So which has it right? How could major statistical surveys, covering hundreds of thousands of home sale transactions, come to such utterly divergent conclusions?
Take a closer look: It's all about the underlying data and the purposes of the two indexes. The government's index taps into a vast housing database - the combined new loan and refinance transaction records of mortgage giants Fannie Mae and Freddie Mac - but omits home loan transactions on upper-bracket houses and jumbo loans above $417,000. It also omits government-insured loans (FHA and VA), has only limited coverage of houses bought by people with subprime credit, and home mortgages using various "exotic" terms that spurred sales in dozens of areas during the boom. OFHEO's data also includes refinancings, which often have more generous appraisals than do actual home sales, but exclude condominiums.
The Case-Shiller index includes no refinancings, and covers the full gamut of loan types, including the exotics, limited-documentation and subprime loans that Wall Street bought and packaged into securities. In that sense, the S&P database ranges more broadly across the home loan universe.
Which has it right? Well, Case-Shiller is tracking the real world (can you imagine any "index" that omits jumbo loans having any accuracy in the SF Bay area, where everything is financed with jumbo loans, many of them sub-prime?), whereas, as is often the case, the government is tracking some politicized, feel-good world where deficits are assets, and some real property is more real than other real property.
SAN FRANCISCO (Map, News) - The current crisis in real estate is going to hurt consumer spending, affecting businesses across the Bay Area, according to a first-ever forum on the local, near-term economy.
Consumers using home equity have been spending too much and will have to retrench — creating either a mild downturn or a recession over the course of 2008, with recovery likely for 2009, economists Christopher Thornberg and Jon Haveman of Beacon Economics said at The Bay Area Economic Forecast Series at the Hyatt Regency San Francisco on Tuesday.
Not exactly a surprise, either.
Over the past several years, there have been a significant number of locals whose homes annually made more than they did. Which did not stop these residents from spending every last cent of it.
House passes HR 1852. This raises the limit for FHA mortgages, appears to lower equity requirements (to less than zero) in certain circumstances, lowers their mortgage insurance ceiling. It also lowers the credit score minimum, and prohibits failures to pay from being reported to credit reporting agencies.
(PRLEAP.COM) Cindy Lin, Owner of Staged4more Home Staging & Redesigns, will be a speaker during the first semi-annual Hire-A-Businesswoman Week (September 17 - 21, 2007) presented by the International Virtual Women’s Chamber of Commerce for women who have been in business for 5 or more years that are looking for business support and new clients to guide their company through the growth and expansion stages.
She will be on schedule Wednesday, Sept. 19, The ABC’s of Moving Out, Moving Up, Or Just Plain Moving, to present the segment “Staging Your Home to Make it Sell Quicker”. During the segment, Lin will touch on important ideas behind staging, share her real life experiences working as a stager and examples of staging to counter the current staging myths on the market.
In a down housing market, whatever you can do to make your home the pick of the litter will be helpful. Stagers may be the only people in our business to keep on making good money - at least for a while. But it's not rocket science. You can pick up a lot of good ideas and tips from the "Sell your house" tv shows, and you can go to events like these. Anything that helps, right?
SEATTLE, Sept. 20 /PRNewswire/ -- Leading real estate Web site Zillow.com today announced a $30 million Series C round of funding led by global asset management firm Legg Mason Capital Management. The funds will support expansion of Zillow's staff of 155 employees, including a 20-person national advertising sales team. The capital also allows the company to fund an accelerated timetable of products and features for homeowners, buyers, sellers, real estate professionals and advertisers.
In the stock market, there are speculators who base their entire strategy in making profit from volatility. They don't care whether the markets are going down or up, but whichever the direction, the wider the swings, the more money they make.
Companies like Zillow - and I like Zillow a lot - benefit in a somewhat similar manner. They do well in up or down real estate markets, as long as there is a lot of buying and selling going on. What hurts them is dead markets - where not much action exists.
I think we're a fair piece from the grave-yard like silence that usually accompanies the bottom of a housing collapse, so I expect Zillow to continue to do well for some time yet.
If you have any interest in the San Francisco rental market (and as a real estate agent you damned well should) CraigStats is a place you don't want to miss.
Put together by a student who lost his apartment in an owner foreclosure, it tracks in several different ways what's going on with SF rentals, as viewed through the lens of Craigslist rental listings, by far the most complete listings in town.
One thing leaps right out at you. In the past few months rental prices have soared as much as 20-30%, depending on the area. A studio in Visitacion Valley, by no means luxury digs or neighborhood, goes for about $1300.
Check out the site, and then come back here tomorrow, and I'll tell you what that means for the SF real estate market.
