Tag: UC Berkeley

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The Worst May Be Over According to Big Brain, Ken Rosen

male_brain

Ken Rosen, Chair of the Fisher School For Urban Economics over at UC Berkeley, has good news for San Francisco home owners.  “The recent rise in home prices and sales activity lead us to believe that the worst part of the correction in home prices is behind us and that housing market conditions are showing signs of improvement.”

This report, based on June results, is the first of what will be a monthly analysis of the San Francisco real estate market undertaken by The  Rosen Consulting Group on behalf of The San Francisco Association of Realtors.  You can download it here.

I’m a big fan of Rosen.   I listen to him speak once or twice a year at a real estate symposium put on by the Fisher School; he and others bring a level of sophistication and breadth of view to the analysis of the real estate market that is hard to find when we are toiling in our own back yards.  I blogged on his predictions about the market  in a couple of posts entitled The View From Space at the end of last year.  Does that mean you won’t be needing me to crunch the numbers any more, gentle reader?  Not necessarily:  I believe the report miscalculated the median year-over-year price change for single family homes from June 08 to 09.  Rosen says it’s 6.8% down.  SFAR’s own numbers put it at 4.9%.  (I have us down 5.7%:  some discrepancies, alas, are inevitable — a result of delays in agents and brokers putting “sold” information into the MLS system from which all this data is derived.)  Anyway, I’ve notified SFAR — we’ll see what happens.  Besides, I’ll continue to try to get as fine-grained as I can in my analyses.  Rosen is a big picture guy.

Quibbles notwithstanding, Rosen makes some interesting points and one of them has caused me to rethink a previous post of mine.

His report points out that nearly a quarter of active and closed sales in June were in District 10, which encompasses “distressed” areas like the Bayview and Hunters Point.  Back in May, I argued against the commonly-heard thesis that District 10, along with District 3, were dragging down values in the city as a whole.  My chart showed that the City taken as a whole was about as far off its all-time high as Districts 3 and 10 were off of theirs.  Well, I was right.  And wrong.

It turns out that both statements are true:  Districts 3 and 10 were doing no worse than the city as a whole in terms of where they were relative to their all-time highs.  But it’s also true that the high volume of low-priced sales in those districts, combined with many fewer sales at the top end of the market, did pull down the median value for the City as a whole.   How did I miss it?  I didn’t look at the distribution of sales across the various districts. Rather, I compared the medians for each data set without looking at relative sales volumes.

Data analysis is tricky stuff.  It’s easy to pick and choose your metrics to match your agenda.  But it’s just as easy to miss a detail that changes the picture considerably.

Here are some more tidbits from the report:

  • Despite the concentration of low-price sales in Districts 10, there has been a significant jump in sales volume in high priced Districts 5 and 7, which encompass neighborhoods like Noe Valley and the Marina.
  • The large number of condos on the market from new down-town and SOMA high rise projects is continuing to put downward pressure on condo values.
  • Rosen expects home prices to be soft but to continue to improve through the remainder of the year.  “With for-sale inventory still at elevated levels and expectations for a continued rise in the unemployment rate through the end of this year, buyers will still have good purchasing opportunities.”

I got that part right.

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The View from Space — Part 3: Above California

As promised, here are a few tidbits from Leslie Appleton-Young’s presentation to the conference sponsored by UC Berkeley’s Fisher School of Real Estate and Urban Economics.  Ms. A-Y is the California Association of Realtors’ Chief Economist.

Most of the data covers the state as a whole, and even when it’s broken down by county, Ms.  A-Y stressed that there can be huge differences when you get more “granular” with the details.  (I made the same point in my 10/27 post discussing how misleading the much-quoted Case Shiller Index can be.)

Continue reading “The View from Space — Part 3: Above California”

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The View from Space — Part 2

More pearls from Ken Rosen and the other big brains who addressed UC Berkeley’s  Annual Real Estate and Economics Symposium on Monday:

•    What to Invest In Now: Rosen and several other commentators say that REITS (publicly traded companies that invest in investment-grade real estate) are cheap relative to their underlying assets.  Some are trading at around 50% of the replacement value of the assets they hold and are paying a dividend of around 10%.  The best sector of the real estate market right now is the apartment rental market.  (Makes sense, since a lot less people can afford to buy homes.) So look for REITS that own big apartment complexes in decent market areas (see below).   Do your homework:  be sure that they have good management teams and don’t have too much short-term debt because refinancing anything is going to be tough for a while. Hedge your bets.  (Easier said than done for us mortals down here on planet earth.)  Rosen has parked his cash in short term Treasuries.  Obviously he’s worried.  We should probably be too.

•    Where to Invest: “Global gateway”, “quality of life,” “new tech.”  These are the buzzwords that describe cities that should weather the recession relatively well.   Seattle, San Francisco, Boston, and Colorado were all mentioned.   An exception is New York, which is ground zero (again) for the meltdown in the financial sector.  Washington DC is poised for a big expansion as government programs expand to address the current crisis.  San Diego is showing signs of improvement.  Places like Detroit “have no reason to exist.”

•    When will things improve? Be careful over the next year.  Watch for lower LIBOR (London Interbank Offered Rates) as an indication of banks’ willingness to lend again.  Also look for a reduction in market volatility.  Here’s a link to today’s Bloomberg for a really instructive piece on the significance of LIBOR.

•    One of the other key speakers at the conference was Leslie Appleton Young, Chief Economist of the the California Association of Realtors (CAR).  Sure, you can dismiss CAR as a spin outfit for the industry, but you can’t argue with the data they collect.  Another post will cover Ms. A-Y’s analysis of California and the Bay Area.