Sunday, September 2, 2012

SF Holds its Own 'Weight'

Using the below tables directly from the S&P / Case-Shiller:


  • In the year 2000, the average number of units (in 000s) was 1,100, while San Fran was 14% lower than the average.  This stat clearly speaks to the inventory / supply issues that real estate professionals, home-buyers and owners constantly reference. 
  • More revealing is that, in the same year, the average price of a home in SF was double that of the average: $465K versus $224.25K.  In terms of statistical significance: that is three standard deviations away.  (465-224.25) / 81.4 = 2.95.  Wow, that bell curve is as flat as Lady Gaga’s abs!  Cheekiness aside, simple economics are clearly present here: lack of supply = increase in demand.  

Begging to rant, the C-S is a weighted index that gives more emphasis to cities such as SF.  Think of the S&P 500—it is cap weighted, where the biggest companies get larger weightings.  Removing San Francisco from the national index, as a mere exercise, would result in the national housing average to drop by nearly 7%.  I think it is safe to conclude that San Francisco is a strong and resilient market (to say the least).