Pulse Of The Market (Pulse 78 - Where Are We In The Cycle?)
Apr 20, 2010
This Pulse is about the San Francisco condominium market.
Where are we in the cycle? Are we at the bottom: will there be a double dip?
A typical Realtor will give you an answer based on his/her own anecdotal
experience. It reminds me of the story about the blind men and
the elephant. The punch line – the old man found that when he was a young
man he hastily concluded that he understood the whole of something when he
had experienced only a part. We Realtors only see a small part of an
The best the PulseFactors.com Team can do is shed a little light on
this subject. While we are not market experts, we do appreciate the economic
forces that influence the market, and we do study the numbers.
A Chart May Help
The chart below depicts price appreciation for San Francisco condominiums
from the end of 1999 through Q1 2010. As a data point, the S&P/Case-Schiller
Index covers single-family homes, not condominiums, and their data include the
nine-county San Francisco Bay Area, not just San Francisco City itself. Our data
are for the City of San Francisco and just condominiums. We use a methodology
similar to the S&P/Case-Shiller Index.
The bottom appears to have occurred about this time last year – April 2009.
The peak occurred in October 2007. The decline in prices was about 17%. Through
March 31, 2010 we seemed to have experienced an appreciation of 6.5% from the
April 2009 bottom. Will it continue?
At the Bottom or Double Dip?
We don’t know.
But we do know a few things. First, buyers are buying, not to flip, but to
fulfill a need. Either they are relocating, tired of renting, ready to start a
family, downsizing from the house in the burbs, investing for a family member,
or buying a pied-a-terre because they are ready to do that – the usual reasons
that typically support the San Francisco condominium market.
We also know that the south of Market Street available new inventory
continues to dwindle and no developer has yet put a shovel in the ground for a
new high-rise development. Prices need to rise to cover construction costs
before developers start over again, and construction lenders need to feel more
sanguine that a new development will sell out in a reasonable time. Some
developer and some lender will venture into the water before long, but we know
We at PulseFactors.com are sanguine about San Francisco residential
real estate in general and are positive about south of Market Street if it is
the right condominium in the right building. So call us and we are glad to share
our knowledge and expertise and represent you in a transaction so you don’t make
Our recommended pre-summer reading includes two recent articles. Don’t
Bet the Farm on the Housing Recovery by Robert Shiller, the man behind the
The other article is from the Wall
Street Journal and discusses the pinpointing of the recession’s end.
Both are interesting and worth your time.
If you are interested in how individual bedroom/bath configurations have
performed in the last few years, take a look at the charts at the PulseFactors.com site.
Written by: Malcolm E.A. Kaufman
Starboard TCN is posting this article on its website and blog with Malcolm
E.A. Kaufman's approval.
Malcolm E.A. Kaufman is Founder of PulseFactors™ LLC. He refers you to his
website, www.pulsefactors.com, where you can see recent issues
of Pulse of the Market© and learn more about him. He invites your comments,
suggestions, and questions.