Here goes my pet peeve again San Francisco Case Shiller Index

So I woke up this morning to NPR singing that the new S&P/Case-Shiller Index is out and San Francisco is down over thirteen percent?!!!  My heart skipped a beat for a second because I was half asleep and I had a mini panic attack thinking 'When did San Francisco drop so much when I wasn't looking?  That hasn't been my experience in this market where did that number come from?' 

Then I rubbed the sleep out of my eyes and woke up to remember (and this will always frustrate the life out of me),  it's not San Francisco County they are speaking of, my favorite 7x7 square mile bit of California.  It is the dreaded/oft misstated San Francisco BAY AREA which includes Oakland, Fremont, Contra Costa, Marin, San Mateo and of course San Francisco.  All of which are different markets with very different average sales prices and very different price appreciations/depreciations.

  

Don't get me wrong I'm all for keeping an eye on numerical trends - GENERALLY.   It's just it makes my life difficult when I get clients that believe they are going to be able to write an offer 13% below asking on a single family home, that in fact is getting multiple offers.   Details media!  The devil is in the details.

So what is the true San Francisco proper (meaning SF county) S&P/Case Schiller index?  God I would love to know.  They do have that information - I did call a poor soul at Fiserv Inc, the parent company of the Case-Shiller Index, today out of pure curiosity, but it's available on a subscription basis only for industrial clients - and for the $3500/mth subscription cost I figured I would let my curiosity die on this one....

What I did sniff out is the huge discrepancy in depreciation between the price tiers even within the SF Bay Area index.   For example the low Tier (under $545,294) went from 269.67 in Jan. 2007 to 192.12 in Jan 2008 - a 77.55 difference; whereas the high Tier (over $794,192) changed from 182.06 in Jan '07 to 175.75 in Jan '08 only a 6.31 difference.   And since those numbers are proprietary to the Case-Shiller index I thought I would pop in a little memo on how they calculate them from their press release. 

 

The S&P/Case-Shiller Composite of 20 Home Price Index is a value-weighted 

average of the 20 metro area indices. The indices have a base value of 100 in January 2000; thus, for 

example, a current index value of 150 translates to a 50% appreciation rate since January 2000 for a 

typical home located within the subject market. 

The Sky is Falling!

Sometimes it would appear that way per all the negative press that abounds regarding real estate. NOT that I am burying my head in the sand - there's no question a good chunk of California is experiencing some serious pains, and even here in SF where in 14 years, I rarely if ever, saw a short sale until last October; I'll admit to it becoming far less of the rare example, at least for the southern part of the city.

That being said - the doom machine has long been at work where the press is concerned and no where is there a better way to see that, than to revisit some historic headlines from era's gone by.

Please do enjoy, North American Title passed them my way several months ago...

"The prices of houses seem to have reached a plateau, and there is reasonable expectancy that prices will decline." Time Magazine, 1947

"The goal of owning a home seems to be getting beyond the reach of more and more Americans." Business Week, 1969

"The era of easy profits in real estate may be drawing to a close." Money Magazine, 1981

"Most economists agree...a home will become little more than a roof and a tax deduction, certainly not the lucrative investment it was..." Money Magazine, 1986

"Financial planners agree that houses will continue to be a poor investment." Kiplinger's Personal Financial Magazine, 1993

"A home is where a bad investment is." San Francisco Examiner, 1996.