Last month, I posted about  a property in San Francisco’s Mission neighborhood that elicited 32 offers. Well, the sale closed last week at a whopping 96% above asking. Which begs the question, will paying double list the week before Facebook goes public prove to be a genius move, or one that we look back on and sadly chuckle at the irony?

The darkest days of the housing market’s downward spiral may be behind us, but the battle over who should shoulder the blame is rambling on.

In Friday’s Wall Street Journal, Nick Tamiraos cited a paper published by the Federal Reserve Banks of Boston and Atlanta that aims to dispel the popular notion that Wall Street, not Main Street warrants the harshest chiding for the financial crisis. Not everyone agrees with the Fed economists’ viewpoint, including Madhaus over on Bay Area Real Estate Trends, who isn’t convinced that we should let bankers off the hook just yet.

The Fed paper pooh-poohs the notion that we should heap blame on “industry insiders” like mortgage brokers and traders at Wall Street firms like Goldman Sachs (GS), Bear Stearns (JPM), Merrill Lynch (BAC), and Lehman Brothers (BCS) for duping the rest of us into believing that their securitization machine could ensure that the real estate party would last forever. Instead, they propose the “bubble theory” where the real culprit was borrowers’ belief that home prices would never go down.

It is easy to see why the paper has sparked criticism from the populist camp. At a time when millions of homeowners still face the prospect of losing their home to foreclosure, piling on and blaming them for causing the crisis isn’t a popular viewpoint. It isn’t that far off, however: Borrowers are to blame for the crisis, since record levels of demand had to come from somewhere.

But implicating borrowers isn’t the same as absolving bankers.

Each side played their role. Wall Street banks widened mortgage underwriting guidelines beyond rationality, opening the market for homes to borrowers that in hindsight had no business borrowing that much money. Mortgage brokers peddled the product, which was endorsed by rating agencies like Moody’s (MCO) and Standard and Poors (MHP), while Realtors waived their pom-poms and promised home values would never go down. Borrowers, some by coercion and some by free will, took the bait — hook, line, and sinker.

Cash poured into the market from abroad, fueling the bubble even as home prices began to wobble. In 2006, I sat in meetings and listened in awe to European bankers who had flown into New York with a single order from bank executives: Put money to work in the US housing market. They didn’t understand what they were investing in, and didn’t bother to learn. They just didn’t want to be left out.

In the final analysis, any assessment of the housing market’s collapse that does not implicate all parties, from borrowers to bankers to regulators to lawmakers, is incomplete. Commentators aiming to absolve certain parties are ignorant at best and engaged in willful deceit at worst.

But this time, fear of the bubble may be more pervasive than the bubble itself. The question then becomes: Is the fear justified? And if it is, what does the future hold for home prices and rents?

The data tell a conflicting story, but one that is illuminating nonetheless.

Those who pooh-pooh the notion that social media firms like Facebook, Twitter and Zynga are wildly overvalued and believe we are in the early innings of the next great housing boom will point to unemployment. It is easy to forget that Twitter launched in 2008, and Web 2.0 and The Cloud have emerged as the dominant force in technology against the backdrop of a substantially weaker economy than we had in the late 1990’s when the original tech bubble blew.

To wit, employment in the San Francisco Bay Area remains elevated, far higher than at any point in the last 20 years. Optimists will argue that as the broader economy continues to strengthen, however slowly, the wind behind the technology industry’s recent expansion will only strengthen.

On the flip side, the segments of the housing market most directly impacted by new tech money feel unsustainably frothy. As anyone in the market for an apartment in San Francisco can attest, it’s wild out there. The market for homes isn’t much better – if you are a buyer that is.

Check out the graph below of home prices in Palo Alto. The black line represents values as expressed by price per square foot – which are higher now than at the peak of the housing bubble in 2008. The red line is Cirios’ proprietary “Over-bid” indicator, which measures homes sold above asking relative to those sold at or below. The recent trend is clear: In 2012, the vast majority of homes in Palo Alto have sold above their original list price.

Looking back to 2000, this indicator peaked a bit higher than it is now, but prices didn’t start to slip for another nine months.

Prognosis?

If you are bullish, the Internet has finally come of age. If “they” can figure out how to turn social media eyeballs into revenue, all bets are off.

If you are bearish, temper your pessimism, at least for now. Even using the dotcom bust as a guide, prices may yet run for another year.

It’s beginning to feel a lot like “the good old days,” where real estate is once cocktail party subject de jour. Oh San Francisco, you do love blowing bubbles.

