Prediction: California Real Estate

[Sam]

pssst: the rental market will become increasingly strong. Great news for the landlords in this area

Not sure about this one. True, that rental will have less vacancy, but won't the rent price decrease significantly? Pure speculation on my part, as I could never understand these highly speculative markets.

 

[Brat]

I read a related article on that site, the % of owner occupied is increasing, investors and flippers decreasing.

There is relatively low turnover of homes in the Bay area because if its tax structure (if you inherit you keep the tax limitation), thus a pent-up demand. As a result locals remain in rental housing longer than the norm and those who do buy often have long commutes to find an afordable home.

When gas prices increase those long commutes decrease the afordability of those houses, and if there is an opportunity to move closer to work they will.

Another factor for the up-scale segment are stock options from the likes of Google.

 

[Sam]

Bargain-Hunting in San Diego's Real-Estate Slump

http://www.npr.org/templates/story/story.php?storyId=6284610

I think it's still too early to bargain hunt now. But this guy, Gene Burns, thinks "the time for buying is almost ripe", only to be questioned by one of his student "How do we know that, if we buy now, it won't drop even lower?"

 

[cube_rat]

Interesting article in SFGate regarding rental market in this area:

http://tinyurl.com/yehgrl

Also, can't forget the reported spikes in foreclosures in the Bay Area:

http://tinyurl.com/wpjpr

 

[Sam]

Thanks cube_rat. You're right, rental prices is going up!

Excerpt from the first article:
The average price of a one-bedroom apartment in the area that includes San Jose, Sunnyvale and Santa Clara jumped 11.4 percent to $1,296, while the rent for the same-size unit in the region that includes San Francisco, Oakland and Fremont climbed 7.3 percent to $1,268.

And the spike in home loan default is scary.

 

[honobob]

Interesting forecasting, boldfaced.* Let's revisit a year from now.* I bet the forecast is wrong.


SAN FRANCISCO, Sept 28 (Reuters) - The slowdown of California's housing market has become a drag on the state's economy as home building and financing payrolls thin, but the most populous U.S. state will avoid recession through 2008, according to a UCLA Anderson Forecast report.

The report, released on Thursday, projected California will through 2008 post overall payroll growth of around 1 percent, a rate similar to that in the first half of this year.

"The housing market has continued to soften and real estate-related employment has moved from a major engine of growth in 2005 to a drag on growth in 2006," the report said.

"Looking forward, the forecast calls for a similar picture," the report said. "Real estate sectors will continue to decline, but without significant declines in another sector, the net result will be a slowdown, not a recession."



Building permits in California will continue to decline, hitting bottom in 2008, the report noted.

A separate report by the economic forecasting group predicted that while home sales in California fall, home prices will not.

The report said California's homes market is "very far from a Great Comeuppance in which the extraordinary appreciation of the last five years is taken away."

"Here in California, though sales rates have plummeted, prices overall continue to push upward, though at a much slower rate, while some cities have experienced modest price declines," the report said.

Without severe job losses forcing home owners to sell houses, home prices in California in five years will be about the same as today, the report added.

Well it's been a year. I know quite a few of you have predicted the top (2004) and the fall of CA real estate. Thought I'd confuse you with some facts.

1920 Jones Street condo sold 8/2004 $1,250,000 Resold 8/07 $1,750,000
12% compounded yearly appreciation since the TOP?
461 2nd St 102G condo sold 2/2003 $650,000 Resold 7/2007 $1,029,000
12% compounded yearly appreciation.

Check this out. In July 1995 429 Baker condo sold for $255,000. In August 2003 it resold for $651,000. $255K compounded at 12.5% yearly to 2003 would be $654,275!!! $3,275 off the mark. You could almost set your clock by it. But wait, it sold again in August 2007. 12.5% compounded would be $1,042,776.

Who wants to guess the sales price??
Yep! $1,039,000 $3,776 off the mark.

My 21 years of 11% annual compounded appreciation is sucking! Maybe I should buy a bond or stock or something.

 

[CuppaJoe]

pssst: the rental market will become increasingly strong. Great news for the landlords in this area

My landlord is offering a one-bedroom in my building (S.F.) for $2,350 which I'm sure he will get. A year and a half ago it was rented for $1,600. Scary to know that Google is busing people to their apts. into the city. Rumor has it that the buyout offers for one bedroom apts. are $24,000 and up to mid-five-digits.

