Inventory continues to decline
The MLS hit its 2006 active inventory peak in October, and other than a couple of weeks of increases at the beginning of January 2007, we see yet another week of lower active inventory today.
For comparison, today’s active inventory of 955 properties is lower than ANY WEEK in 2006 (other than the week after Christmas).
Smart/quick/aggressive buyers can still find deals, but it’s the sellers who are benefitting right now.
Buyers who think that that the slow-decision-making of last fall is still an option will likely find themselves missing the good properties.
Sellers who are arrogant enough to think that low inventory will still sell their piece of crap without preparation or staging at an all-time-high price are also being passed over.
Anyone who was/is predicting doom and gloom for the SF housing market, what’s your position now? I’d also love to hear from those who argued against my supply/demand comments last year…
Matt,
Two things:
1) “Having worked in San Francisco real estate since 1998, I have been along for the ride for most of this currently hot market.”
When are you going to change that statement to reflect the actual market?
2) I think I know an unsustainable trend when I see one:
http://macromarkets.com/csi_housing/MSA/san_francisco.asp
http://mysite.verizon.net/vodkajim/housingbubble/san_francisco.html
Or:
http://tinyurl.com/2ylf4t
http://tinyurl.com/34lmyl
sf jack at February 26th, 2007 at 10:07 pm ( )Not sure how you can even ask me about #1. Buyers still can’t afford anything close to what they would like in this town, and sellers keep getting higher and higher prices. Why is the statement on the byline not accurate?
As for #2, if it’s so unsustainable, how does it keep happening? I see more buyers this year than last, and (at least for the time being) fewer properties.
In the parts of the market where we are seeing saturation (SoMa and SoBe), we are seeing considerable shifting (mostly in free HOA dues, upgrades, etc). But in the traditional SF neighborhoods, where a far larger number of buyers want to live, there’s nothing keeping buyers away.
Sure, prices keep away those who can’t afford to buy, but there are still more than enough buyers to drive this market right now.
And with 50% of last fall’s inventory, it’s definitely a seller’s market right now.
Looking back at 2006, that was a balanced market. More buyers (who weren’t fooled by the media hype) were able to buy due to increased opportunities and inventory, and sellers still got very good prices for their sales.
I really couldn’t tell you what will happen in June and July (and beyond) when the inventory traditionally spikes, but for now, the market is still quite ‘hot’.
Thanks, as always, for your comments.
Matt Lanning at February 26th, 2007 at 10:36 pm ( )According to this site, SF inventory has been very slowly increasing since the start of the year and is about 15% higher than a year ago:
http://www.housingtracker.net/old_housingtracker/location/California/SanFrancisco/
Anonymous at February 26th, 2007 at 11:24 pm ( )silly blogging software… try this url:
http://tinyurl.com/2b3ewa
Anonymous at February 26th, 2007 at 11:26 pm ( )Matt,
Re: # 1 above
Besides disagreeing with your statement about “higher and higher prices”, I reviewed the below items and I have to inform you that none of them (as in zero) struck me as appropriate for describing the San Francisco housing market.
In fact, this one seemed a particularly contrary description:
“Requiring immediate action or attention: a hot opportunity.”
(Actually, it may not need that sort of attention anytime before 2012, and perhaps not even by then)
**********
“hot
(hŏt) Pronunciation Key
adj. hot·ter, hot·test
Having or giving off heat; capable of burning.
Being at a high temperature.
Charged or energized with electricity: a hot wire.
Radioactive, especially to a dangerous degree.
Marked by intensity of emotion; ardent or fiery: a hot temper.
Having or displaying great enthusiasm; eager: hot for travel.
Informal
Arousing intense interest, excitement, or controversy: a hot new book; a hot topic.
Marked by excited activity or energy: a hot week on the stock market.
Violent; raging: a hot battle.
Recently stolen: a hot car.
Wanted by the police: a hot suspect.
Most recent; new or fresh: a hot news item; the hot fashions for fall.
Currently very popular or successful: one of the hottest young talents around.
Requiring immediate action or attention: a hot opportunity.
Performing with great skill and daring: a hot drummer.
Having or characterized by repeated successes: a player who is on a hot streak.
Fast and responsive: a hot sports car.
Unusually lucky: hot at craps.”
