Have San Francisco home prices ever declined?

[powayseller]

Does anyone know? Several friends insist prices have never gone down in SF, not even during the SD downturns.

My friend, who cashed out of the SD housing bubble a year early, in 2003, is renting now, but moving to SF this summer and plans to buy a house in SF.

Am I missing something?

RE is cyclical, except in SF?

[powayseller]

Not even the .com bust affected pricing of SF houses.

SF housing has only gone in one direction: up.

How is this possible?

I checked the OFHEO site, and the data goes back to only 1998. That year was only broken down by state, not MSA. I called and requested the data for the earlier years, if available by MSA. The data for the later years is limited in usefulness, because it applies only to SF homes selling for under $359K (raised to $417K recently), and when was the last time you could buy a house in that price range in SF?

[ARMwrestling]

Prices fell from 1989-1994. About 10-15% in nominal terms, more factoring inflation of course. Some areas were hurt more than others, Silicon Valley in particular. In Cupertino, where Apple is based, it was a dark period.

SF itself was probably closer to the 10% mark, but decline it did. It also fell in the 1981-1982 recession (in real terms), which everyone seems to forget about, as well as 1972-74. The idea that SF prices never drop is a myth, pure and simple.

Judging from today’s nosebleed prices in the city by the bay that lesson will have to be relearned yet again, and more painfully than ever it seems.

[powayseller]

I reviewed the data back to 1977, and I probably didn’t analyze it as well as Rich would, but I concluded that San Francisco’s housing prices are stronger than ours, except during the years of the .com bust.

San Francisco has always had greater housing appreciation than San Diego, and smaller declines, except the year 1977, and the years 2001 – 2005, where its appreciation rates lagged our city.

If you go on the premise that income should support housing, you’d expect housing prices to rise the same as income. However, SF housing prices rose in excess of income for all years from 1977, except 1982, 1984, and the period 1991-1997. From 1991 – 1995, house prices were negative, and 1996 – 1997, they rose only slightly whereas wages were growing well.

San Francisco housing prices declined only once: between 1990 and 1994, SF homes lost 12% of their value, while SD homes lost only 10%. However, SF prices rose 15% over the following 3 years, erasing the loss, while SD home prices only rose 5% over that period.

It’s interesting that during our bubble runup, starting in late 2000, we had annual appreciation of 10% to 31%, while SF had only 1/4 – 1/2 of our appreciation rates, probably a result of the .com bust. It wasn’t until the middle of 2005, that SF housing appreciation rates caught up to ours!

So while SF has been stronger than SD in the past, they’ve had periods of weakness too, and I don’t see any reason now to believe they’ll be exempt from a decline in prices.

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