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Good Reading -- October 2015

Facts and Figures

  • Changes in the real price of homes, car, and college tuition as compared to income:

Source: NY Times, Census Bureau, KBB. Note: some of the author’s numbers appear to be off – slightly in the case of household income, significantly in the case of new car prices (unless he wrote average but meant median). The point remains.

  • [From 2000 to 2013]: "Every major metro area in the country that has been losing population and/or jobs is actually gaining people with college degrees at double digit rates." (Source: Manhattan Institute, via the blog article "America's Shrinking Cities..." below)


"Risk, like energy, tends to be conserved not dissipated, to change its composition but not its quantum. So it is possible the financial system may exhibit a new strain of system risk -- a greater number of higher-frequency, higher-amplitude cyclical fluctuations in asset prices and financial activity, now originating on the balance sheets of mutual funds, insurance companies and pension funds." -- Andrew Haldane, Bank of England (via Grant's)


  • Superforecasting: The Art and Science of Prediction -- Phil Tetlock's book, co-written with Dan Gardner, has arrived, and it is excellent. I think this is the best book I've read this year. It is thought-provoking and relevant in a very important area, and it's also very readable. If it's not quite as good as "Thinking, Fast and Slow" it is very close. Highly recommended.

  • The ongoing "master class" with the author is here. The author's new blog is here, including a link for anyone who'd like to join the Good Judgment Project.

  • Reviews of the book: Economist; Goodreads; WSJ (Zweig)

  • Shaky Ground: The Strange Saga of the U.S. Mortgage Giants -- Bethany McLean's new book is out, and unsurprisingly the combination of a fascinating subject and great writing makes for a fantastic book. It's very compact -- only 150 pages in a small format -- but it covers a lot of ground. And it is a topic with equal parts business, government, and human folly -- "a cross between Monthy Python and Shakespeare" that has massive ramifications for every American. Highly recommended.

  • McLean -- along with Bill Ackman -- on Charlie Rose, talking about the GSEs and her book.



  • In San Francisco's Bidding Wars, Home Prices Go Ballistic -- Some of these practices are just reckless, and the auction-frenzy mentality is nuts. It's hard to believe this behavior is back so soon, but there is no way this will end on a happy note this time either.

In San Francisco’s Bidding Wars, Home Prices Go Ballistic

In the San Francisco Bay Area, selling a house is easy. The trick is getting $100,000 or more over the asking price

Even in an extreme seller’s market like the San Francsico Bay Area, upfront prep work and smart marketing are essential to getting top dollar – and multiple bids – for a property.

By CANDACE JACKSON Aug. 27, 2015 9:45 a.m. ET

In the San Francisco Bay Area’s hot real-estate market, the question for many sellers isn’t whether they’ll get an offer. It’s how much over the asking price the offer will be.

“It’s easy to sell,” said Ken DeLeon, a real-estate agent based in Palo Alto. “The key is getting the extra $100,000.”

Even in an extreme seller’s market where bidding wars are common, upfront prep work and smart marketing are essential to getting top dollar for a property, homeowners and real-estate agents say. Sellers who invest $15,000 or more when listing their homes can recoup their costs many times over.

Several weeks before listing their 1,800-square-foot, loft-style condominium on Haight Street in San Francisco, Melanie and Adam Gensler spent $6,639 to repaint and recarpet the unit, $1,740 to repair and refinish the concrete floors and nearly $13,000 on staging—complete with contemporary paintings leased from local galleries through the San Francisco Museum of Modern Art. The effort was coordinated by the couple’s real-estate agents,Gregg Lynn and Alex Hachiya, of Sotheby’s International Realty.

The Genslers—he’s a financial and tax planner and she works in advertising sales—said they understood the need to freshen up and stage their condo before selling because they’d recently been house-hunting themselves. “For me the contrast has been pretty stark,” said Mr. Gensler, whose home’s interiors were handled by Mark Lopez at Guild Staging and Design. “Though I was surprised at the cost.”

The Bay Area’s latest market boom has been driven by an influx of high-paying tech jobs and, in some areas, overseas buyers looking for investment properties. A scarcity of listings is sending prices to new highs. In June, the number of new listings in San Francisco was down 23.1% from a year prior, according to the San Francisco Association of Realtors. The average listing spent 26 days on the market, compared with 31 days in June 2014. Median sales prices were up to $1.177 million—a 12.1% jump from a year ago. Real-estate agents say bidding wars are most common on properties priced below $2.5 million, and that buyers often make offers on numerous properties—anywhere from two to 20—before finally winning one.

Roh Habibi, a Bay Area real-estate agent who stars on Bravo’s “Million Dollar Listing San Francisco,” said he and a client, a 20-something Google employee, made 12 offers before finally winning a bidding war on his 13th offer, a place in the Mission District that he purchased for $900,000—about $200,000 above asking.

Mr. DeLeon said low pricing can create an “auction dynamic” that draws high bids. After a 1,904-square-foot home in Menlo Park, listed for $1.895 million, was sold for $1.92 million, Mr. DeLeon listed a comparable home on the same street. He intentionally priced it low, at $1.498 million, which he said helped bring in 13 offers and a final sale price of $2.29 million.