So what's really going on with the rental market? As foreclosure clouds gather and everyone from first-time home buyers to veteran investors feel more pressure, why would one microclimate of the San Francisco housing market seem to be enjoying a hot Indian summer? I had always assumed that people's inability to buy expensive homes (and the correlative decline in the real estate market) would go hand in hand with people's inability to afford outrageous rents (and a correlative fall in rental rates).
But James Wavro, a broker specializing in San Francisco rentals, disagrees.
Wavro's thesis is that the SF rental market is driven by the jobs climate, and employment is still hot in SF and its environs.
The guy who invented CraigStats, on the other hand, thinks that speculators who entered the SF rental property market are getting caught in the squeeze and forced into foreclosures, thus taking those units off the market.
Wavro further postulates that "condo conversion fever" in San Francisco has significantly limited the rental inventory in the city, a proposition I find dubious, given that we are talking about a net effect of only a few hundred units, if that, given SF's draconian condo conversion rules.
So why are rents going up? The usual reasons: supply, and demand. San Francisco's rent control laws guarantee that supply will be low, although, given that new rental property construction that meets certain standards is exempt from the City's rent control laws - certainly an incentive to build, given current rental rates. My guess is that certain other factors involving the sort of extortion the City levels against would be builders for these projects has a great deal to do with the lack of new construction, though.
On the demand side, the guess that reverse commuting driven by increased Silicon Valley employment is the biggest factor. But why doesn't that also drive the housing market as a whole?
Because the fact remains that even a twenty-something making $80k a year probably cannot, under new lending standards, qualify to purchase a home in San Francisco.
My guess is that, eventually, if the nationwide credit crunch throttles the housing and ancilliary industries, we will see recessionary influences on the jobs markets as well. Employment is a trailing, not a leading, indicator. And if we see employment begin to sag, then I expect to see, if not falling asking prices for SF rentals, then certainly a sudden surge of "For Rent" signs in the neighborhoods. Signs that, I expect, will stay up a quite a while this time around.
In San Francisco, those fighting against limits to condo conversions often call tenant rights activists alarmists, claiming the effect of lifting the current cap of 200 conversions per year would be negligible. For proof they’re wrong, one need look no further than a few hundred miles north to Seattle, Washington, where high housing costs and a hot condo market recently prompted a dramatic spike in conversions. The total number of apartments converted to condos in Seattle grew from 430 in 2004 to 1,551 in 2005 to 2,352 last year.
Quite a disaster, eh? No doubt absolute proof that we need to add even stricter controls to SF rentals and condo conversions. Except...well, you know, they left something out, and it is this: Seattle, by state law, has no rent controls. That's right, none. Zero. Zippo.
So let's take a look at the "high housing costs" there, shall we?
• King County's average one-bedroom rent is $812. Two-bedroom units average $975. Both are roughly 7 percent more expensive than a year ago.
So...$812 for a one bedroom, and a whopping $975 for a two bedroom.
And how does San Francisco, which has so generously protected its renters with one of the strictes rent-control setups in the nation compare? Let's take a look at that CraigStats thing I mentioned earlier:
And that, my friends among you who rent, is what you have to thank San Francisco's rent control regimen for. Nobody has ever put it better than the NYT's Paul Krugman:
SYNOPSIS: That great sacred cow-- Rent Control-- is a textbook case of Economic stupidity
Of course, when you know this - and everybody who supervises rent control in San Francisco does know this - and you still impose rent control -then I think you progress beyond stupidity and start to enter the environs of evil.
Many of his sales are at a 10% to 15% discount to already-weak market prices...To Mr. Abbott's chagrin, many lenders don't grasp the futility of holding out for boom-time prices in a collapsing market. Lenders trying to sell a foreclosed home for $250,000 often don't react pragmatically by cutting a deal when a bidder offers $230,000; instead they might counter with a token -- and potentially insulting -- price reduction of $1,000.
There is still a lot of wishful thinking in this market.
I feel like I have to get a night job to keep my house or something," said Tony Ramirez from Sacramento. Ramirez and his fiancé Clarissa are not in foreclosure but have received notice from their lender that their loan is adjusting up $300 per month. "I'm pretty upset that when they sent us a letter saying that your house is going to go up, they didn't offer help.
Did they hold a gun on you when you agreed to the terms of your mortgage?
Some said the government should do more to help ease credit restrictions that make it harder to qualify for California's more expensive housing.
...
But Tuesday's action will bring little relief to thousands of Sacramento-area homeowners who owe more than their houses are worth, experts say. Most say today's tightened lending standards will continue to block them from refinancing their way out of trouble. That means more of the defaults that in August caused one foreclosure for every two home sales locally.
Short of simply paying off their mortgages for them, a lot of today's home "owners" (do you own your own home if it's worth less than what you owe on it?) are, simply, doomed to foreclosure.
