline then if sales volume declines. You can't collect a commission if the house isn't selling! In this case we have 61 less homes sold within a single month. If all these homes were all priced at the median price of $800k that's $48 million dollars of sales that dissapeared. Which of course translates to roughly 2.5 million dollars in realtor commissions that evaporated out of a total pool of roughly 8.6 million. That's a lot of missing money for a single month!

If realtors had sustained volume by being more successful at encouraging owners to drop their prices they would have fared much better. For example let's say prices had fallen citywide a jaw dropping and unheard of 10%, the realtors would be looking at a loss of only $860k for the month.

So if you are a realtor, and you want your properties to move, I would strongly urge your clients to start dropping prices.

Sunday, January 6, 2008

What's The Diff?

We're going to start 2008 off with a bang here and start a new feature where we take a look at some of the pain in SF real estate. Looks like some folks have discovered that real estate doesn't always go up. Know some of the back stories? Share them with us!


61 Ina Ct.
Last Sale: $730,000 (07/18/2007)
Asking: $650,000
What's the diff? $80k in about six months.

Even in Bernal Heights!
38A Elsie
Last Sale: $695,000 (08/25/2006)
Asking: $550,000
What's the diff? $145k in 17 months.

Another Bernal haircut...
277 Bradford St.
Last Sale: $775,000 (10/10/2006)
Asking: $675,000
What's the diff? $100k in 15 months.

Missing money in the Mission.
1800 Bryant #311
Last Sale: $739,000 (11/22/2005)
Asking: $625,000
What's the diff? $114k in 50 months.

Western Subtraction?
2529 Post
Last Sale: $756,000 (07/30/2007)
Asking: $669,900
What's the diff? $86k in six months.

Downside in Ingleside
230 Howth St.
Last Sale: $745,000 (08/31/2005)
Asking: $650,000
What's the diff? $95k in 52 months.

Keep in mind these are just the differences on buying and selling. Don't forget a true measure of loss would measure closing costs, sales commission, property taxes, carrying cost, etc. If you really want to measure the pain, use the infamous Submedian Spreadhseet and you'll see just how bad it really is.

BTW, Crocker Amazon, Excelsior, Bayview? Just too damn many to list. Seriously, there must be over a hundred properties in the city right now selling for less then what they paid for. Just a year ago that would be inconceivable.