Case in point: 86 Wool St., an 1,100 square foot Marina-style home in Bernal Heights, just sold for $202,000 above list. Wow. A block north of Cortland, dated but with expansion potential, this property sat squarely in the cross-hairs of investors and wealthy buyers looking for a project. And thus the bidding war began, settling in at $801,000, just shy of $800/sqft.

I am now asked almost daily if the real estate market is in a bubble again. For the answer, I would point readers to an interesting message board discussion I had last week on local housing blog, Bay Area Real Estate Trends where we debate that very subject.

May we live in interesting times, indeed.

I had an interesting conversation this morning about relative performance in different San Francisco neighborhoods during and after the housing bubble burst. Conventional wisdom would lead one to believe that SoMa, the fringier and “overdeveloped” part of San Francisco would have performed better than Nob Hill, which is much more established as a desirable part of the city.

Conventional wisdom, as it often is, would be wrong.

Looking at normalized condo prices back from 1997, prices tracked pretty closely until the market collapsed in 2008. Interestingly, prices in Nob Hill (using the 94109 zip as a proxy) actually fell further than those in SoMa (using the 94103 zip), and recovered later.

Why would that be? I would cite three reasons.

1) SoMa (along with Palo Alto of course) is ground zero for the Web 2.0 / Social Media revolution. Young money is pouring into SoMa for an easy commute to the Peninsula and fresh new condos popular with that demographic of young buyers.

2) Nob Hill has fallen out of favor as a popular destination for young professionals, who drive the condo market. With the Mission, Potrero, SoMa, Bernal and Noe Valley seen as the “hip” places for young people to live, Nob Hill has become analogous with old, rather than new money.

3) Foreclosures, heavier in SoMa than they were/are in Nob Hill, accelerated SoMa’s journey to the bottom. Price discovery through distressed sales meant SoMa more quickly arrived at price equilibrium, and when coupled with a new crop of buyers, the story starts to make sense.

My points above are of course generalizations, not all young people want to live in SoMa and hate Nob Hill, but it is enough of a trend to support what the data has proven out: San Francisco neighborhoods are economies unto themselves, and unless you understand the dynamics of each, tread carefully with conventional wisdom.

We get asked almost every day whether we think a bubble is forming around social media companies like Facebook, Twitter and Zynga. And with Facebook buying Instagram this week for $1 billion, “bubble” is now on the tip of everyone’s tongue.

They say you can see a bubble if you look at the real estate markets. So here is a bit of color from the Inner Mission, one of the neighborhoods popular with programmers, developers and other young professionals driving the latest iteration what-may-soon-be-a-bubble.

Listed as a fixer upper, this property received 32 offers after 9 days on the market. No typo, 32 offers.

We’ll see where it sells, but needless to say there is a lot of money out there chasing development opportunities in San Francisco’s south side.

Occupy Bernal, after holding a mock auction at the Russian Hill home of Wells Fargo CEO John Stumpf, lobbied the Board of Supervisors to support a resolution to stop foreclosures within the city limits. Coupled with a recent report that found evidence of improper foreclosure procedures and California Attorney General Kamala Harris’ proposed homeowners bill of rights, public sentiment against foreclosures is spilling over into local politics.

But is the ire warranted? Are banks really taking homes from innocent, unwitting homeowners who did nothing wrong?

As we have long written, there are many legitimate victims in the ongoing foreclosure crisis. Borrowers duped into signing toxic mortgages, fraud perpetrated by mortgage brokers and real estate agents – it all happened. But far more foreclosures happen to borrowers, through either their own greed or honest mistakes, willingly got in over their heads. Foreclosure, while a heart-wrenching experience, is also a cleansing process. It allows homeowners, struggling under the burden of unaffordable debt, a chance to start over.

This may sound like a callous, heartless assessment. But it is rooted in experience, our view after four years of working closer to the actual foreclosure machine than activists, pundits and politicians would ever care to.

We cannot and would never support fraud, or truly deceptive lending practices. But foreclosure moratoria have proven time and time again to be a political, rather than economic solution. And one that ultimately, prolongs the inevitable.

Three years of wrong predictions notwithstanding, perma-bears are emerging from a winter’s hibernation with tall tales of another impending collapse in home prices. They could not be more wrong.

For pundits, academics, bloggers and others who get their market “color” from crunching numbers and poring over 50-page long analyst reports, the situation is dire: Foreclosure machines are whirring again with the big attorney general settlement behind us, employment conditions remain tepid and getting a mortgage isn’t getting any easier.

