
San Francisco Home Prices Fell for the First Time in Four Years in March - Ankaios
https://www.redfin.com/blog/2016/04/march-national-housing-market-tracker.html
======
gigawhat
Weirdly, I own a house and think I'd be better off if prices fell-- fell a
lot. I bought a few years ago and would be happy if prices uniformly dropped
to those levels.

Why? I want a 50% bigger/nicer house in the same area. But bigger/nicer houses
have increased in price proportionally to mine. So the gap in absolute dollars
between what I have and what I want has expanded quite a bit. My income has
increased, but not really enough to cover the gap.

Strong increasing prices really only help homeowners to the effect that
they're eventually willing to downsize or move to a lower-cost area.

If prices rise strongly and proportionately I suspect it just causes
stagnation. I can't really upgrade without a windfall, thus my house stays off
the market. So other folks can't upgrade to my house.

~~~
lisper
It's even worse than that. If your house has appreciated more than $250k (or
$500k if you're married) then you have to pay capital gains tax on the rest.
And this is a fixed amount regardless of how long you've owned your home, so
the longer you stay, and the more your house appreciates, the greater the
penalty when you ultimately sell.

~~~
kspaans
"Penalty", yeah because people have put in sooo much hard work to make their
house values go up. (Sure, some people will spend money on renovations, and
there could be tax credits for that. But I don't think that sitting on an
asset and letting it appreciate should be a free lunch.)

~~~
lisper
"Penalty" because someone who sells their house and buys a new one every time
it appreciates $250k pays zero tax whereas someone who buys and holds pays
significant tax despite having the same net gain over the same time period.

~~~
dice
There's a two year minimum that you must hold the home to qualify for the
exclusion. So it's not "every time" it appreciates, but it is "once every two
years".

[https://www.irs.gov/publications/p523/ar02.html#en_US_2015_p...](https://www.irs.gov/publications/p523/ar02.html#en_US_2015_publink1000200611)

~~~
SapphireSun
Seems simple to apply the tax rate pro-rata rather than on a cliff. Then the
rule works more fairly and gaming is somewhat limited. Government seems to
love rule cliffs for some reason.

~~~
ethbro
Artifact of a pre-digital tax/legal system?

------
ChuckMcM
Reaffirming once again that if "nobody can afford to buy them" the actual
prices start coming down. A more interesting thing for me however was that
owner occupied (which is to say the person buying the house lives there) has
not been growing[1]. Instead third parties are buying the houses as
investments and renting them. That is a really risky strategy in a place like
SF with rent controls as the floor can fall out of the market, and you're
unable to raise rents to cover your balloon payment (or other over leveraged
strategy) and that squeezes the investor to default.

[1] [https://www.homeunion.com/blog/investment-home-prices-
rising...](https://www.homeunion.com/blog/investment-home-prices-rising-
faster-than-owner-occupied-home-values/)

~~~
kspaans
Remember that rent control only applies to buildings built before 1978, so
it's not _all_ rent controlled.

~~~
andersen1488
It's scary to think that in 20-30 years nearly the entire available housing
stock will not be covered by rent control. My landlord wanted to raise my rent
40% in one year here in Oakland until I pointed out the laws. Eventually the
entire middle class will just be landless peasants again, allowed to live
wherever the rich say that they can.

~~~
rconti
It's only scary if you believe rent control is a net benefit.

~~~
beatpanda
No, facing a 40% increase in your rent without an attendant increase in your
wages or salary is scary no matter what the macro situation is. Anybody
working on or thinking about housing policy needs to keep this in mind -- no
matter how right your policy prescriptions may be, you need to keep in mind
that they may do massive harm to individuals in the short term. And the
failure to even _try_ to ameliorate those harms is one of the reasons why
things like getting rid of rent control are politically impossible.

~~~
pjlegato
Advocates for the reverse ought to bear in mind that however noble the goal of
avoiding harm to individuals in the short term may be, the harm done to
individuals in the long term is even more massive, and then much harder to
fix.

Two case in point examples: Prop 13, and rent control.

These are not, as popularly concieved, great ways to protect the poor and
disadvantaged. They are simply examples of very short term thinking becoming
public policy, which has the unintended and paradoxical effect of harming the
poor and disadvantaged much more in the long run.