 

[Martha]

Existing home sales fall to record low - Yahoo! News

 

[lazygood4nothinbum]

hate to burst your bubble but according to DQNews - Bay Area Press Release - October 2007

Bay Area home sales plummet amid mortgage woes
October 18, 2007


La Jolla, CA.----Bay Area home sales sank to their lowest level in more than two decades in September, the result of a continuing market slowdown and borrowers' increased difficulties in obtaining "jumbo" mortgages, a real estate information service reported.
A total of 5,014 new and resale houses and condos were sold in the nine-county Bay Area in September. That was down 31.3 percent from 7,299 in August, and down 40.1 percent from 8,374 for September a year ago, DataQuick Information Systems reported....

The median price paid for a Bay Area home was $625,000 last month, down 4.6 percent from $655,000 in August, and up 0.8 percent from $620,000 for September last year. If the jumbo-financed portion of the market had remained stable, last month's median would have been $654,000.

or HousingTracker.net: Median Home Asking Price & Inventory Data for San Francisco, California

San Francisco, California

The San Francisco-Oakland-Fremont Metropolitan Statistical Area approximation has 21,894 total listings of which 18,801 are either Single Family or Condo homes (browse San Francisco homes). The area includes the major cities of Berkeley, Concord, Daly City, Fremont, Hayward, Oakland, Redwood City, Richmond, San Francisco, San Mateo and many others. See also housing affordability for San Francisco, California

Weekly Data

Weekly inventory and median asking prices for Single Family and Condo homes (together) are displayed in the trend box below. 25th and 75th percentile prices for the last ten weeks are shown in the table. For a longer history of trends see the averages data further down.

Trend10/22/20071 month3 month6 month12 monthMedian Price$585,000-2.2%-2.5%-2.8%-9.9%Inventory18,801-2.6%+6.3%+33.3%+21.2%

or even California Housing Market, Los Angeles, San Diego, San Francisco, San Jose

San Francisco, however, has become a new market of sorts with a large migration of former Hong Kong citizens, which led to more properties without financing than at any other time in The City’s history. But appreciation has all but stopped in the City by the Bay and it is projected to fall another 8.9% in 2007.

 

[figner]

This morning getting ready for w*rk, I saw an infomercial for Trump's "proven real estate investment techniques" for making money on foreclosures. Now I'm no expert, but that looks like an indicator to me that folks are still way too optimistic about RE.

 

[twaddle]

 

[honobob]

hate to burst your bubble

LGFNB Don't you get it? There is no bubble! All this talk about asking prices dropping but no one in 4 years has posted a verifiable resale at a lower price. I can only find resales that support 12% YOY appreciation.

The big reported decreases (11-12%) in the "Bay Area" were Napa and Solano counties (wine country). These are not highly populated areas. So Mr. and Mrs, well or Mr. & Mr./Ms. & Ms. San Francisco realize their home is up $500K and think it would be nice to buy a place in the country for $300-400K. Things look so cheap so they have no problem driving the prices up and probably overpay. Things settle out and people read the paper so 2nd homes in Napa and Solano drop 12% so their $400K country home is only worth $352K. Life as we know it stops...or maybe not. Their SF condo that has increased in value $500K in the last 3 years. They're down $48K in Solano. Still up $452,000 in three years!!!

Alameda County got hit almost 6%. There's a huge new "manufactured" town called Mountain House about 60 miles from SF. Probably alot of money spent out there that shouldn't have been. Values are going down out there because the developer is underselling earlier buyers. I suggest never buying into a new development unless it cannot be duplicated elsewhere.

Then there are all the people who undersold in fear after seeing some unanalyzed graph and those who paid too much trying to save on a REALTOR fee and then sold for too little trying to save on the REALTOR fee.

Sorry LGFNB, you actually need a bubble to burst.

 

[twaddle]

There is no bubble!

honobob, for that to work I'm pretty sure you need to say it three times while clicking your heels together.

 

[Martha]

Hey, Sam started this thread. Where has he been? Haven't seen him around for quite a while.

 

[REWahoo]

He was on the forum a couple of hours ago, so he's around.

 

[honobob]

honobob, for that to work I'm pretty sure you need to say it three times while clicking your heels together.

Twad Don't I always give you at least three good comps?

1920 Jones +500K
461 2nd St. 102G +$379K
429 Baker +$388K

You have no power here! Now begone, before somebody drops a house on you!



Glinda, the Good Witch of the North(ern California)

 

[twaddle]

Twad Don't I always give you at least three good comps?

I appreciate your efforts, but the OFHEO has you beat. Like you, they use a repeat sales methodolgy. But unlike you, they have a large sample size -- about 40% of actual sales (limited by the mortgages that Fannie and Freddie purchase).

 

[honobob]

I appreciate your efforts, but the OFHEO has you beat. Like you, they use a repeat sales methodolgy. But unlike you, they have a large sample size -- about 40% of actual sales (limited by the mortgages that Fannie and Freddie purchase).

