Although this article applies to new building, the economics work the same way for resale. The media is beginning to understand that this is a cycle and not a significant one.

Here is what the December 27th report from CNN Money News entitled New Home Sales: Back from the Dead? says, “Homebuilding, one of the most battered sectors of the U.S. economy in recent months, showed surprising strength in November, according to a government report Wednesday.

“New homes sold at an annual pace of 1.05 million, up from the revised annual rate of 1.01 million in October. Economists surveyed by Briefing.com had forecast that home sales would rebound to a 1.02 million pace.

“The median average home price came in at $251,700 in November, up from the $248,500 level in October. The median price, that is, the point at which half the homes sell for more and half sell for less, had shown declines earlier in the fall because of a glut of homes available for sale on the market.” Read more…

However, there is an interesting link to Hot Spots and Cold Spots which predicts that California (including the San Francisco Bay Area) will be COLD in 2007. We’d love to show them how wrong they are!

- Avram Goldman and Mick Orton

Calif. median home price – November 06: $555,290 (Source: C.A.R.)
(note: compared to $548,680 last month)

Calif. highest median home price by C.A.R. region November 06:Santa Barbara So. Coast $1,083,000 (Source: C.A.R.)
(note: compared to $1,115,000 last month)

Calif. lowest median home price by C.A.R. region November 06:High Desert $332,340 (Source: C.A.R.)
(note: compared to $328,650 last month)

Calif. First-time Buyer Affordability Index – Third Quarter 06:24 percent (Source: C.A.R.)

Mortgage rates – week ending 12/21:

• 30-yr. fixed: 6.13%; Fees/points: 0.4%
  (note: compared to 6.18% and 0.5% points last report )
• 15-yr. fixed: 5.89%; Fees/points: 0.4%
  (note: compared to 5.91% and 0.5% points last report )
• 1-yr. adjustable: 5.44%; Fees/points: 0.6%
  (note: compared to 5.49% and 0.6% points last report )

- California Association of Realtors & Freddie Mac

Yahoo Travel says, “Once the most popular from of public transportation for early San Franciscans, the cable cars have become a major tourist attraction. It’s still a reliable and scenic way to travel around parts of the city. There are three lines : Powell- Hyde (Powell-Market, Nob Hill, Russian Hill, Hyde and Beach), Powell-Mason (Powell-Market, Nob Hill, North Beach, Bay and Taylor) and California Street (California and Market, Embarcadero BART/MUNI, Financial District, Chinatown, Nob Hill to Van Ness). Fare is $5 one -way. Tickets or a MUNI passport can be bought from the conductor or from booths at Powell and Market or Hyde and Beach near Fisherman’s Wharf.”

401 Van NessSan Francisco, CA 94102-4522

+1 415 673 6864

Open HoursDaily 6:30a-12:30a

http://www.sfmuni.com

- Mick Orton

Other San Francisco Attractions

Dow Jones MarketWatch reported today that mortgage rates edged up over the week following the news of rising consumer spending. This surge in spending is causing fears of higher inflation. Does anyone else see paranoia here?

We want strong numbers to show that our economy is humming, yet because it is doing well, there are fears that this will cause rampant inflation. I, for one, am skeptical. The market is based on a lot of factors, and like the weather, it is difficult to predict. So, in my opinion, the Fed’s tight grip on the interest rates can only be one factor in controlling inflation and can not be a panacea to all ills.

Recently I went to a website on economics and found an article on inflation. Here is their definition:

“Inflation is an upward movement in the average level of prices. Its opposite is deflation, a downward movement in the average level of prices. The boundary between inflation and deflation is price stability.”

Think about that. Everyone wants to make more money and earn more for the products they produce, yet we don’t want prices to increase because it causes inflation. Why not? Those $1,500,000 houses and condos that are selling in the City used to be worth $500,000-$700,000. Even though a million dollars isn’t what it used to be (as Donald Trump says), it’s still an awful lot of money. So it seems that in a lot cases, inflation may be our friend.

To me, money has always seemed an elusive concept anyway. Most of the money now is just electronic data sitting in a database of some bank somewhere and actually doesn’t account for anything until I buy something real. I could pull my money out of the bank and have money under the mattress, but paper money is only worth what people believe it is worth… and goes down in value every day… because of inflation.

So it seems to me that there are things much more important than money, and that is the thought as we head into the new year. Enjoy life, and don’t worry so much. Stop listening to the negative news and create your own positive reality. Interest rates up or down; stock market up or down; real estate market up or down it really doesn’t matter. Health and happiness are the keys to enjoying life!

Happy New Year!

- Mick Orton

Avram Goldman, President and COO of Coldwell Banker, San Francisco Bay Area said in his latest weekly report:

“Hope all had a festive holiday celebration. It’s that time of year to be with family and friends.

“Time to reflect on a year filled with change. Although sales were not as strong as the last several years the market held its own. We moved from a frenzied sellers’ market to one with more sanity. A market that cannot be defined with a broad brush as each market has its own pulse. Sellers had to adjust to a new reality of negotiation and compromise and buyers learned that sellers are not giving away their homes. A year where skilled and experienced realtors are more appreciated for their real estate acumen.

“We are ending the year on a positive note. Over the last three months the decline in volume of sales dollars on a per month basis has declined. Year to date through September the market was off about 22%. In the last quarter of the year it has declined to under 15% from the same period last year. Inventories continue to decline. They are lower than both 2002 and 2001at year’s end..