~~~
beatpanda
Right, and I agree with you, but the fact that it would be better not to have
them in the long run doesn't do anything about the short term harm of
thousands of people losing their homes all at once. "It will be better for
everyone in the aggregate, eventually" doesn't do anything for someone who
just became homeless.

What I'm saying is, if you want this policy, start thinking of ways you could
change it while accounting for the harm that changing it would do.

~~~
deelowe
Sometimes the only way to fix systemic issues is via strategic planning.

------
ryanSrich
It's always hard to believe the numbers, but I trust Redfin since I used them
to purchase my home. I think the problem is comparing what's turn key and not.
For example they say:

> Portland, OR had the nation’s highest price growth, rising 16.1% since last
> year to $325,000...

The problem is you're fighting 100's of people for that one house in Portland
that is livable at $325,000. Most houses that cheap need a ton of work.

SF on the other hand is just seeing their ceiling come into play. Only so many
people can justify raising a family and purchasing a home in The Bay. Why not
change jobs to Seattle or Portland and make around the same money, but spend
half on a house? I think that's what we're seeing.

~~~
tortilla
A bit off topic, but how was your experience with Redfin? I'm thinking of
using them.

~~~
marincounty
I don't know anything about this company. I have an idea what market they are
trying to crack. I can't believe it's taken this long.

I've always felt paying a Realtor 3% on the biggest item most of us will buy
in our lives is crazy. I just don't know what they do for that commission. I
don't know what makes one successful--just because he/she sold more than the
others? Pay them more because they know how to network?

I missed getting my RE Brokers license a few years ago. I procrastinated. The
Realestate lobby got to Jerry Brown, and got their bill though. A rediculious
bill that just made it more difficult to get a license, essentially cutting
down on supply. Enough said. To get a licence. It's about eight courses, and
couple of years of doubious experience, and a simple test.

Now what does a good Realtor do earn that huge financial jackpot when they
sell/buy you a house? I haven't a clue. Maybe a good omissions/errors
insurance policy? I don't have a clue.

I've been told to pay full commission, and you will see what they bring. Then
again, this sounds like something the King of Realestate came up with?

So, to all you young, hungry developers. I really believe the Realestate Agent
is long past it's due date. I would love to see a safe way to exclude them,
and their commissions form the home/commercial buying experience. A fool proof
way?

I will now look into Redfin. If it's half what I believe it to be; there's
much room for competition?

~~~
beachstartup
you pay them a commission because real estate deals can get ugly, fast,
especially in competitive markets like in the coastal US.

a good agent has seen it all before, knows what to do when the seller or buyer
starts making threats or is trying to angle the deal somehow. he knows what
lawyers to call, what finance people to call, and yes, networks and has
relationships with agents to get you properties that haven't hit the market
yet.

out of my peer group who has ever bought property, i'd say a good third of
them had some kind of issue during the deal that required an expert to
mitigate.

of course a shitty real estate agent isn't worth their pay - but that goes for
any job. but otherwise, it's the same old shit -- things are going great, what
am i paying you for? things are going shitty, what am i paying you for?

~~~
kale
I have a great real estate agent. He knew the math equations that HUD used to
price their homes at auction, and what percentage of that price they'd take.
Our first house (bought in 2008), he suggested that if we waited to make a bid
on a house until a certain day, the price would drop, and they'd take 80% of
the asking price. He was correct and we made a lot of money by selling when
the market came back.

On the next house, he looked at the roof and knew that the house probably had
a recalled shingle on it, and we couldn't even get insurance on the house with
that shingle. The homeowner was stuck between replacing the shingles or taking
a chance that the next buyer would have less attentive real estate/home
inspectors.

Twice I have greatly benefited financially by his expertise. I'm not paying
him a lot for his services necessarily (although he's great at it), I'm paying
him for his expertise.

------
mdorazio
The article seems to imply some meltdown in housing is around the corner, but
it seems more like the housing market is just leveling off as a result of
market forces. You can only drive home prices so high before there aren't
enough people who can afford them anymore. Hopefully that means that rent
prices will also level off in the area in the near future.