The notion too many folks have that the government (that is, the rest of us) should protect them from their own stupidity is still far too prevalent. But that won't stop many from continuing to demand it.
I have a question for you. Let's say somebody walks into your office in this guy's financial mess.
What would you be able to do for him? Email me your response. Depending on what it is, I may be able to offer you some very targeted local advertising at very attractive rates.
The point of all this is I don't want to sell my own ads to hucksters masquerading as mortgage lenders. That's what got us all into this mess in the first place.
First the National Association of Realtors (NAR) pushed for exotic loans to keep prices rising. Then they redefined the way affordability is calculated so that housing looks more affordable than it really is. Then they demanded that the Fed lower interest rates. Then they backed the asinine Bush housing bail-out proposal. And now they are pushing for raising Freddie Mac's and Fannie Mae's portfolio caps:
The NAR is no different than the old railroad companies or, more recently, the US automakers. The key is not working harder, smarter, and with greater innovation. It is being able to leverage a government bailout.
The bubble is bursting all around us and the National Association of Realtors comes out with a report that San Francisco Bay Area median home prices increased by 13% in the second quarter. Nooooo, can it be? If you can't trust NAR, who can you trust?
Why would you trust the NAR? They are a special interest pressure group representing those of us in the real property biz. It is neither in their brief nor their intent to play up bad news about real estate, or play down whatever they can pass off as good news.
The NAR will be predicting the imminent bottom and turnaround in real estate for the next two years, and it will do so on a monthly basis. The signal you want to watch for is when the NAR finally shuts up about supposedly good news. That capitulation will indicate it's time to stick your head out of the rubble and start bottom fishing.
Homeownership for most San Franciscans is unreachable, according to a recent report by the National Association of Homebuilders, which said less than 6 percent of Bay Area homes on the market are affordable to households with an income of $86,500. Not surprisingly, 61 percent of San Francisco households are renting, compared with 33 percent nationwide.
Recognizing the high cost of housing, city leaders have tried to maintain economic diversity. In addition to federally subsidized public housing and housing vouchers for the lowest-income households, San Francisco has laws that mandate rent control, provide taxpayer-supported subsidies used to create housing units, and require private developers to fund affordable units when they want to create market-rate projects.
Of course, "local officials" have not done the one thing that could bring down all prices - repeal rent control and remove the incredibly complicated and restrictive zoning and building process that keeps the market from knocking those prices down.
They won't, either. Too many powerful people have too much invested in keeping those prices as high as possible.
Here is a graph of starts and completions. Completions follow starts by about 6 to 7 months.
My forecast is for starts to fall to around the 1.1 million units per year level; a substantial decline from the current level. Goldman Sachs' forecast is for 1.1 million units, and UCLA is for 1.0 million units.
Of interest beyond the possibilities of further considerable drops in housing starts, is what the graph may portend about the possibility of a recession.
And if we move into a full blown recession, the last remaining support for the Bay Area housing market - jobs - may abruptly vanish.
Rotten Neighbor is building a database of bad neighbors, complete with what makes them so rotten. Find the noisy, annoying scoundrels by zip code. There is a nice mapping feature that’s let’s you zero in on these property devaluing unzillowables.
Something about this strikes me as major tort bait, but the notion is certainly appetizing, isn't it?
Eventually, I suppose, every home in the world - and every person living in one, will be annotated in some way on Google Maps or Google World.
Curbed SF has re-incarnated (re-vivified? re-built? re-webbed?) itself, and is back in smart, snarky business. If out-cheeking the poor saps crammed into Manhattan in January or August is your game, this is your playground. Oh, and they've added a foodie-trendy-nightie blog, too: Eater SF.
Robert J. Bruss, an author, investment expert and syndicated real estate columnist whose advice appeared in newspapers across the country for more than two decades, died Wednesday at his Burlingame, Calif., home, according to Inman News, the Emeryville, Calif., news service that distributes his column. He was 67.
Bob Bruss, whose career started and was based here in The City, was one of the finest writers ever to grace the real estate pages of any newspaper, period. He will be missed.
Several months ago, Eugene Wright found a foreclosure notice posted on the door of the three-bedroom South San Jose house he and his family had been renting since January. He called his landlord, who told him not to be concerned. It wasn't until a real estate agent showed up in July to tell him that a bank had repossessed the house that he realized he had to move.
Given that about two-thirds of SF's residents rent, this sort of thing would have the possibility of causing widespread chaos. But SF's rent control laws don't permit evictions except for "just cause," and the permissible causes don't include foreclosure.
Breathe easier, San Franciscans. You'll miss at least this much of the potential horror of a bubble collapse. The banks may not be too thrilled, but frankly, banks are pretty low on everybody's pity list.