Good try Twad! I am their source and I access 100% of the actual sales! I wonder if any of the resales I've posted were used in their limited sampling? Could make their efforts meaningless. You have a graph that shows 100% is more than 40%, right?

But really it's just about you believing in half price beach front property. Well maybe in Kansas. Just posting some factual information. Your beliefs don't change that a bit. Get your OFHEO to give you an address of a lower resale and wave that to the masses. It's not an arguement.

 

[mb]

Bay area is not one market. The south Bay is impacted by options, aka Google employees and their ilk.

I have heard that there is a pretty significant Google effect in Mountain View.

 

[mb]

The antedotal evidence that I have seen suggests that honobob is at least partially correct. He is not saying that real estate is up everywhere just in some of the areas that he is interested in and from what I have seen that is right.

It really seems to be a tale of two markets in the SF bay area.

A couple of weeks ago they had an article in the San Jose paper about the Mountain Home development. IRRC, recent buyers had paper losses on the order of $100k in a couple of months. This is an area in the central valley on the out skirts of the metropolitan area where there is a lot of land and a lot of new mini-McMansions and where houses are cheap for the bay area because the commute is terrible.

That same week I got a flyer in the mail showing that about 1/3 of the sales in my area were ABOVE the asking price. Now that is a bit of a decline because a couple of years ago it was 2/3. This is a close in area with modest homes built after WWII. But prices are high because it is a very easy commute to all the major employers in Silicon Valley. Prices are $700k-$1,200k for a 50 year old 1400 to 2000 sq ft house. There is little new housing in the area because it was built out many year ago and there isn't any land left. There was little turn over during the run up. I don't know how many were refinancing and taking money and that's a factor that I can't even guess at. But the economy is good and no one is losing their jobs so very few are forced to sell because of a drop in income. My impression is that prices have been stable for the last couple of months. I don't think that there are any major factors driving the prices higher but I also think that many of the factors causing major decreases elsewhere aren't as strong in my particular micro-market.

Now I don't think that bay area real estate will be a particularly good investment over the next couple of years in even the better markets. I think that it will probably go side-ways at best for a while and it is just so expensive that many people are priced out of the market. But I have been wrong on that prediction for the last 20 years and may be wrong for the next 20. Sort of a market can stay irrational for longer than you can stay solvent sort of thing.

MB

 

[tryan]

Quote:
Originally Posted by cube_rat

pssst: the rental market will become increasingly strong. Great news for the landlords in this area

My landlord is offering a one-bedroom in my building (S.F.) for $2,350 which I'm sure he will get. A year and a half ago it was rented for $1,600. Scary to know that Google is busing people to their apts. into the city. Rumor has it that the buyout offers for one bedroom apts. are $24,000 and up to mid-five-digits.

Interesting ... rents - and therefore prices - will certianly continue to increase as long as GOOGLE keeps pumping. Question is how long can they keep pumping ... and is this a one horse town?

pssst: I won't be buying SF RE any more than I'ld be buying google stock.

 

[honobob]

(It's not that easy to find 03-04 pruchases that then sold in 07. Most people hang on for the appreciation.
1919 Broderick condo 04 $855,000 Sold 07 $1,100,000 +245K 10.5% yearly
2565 Washington condo 04 $1,710,000 07 $2.4M + $690,000 12.5%
2312 Divisadero condo 03 $1,300,000 07 $2,350,000 +1,050,000 16%

 

[tryan]

ah-oh ...

In the Bay Area - which, by the California Association of Realtors' measure is made up of Alameda, Contra Costa, Marin, San Francisco, Santa Clara, San Mateo and Solano counties - sales of existing, stand-alone homes plunged 45.6 percent between September 2006 and September 2007, while the median sales price slid 5 percent to $702,240. September's median was a whopping 17.7 percent below May's peak of $853,910.

"We see a sea change almost overnight in the Bay Area," said Robert Kleinhenz, economist with the trade group.

Home sales plunge in September

 

[honobob]

ah-oh ...

And yet actual resale prices are up 12%. Makes you wonder what a reporter will do to sell some papers. Of course he is reporting on a very large area and seems to attribute the decrease not to lack of demand but to the mortgage mess. After the taxpayers bail out the mortgage companies and the subprime borrowers I think we'll see a spike in sales and prices above the normal double digit appreciation.

 

[calmloki]

Property tax statements have hit the mailbox: What's your guess; did they go up or get higher? You're right! Perhaps worthy of note: the tax appraiser's True Cash Value (lower than what i think the properties would sell for) is up more than 10% over last years TCV. That means the appraiser thinks the value of our properties went up about $60k more than we showed as total income on last year's taxes. Dang rentals.

BTW: Oregon here, not Califormia