The American Heritage® Dictionary of the English Language, Fourth Edition.
sf jack at February 26th, 2007 at 11:54 pm ( )Hi Matt,
I’m not a doom-and-gloomer, but what puzzles me about SF is the fact that nearly 80% of all purchases here are financed via ARMs and with very low downpayments. I understand that people are using “creative financing” to “achieve affordability” but isn’t this incredibly risky in a flat market? I mean, if they can’t truly afford the house and can’t come up with a sizeable downpayment, then maybe there shouldn’t be so many buyers.
Prices were basically flat last year (adjusted for inflation) so these buyers can’t assume they’ll be able to refinance their way out of a massive increase in payment once the ARM resets. It just seems to me that risky financing is continuing to drive prices higher, which typically ends poorly in the long run.
What do you think?
-Dave
dave at February 27th, 2007 at 12:28 am ( )First, Anonymous (who commented on the inventory), on the site you reference, they state that the data includes “Brisbane, Broadmoor Village, Colma, Daly City, Millbrae, San Bruno, South San Francisco”. I have never pretended to include any of those areas in my data, and that site also only gathers data that is publicly available. My data (which does not include the large numbers of high-rise, new construction projects in SoBe) is directly from the MLS, and is as accurate as the MLS is. Additionally, public data does NOT include all available listings.
The inventory peaked at over 1800 listings in October, dropped below 800 just after Christmas, rose to 1000 in early-January, and has dropped each week since. That number is now at 955.
At the beginning of 2006, we never saw numbers below 1000, and we saw rising inventory throughout January and February (and beyond).
The whole point of my spending time on this blog is to give you a perspective you can’t get from some coder who knows how to scrape publicly available data from Realtor.com.
–
Dave, I can’t speak for everyone, but knowing what my clients are doing and speaking with my favorite mortgage broker, we aren’t seeing many adjustable loans being used right now, and haven’t seen that since rates shot up last year.
The rate for the 30-year fixed is the same or better than the 5-year ARM, so unless you’re going for the starter-rate-negative-amortization loan, I think everyone is running their loans rather conservative.
I’m also seeing a lot more 20% downpayments. Lots of money coming from parents, etc, in order to avoid the riskier loans.
Again, I can only speak of the deals that I have first or second-hand experience with, but that’s what I’m seeing.
Matt Lanning at February 27th, 2007 at 2:33 am ( )Matt,
I was part of the supply/demand party last year. I still believe!
Cheers,
Shawn @ Entroporium at February 27th, 2007 at 3:56 am ( )Shawn
Ah… here we are…
The “Map of Misery”
“The Percentage of New and Refinanced Mortgages Into Loans With Payment Options”
http://www.businessweek.com/common_ssi/map_of_misery.htm
Or:
http://tinyurl.com/laz9y
******
Nope – no affordability issues here at all.
Parents and rich uncles everywhere available for 20% downpayments. And let’s not forget the foreigners, boomers from the Heartland, and Googlers – just dying to be throwin’ their cash around.
Never mind what fundamentals say: that wage growth has been flat to barely perceptible, that population is down and inventory (imagined, public, private, otherwise, what have you…) is UP.
I’m tellin’ you, this market is solid!
If not outright “hot!”
sf jack at February 27th, 2007 at 6:41 am ( )Jack -
You’ve shown your moments of fair-mindedness, but for whatever reason you’ve gotten a little bitter over the holidays.
I’m not trying to sell anyone on this market or any other market. The fact has been, and continues to be, that there are people who are going to transact real estate in this town no matter the economics. And all I’m doing is helping people who will be doing the buying and selling make smarter decisions.
And if you are coming into this market from somewhere else (pretty much anywhere else, other than resort towns like Aspen), this is a very fast-moving market.
Or to quote your definition above, “Marked by excited activity or energy: a hot week on the stock market.”
I really don’t care whether people listen to, or agree with, what I have to say.
I call it as I see it, and for more than a few people, that has made a positive difference in their real estate decisions.
And that’s all I am here to do.
Matt Lanning at February 27th, 2007 at 6:49 am ( )I’m always amused by those that think they can predict the real estate market by looking at past numerical indicators. If we’ve learned anything it’s that the past ten years have defied logical number trending. If one is soley relying on numbers for their analysis of the market they are going to be consistently behind the trend.
It is better to look at the over all health of a particular buisness economy in the area – commercial rents are inching up to their 2000 highs as an example.