In Palo Alto, where the median sale price of a home is $2.667 million—up from $1.42 million four years ago, Mr. DeLeon said he experimented with extreme pricing, asking just $1 for a small condo he owned. “I knew I couldn’t have a client take a chance on that,” he said. It sold for $385,000, which he said was a record price for the complex at the time.

Setting prices artificially low leads to some guesswork for buyers.Nora Dahr and Firas Azmeh have been looking for a four- or five-bedroom house for themselves and four children in Menlo Park, Palo Alto or Los Altos. The couple, who moved to the Bay Area from Texas for Mr. Azmeh’s job at a mobile-security company, have put in seven offers and increased their budget from $2.5 million to just under $3 million with a large cash down payment and no contingencies. “The challenge now is that sellers aren’t even willing to accept asking price these days,” she said. “You’re almost bidding blindly as to what they want, which encourages you to come in way above ask.”


To get top dollar for their condominium in San Francisco, Adam and Melanie Gensler spent about $20,000. Some of their expenses include:

· Repainting and re-carpeting: $6,639

· Pre-sale inspection report: $500

· Repair and repolish concrete floors:$1,740

· Staging by an interior designer:$12,600

ASKING PRICE: $1.55 million


Strategies sellers and buyers are using in San Francisco’s competitive real-estate market.


· Underpricing to stoke the competition

· Staging with help from interior designer

· Pre-sale inspections and subsequent repairs and upgrades

· If there are no offers, raising the price


· Bidding far above asking price

· High down payments, and dropping contingencies on inspections and financing

· Bidding quickly, sometimes after one brief viewing

· Personal letters, with family photos, to woo sellers

Mr. Lynn said underpricing can drive traffic and create momentum, but he has also seen it backfire. “Sometimes Realtors end up with egg on their faces” if a home gets no offers or only one low offer, he said. “It’s basically like you’re a Hollywood producer and you didn’t do well at the box office.” Other agents say if a home receives no offers, they’ll take the counterintuitive step of raising the price, as a way to indicate to buyers the price they’re willing to accept.

In the end, the Genslers priced their Haight Street loft at $1.55 million—the higher end of the expected price range. Mr. Gensler said he’d be happy with any offers above $1.6 million. Ms. Gensler said she hoped it would sell for much higher, though she said “the most important thing is that we sell it, so we could just focus on our family.” The couple purchased the condo in 2006 for under $1 million and spent nearly $150,000 on improvements.

Agents say the right price tag and attractive staging are key to prompting the kind of quick decisions that spark a bidding war. Mr. Lynn and Mr. Hachiya, like many Bay Area agents, also encourage sellers to get a thorough pre-sale inspection report, which for the Genslers’ loft cost $500. (Typically, buyers pay for this during the closing process.) A satisfactory pre-inspection report makes potential buyers more willing to put in offers that aren’t contingent on a home inspection. Buyers willing to waive the contingency on bank financing are also more attractive to sellers.

A few days before the brokers’ open house at the Gensler home, the listing got picked on Curbed, a popular real-estate blog, which gave the home “two thumbs up” and described it as “a tad underpriced.” Mr. Lynn and Mr. Hachiya held three open houses, one for agents on a Tuesday and two for buyers the following Saturday and Sunday.

Three days after the Sunday open house, the Genslers received two offers, one for $1.57 million and another for $1.62 million with a large down payment, no inspection or loan contingencies, a 21-day closing window and a four-paragraph personal letter with a photo of the buyers, a young couple relocating from Seattle. They accepted the higher offer, which was $70,000 over their asking price. The home went into contract nine days after it was listed.

Mr. Lynn said he thinks the property might have gotten even more offers if it had listed in the spring or the fall, peak selling seasons in San Francisco, but that the highest offer was strong.

Mr. Gensler said he hoped for a higher offer, but was happy with the three-week closing and no contingencies. “In the end, we got pretty much what my conservative working number was,” he said. Plus, they can now focus on enjoying their new place in the Oakland Hills. They paid $1.75 million for it in a bidding war, offering about 17% over the asking price.

Write to Candace Jackson at

The Goal: $100,000 Over Asking Price

A behind-the-scenes look at a San Francisco home sale



Adam and Melanie Gensler purchased their condo in 2006 for under $1 million. Then they spent nearly $150,000 on improvements.



In June, they listed the property for $1.55 million. Before it hit the market, the Genslers spent $6,639 to repaint and recarpet the unit.

Nearly $13,000 went toward staging. A loft upstairs, which the Genslers used as an office, was set up as a bedroom. Stagers also brought in flowers to freshen up the space. ‘For me the contrast has been pretty stark,’ said Mr. Gensler of the new decor. Custom furniture and contemporary paintings were used in staging the condo.

The kitchen in the home, which went into contract nine days after it was listed and sold for $1.62 million—$70,000 over the asking price.


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