~~~
avn2109
From the article:

>> "...historically low inventory"

>> "...many sellers are sitting this year out."

>> "...The median sale price ... fell by 1.8 percent..."

The article's authors are confused. Their explanation for falling prices
consists entirely of "Supply is down."

That's exactly the opposite of how supply, demand, and prices are related. If
they wanted to claim that low prices are scaring sellers out of the market,
since those sellers are hoping for a future rebound in prices, I might believe
it. But the article claims the causality is going the other way.

~~~
rspeer
In Cambridge, a faction of candidates for city council promises that they will
make housing affordable by opposing the construction of new housing.

Apparently you can just tell people that supply and demand work the opposite
way in the housing market, and people will believe you.

~~~
home_boi
The reasoning might be that if a place gets luxury apartments, rich people
will flood the area. Then the crime rate per capita goes down. The criminal
population becomes diluted. It starts a snowball effect where crappy
apartments in the area looks more and more attractive to the upper middle
class as more upper middle class outbid previous poorer renters for the old
housing.

~~~
rspeer
I know that's the argument, but it doesn't make much sense to me. It's
comparing to a fictitious alternative where rich people _don 't_ move in. Why
wouldn't they? It's already a desirable place to live, so rich people desire
it too, and by definition they can afford to act on that desire.

It is not hard for a rich person to outbid a poorer renter. I mean, this
doesn't require a complicated explanation. Whether or not there's new housing,
rich people can already outbid current renters because they _have more money_.

And when this happens without new housing, not only does a rich person move
in, someone else moves out. By trying to prevent gentrification from
indirectly causing displacement, you just cause the displacement right away.

This still sounds like supply and demand doing what one would expect, not
doing the opposite.

------
epimetheus
A bit of an anecdote because the article mentions my town specifically -
Tacoma:

We put our house on the market Friday, April 8th, a bit below the "redfin
estimate" \- I saw it had gone live by 11am and we already had an interested
party set up a viewing by 12pm. We showed the house 11 times by Monday morning
and had 5 offers, some 12k above asking price. We accepted an offer by Tuesday
(April 12). My head is still spinning from how fast this was and how many
calls we were getting for appointments for viewing. This in a central Tacoma
location, not exactly prime location (like the Proctor District or Stadium).
We only had 3 other homes as comps in the area (1 mile radius).

Port Orchard / Gig Harbor area is very low on inventory too, which is where we
are moving (Port Orchard, we looked in GH though).

~~~
djb_hackernews
This plays out daily in hot real estate markets. I've been casually observing
the Boston/Cambridge market and I have to scratch my head when I see
properties on the market for only a few days and agents demanding offers by 2
days after the open house. Typically, I see listed on Thursday, OH Sat/Sun,
offers due Tuesday evening.

If I were a seller I'd think that we priced the property too low, then again I
can imagine sellers just want it over and done with and who cares when it's
the difference of locking in 100% appreciation or 108% appreciation.

~~~
twoodfin
As mountineer22 points out, this is a strategy to concentrate serious offers
and play them against one another. The lower you set the price, the more
initial interest you get, the greater chance two or more potential buyers get
excited. With competitive bids, you can find the true 'market' price pretty
quickly.

In a hot market this apparently works well.

Anecdotally, when my wife and I were looking for our eventual home in
Cambridge a few years ago, we went to more than a couple of "open houses"
which were _pro forma_ : Despite being listed on Wednesday, by Saturday the
sellers already had an offer they were prepared to accept without even waiting
for competitive bids!

~~~
djb_hackernews
Yup, a family member sold their condo in southie in 2014 and got an offer they
accepted on the condition they cancel the open house...