Anonymous at February 28th, 2007 at 6:43 pm ( )Anonymous -
I agree with what you say. But I have posted these numbers to give consumers some perspective about why the market is suddenly like 2005 all over again.
I see lots of trends year-over-year for the years that I’ve been in the market, and they continue to play out fairly regularly.
But as we continue to see, the market has a life of its own, and very few people would have been able to predict the strength of the market in February 2007.
And I appreciate your mention of the commercial market. It does provide a bit of an indicator, relative to the health/strength of the economy, as well as the buying power of consumers who may now be more gainfully employed than they were last year.
Matt Lanning at February 28th, 2007 at 8:51 pm ( )Matt -
All I’m trying to do is to inject some reality into this discussion.
anonymous #312,221 (February 28, 2007 10:43 AM):
Thanks for the philosophy.
Now I have a couple of questions:
1) Just how did the local economy do after commercial rents hit their peak in 2000?
2) $1 trillion of Adjustable Rate Mortgages will reset in 2007 in the United States – do you expect this could have an impact on the local economy?
sf jack at February 28th, 2007 at 8:56 pm ( )Hello Matt,
Appreciate your updates on housing in SF. I can see you are here to inform not just regarding the housing market, but also the neighborhood projects/plans (good or bad) that are going on in SF. I check back often to see what new happenings are going on in SF.
I was in the market for a condo in the peninsula area for a while now without pulling the trigger as I wish to stay within my means and avoid buying with the expectation that appreciation will bail me out.
My question is: I see how real estate agents respond to media posturing. But what have you heard from real estate professionals in response to additional housing data out there? To me, it seems not all, but many people in the real estate business focus selectively on favorable data and voice their concerns/suggestions.
How does the real estate industry respond to fundamentals that indicate real estate is a “low value/return investment now”.
I don’t expect you to go through this hour long presentation, but I found it very informative – especially the last 30mins regarding the housing bubble. It is from Senior Economist at UCLA Anderson School of Business:
http://video.google.com/videoplay?docid=-2640239019877885520&q=housing+bubble+boom&pr=goog-sl
Appreciate any of your feedback and comments.
Best,
Jimmy at March 2nd, 2007 at 7:50 am ( )Jimmy
Sorry, the link to the UCLA MBA presentation on Housing:
http://tinyurl.com/2c33wk
The last 30 to 20 minutes refer to fundamentals that explain why there’s may be a slowdown.
Best,
Jimmy at March 2nd, 2007 at 7:53 am ( )Jimmy
Jimmy -
I can’t speak for anyone else, but although it might seem like I only focus on favorable information, I just choose not to post the sensational journalism that drives most media outlets. When I completely disagree with something that was written (based on personal experience and/or data), I see no reason to promote someone else’s agenda.
I try to post the realities of the market as I see them.
And you don’t see that much negative news from me because I just don’t see the market as negative.
You may argue that if you wish, but until you are actually working in real estate and seeing the transactions happen, a non-agent couldn’t understand how stable this market really is (or appears to be from my standpoint).
I don’t pretend to know anything about the future of the market, but trends have been very consistent in my tenure in SF, and until I’m proven completely wrong about something, I’d like to think that the information I provide would allow a savvy homebuyer or homeseller to make smarter choices than they would have otherwise.
If you have been reading for a while, you know how much respect I have for the UCLA/Anderson forecasters. They’re as sensational as the media.
As for the ‘low value/return’ comment. I just don’t believe that. Sure, you can find buyers who made bad decisions that were advised by bad agents, or sellers who just don’t get what it takes to sell in this town, but in general, this market is solid.
All of my clients who bought in 2005 could more-than-likely have sold at a profit in 2006, and all of my clients who bought last year could more-than-likely sell at a profit right now. And at a higher return than they would have gotten in a more traditional/stable investment.
Thanks for reading!
Matt Lanning at March 3rd, 2007 at 6:48 pm ( )Inventory is low because only the people that need to sell are actually selling. Buyers that need to buy are buying. There are always more people (demand) in SF than supply so this market is always going to be slow to react/adjust but its not bullet proof.
We are not seeing 2005 bidding mania where prices are premium at per sq ft and still getting multiple offers above asking. That market is gone. If a proerty is getting multiple offers now, its because (gasp) the realtors are doing a good job of pricing the property just below the current market to drive interest.
See here: http://tinyurl.com/2owxxu for a current such example.
A.
Anonymous at March 8th, 2007 at 9:08 pm ( )