And while we may be years away from renewed, sustainable appreciations, there is little actual evidence to support the thesis that home prices are about to implode again. All the above statements by the likes of Zero Hedge may be true, but they only tell half the story and amount to a thinly veiled attempt at fear-mongering, whose real time for glory was in 2006, not 2012.

Here are my top five reasons why the housing market will not crash (again):

1. Foreclosure demand far outweighs supply

The supply numbers aren’t pretty. Recent reports show that “shadow inventory,” the supply of potential foreclosures in the pipeline at banks like JP Morgan, Bank of America, Wells Fargo and Citigroup, is approaching 10 million homes. And with the settlement between big mortgage servicers and state attorney generals over the robosigning debacle behind us, it is true that lenders are again foreclosing at rapid rate.

But what about demand? Buyers of foreclosed homes are literally lining up at auctions to outbid each other. Talk to anyone who is actually in the business of buying and selling bank owned properties and they will tell you that, in most markets, demand far outweighs supply. Any property priced even remotely well sells above list with multiple offers. The demand pool is deep, and now there is a new buyer in town with very, very deep pockets: Wall Street.

Earlier this year, the Obama Administration announced a pilot program to try and turn the vast inventory of homes owned into rentals. Big investment houses, including Wall Street titans like Fortress, Barclays and UBS are launching funds to snatch up big pools of homes to rent and hold. Notably, these firms’ longer term outlook and modest cash flow targets enable them to pay 10-15% higher prices than your average house flipper.

These funds all well capitalized and are being joined by scores of family offices, smaller operators and other investors who, short of any novel investment ideas, are following the “smart money.” This deep demand pool is more than sufficient to sop up foreclosure supply for the foreseeable future. Whether this trade will go well is, however, another story for another time. (Spoiler Alert: It won’t.)

2. Rents are up, rates are down.

As household formation gains momentum in the wake of the Great Recession and real housing inventory remains tight in most metro areas, rents have been rising steadily for the past two years. Combined with low interest rates, those fortunate few who do qualify for financing are finding that the rent vs. buy calculation is tipping back in the favor of buying. Mix in a strong stock market and rising consumer confidence, and there is real, actual homebuyer demand in certain markets that will help prevent another cascade collapse in prices.

3. Homebuilding Remains Uneconomic

Until home prices rise again, building new homes will remain an uneconomic prospect; the likes of Lennar, KB Home and Toll Brothers are breaking ground on precious few single family home projects. And while multifamily housing starts are hitting record levels to try and keep up with breakaway rental demand, without new home inventory coming to market, inventory of existing homes will remain relatively tight in the near term, supporting prices.

4. Political Will

There are few things on which politicians these days can actually agree. One of those few is that foreclosures are bad. Or, at the very least, a homeowner who loses his home is less likely to vote for the incumbent than look elsewhere for political leadership. And whether we agree or disagree with the relative merits of housing support schemes, politicians and regulators alike have shown remarkable resolve when it comes to propping up the the housing market. As I wrote in 2009, and continue to believe today, “Betting on another all-out collapse in residential housing prices is akin to betting on the bankruptcy of the US government. Could it happen? Sure, but that certainly isn’t the base case.”

5. Confidence

The housing market is driven, in large part, by Americans’ view of their own economic future. If we tend to believe that we’ll keep our jobs, find spouses, be able to afford kids and will be economically OK, buying a home becomes a more appealing option. And while demographic trends surrounding both the Baby Boomer and Millennial generations don’t paint a rosy picture for home prices in the long run, improving confidence doesn’t support the notion that home prices are about to collapse, either.

Minyanville’s Todd Harrison is apt to say, “we must trade the tape we have rather than the tape we want.” Housing bears clinging to either past glory in predicting the market’s demise or hopes of future glory predicting another collapse would be well to remember this quip. It may be true that falling home prices could be a boon for the middle class, as prospective homeowners could get in at lower prices. Indeed, the quicker backlogged inventory clears, the quicker the market can get back to trading truly on fundamentals.

But we live in an environment where an imminent collapse in home prices is just not likely. In fact, it could now be considered a Black Swan, if it weren’t for the fact that everyone is looking for it, rendering it no longer as such.

Lastly, for those of you who do a quick Google search on me and find my begrudging association with the National Association Realtors, you will find two things. First, I am not a Realtor shill, and have staked my reputation on that fact. Second, my business would actually benefit from falling housing prices and a cooling of the real estate market in general.

