I am alive—because
I do not own a House
Entitled to myself—precise—
And fitting no one else
In my fifty-person office, at least six people are looking to buy a home right now. That small sample says something about the San Francisco real estate market, where increasingly the froth looks less like champagne and more like late-stage rabies.
I’d spent two weeks trudging to Craigslist rental flats in the rain when I got to my friend Romanus’s birthday party. We were on our second pitcher of strawberry margaritas when his friend and realtor, Helga, arrived: a vision in lilac shantung, offering tulips.
“Ciao, darlings,” she said, and got to work on the blender to make another batch of drinks. Helga was Marilyn blonde, like her sports car, and though I could see she was good-hearted, I was still scared when when she turned the high-beams on me.
I told her I’d just moved here from Brooklyn. No, my company was putting me up for a month. No, I was planning to rent, at least until I knew the city a bit better.
Helga was having none of this. She was going to hook me up with a friend of hers, a great mortgage broker, to see what my choices were. Then she’d take me out, show me some neighborhoods, a few apartments in my range. Educate me. If I decided I wanted to rent, great—I’d be out twenty-five bucks for Sophia’s credit report, and I’d have some groundwork done for next time. What’s to lose?
It seemed settled. There was nothing for me to do but nod.
A few days later she sent me to Sophia, another abundant North Beach Italian in an overflowing office. I liked her. She lived in a world of phones and paper. I signed six or eight pages of disclosure agreements, and watched her cover loose sheets with figures.
“And here’s an 80-10-10, with a floating arm. We could get you this one real easy, with your scores. So, interest payment on the first loan, fixed rate, plus interest on the line of credit, floating, plus HOA, plus property tax of 1.25%…I’m looking on the ratios on your salary, and here’s what I think you could get..”
“Homeowner’s association. Condo dues. Covers water, insurance, maintenance.”
She gave me a motherly tutorial on credit ratings, closing costs, and the kinds of outgoings that ten-year-olds don’t think about when they wish they were grown up. Numbers bore me, but I like independence enough to pick this stuff up fast. And I liked being inducted by women. With women, business blurs into life, the way it used to before Adam Smith decided we should specialize. Look, here’s what we need to know in order to take care of ourselves, they seem to say. Just because it’s business doesn’t mean that we can’t talk about our sick parents, our kids, or our ramshackle love lives. On the contrary—why else would these scribbled figures be important, bella?
Sophia totted up my allowance. I felt like Dr. Evil, cackling over the million dollars he didn’t realize was meager in the market he’d woken up to. Maybe I could buy love for soggy San Francisco, in spite of its refusal to be Brooklyn.
Helga put me in her Jaguar and hauled me through her city. She shrieked at the stiffness her exuberance brought out in me.
“When are we going to the Mission proper?” she’d mimic. “Oh sweetie, you’re killing me. The Mission proper. Where’d you get that from?” At the open houses, I was glad that the badass broker was my badass broker.
“What are the comps?” she’d demand from the hapless selling realtor.
“Well, a unit on the fourth floor sold for $597 in September…”
“September was a whole different market. It has nothing to do with what’s going on right now. What are you guys really expecting?”
“Well, we’re seeing in general that, you know, the market has gone up maybe 20% since the fall. So we’re using that as a cautious guide, though of course you never know…”
“So how many disclosure packets do you have out right now?”
I’d watch them dance. It made me go dreamy in panic. In Helga’s car, I’d want to fall asleep to the sound of the windshield wipers, though her illegal parking always snapped me to attention.
“What’d you think? Be honest. You won’t hurt my feelings.”
I didn’t really know. I’d been distracted by the pink Kitchenaid mixer, or the black-and-white tiles, or the built-in bookshelf. Patiently, she tutored me on exactly what that apartment would sell for, and why. After a few attempts, I could guess along with her.
I appointed a San Francisco Advisory Board, six friends who knew the market. One was still shopping, and the others were newish homeowners. Their counsel wasn’t a surprise. Come on in, they said. The water’s lovely. Mind the sharks, some added. I wrote to the two landlords I’d liked best—women my own age—telling them I wasn’t ready to rent their apartments because I was looking at places to buy.
“Right on, Dervala!” answered Michelle by email. “I’m a huge advocate of owning a peice of the rock!”
“Totally,” said Catherine. She’d wondered why I was renting in the first place, with those credit scores I’d shown her. (Immigrants have to keep good credit.)
I began to nurse daydreams about life as a home-owner. San Francisco is an early-to-bed city, a better place to develop an interest in Williams-Sonoma and window treatments than New York. Not that I’d be able afford Williams-Sonoma with a mortgage this fat, but the catalogues would keep me company over beans and rice. I’d stroke the walls: mine, all mine.
