Free Fallin’

“There are three kinds of lies: lies, damned lies and statistics” Mark Twain

I got so excited about this post that I really feel like it needs musical accompaniment…so before you start digging in, go ahead and click the button below first. It’ll add to the enjoyment!

On Tuesday afternoon I surfed through SFGate.com and discovered that our friends at the Chronicle had, as one of their lead stories, a piece on the real estate market that was headlined “Real Estate Market in Free Fall”. They later modified that and it morped into the more friendly “The Plunge In The Price Of Homes Gets Worse” . The story had an attached companion piece showing Bay Area Home Prices By Zip in which I was shocked to discover that Foster City(FYI: The Chronicle thinks that Foster City is in San Mateo) has dropped in value 9.9% and, incredibly, the San Mateo Zip Code 94402 has dropped a whopping 27.1%! That last number was particularly stunning since it made it worse than Daly City, South City or Pacifica. As you may have guessed…I didn’t believe these numbers.

The Chronicle was touting the work of “experts” S&P/Case-Shiller who had compared the numbers from May 2007 to May 2008 numbers and thus had drawn their conclusions. Honestly, I got a little nervous because I had not done a year to date analysis myself and I reasoned that since May 07 was pre-mortgage meltdown I figured it was logical to assume that there could have been a fairly significant drop. So yesterday morning I got up and crunched the actual numbers from the MLS database. I looked at 94402 because that decline was so enormous. That zip is comprised of San Mateo Park, Baywood, Aragon, Parrott Park and, atypically, Sunnybrae, which is largely a starter home neighborhood. The others are very pricey. Guess what? Turns out that in May of 2007 not a single house in Sunnybrae sold…the lowest priced house in 94402 that month went for $1,200,000. Of the 20 houses that sold then all of them were on the west side. In May of 2008 8 out of 21 houses sold were on the east side and as you might guess that has a very large effect on the averages…actually a difference of 27%!

How about Foster City? In single family homes in May of 2007 19 sold at an average price of $1,131,526. In May 2008 17 homes sold…at an average price of $1,153,287! That’s right, values on single family homes actually ROSE year to date! So why the 9.9% decline? Because S&P/Case-Shiller averaged in condos/townhouses, and in May 2007 19 of them sold…including two at Promontory Point that sold for $1,087,000 and $1,335,000. In May of 2008 only four condos/townhouses sold…the most for $750,000. The average of both single family and condos/townhouses together shows a net loss of 9.9% as a result.

This kind of reporting is preposterous folks. You can’t compare multi million dollar properties to studio condos in search of truth about real estate values. I wonder if the June or July numbers come out and show no Sunnybrae sales in 2008 but 8 or 9 in 2007…will the Chronicle report that 94402 had a 27% increase year to date? If the July 2007 numbers show several 1 bedroom condo sales at the Admiralty and the July 2008 numbers show the three single family houses that closed over $1,600,000, will they report a 200% increase in values in Foster City?

I think this reporting is unfair and stretches the truth about this area alot. The only free fallin’ going on here is done by Tom Petty. (I saw him once in concert at the University of Denver…but hey, I’m a fossil)

Comments

  1. Patrick Au-Yeung says:

    How much stock do people really put into “news” reporting these days? Especially the san francisco papers? they’re all a bunch of schmutlapps looking for something sensational to write about, and people will always want to read and believe what they want to believe. If you are a homeowner or seller, your post is absolutely correct and objective. If you’re a potential buyer or someone who’s jaded about the market because they haven’t been able to get in, then the SFGate article is gospel. At least you actually crunched some numbers and took an honest attempt at making sense of what’s really happening in a market you personally know well. The jokers up north are making stuff up based on conjecture and a need for readership.

  2. Jim Minkey says:

    Really well said Patrick. No doubt we’re all prone toward believing that which we’re closest too. I guess we’re all just naturally skeptical. I couldn’t agree more about the “news” media too!

  3. The use of May numbers got me to thinking, why didn’t they use June? The story ran last week. I wouldn’t be surprised if the June numbers were more positive and that didn’t fit their agenda. I agree with Patrick!

  4. of course, these are all averages. People does not buy homes by looking at the averages or for investment, atleast I don;t think homes as investment. Its place for living. If you can afford, you buy it, otherwise rent it.
    Am sure most of your readers own atleast one home and they try to not lose their home values or gloat about it when the home prices went up leaving thousands of people not eligible to buy.
    I don;t give much credence to these numbers/reports anyway.

    Happy renter/saver

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