The chart shows that nominal (ie. not inflation-adjusted) prices hadn’t shown an actual decline in over 50 years prior to 2006/7.  Real (inflation-adjusted) prices have fallen in previous recessions, though with the exception of 1980-82, those declines were pretty small.  This time round, though, we’re down big-time.

An inflation-adjusted annual average price growth of 1.3% sure doesn’t sound like much to me.  And that number’s not going up a lot even if you discount the suislide of the last three years.  Proof that a home isn’t a “good investment?”  I’ve never suggested that it is.

Doesn’t look a whole lot better even after you factor in leverage.  If you’ve put 20% down, the rate of return on your equity increases five-fold.  Now we’re up to a whole 6.5% gross return.  But that’s before all the expenses of ownership not to mention the endless lists of things “to do.”

Of course, the real reason to buy a home is because it’s about “shelter” in the broadest sense of the word.  It’s as basic as finding a comfortable cave for yourself and your loved ones and painting beautiful drawings on the walls.

First, a look back (in anger?) at the make-up of Noe Valley sales in 2009.

Note that there were more than twice as many condos sold as TICs, and more homes sold than condos and TICs put together. (What’s a TIC?  — Check out my series of posts on Tenancy-In-Common Interests, starting here.)

Also, that absurdly long DOM for TICs was distorted by 3 TICs at 201 Hoffman that took 410 days to sell.  Still, without those sales, DOM for TICs (tired of the acronyms yet?) was still 99 days.  And I’d be somewhat skeptical of the whopping difference in price between TICs and condos as well:  TICs sales often don’t have a price per square foot listed, so there are very few data points — and there are very few sales to begin with.

Here’s how condos and TICs have been doing as a combined group, versus their all-time highs.

That precipitous plunge (actually a huge increase since the scale is reversed) in DOM at the end of 2009 was also due to the lingering effects of 201 Hoffman.

For a shorter term view, prices through February 2010 are up 11% from January 2009 and are up a whopping 31% from the trough of June 2009.  Since I use trailing 3 month averages, I think this is a belated reflection of the deep credit freeze of Spring 2009 when we thought the world might come to an end.

And here’s how condos and TICs stacked up against homes.

For what it’s worth, it feels like spring has really sprung.  Nice-looking condos/tics are swarming with people and are moving fast — no kidding.  Whether it will last is anybody’s guess.

Author: Jack French -- Used under Creative Commons Permission 2.0

Back in May 2009, I showed that Noe Valley was not immune from the slump in prices affecting the rest of the city, despite suggestions to the contrary from real estate agents, mavens and media.

Have things gotten any better?  Well, no.  And maybe.

Here’s a chart showing percentage change in single family home prices for the last 14 months, relative to their all-time highs  (click to enlarge).  (All figures are 3 month moving averages.)

After reaching an all time high in March 2008, prices plummeted.  Just a year later, in the midst of fears of a global Depression, home prices were down 30%.  Did things get better?  No, they got substantially worse.  Despite an impressive  city-wide recovery in 2009, with prices going from 30% down to around 18% down for single family homes at  year’s end (see more detail here) , Noe Valley home prices continued to retreat.  In October and November 2009, prices were down 35%.  At year’s end, they’d barely clawed back two percentage points. Not surprisingly, days on market (DOM) remained stubbornly high for all of 2009.

Still, with cherry blossoms busting loose all over Noe Valley’s quiet streets, there certainly seems to be a change in the air.  There are many more listings coming onto the market and there’s even the occasional feeding frenzy over a clean, well-priced home.  These go in a matter of days, not weeks. Maybe that upturn in prices for January and February suggests a continued warming trend.

In the next few posts, I’ll look at Noe Valley in more detail, including how condos have fared.

It’s hard to remember just how close to the brink of catastrophe we seemed to be just a year ago.  Major financial institutions – failed.  Credit – impossible to get. Sales—anemic.

With the benefit of hindsight, not to mention survival, some are now criticizing Paulsen, Bernanke, et al., for their haste in rescuing the financial system, but I, for one, will reserve my scorn for the appalling judgment of the likes of Morgan and Goldman and their obscene bonuses.

How did the San Francisco market do?  Here’s where we are for single-family homes (click to enlarge).

We ended the year still down 18% from our all-time high of June of 2007.  That puts us at around the price levels of the spring of 2005.  Not great, but during those scary first months of the year when there was no bottom in sight, we were down to price levels not seen since early 2004.

It’s also interesting to see how Days on Market (DOM) inversely correlates with price, at least over longer periods.  In addition to the very regular seasonal dips in price every December/January, it’s easy to see that as DOM lengthens over time, prices decline.  While DOM remained less than 40 days, prices stayed high.  The correlation isn’t perfect – and certainly not on month-to-month time-scales — but it looks pretty good to me.

