Pulse Of The Market (Pulse 82 - Summer Reading)
Aug 13, 2010
As someone mentioned the other day, you can tell it’s summer by the number of available parking spaces throughout the city. That and the fact that a fleece jacket is the garment of choice on a daily basis. With the market being a bit slow, I have had ample time to read, and I would like to share a couple of articles with you.
The first is about the S&P/Case-Shiller Index, which we have come to know well, thanks to the media, and which I have always found suspect. Two issues have troubled me. First and foremost, when it cites San Francisco, it is talking about the nine-county Bay Area, not the city/county of San Francisco. All cities are lumped together, and the Index ends up being a hodge-podge of disparate communities; not an indicator of San Francisco’s market health. My second issue is that the Index includes only single-family properties and no condominiums. In other words, a big segment of the market is not included.
Along comes some research from Morgan Stanley calling into question the veracity of the Index itself. To quote from the article……..”While greater macro trends can certainly affect housing across the country, individual markets can deviate substantially from each other.” Well, yes indeed! Morgan Stanley goes on to compare the S&P/Case-Shiller Index with two other indices. Bottom line – look at the three indices and you will get three different impressions of the market. The Morgan Stanley article is worth reading.
Have you been following the property market in China? It seems that the government is a bit worried about the state of the market, noting that “residential real estate prices soared 68% in the first quarter of 2010 compared to the same quarter in 2009.” The government has opined that there may be a bubble brewing, and there is concern that the banks will be stuck with a bunch of bad loans. Why should we care? Two reasons. First, whatever happens in China, given its size as the world’s fourth largest economy, affects every other country, especially the U.S., one of its major trading partners. Second, the essence of this Bloomberg article is that the government is urging its banks to incorporate worst-case scenarios of prices dropping 50 to 60 percent. That would be unnerving, particularly if you had just bought within the past year.
While we have had our share of speculation in the 2004 – 2007 run up, it would appear that our brand of speculation is nothing when compared to the Chinese version.
So how’s the market? Notwithstanding how much summer reading you do, I submit that an experienced, financially oriented agent (this is a blatant plug for our PulseFactors Agent Team) is a must for superior market strategy and making money. Here’s a case in point. A Cow Hollow single-family home came to market a few weeks ago priced at $1,995,000. I shall withhold the specific address and agent’s name for obvious reasons. It used (savvy) agent pricing; certainly not seller pricing. They received five offers, and it closed for $2,200,000 – 10+% above list price and a cool $200,000 plus. Had the seller insisted that it was “worth” $2,200,000 at the outset, and it listed at that price, I’ll bet that it would have languished on the market for a couple of months and then sold for less than $2.2 million. We’ll never know.
This market is for pros. It’s not amateur hour. Pleasant reading and enjoy the rest of the summer.
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, 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.