------
NDizzle
Maybe it's just redfin not having this in their own data, but I'd really like
to see these graphs from 1998 and up. Only going back to 2012 isn't very
useful in my opinion.

~~~
underwires
Trulia has some of the more basic data going back to 2000
[http://www.trulia.com/real_estate/San_Francisco-
California/m...](http://www.trulia.com/real_estate/San_Francisco-
California/market-trends/)

~~~
NDizzle
Wow. Number of home sales for 3 and 4 bedrooms currently at it's lowest level
since 2000. I guess that's expected. Really validates my decision to move out
of the bay area to raise my 3 kids.

------
mladenkovacevic
Meanwhile in Canada: [http://www.cbc.ca/news/business/crea-house-prices-
march-1.35...](http://www.cbc.ca/news/business/crea-house-prices-
march-1.3537143)

~~~
adventured
Pretty incredible bubble price increases, given the growth rate of the
Canadian economy. How can that end any other way but in a massive crash?

"The average price of a Canadian home hit $508,567 in March, a jump of 15.7
per cent compared to the same month a year earlier."

vs

"IMF downgrades forecast for Canada's economy in 2016 and 2017"

"Canada's GDP will expand by 1.5 per cent this year and by 1.9 per cent next
year. That's better than the 1.2 per cent performance clocked in 2015, but a
pullback from what the IMF was expecting in January, which was 1.7 this year
and 2.1 per cent next year. The unemployment rate is expected to rise to 7.3
per cent by the end of this year before ticking up to 7.4 per cent next year,
the IMF now says."

[http://www.cbc.ca/news/business/imf-canada-
forecast-1.353186...](http://www.cbc.ca/news/business/imf-canada-
forecast-1.3531869)

~~~
dgemm
Most markets in Canada are in slow decline, which reflects reality. Then you
have the two special markets of Vancouver, which needs no introduction, and
Toronto, which fits somewhere between Vancouver and reality.

It would be interesting to examine the fundamentals of each separately.

------
jordanb
I think that SV has probably been in recession for the last few quarters
judging from some friends I have who have been interviewing. Everyone is
interviewing like crazy but few are hiring.

~~~
shiftpgdn
I've noticed a (perceived) spike in the number of foreclosures in SF on Zillow
as well over the last 6 months.

~~~
ModernMech
I'd say in the last 6 months, for sale signs have gone up all over my
neighborhood in SF. There are at least 3 on my block alone. Despite this,
there is a 3 bedroom apartment two doors down from me that is asking for
$10,000 a month rent, $30,000 due at lease signing.

------
phamilton
"Plummet 22%" comes off as extremely alarmist.

Median sales price dropped 1.8%. The number of sales dropped 22%.

It's a signal, but of what? That's uncertain.

~~~
lubujackson
It's worth noting how tiny these numbers really are in a month like March. I
just checked Zillow and 105 houses were sold in SF in the last 30 days.

------
ziszis
Talking to a notary based in SF this week, she saw an increasing # of Bay Area
clients buying a home in Portland or Seattle and moving.

~~~
theandrewbailey
My brother in Portland has been complaining about the area receiving all these
ex-San Fransisco residents and how they've been driving up prices.

------
raldi
Is this just a reversion to the mean following a one-time jump due to IPOs
from, e.g., Facebook and Twitter?

I guess what I'm asking is, did SF housing prices merely fall back to where
they were in 2013? Or all the way back to where they were in, say, 2009?

~~~
BashiBazouk
Not even close. More like they dropped to a few months ago. 1.8% seems like a
rounding error. Probably the middle to high end is seeing most of the drop. In
the 2-5 million range, houses have been staying on the market longer. Houses
around where I live are still selling for $100,000 + over what I paid in
2013...

------
chadlavi
As a Brooklyn resident (who rents), I hope this trend picks up steam and
continues. Maybe I could be a homeowner some day after all!

~~~
KKKKkkkk1
As a foreigner, I don't understand this attitude. Why would you want all your
wealth to be invested in a single leveraged asset that's also depreciating,
requires your constant attention and ties you to a single locale?

~~~
nattaylor
In addition to what reverend_gonzo said, there is the simple fact that rents
(mostly) go up and mortgage payments don't.

