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Could San Francisco home prices rise dramatically again?

by sfishome on October 29, 2009

Could San Francisco home prices rise dramatically again?

I thought I was reading an old article when I read Robert Shiller of Case-Shiller said “It is entirely possible that even with the bad news we are getting, home prices could start a major increase….what happens from here will depend on people’s animal spirits and speculative impulses,”

Click here for the link to the article.

The article specifically references San Francisco:
“Home prices in certain areas like San Francisco, have risen by double-digits over four months, and if viewed on an annualized basis, they look like they are in ‘bubble territory,’ Shiller said.”

When the Case-Shiller Index refers to “San Francisco” they are usually referring to the San Francisco “MSA” or what I’d refer to as the “Bay Area”. There definitely have been pockets of strength in the City of San Francisco recently, but for big gains you can look outside of the City in low-cost areas where investors and first time home buyers are snapping up foreclosures. I predict gains to be realized in the next few reports for two reasons – the reports are old news, and Closed sales are actually reflect the month earlier action – you contract at a price, and don’t get it reported until it Closes, often 30 days later.

Home prices fell off a cliff starting in late September 2008. We’re probably a few weeks from seeing how this September did vs. last September, but the real news will be October over October and even November over November since again, a November sales price reflects a October contract – immediately after everyone was worried sick about the economy.

The month over month reports should be extremely interesting for a full year – and could – as Robert Shiller suggests – cause a new bubble mentality with reports of big increases leading to even bigger increases.

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