News & Research Archive

Pulse Of The Market (Pulse 99 - Have we hit bottom yet?)

Feb 10, 2012

 

Yes and here's why...

We all know that the economy goes through cycles, and of course, the real estate market does as well. The last few years have witnessed a sizable leg down. Prices peaked in 2007, and since then they have declined some 15%-20% across the board throughout the City.

The stock market (see Dow Jones chart below) has rallied to a high in early February 2012 not seen since May 2008. It reached a record 14,164 in October 2007.

National unemployment was 8.3% in January 2012, the lowest since February 2009 as shown below.

San Francisco's unemployment dropped to 7.6% in January 2012, versus 11.1% for all of California, and the previously mentioned 8.3% nationally.

Mortgage rates are unbelievably low. Rental rates continue to escalate.

New product inventory south of Market Street is relatively miniscule, about 450 unsold units: 140 at the Millennium, 260 at Madrone, and 50 at One Hawthorne.

There is little re-sale inventory: just ask a real estate agent. There seem to be many buyers ready to spend money, and there are multiple offers on some properties, something that was unheard of in 2009 – 2010.

Recent IPOs, plus Facebook in the wings, are creating new wealth.

Getting back to normal...

...normal being defined as people buying and selling homes without being concerned that a trap door might open beneath them at any moment. Imagine what it was like for folks post-depression, trying to figure out whether life would get back to normal. What we just experienced is the greatest recession since the Great Depression. The American economy did not fully recover from the Great Depression until the Second World War effort started taking hold when U.S. industry flexed its muscles.

We have been fighting two wars for 10 years. New manufacturing jobs will not bring the economy back, but the American image will. The U.S. remains a mecca for people from throughout the world, and the wealthy from India, China, Brazil, Russia and Middle East still want to educate their children here, start a new business, and buy real estate. New York City and San Francisco beckon. Both are vibrant, have scores of young talent and a restricted residential supply.

There will be NO announcement – it is okay to get back in the market and you will not get hurt: not going to happen. Meanwhile there are many buyers in San Francisco, writing offers and often competing. Many agents witness properties come to market, appropriately priced, and enter into contract in days rather than weeks or months. Some sellers, however, cannot seem to bring themselves to part with their home at a price that does not reflect the "true value of their home." I still have not figured out what that really means. The market speaks loudly as to market value.

Hit Bottom? Yes.

Next question? Let me know if I can help.

Written by: Malcolm E.A. Kaufman

E-mail: mkaufman@pulsefactors.com


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.

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