Any chance real estate market will crash? (Hayward: apartment, rental)

[sonarrat]

Originally Posted by vrhunski

This current market prices are actually very LOW. In 3-5 years you will see much much higher prices in real estate then today.

Mortgage Rate below 4%
Zillow: Mortgage rates fall below 4% | 2014-10-07 | HousingWire

Low mortgage rates tend to push housing prices higher if anything. But the crazy highs of the market are being driven by speculative buys with all cash.

Population growth 2-3% year over year. (and new real estate development is just 0,2-0,3 year over year)
Bay Area's Population Boom is a Bust for Housing Market | NBC Bay Area

And that justifies sudden 50% gains in valuation how?

USA have very strong US Dollar right now
The U.S. dollar is super strong now - Sep. 2, 2014

Which makes it harder to export anything, since it is harder for people overseas to buy it.

More then 200,000 new jobs
Private-sector jobs growth likely north of 200,000 for September - Capitol Report - MarketWatch

Most of them service sector, minimum wage. Nobody is moving to California to get one of those jobs.

[sonarrat]

Originally Posted by Azmordean

Just to add to my long post -- I'd be a little more nervous if I were buying out in the exurbs -- places like Tracy, Davis, and the like. And even the far East Bay (Livermore, Dublin, Pleasanton) may be a bit less stable. But anywhere in the inner East Bay, SF, Silicon Valley may slow down, but don't see it dropping anytime soon.

The areas that are highly desirable didn't have any crash in 2008. I'm talking Palo Alto, Menlo Park, northern San Francisco, Sausalito, places like that. They just flatlined for a couple of years and then continued going up again like nothing had happened.. because the super-rich demographic who lives there didn't suffer any negative effects and are now doing better than ever. Everywhere else had a major correction, including large parts of the South Bay, the peninsula, the entire East Bay, and western/southern San Francisco.

[shoenberg3]

There's another big aspect that I believe will contribute to sustained high prices in the area, and these are the "constants" that made the area so desirable in the first place -- not at all affected by the economic climate or rise/fall of the tech industry.

Namely, world-class climate (second only to San Diego in US, IMO), easy access to cultural centers (museums, food, tourist attractions, demographic diversity), and varied/attractive topography (yosemite, redwoods, pacific ocean etc.) are few of the aspects that render the area highly desirable and will always contribute to higher prices, notwithstanding the economic climate/tech boom of the Bay Area.

[vrhunski]

>> And that justifies sudden 50% gains in valuation how?

Those 2-3% population increase are those who are looking for place to stay. Lets say you have 100,000 people who are looking for apartments and then you get next year more 100,000 people who come from USA or overseas to bay area that mean 50% gain. I think gain will be 20-25% year over year for next 5 years.

[SantaTeresaHills]

The main reason that real estate won't crash unless technology crashes is the whole Santa Clara valley is building very few single family homes. Most housing is apartments and condominiums which is skewed greatly towards apartments. If you want a single family home where the jobs are, you will just have to pay the price.

There will never be be a large number of single family homes built in this area. The areas that are being converted from non-housing to housing are being built as mostly 4 or more story buildings. The one area that can be built with single family houses is Coyote Valley in San Jose. San Jose will not let houses built there until there are demand for a lot of jobs there. The demand for new office buildings is slowly getting into North San Jose. Downtown San Jose is not seeing enough demand to build any new office buildings and Edenvale in South San Jose is probably has the weakest demand so I don't see demand for new offices south of that area for a long time. Even if they could put all single family homes in Coyote Valley now, it still wouldn't add a large number of house compared to the demand for them.

[bobby_guz_man]

And I would like to add that the modern "single family home" being built nowadays, especially in San Jose, Santa Clara, Sunnyvale, and Milpitas, are not the same one like 10 years ago.

No more 6,000 sqft lot anymore, best I've seen is 3000 sqft. In many newer developments, there's not even that much lot (see Avenue One by Cottle or even the SFHs on Communications Hill and Cherry Hill). They're basically larger 3-story "townhomes" that happen to have about 2 meters separation between one another.

[bobby_guz_man]

The days of standalone 1 and 2-story single-family home sitting on 6-7,000 sq ft lot is dead here in the Valley, as far as I'm concerned.

Gilroy and Morgan Hill, and to some extent Fremont and the suburban part of the inner East Bay may still build these kind of SFH, but I foresee them going for density soon as well.

[jbunniii]

Originally Posted by bobby_guz_man

No more 6,000 sqft lot anymore, best I've seen is 3000 sqft. In many newer developments, there's not even that much lot (see Avenue One by Cottle or even the SFHs on Communications Hill and Cherry Hill). They're basically larger 3-story "townhomes" that happen to have about 2 meters separation between one another.

Many of them seem to be in bad locations, too, right next to freeways or busy streets, wherever some long-term landowner finally decided it was time to cash in. So in many cases, the new owners get all the downsides of high density but none of the benefits (e.g. walkability to anything). I can't imagine that these things would hold their value long-term as well as more properties on more traditional lots. Even more so if the construction quality is as poor as one might suspect.

[jbunniii]

Originally Posted by SantaTeresaHills

The main reason that real estate won't crash unless technology crashes is the whole Santa Clara valley is building very few single family homes. Most housing is apartments and condominiums which is skewed greatly towards apartments. If you want a single family home where the jobs are, you will just have to pay the price.

Even if we accept this argument, it would only seem to imply that prices of single family houses (as opposed to real estate in general) would not crash. Seems like we could easily end up with an oversupply of condos if construction of new ones continues and the job market eventually cools off.

[nagleepark]

Originally Posted by jbunniii

Many of them seem to be in bad locations, too, right next to freeways or busy streets, wherever some long-term landowner finally decided it was time to cash in. So in many cases, the new owners get all the downsides of high density but none of the benefits (e.g. walkability to anything). I can't imagine that these things would hold their value long-term as well as more properties on more traditional lots. Even more so if the construction quality is as poor as one might suspect.

Very true.

One minor benefit is convenient freeway access. If the freeway is outside your front door, it's easy to access.

A major disadvantage is homeless people hang out under and near freeways.

Walkability is hit or miss. Lots of stores are located near freeways for obvious reasons. Living next to a shopping center or mall is great for walkability; I greatly miss being able to walk to a grocery store, a small selection of restaurants or just look in store windows.

School quality drives long-term value, regardless of where the property is located.

Construction quality varies pretty much in line with other properties.