So for the “half-empty” crowd, the bottom line is that we’re still down 18% from our all-time highs.   The story looks much more positive, however, if you look at 2009 in isolation.

Now a 23% gain for the year ought to be making people feel pretty good.  Note that median prices have been in the $700,000 to $800,000 bandwidth for the last three quarters.  The dip in the waning months of the year can be attributed to seasonal factors.

I can already hear the nay-sayers arguing that looking at year end numbers is arbitrary  or, worse, distorts the picture.  (These are the same people who don’t believe in celebrating their birthdays!).

I’m certainly not arguing that happy times are here again.  But , if nothing else, that 23% increase confirms just what a wild ride the last two years have been.

As for 2010, I confess I’m beginning to feel a bit more optimistic than I was a few months ago.  Manufacturing seems to be continuing to expand.  There are some signs of job growth.  Still, Europe is now looking shaky and, closer to home, one should never discount the ability of our politicians to screw up the recovery.

All things considered, though, I’ll take my glass half-full please.

Another glorious winter’s day in San Francisco.  My family and I biked over the GG Bridge to Sausalito and then took the ferry back to Fisherman’s Wharf. Thirty-five years in this town and I’ve only done that ride twice.   The previous time was a week ago, to celebrate my 10 year old son’s new birthday bike.

2009 was not a kind year.  I feel very grateful that my family has come through in reasonable shape.  It makes it easy to appreciate the fine views and the fine weather.

Exactly a year ago, I officially launched this blog. It’s been enormously gratifying writing it.  First, it’s made me feel plugged into the market in ways both large and small.  Secondly, because I’m a visual kinda guy, those charts that I’ve tried to make a central part of  this blog have helped me understand and retain what’s going on in ways that columns of numbers just don’t.   Plus, I’ve learned a heck of a lot more about Excel — and, alas, its limitations as a database –  than I ever knew before.)

And finally, it’s been great to feel appreciated!   Though I sometimes joke that I have a readership of 7½, it is a loyal, thoughtful and appreciative one.  Well, that’s three of you anyway.

Happy New Year everyone!  My best wishes to each of you, and thank you for your support.

That’s useful if you’re looking at an average-priced TIC and you’re curious about how much of a premium you’d have to pay for an average-priced condo.  But how about reducing that to a per square foot premium?

For those who just want the bottom line, here’s the answer, but it’s worth reading on for the caveats.

$37 a foot doesn’t sound like much of a condo premium to me, that’s for sure.  And as my astute readers will note, the drop in price on a per square foot (from around $225 per sf) is obviously much more than the drop in median sales prices shown in the previous chart.

What’s going on?  It’s really simple:  there’s a lot less information on sales price per square foot for TICs.

All my data comes from the MLS (Multiple Listing Service) that real estate brokers use to find and market properties.  When a sale’s completed, they are required to enter the sales price.  If there’s information on the square footage of the property — provided by the owner or more frequently from the property records — the database calculates a per square foot price.  Roughly 80% of condo sales have a recorded price per square foot in the MLS.  Only 45% of TIC sales have a recorded price per square foot. How bad is that? In September 09, there were just 27 TIC sales.  Only 9 of them had a recorded price per square foot.  For all of 2009 through September, there were 275 TIC sales.  Only 113 – 41% – show a per square foot price.

There are lots of people — mostly on other blogs   — who love to trash statistics and say they’re meaningless.  Medians don’t reflect home values, etc etc.  I disagree.  Provided you have enough data  and you understand what you’re measuring, statistics help make sense out of what is otherwise undifferentiated data.  But I am afraid that in the case of measuring the condo premium on a per square foot basis, we are in dangerous low on data.

One final reminder:  For this series of posts, my TIC data includes the handful of stock cooperative sales that occur in this market.

And thanks for sticking with me on this long series of posts….

Look at that!  Excluding those wonderfully regular dips every Xmas, condo sales are generally at around 200 units per month.  TICs rarely break 40.

Here’s how TIC and condo median prices stack up against each other on a monthly basis.

Dueling spaghetti you say?  That was my reaction, too.  The huge variability in prices from month to month on the TIC line is a direct result of the paucity of sales.  And this chart certainly doesn’t help get at the key question, which is this:

Given that TICs are riskier and less flexible than condos, what’s the premium that you pay for buying a condo vs.  a TIC?

In fact many TIC buyers do so with the hope of being able to realize this “premium” by converting their TICs into condos down the road.  Fat chance unless you’re buying a TIC in a two unit building which — for now at least — remain exempt from San Francisco’s byzantine annual lottery system.

