So I was recently asked the question of is paying above 2009 prices normal for San Francisco.  I can tell you from experience here in San Francisco that prices vary considerably and that many different factors determine what a property sells.  Some of the factors that I consider when looking at a property for determining if it has been priced correctly are the following:

• Neighborhood/Location
• Condo v. Single Family Residence
• View v. Non-view Unit
• Price Range
• Condition and if it was recently updated or built
• Number of Bedrooms
• Parking
• Amenities/Unique Attributes

Every property is different and if your realtor should be able to provide you with numbers, trends and market conditions that let you decide for yourself that the value is there.  If they can't you should consider getting another realtor who can.

According to the Wall Street Journal "Home values posted the largest decline in the first quarter since late 2008, prompting many economists to push back their estimates of when the housing market will hit a bottom."

During the first quarter according to data from Zillow, home values fell 3% in the first quarter from the previous quarter and 1.1% in March from the prior month.  The primary reasons for this were the oversupply of inventory and the large amount of foreclosed properties. Fannie Mae and Freddie Mac during the first quarter sold more than 94,000 foreclosed homes during the first quarter.  This represents a 23% increase over the previous quarter.

There had been appreciation of property values here in San Francisco, Los Angeles, and San Diego, but recently they have declined again resulting in a double dip. 

Condo prices have been falling throughout the Bay Area.  It is true that things are neighborhood specific in San Francisco, but this chart below is from the April 10th, 2011 Chronicle with fractions rounded and source being DataQuick Information Services. It definitely shows that as of the end of last year across the Bay Area prices are down 42.9% overall since their 2007 Peak.  Note San Francisco has had the least drop but is still 14.5% lower than our 2007 peak.

County                    2006            2007            2008          2009         2010           Peak            2010 v. Peak
Alameda                $462.5K      $460K         $320K        $250K       $248.3K    $462.5K      -46.3%
Contra Costa        $420K         $429K         $280K        $185K       $180K        $429K         -58.0%
Marin                      $548.8K      $570K         $402K        $317.5K    $350K        $570K        -38.6%
Napa                      $462K         $440K         $400K        $242K        $236.5K    $462K         -48.8%
Santa Clara          $499K         $520K          $417.5K    $300K        $328.8K    $520K         -36.8%
San Francisco     $715K         $760K          $749K        $640K        $650K       $760K         -14.5%
San Mateo            $535K         $550K          $450K        $393K        $375K       $550K         -31.8%
Solano                  $300K         $294K          $125K        $75K           $78K         $300K         -74.0%
Sonoma               $380K         $359.5K       $220K        $174.5K     $175K       $380K         -53.9%

BAY AREA            $490K        $508K            $375K       $275K        $290K        $508K         -42.9%

I am a complete realist when it comes to numbers.  Numbers should always be taken with a grain of salt and you should always look at the potential agendas of the source.  Given this I came across an article which I found somewhat disconcerting.  It was called "Flawed housing data might mask depth of woes" by John W. Schoen.

In synopsis it stated that The National Association of Realtors (NAR) has been overstating the rate of sales of houses.  This in turn has made the inventory numbers which is usually referred to as the monthly supply of houses suspect.  Basically this number is the number of unsold houses divided by the pace of sales.  When you have about 6 to 8 months of inventory, prices are typically stable.  When you have under 6 months of inventory you have a tighter market and prices typically increase.  When you have over 8 months of inventory you have a market where prices typically decrease due to the large supply of houses on the market.

Apparently the NAR has been stating that there was an annual sales rate of 4.88 million home and thus an 8.6 month supply.   Meanwhile mortgage data and data from the private research firm CoreLogic  which track closings in over 2000 counties came up with much lower annual sales.  CoreLogic stated that for February the sales rate was 3.66 million homes on an annual basis which would mean that there is more like a 17 months supply of inventory.

How could such a discrepancy happen?  Well it turns out the NAR only polls about 40% of its members and it used to benchmark its data with US Census data.  In 2010 the US Census excluded some of these benchmarking questions  from the census.  Then the data is also suspect as with the collapse of the housing market there has been a consolidation of agencies.  Thus some of the agencies may be experiencing  higher sales not from purchasers buying more homes, but from more agents working for them.

In addition to all this I would also throw in that there is another factor the "off market" houses.  There are a number of houses that are for sale but are not officially listed because they are over priced.  The owners want to sell, but do not want to take the losses from their outstanding loans and home improvements they have put into the property.

Based on all of this you can expect to see national housing prices continue to decline at least in the immediate future.  Note though each neighborhood and locality is different and should be evaluated accordingly.

I was reading Standard and Poors and from the S&P/Case-Shiller Home Price Indices of 20 cities, where there are 18 with their rates showing a home-price decline from the last quarter of 2009 to the last quarter of 2010:

• Detroit, down 9.1%
• Phoenix, down 8.3%
• Atlanta, down 8%.
• Portland, down 7.8%
• Chicago, down 7.4%
• Tampa, down 6.2%
• Seattle, down 6%
• Minneapolis, down 5.3%
• Las Vegas, down 4.7%
• Charlotte, down 4.4%
• Cleveland, down 4%
• Miami, down 3.7%
• Dallas, down 3.6%
• Denver, down 2.4%
• New York, 2.3%
• Boston, down 0.8%
• San Francisco, down 0.4%
• Los Angeles, down 0.2%
• San Diego, up 1.7%
• Washington, D.C., up 4.1%

Luckily San Francisco only has had a .4% drop.