~~~
kspaans
Interest rates aren't guaranteed to stay low. Here are the historic rates:
[http://b-i.forbesimg.com/phildemuth/files/2013/07/image001.p...](http://b-i.forbesimg.com/phildemuth/files/2013/07/image001.png)

Though if you have a long-term fixed-rate mortgage, you are probably OK.

~~~
nattaylor
True, I was assuming fixed rate.

------
nxzero
SF had another real estate bubble during the dotcom boom, and as far as I
know, the bust was regional in scope.

------
gorkemyurt
Developers are finally building in SF..

[http://www.bizjournals.com/sanfrancisco/blog/real-
estate/201...](http://www.bizjournals.com/sanfrancisco/blog/real-
estate/2016/04/s-f-s-10-largest-residential-projects-of-2016-will.html)
[http://www.socketsite.com/archives/2016/04/san-franciscos-
hu...](http://www.socketsite.com/archives/2016/04/san-franciscos-hub-
heights-2-0-and-potential-for-a-600-foot-tower.html)

This is very good news, my prediction is that this wave of supply is going to
reduce the prices for a while. There is actually still a lot of space in
SOMA/Mission Bay/Central Waterfront to build. New construction is all going to
be condos rather than single family homes, people who want to live in single
family homes and drive to Costco on the weekends (nothing wrong with that)
will continue to move to Seattle or Portland.

Money is flocking to SF from all over the world through VC companies and
mutual funds, still. It used to be VCs with previous exits who already live in
the region but in the last 2 years a lot of dumb money coming in. At some
point in the next 5 years Uber, Airbnb, Pinterest, Lyft, Dropbox, Slack,
Palantir and Stripe are going to have exits, even if 3 out of 8 lives up to
their potentials these exits are going to create a lot of potential home
buyers. Facebook, Google, Apple and Netflix (yes, netflix) are going to
continue growing their empires. If SF's city officials can pull it off, with
the increased investments in public transportation eventually San Francisco is
going to become a global A+ city.
([https://en.wikipedia.org/wiki/Global_city](https://en.wikipedia.org/wiki/Global_city))

Only a 'black swan' event can stop SF's medium term growth. We already had a
'black swan' event in tech in the recent history, burst of 2000, everyone is
expecting a similar story here. It's the nature of 'black swan' events that if
people are already expecting things to fall apart, the magnitude is much less.
([https://en.wikipedia.org/wiki/Black_swan_theory](https://en.wikipedia.org/wiki/Black_swan_theory))

~~~
fchollet
> If SF's city officials can pull it off, with the increased investments in
> public transportation eventually San Francisco is going to become a global
> A+ city.

This is the most hilarious comment I've read on HN in a long time.

~~~
scurvy
They must not know SF's history...

------
naakkupoochi
East Bay - My neighbors on either side sold their homes recently (last week).
The house on the right sold for 75K above asking price. The one one the left
sold for 90K above asking price (around 20 offers for each house). Listing
price for both houses were already high.

~~~
muzz
That really just means that both houses had too low of a listing price.

------
steven2012
I wouldn't hold your breath just yet. In the peninsula prices are up $100k in
my neighborhood. Interest rates are still low so it will take some time.

------
727374
Sales plummet 22% in SF, yet there's a bidding war on every property? This
implies that demand still outpaces supply so I don't see how you could predict
a crash, yet. In reality, prices only dropped 1.8% y/y. And that was for
March, which is traditionally a low-inventory month. I personally think the
correction is still a year out.

------
geggam
From the article you can see its a local equalization in process

While San Francisco had the highest median sale price in the nation at
$1,042,500, that number actually fell 1.8% year over year, and declined by
0.7% month over month, an unusual change from February to March. * In
neighboring San Jose, prices rose 3% to $860,000 and Oakland rose 5.4% to
$590,000 _

------
jmount
More like: distribution of sales prices fell. I don't think many individual
homes sold for less.

------
simonebrunozzi
An Uber, Dropbox or AirBnB IPO would quickly make prices go up again.

However, these companies don't seem to be preparing for an IPO anytime soon.