Luckily, I have a bona fide statistician mathematical genius phd for a wife, and she always lends a hand on methodology when I need it.  She suggested that where one set of data (condos) is so much larger than another, using averages provides a more reliable “apples to apples” comparison than medians.   Also, with so few monthly TIC sales, I decided to look at annual rather than monthly trends.

Here’s attempt number two.

Much more useful!  (By the way, the fact that TICs were more expensive than condos in 2003 and 2004 can be explained by a few massively (in excess of $8 million) expensive TIC sales in those years.  This is a great example of how using medians or averages can really affect the results.)

So, can we drill down further and come up with a condo premium per square foot? Stay tuned….

Author: Jack French -- Used under Creative Commons Permission 2.0

As I mentioned in my previous post, I’ve had several questions about per square foot prices recently.  There’s no doubt that it’s a very useful metric, for the obvious reason that it allows you to get closer to an “apples to apples” comparison of the value of two different properties that are different in size.  Of course, that leaves all sorts of other variables — location, amenities, etc.  But if, say, you’re looking to make an offer on a property, certainly you’d want to start by looking at what other properties in the same area have been selling for on a per square foot basis, and then use that to see if the property you’re interested in is in the ballpark.

Since I live in Noe Valley, I’ll readily admit that I tend to follow my neighborhood more closely than other areas.   No great surprise there.  So here, without further ado, is a chart showing the price per square foot for single family homes in “core” Noe Valley (click to enlarge).

Rather than run the chart as Percentage Change From All-Time High, as I usually do, this simply shows price per square foot as a 3 month moving average.  I’ve added the  “number of sales” per month, plotted on the right-hand axis as well.   Note that low monthly sales volumes ( no surprise, given the small geographic area) will make the data less statistically reliable.  In most months, there are less than 15 sales.

While we’re on the subject of sales volume, I recently read an advertisement in the local rag, The Noe Valley Voice, from a local real estate company touting how sales volume in Noe Valley is up, compared to San Francisco as a whole.  So what?  As I’ve stated before in the context of the luxury home market, I really haven’t found any correlation between volume and price.  Though it may be a little difficult to tell from this chart, I don’t see it here either.  For example, sales volumes were down and falling during the autumn months of 2007, but that’s when prices started climbing towards their all-time high in early 2008.  Likewise, sales volumes were increasing through the first 6 months of 2008, even as prices were sliding.

The bottom line is that Noe Valley homes are still fetching north of $700 a square foot, and that’s after a protracted slide.  Sure, the price per square foot is  down substantially from the near- $900 a foot that they hit back in January 2008, but it’s a pretty well-heeled foot nonetheless.

Bear in mind that “Noe Valley” means a very small area.  What’s more, there were only 7 sales in August, down from 14 in May and June, and 22 in July.   Sure, there’s been a bit of an improvement over the previous month, but there’s still an 11% difference between how far prices have fallen for the city as a whole (19%) versus Noe Valley (30%).

Arrian Binnings over at Inside SF Real Estate also did a recent update on Noe Valley, looking at median prices in a different way.  (I’ve forgiven him for appropriating my term, “getting granular” to discuss what I now have to refer to as “focusing” on a particular area. Sniff.)  Here’s one of his charts.

Not much comfort there either.

People will continue to point out that this doesn’t mean that your beloved home has fallen in value as far as the data suggests  — and that’s probably true, unless you bought a median-priced home at the top of the market.  Still, Noe Valley seems unseasonably cold right now, and it’s not just the fog whipping down off Diamond Heights.

At the same time, I noted that there was only about $100,000 difference in median value between condos and homes.  That seemed like a small delta and I was interested to see whether it was, historically speaking.  Turns out that it is.

Since, until recently (ahem!), home prices along with everything else have tended to go up, I decided not to look simply at the difference in price between condos and homes.  Instead, I converted the price difference to a percentage of the median value of condos sales for the given period.  This represents the “premium” for owning a home rather than a condo.  Here’s the result.

Sure enough, you’d normally expect to pay around 20% more for a home than for a condo.  But starting in 2008, the home “premium” started dropping significantly.  I believe that drop was a direct reflection of the housing market decline that began with homes and only subsequently spread to condos.  As I postulated in my blog, condo values possibly held up for longer as people got squeezed out of the single family home market by tightening credit standards.

But what about 2009?  The chart above shows the premium based on all sales for the year to date.  The picture looks a little different if you look at values on a monthly basis.

Again this is consistent with my previous blog.  It suggests while that condo values may have held up longer, they too have fallen so that the premium paid for a home is now heading back to its historic norm.  Of course, the other possibility is that home prices are beginning to recover.  It may well be that both explanations are true.