“The numbers of multiple offers have declined. However, San Francisco and the Peninsula (Palo Alto, Menlo Park, Burlingame and San Mateo) still generate a good number of multiple offers. This is primarily due to having the lowest supplies of inventories. Those sellers who adjust their prices to the new reality are selling their homes, at times with more than one offer. Buyers are savvier than ever to pricing and value. If you are going to find the willing buyer you will need to use the right bait—meaning pricing and presentation.

“It looks like 2007 is shaping up to be similar to 2006. We are not going to see the go-go days of 2004 and 2005. With that said, prices will not drop off the face of the earth. The expected continued rise in listing inventories has not occurred as predicted by the nascent media reporters and some economists. Interest rates should remain relatively stable provided oil prices don’t rise through the stratosphere. The economy is bumping along with unemployment remaining fairly stable.

“The numbers for the week of December 11-17th are as follows: 2 offices reported increasing inventories, 6 steady and 19 decreasing—4 offices showed increasing sales, 10 steady and 13 decreasing.

“This will be the last report of the year. Due to the holidays, I will be taking a two week break and resuming next year. Wishing all of you a Happy New Year and a year ahead filled with good health, fun and much success.”

- Avram Goldman

* For an e-mail alert when this report is updated, send a note to info@SFResidence.com with “weekly market report” in the subject line.

Potrero Hill as described on the SFResidence neighborhood guide:

“On Potrero Hill, you can relax in brilliant sunshine while watching fog engulf the rest of the city. Bounded roughly by 16th, Third and Cesar Chavez streets and Potrero Avenue, the neighborhood is relatively isolated by freeways and large tracts of industrial landscape, giving Potrero Hill its own pace and a feeling of distance from San Francisco.”

SFGate says, “Relax in brilliant sunshine while watching fog engulf the rest of the city, in the former ‘hood of OJ Simpson and Seals Stadium.” Read more here.

Other features include:

• Sights and Culture
• Food & Drink
• Shopping
• Nightlife

For more information on other neighborhoods and street maps visit our website.

- Mick Orton

Previous Neighborhoods

Merry Christmas everyone!

A reader asks: Where can I find out more information on Owner Move-In Evictions and do you know if this will restrict me from condo converting our 3-unit TIC?

Our reply: There is information on the latest rules and guidelines for Owner Move-In (OMI) and condo conversions on Andrew Sirkin’s web site. He is an attorney who specializes TICs and condo conversions.

We also have the Stirling-Davis condominium conversion resource on our website presented by Adams & Kessler LLP, another group of attorneys who specialize in condominium conversions.

Finally, you can call or access the Rent Control Board to read the official rules or talk to a counselor. I would advise anyone who is considering doing an OMI eviction to consult with an attorney who specializes in San Francisco Rent contol law for landlord prior to doing anything.

- Janis Stone

A reader asks: If a property’s backyard leads into a park, who’s responsibility is it to clear the brush next to the fence (on the side of the park)? — Am I able to hire someone to cut down some of the brush?

Our reply: The City, County or State parks department is responsible for the maintenance of the park. They usually do not allow anyone who is not hired by the park to do any “landscaping”. So if you have a problem with the brush on the other side of your fence, contact the appropriate parks department and ask them to clear it away.

- Janis Stone

A reader asks: Is the Marina safe to live in? I have heard a number of stories about the “liquefaction” in this area — and wanted to know if this is a safe area of the city.

Our reply: Parts of the Marina are built on Land fill which is subject to liquefaction in case of an earthquake. During the 1989 earthquake many properties in the Marina suffered significant damage and some buildings even collapsed as a result of the earthquake.

I have heard engineers tell clients that one of most important factors that will determine the extent of damage from an earthquake is the ground that a building is built upon. So if your property is built on rock it is less likely to sustain as much damage as a property built on sand, bay mud or landfill. But after the earthquake many buildings in the Marina were retrofitted with shear walls, foundation bolting and increased supports so that they are stonger and more able to withstand the shaking of an earthquake. New buildings were built with piers anchored on bedrock. This will hopefully reduce the risk of serious damage during an earthquake. However, we will not know how well the retrofitting works until we have another earthquake.

There is also risk of landslides for properties built on hills, so there are very few areas that are “risk free”. I would advise anyone considering purchasing property in the Marina to talk to an engineer and have the property inspected by an engineer to determine the structural integrity of the home and what the professional’s opinion is about the area. It is also important to ask yourself how much risk you are willing to take on your home or investment property. People differ greatly in their willingness to gamble on the future. The best bet may be to have great insurance!

- Janis Stone

Also see our previous article:

San Francisco Real Estate and Landfill

Yesterday was the shortest day of the year. That really has little to do with San Francisco real estate, unless you’re trying to look at property at 4:00 in the afternoon when it’s starting to get dark.

December 21, 2006 at 7:22 PM, EST was the winter solstice where the sun reached its southern most point in the sky. And with the rainy weather we have had lately, it makes the days seem all that much shorter.

Along with the shorter days comes a slowing real estate market. It happens everytime at this time of year, yet skeptics still are talking about the “housing bust”. However, our experience is that although marketing times are now much longer, prices are holding relatively steady and multiple offers are beginning to become more common. Could this indicate a strong 2007? Only time will tell.

Have a Happy Holiday season.

- Mick Orton