May 19, 2012

CNN blogger creams himself over Facebook Effect

Have we discussed the price adjustments (up! up! up!) in both buying and renting in San Francisco due to the Facebook IPO?  Not enough!  Let’s see what happens when CNN lets one of its bloggers write a tl;dr post that makes our zip code pieces look like tweets by comparison.

The Facebook effect on San Francisco real estate

By Julian Hebron, contributor @CNNMoney May 17, 2012: 1:27 PM ET

120517-sf-facebook-effect(StockTwits) — The Basis Point is a popular mortgage and housing blog that tracks consumer critical issues and data. It is edited by Julian Hebron, a retail mortgage lender who runs the San Francisco branches of RPM Mortgage.

Three weeks ago, some clients wrote a $1.25 million offer on a 1,400 square foot 3-bed, 1-bath house with original kitchen and bath near San Francisco’s Dolores Park. They weren’t even close. There were 51 offers. It sold for $1.4 million and closed 8 days after offers were due.

That’s the most offers I’ve seen in 10 years. And a different property at that week got 23 offers.

Two weeks ago, another client offered $245,000 over list price on a 3-bed, 2-bath Pacific Heights condo. One of the other 9 offers was the winning bid in this $1.6 million to $1.9 million market segment. That was my client’s fourth rejected offer. He’s looking at two properties in this price range this week, and the listing agents are reporting similar demand: about 10 serious buyers circling.

That’s the norm. It’s what some are calling The Facebook Effect on San Francisco real estate.

That’s the norm: 10 serious buyers circling.  StockTwits goes on at very great length to explain why this is happening, and mentions “The Facebook Effect” as if the term were newly minted.  Here’s what Hebron said in much fewer words.  (The charts are all linked from his article.)

1. Everyone not already working for Facebook is trying to buy before millions of Facebook employees get their license to print unlimited money

You will love this quote from the article:

The San Francisco buyer mindset is that they want to get in before they’re priced out, but they either haven’t reaped their firm’s windfall yet or don’t expect much if any windfall from their firm.

That’s right.  They’re all worried about being Priced Out Forever.  And this has never, never, ever happened before!

120517-sf-facebook-house-prices

2. Ed Lee’s reelection as SF Mayor means tech employers can demand payroll tax adjustments

Twitter threatened to leave SF over the 1.5% payroll tax, what with all the high salaries and the stock option financials on top of that, Lee negotiated an adjustment with a maximum annual tax, and now all the other tech companies will expect similar easements.  Which means they’ll stay in SF, which means high-paid twentysomething technogeeks will continue to buy real estate there, which means you can’t afford anything.

And this is all very interesting, except Facebook is not in SF.  So why isn’t this article called “The Twitter Effect”?

3. Constricted housing supply.  Really, really, really constricted.  Plus rising rents.  Did we mention constricted housing supply?

120517-sf-facebook-inventory

The key takeaway is that there were only 500-600 annual SF home sales above $1.5 million.  Now, how many people do you think will be wanting one of those better places once the IPO cash hits?

120517-sf-facebook-sales

And is it maybe possible that more homeowners would cash out when they start seeing more of these prices? 

Comments (31) -- Posted by: madhaus @ 5:08 am

31 Responses to “CNN blogger creams himself over Facebook Effect”

  1. Tom Stone Says:

    At least in Sonoma County (and I suspect elsewhere) there is an unusually low inventory. With fewer REO coming on the market on the low end and thus fewer low end sales the median price rises. This has been exagerrated by a substantial increase in high end sales due to a number of factors. Even those high end sales are not at higher prices than I saw last year, most are below last year’s price. The headlines are encouraging buyers to offer a little more and sellers to ask for much more, not a big deal with all cash transactions. In the mid range there’s a problem, the homes will not appraise. Oops. No loan, no deal.

  2. Real Estater Says:

    Even in Vegas the inventory is dwindling, for those who are paying attention.

  3. PK Says:

    Shouldn’t the Facebook effect start to mean something new – pricing a house or stock perfectly to reduce overbidding? Sell for $38, close just over $38 – Zuck is a savvy dude.

    Whenever I see these stories about 50+ offers all over list I say to myself “don’t use that agent. They will list your home too low.”

  4. SEA Says:

    “Even in Vegas the inventory is dwindling, for those who are paying attention.”

    After being marked down 75% or so, is it any surprise that so few are willing to sell at current prices?

    I’m sure prices will quickly double–twice–to bring Vegas right back to peak pricing. And for those who purchased near the peak, I’m sure it will double quickly again, a third double in 2012.

    Buy Vegas now or be priced out forever.

  5. SV Shopper Says:

    Good to know that I’m not the only one getting outbid. It is happening everywhere in the Bay Area, especially where there are good schools.

  6. SEA Says:

    “Good to know that I’m not the only one getting outbid.”

    Life is so tough when you’re a low-baller.

  7. madhaus Says:

    I can understand getting outbid in the current market. We’ve got plenty of evidence that certain markets have such low inventory that homes are snapped up within days. And there’s the new tendency of most places going to Pending/Don’t Show status, which removes the photos from MLS.

