Frequent readers are aware that the one U.S. housing market which we follow the closest because it is perhaps the best proxy for global liquidity but even more importantly, Chinese excess liquidity (and capital outflows) is that of San Francisco - a mecca for not only the beneficiaries of the second tech bubble, but the favorite spot to park cash for thousands of uber-rich Asian and, until recently, Russian oligarchs.

This is what we said last June when describing what was then the start of the inflection in San Fran housing:

When it comes to critical housing markets in the U.S., none is more important than San Francisco.

Courtesy of its location, not only does it reflect the general Fed-driven liquidity bubble which is the tide rising all housing boats across the U.S., but due to its proximity to both Silicon Valley and China, it also benefits from two other liquidity bubbles: that of tech, and of course, the Chinese $25 trillion financial debt monster, where since the local housing bubble has burst, local oligarchs have no choice but to dump their cash abroad.

It is no surprise that during ever single previous bubble peak, San Francisco home prices managed to post a 20% annual increase, starting with the dot com bubble in the year 2000, the first (not to be confused with the current) housing bubble peaking around 2005, and then the European sovereign debt bubble.

Since then this happened: June

... October.

Then things normalized for a bit, as the rate of both annual and sequential decline slowed down.

Until today, because in today's Case-Shiller update for the month of January housing prices across the US, it was none other than San Francisco which posted the largest sequential drop in home prices.

As the chart above shows, it was not only the annual growth rate of only 7.9%, matching the lowest since the European debt bubble burst in 2010, but also the sequential rate of price drops, at -0.9% - the biggest monthly drop in three years, or since January 2012 - that will once again be a subject for concern of housing watchers. Because should the price decline resume its acceleration without any emerging tailwinds to prop up the local housing market, then there will surely be some severe fallout such as this peak housing bubble example, in which as Curbed reported last week, a run down shack which listed for $799,000 sold for 50% more, or $1.2 million a few weeks later!

From Curbed:

In late February, a very run-down four-bedroom house along the Outer Sunset's Great Highway listed for $799,000. The listing warned that the property was "in a deteriorative state" and that it was "not for the novice" to fix up. The property looked to be almost ripped apart, with carpeting torn off the stairs, drawers and appliances pulled out of the kitchen, and a boarded-over hole in one door. None of that mattered to the buyers, who saw potential in the ocean views and paid $1.21 million in all cash. The final price came in at $411,000 over asking.

When the home last sold back in 2008, it was well kept and very livable. Listing photos showed a stained glass front door, a vintage but tidy kitchen, and a neatly kept backyard. It sold for $935,000 back then. The state of disrepair that the property fell into during the ensuing years is sad, and it's hard to see how it deteriorated so quickly without some very destructive use. 

All of the above real estate splendor could have been yours for the modest sum of $1.2 million.