by
Carol LloydSunday, November 11, 2007
F rom the mortgage meltdown to the plunge in home sales, dark clouds continue to threaten San Francisco's seemingly endless real estate summer. And yet remarkably, local Realtors I know seem as cheery as ever.
"It doesn't look slow to me," says Bonnie Spindler of Zephyr Real Estate. "I keep telling people it's not a buyer's market, but they don't believe me until they get into the trenches." She says she'd heard that the softest sector of the market was entry-level properties, but a recent open house of a six-unit tenancy-in-common building with units ranging from $500,000 to $590,000 challenged even that generalization: "I had 100 people go through the house and seven or eight requests for disclosure packages. Many of the buyers were already preapproved with loans."
Alexander Clark, whose blog theFrontSteps (
www.thefrontsteps.com) and newsletter (
links.sfgate.com/ZBMW) offer similar testimonials from the real estate front, agrees that in the city, the sky is far from falling.
"The inventory for good properties is very low and there's a multitude of buyers for good homes," he says. "For turnkey places with good remodels, priced properly, they are going fast with multiple offers."
In an attempt to explain these discrepancies, Clark's recent newsletter featured a "walk down Lake Street" - a description of recent sales activity on one street in San Francisco. "If you look at numbers, our market has slowed month-to-month and year-to-year, but Lake Street - though a tiny pocket of San Francisco - is representative of what's going on in whole city," it said.
"Literally on the same street there are places that sold with multiple offers and flew off the shelves and there's stuff that's not selling or getting big price reductions." The difference between them? Alexander mentions all the usual suspects: overpricing, lack of staging, homes with no parking, a bad layout or an unfortunate location.
Are these tales of multiple offers, bids way over asking, and legions of eager buyers waiting for a halfway decent home simply the provenance of professional optimism? Not exactly. The same rosy stories radiate from the San Francisco sellers I know.
One couple I know who bought a Victorian worker's cottage two years ago sauntered away from its recent sale with an extra $200,000 and an annual appreciation rate of about 10 percent. Buyers describe the same surreality from the opposite perspective: "We had to overbid"; "There were already three offers when we saw it"; "It's a fixer, but it's all we could find in the neighborhood."
But of course, a few anecdotes do not an economy make.
The federal, state and regional numbers paint an altogether different picture. Two weeks ago, DataQuick released a report under the headline "Bay Area home sales plummet amid mortgage woes." The release noted that Bay Area sales hadn't been so low in two decades and had declined 40 percent since last year, mostly because buyers were finding it increasingly difficult to obtain jumbo loans. (Jumbo loans have since become more available.)
The median price paid for a Bay Area home in September also dropped 4.6 percent, to $625,000, compared with $655,000 in August. A week later, DataQuick said California was experiencing record foreclosure rates - jumping 166 percent for the third quarter over the same quarter of 2006. Some of these homes no doubt are on the auction block: This week, 200 homes from a range of cities - from nearby Oakland and Richmond to farther-flung Tracy and Antioch - will be sold to the highest bidder.
Last week, an ABC News story noted that Antioch and nearby Alamo embody the striking inequities of the current real estate bust. Quoting Prudential California research, the article said home sales in Antioch have dropped 58 percent since last year, while Alamo's have risen 58 percent.
Details on the San Francisco market provide clues as to why some Realtors and homeowners are not feeling the gathering storm. Although sales are off 17 percent compared with last year, the relative lack of inventory means that demand still exceeds supply.
Compared with last year, the median price edged up 1.9 percent to $773,500. And so far, the city hasn't been hit by foreclosures' influence on home prices. According to DataQuick, mortgages were least likely to go into default in San Francisco, Marin and San Mateo counties.
As someone who has been weighing real estate statistics against anecdotes for years, I still sometimes find the whole situation confusing. So I called Ryan Ratcliff, an economist with the UCLA Anderson Forecast and author of its recent California Report, to learn how he makes sense of the apparent contradictions in the market.
"We've noticed that the hardest hit areas are those like Sacramento, where there's been an abundance of new construction," he explained. But in areas like San Francisco, where there's mostly existing housing, he says homeowners set prices based on their desires and aren't in a hurry to sell, which keeps prices high. "But builders don't look at things this way," he added. "For them, housing is inventory, like toys are at Toys R Us, so they cut prices to move homes."
Ratcliff says it's also the more modestly priced areas that have the most foreclosures. "Foreclosures have been most intense in areas where people took out adjustable rate mortgages to buy moderately priced homes," he said. "It's where first-time home buyers really stretched."
Thus, San Francisco real estate has remained relatively unscathed because existing housing immunizes it against builders' deep discounting and its affluent population is less threatened by foreclosure.
Like many people, I tend to fixate more on home prices than home sales as the meaningful statistic. After all, sales numbers may affect the real estate industry's bottom line, but not mine, right? Au contraire, says Ratcliff.
"Most people look primarily at the home prices, but for a lot of people it's just a number on a piece of paper," he explains. "The two primary influences of the housing market on the economy are in jobs: either construction-related employment or real estate and mortgage industry jobs. It's there that we expect the current housing crisis to drag down the California economy, staying sluggish through the end of 2008."
So, although San Francisco's housing market has not been hit hard like those in Sacramento and Antioch, it doesn't mean we won't feel the effects of the real estate maelstrom anyway.
E-mail Carol Lloyd at
surreal@sfgate.com.