Cait and I had once hoped we’d end up as spinsters in a book-lined cottage, where we’d entertain gentlemen callers, and it now seemed it might come true, at least for me. I got a verbal acceptance of my (conditional) bid on a Victorian condo I’d seen only in the dark. It faced north over one of the busiest traffic streets in San Francisco, and smelled of old man, but it was a bargain, just like those January shoes you don’t really like.
I asked my ex-husband to send some paperwork for my mortgage application. He forwarded two recent Economist leaders which claimed the smart money was on renting. This needled me. I told him I wanted a sense of home after all my vagabonding, and I’d been listening to this stuff about the property market for years. He wrote back. “Remember that Alan Greenspan was talking about irrational exuberance in 1996? Three years later we said to hell with it, put our savings in the market and started a dot com. Oops.”
Goddammit. Ten years before, when Jason still a cute young socialist, I’d started him on a steady diet of The Economist. Only when we’d strayed from its righteous path had we ever run into trouble. I gave in and read the articles he’d sent, which I’d been ignoring on the magazine rack at work. Of course they made elegant sense. I re-read them and though about turning 40 stuck in negative Victorian equity. Then I called Helga and babbled about a bubble.
“I think you’re feeling pressure.” she said, graciously. “I want you to be happy.” My friend Peter bolstered me with more real estate bubble-bursting from the New York Times and the Wall Street Journal.
Here’s what’s going on here right now: when I looked at Craigslist tonight, half the rental listings are for apartments I’d looked at five weeks ago. Perfectly nice places. I’m almost always the only prospective tenant at a showing. Landlords call me, offer discounts or a free month or two. Some seem unable to accept how soft the market is now that everyone is stretching to buy instead; that rents need to come down again; that the dot-com days aren’t coming back. They’re the ones who keep re-listing.
Five years ago, everyone tells me, thirty or fifty or seventy people showed up at each rental showing. They waved credit reports and college transcripts. They brought their checkbooks to sign away their signing bonus, if only the landlord would consent to accept ten months’ rent in advance, and maybe a little sweet something for the kids’ college fund.
And that’s still happening in the seller’s market. The unwritten rule here is that you should offer at least twenty per cent over the asking price to win the inevitable bidding war. When I’d fallen for a little condo in unsexy Bernal Heights, Helga told me I’d need to offer a 50% sweetner to get it. We sat in a cafe, late into the evening, filling out the paperwork for my first ever bid. Next morning I balked and dropped my offer to a 40% premium. I lost to a bidder who offered more and said he didn’t need a contractor’s inspection or a mortgage contingency. The natives act like this is normal.
I can rent something far better for less than half the cost of interest-only repayments. And if I bought a place, I couldn’t cover the mortgage by renting it out. Buyers dismiss this because they’re betting on capital gains. The demand that pushes prices up is fueled by people like me, who have been running alongside the train for years, and fear it’s steaming out of the station. The Irish market has been like this for years, but it’s ugly to watch it up close.
San Francisco buyers seem out of touch with how weak the rental market is (or they don’t care). They’re not hanging out on Craigslist, watching the same “Edwardian charm” pimped out week after week, sliding from $1600 to $1550, then $1500.
To judge by my postbag when I said I was moving, people truly love this city, and they continue to want to live here. The job market is healthy. There’s little room to build new housing. I don’t think there will be a catastrophic fall in house prices, though of course it’s possible. But the enormous year-on-year appreciation is going to stop, and very soon. Rates will creep up, and the foreclosures will start, and we’ll look at each other and realize that it’s not smart to throw Dr. Evil dollars at places we’d hate to get stuck in. At that point, I’d start to ask myself where else I could have put that down payment and those fat closing costs, or how I could have invested the extra money that would otherwise be paying off mortgage interest. The numbers only add up if you believe that the house price train will keep steaming ahead, or you want to stay put for longer than the average tenure. It’s seven years nationally; I’m sure it’s shorter in San Francisco.
That’s why I’m spending Saturday moving into a Bernal Heights rental: a sunny 2bd w/charm, eat-in kitch, shared gdn, hardwd flrs & vws. I’ll sleep easier without the traffic, and the HOA dues.
Further reading: Trading Places: Real Estate Instead of Dot-Coms.
“Real estate-crazed Americans have started behaving in ways that eerily recall the stock market obsession of the late 1990’s.” –New York Times
200 v 2005: Totally Insane! –Curbed