San Francisco is known for its mindboggling booms and breathtaking busts as the hot money from all over the world ebbs and flows amidst startup frenzies and IPO manias.
And now the hot money is flowing. It has created a delirious craziness in the housing market, surrounded by an environment where app makers without revenues but with big dreams and the word “disrupt” in their description are worth billions and draw so much cash from investors that they struggle harder to burn through it all than to disrupt anything.
So I read with fatalist amusement in SF Curbed that the most expensive home on the market in early November is still on the market. At the time, SF Curbed described it this way:
Raw food chef Roxanne Klein and her entrepreneur/guitar-CEO husband, Michael Klein, have put their neoclassical-revival mega-manse on the market for $39 million. The couple have only owned the seven-bedroom, 16,000-square-foot home, located at 2701 Broadway, for two and a half years, having picked it up from real-estate mogul Ron Zeff for $27 million back in 2012…. The ask is a full $12 million above the last sale price, though the present owners haven’t so much as changed the paint in the au pair suite.
Why fatalist amusement? The asking price is 44% higher than when the home was sold two-and-a-half years ago.
So Fed Chair Yellen, in her press conference after the FOMC meeting today, said she’s surprised that housing hasn’t recovered more than it has. But for those who were on the receiving end of the Fed’s free money, the housing market recovered just fine.
There’s only one problem: there aren’t enough of these folks, and they don’t like to live in median homes. But with each price increase, more and more people who want to buy a median home to live in are left behind. And homes sales tumble.
In the nine-county San Francisco Bay Area, sales in November of new and resale houses and condos dropped 10% from November last year, according to CoreLogic DataQuick. It was the worst November since crisis-year 2008. DataQuick blames the debacle on the “limited number of homes for sale, cautious buyers, a challenging mortgage market, and a quirk of the calendar….”
But with a median price of $601,000 in November, up 9.3% year-over-year, there aren’t that many people left who can afford to buy a home. And investors, fattened by Yellen’s monetary policy? They’re starting to lose interest. These “absentee buyers” purchased 18.6% of the homes, down from 20.4% in November last year, the lowest level since September 2010.
Sales volume was down in all nine counties year-over-year, topped by my crazy and beloved San Francisco where sales plunged 20%.
But … the median price soared, gulp, 27% from November a year ago – um, that’s not a typo – reaching a new all-time record of $1,072,500.
That’ll buy a 2-bedroom no-view apartment in a so-so area.
The peak of the prior housing bubble in San Francisco occurred in November 2007, based on the same DataQuick series, with a median price of $814,750. After it imploded so spectacularly, everyone acknowledged that it had been an out-of-whack bubble phenomenon. Everyone had anecdotes of craziness. Sanity would henceforth reign in San Francisco, they said. Now, exactly seven years later, the San Francisco median home costs 32% more than it did during that crazy bubble peak.
Only this time, it’s neither a bubble nor a peak. It’s just an insufficiently recovering housing market, according to Yellen. And so she’s surprised that, after six years of free money for certain folks, it hasn’t “recovered” even more.
In the six-county Southland, the nuances are different. November home sales dropped 19% from October and 9.5% from November a year ago, to the lowest level for any November in seven years. The sales debacle hit lower priced homes particularly hard. While sales of homes over $500,000 edged down 3.3% year over year, sales of homes under $500,000