In short, I am calling it like I see it — not talking my book. I challenge housing pundits to do the same.

My wife and I own a condo in the city and are thinking about moving to Marin to start a family. We have a nice little nest egg to use for a down payment on a new house, so don’t necessarily need to sell our condo in order to buy in the suburbs.

I have two questions:

1) Should we sell our condo or rent it out?
2) How should we go about looking for a place in Marin when we live in the city?

Thank you!

- Anthony

Your dilemma is very common among young professionals contemplating the jump to the burbs. It is tough decision to leave the city, but one that most people eventually make. And since you were responsible enough to save, you have put yourself in a situation where you have the power to choose how to proceed.

Let us address your second question first. We typically advise people moving to a new area, that unless they already know the exact neighborhood in which they want to live, it is best to rent in a new area before buying. While it does add some headache in terms of moving (twice), and renting can be a suboptimal living situation – in particular after owning – you may be glad you did.

Concede that you may not be in your ideal home for a year, but during that time you can explore your new area, get to know neighborhoods, visit schools, meet the locals and really investigate where you want to raise your family. The location you choose will matter not just for property values, but for your kids quality of life and your own. This is not a decision to be taken lightly, and should be given the proper time to do right.

As for selling or renting your condo, that is a bit more complicated. To fully answer the question, we’d need to know more about your complete financial situation and investment portfolio. But the short answer is that as long as you have a comfortable savings cushion (it sounds like you do), why not hold onto the condo as a long term investment.

If you have not already, refinance at today’s low rates into a fixed rate, amortizing loan. Despite high property values, rents in many parts of the city can actually cover your mortgage, taxes, HOA fees, insurance and even some maintenance. Think about it this way: If you rent your condo out for the next 20 years, you will have paid down 50% of the balance of your loan. Correct that, your tenants have paid down 50% of the balance of your loan.

In other words, a bunch of strangers just paid for your kids’ college education, a slug of your retirement or a down payment on that vacation house in Tahoe that you’ve always wanted. Or you can hold onto the condo and keep collecting rent until the loan is completely paid off.

If you have a truly long term time horizon and focus on rental income that covers your ownership costs, the ups and downs of real estate cycles are less painful, resulting in what can end up being your own personal pension.

Hope this helps and keep the questions coming!

- Cirios

For most young people, there may not be a single topic more mind numbingly boring than saving for retirement.

In our immediate gratification world, planning for a future that may be decades away just doesn’t make it onto many to-do lists. Meanwhile, we are reading about and seeing firsthand what is happening to the Baby Boomer generation, many of whom haven’t saved enough for retirement and are being forced well into their sixties, and sometimes beyond.

Consider this: A recent study found that over half of Baby Boomers expect to work after retiring. Some retirement!

This should be a wake-up call for younger generations. So why isn’t it?

Humans in general are lousy fortune tellers. It’s hard enough to predict what’s going to happen next week, or next year, let alone 20 years from now. As a result, most of us end up in one of two camps when it comes to envisioning, and therefore planning for the future: The overconfident and the overwhelmed.

“20 years? Shoot, I’ll be rich by then, why should I save now?” Confidence in our own ability to succeed, while a positive trait for most aspects of life, doesn’t help much when it comes to responsible financial planning. We figure that between now and then, we are smart enough to figure it out. Usually however, we’re not.

“20 years? Shoot, I’ll be dead by then. May as well spend what I have, while I have it.” Making the jump from life as a single (or married) person living in the city to the white picket fence suburban dream is just too much of a stretch for most people. To sit down and actually envision what life will be like, how much college may cost, or daycare, or anything that far into the future is an exercise in futility. So we just give up and grab a beer.

If you fall into one of these two camps, rest assured you are not alone. And if you don’t, congratulations, you will be lending the rest of us money when we can’t afford a hip replacement.

So what does this have to do with real estate investing? Everything (of course).

Real estate is the natural counterbalance to the human proclivity to being lousy long term financial planners. Cash flowing property, when held over the long run, has the amazing characteristic that your retirement, or a college fund, or whatever it is you value, is paid for by strangers. As those rent checks pour in, your mortgage is gradually paid down, building you equity whether the market is going up or going down. It takes time, to be sure, but all of a sudden time (and inflation) are working for you, not against you.

I was recently rummaging through a bunch of old stuff and found a couple quarters I hadn’t seen in 20 years. Thanks to inflation they are now worth about half what they were back then.

What if instead, I had found an apartment building?