    But SV Shopper, there’s no way you were continuously outbid in 2009 and 2010 and 2011 unless you were either a low-baller… or your claims were not intended to be a factual statement.

  8. nomadic Says:

    #3, does list price really matter in a market where multiple bids aren’t unusual? Better to get 5-10 bids (hoping that one buyer will go nuts – as long as the house will appraise of course) than to price perfectly at the market and take a few more weeks to get into contract at a potentially lower price (than when buyers are feeling competitive). Ever notice how some fools will bid sh*t up on eBay to more than what you’d pay at your local store? That might not happen any more these days with all of the “buy it now” listings, but it was common several years ago.

  9. Real Estater Says:

    SEA says,
    >>I’m sure prices will quickly double–twice–to bring Vegas right back to peak pricing.

    I would not be surprised at all if Vegas doubles within 10 years. The price point is so low now doubling is not very difficult.

  10. SEA Says:

    #9- Do you think I really seeks to invest very little and double it? What I want is RBA property: Double more than not a lot of money.

  11. Real Estater Says:

    I think the moral of the story from today’s feature is that when people come to a lot of money (as opposed to not a lot of money), they want to buy real estate. It is what people want. The #1 reason for people to not buy real estate is because they don’t have a lot of money.

    If you want to tell who has money and who doesn’t, don’t bother to look at the person’s cars, jewelry or clothing; all you have to look at is whether they own real estate.

  12. Faux Estater Says:

    all you have to look at is whether they own real estate.
    —–

    You are right, home-debtor.

  13. nomadic Says:

    Yep, just look at all the people in the ‘hood in my hometown of Detroit. They own real estate. They’ll continue to own it for a long time, unless they can get the city to take it back for an urban farm.

  14. SEA Says:

    “If you want to tell who has money and who doesn’t, don’t bother to look at the person’s cars, jewelry or clothing; all you have to look at is whether they own real estate.”

    For so long I thought Zuckerberg was a poor man. Good thing he ended that run by buying real estate.

  15. sprezzatura Says:

    Obvious Troll is obvious.

    That said, I must admit I’m feeling like I got the last good deal in the Bay Area by buying this winter.

  16. madhaus Says:

    That’s why Warren Buffet is dirt poor, while Casey Serin is rolling in simoleons.

  17. Real Estater Says:

    >>You are right, home-debtor.

    Let me correct you, you are the home debtor. Not only will your rent go on forever, it will keep increasing, forever.

  18. Real Estater Says:

    >>That said, I must admit I’m feeling like I got the last good deal in the Bay Area by buying this winter.

    Last year was the best time to buy a house. I said it last year, and I’ll say it again. If you missed the last train, you are left walking. Needless to say it’s pretty tough to keep up with those who are riding the train.

  19. Real Estater Says:

    >>just look at all the people in the ‘hood in my hometown of Detroit. They own real estate. They’ll continue to own it for a long time

    What happened to those people was a once in a lifetime event. It’s also a once in a lifetime opportunity for investors.

  20. Faux Estater Says:

    Let me correct you,
    —-

    You are not qualified. :)

  21. madhaus Says:

    Hey everyone, while you’re all arguing about when the bottom was, the Zuckster went and got himself hitched!

  22. nomadic Says:

    I was just wondering when someone would bring that up.

  23. Faux Estater Says:

    Less talk about prenuptial agreement.

  24. Faux Estater Says:

    BTW, some of his Harvard friends used to say he always had weakness for Asian girls.

  25. SEA Says:

    Do you think he’ll be surprised to learn about the extra tax deduction?

  26. SEA Says:

    WARNING: Some trains are bound for wrecks.

  27. Crissa Says:

    I dunno, we got outbid in 2009 twice… Before getting a house that had no bids on it 20K below asking.

    I’m wondering why the inventory is still so low… I mean, I know why some of it is low; people don’t want to sell while they won’t get back their investment and buy what they want. But why is rental low? As far as I can tell, we don’t suddenly have more people in town and many apartment and condo complexes had a large churn in the downturn; our old apartment complex went from having two times as may people as bedrooms to less people than bedrooms.

  28. Crissa Says:

    Looking back, one of the houses we lost a bid on they paid 8K less than we offered.

  29. sprezzatura Says:

    One of my neighbors is renting her place out – she’s moved out of state but (looking at the comps) she’s probably not going to be able to sell without a loss.

  30. Petsmart groomer Says:

    > Hey everyone, while you’re all arguing about when the bottom was, the Zuckster went and got himself hitched!

    IPO, wedding… See how all these good things happened AFTER he bought a house. That’s definitely proof that real estate is a great investment.

  31. San Francisco prices and Facebook | Bay Area Real Estate Trends Says:

    [...] got a new piece on Burbed on why SF house prices and rents going up so much, which is a response to this article on CNN/Money.  The article is actually pretty [...]


Leave a Reply

Please be nice. No name calling, no personal attacks, no racist stuff, no baiting, etc. Let's be nice to each other in the true Bay Area spirit! (Comments may be edited/removed without notice.)