The San Francisco housing cycle will be more difficult to predict (Sacramento: rent, home sales)

[bornincali]

I wonder if some sort of infrastructure or ecological disaster could also affect things. With the Bay areas extensive connectivity if this is broken things could go South pretty quick.

[JohnS_15]

Originally Posted by Chuck5000

I love posting this article - it illustrates clearly the many factors involved in high housing prices here: How Burrowing Owls Lead To Vomiting Anarchists (Or SF’s Housing Crisis Explained) | TechCrunch

Very interesting article. By far the most comprehensive and rational I've read on this issue. It's pretty long!

[Chuck5000]

Re: an earthquake - I read a great book by Phillip Fradkin on the 1906 quake, and the wealthy investors took advantage of opportunities post-quake as soon as they could.

I think if a major quake happens, the same will happen today - it will only accelerate gentrification, it will not usher in some fantasy period of affordability. Most people would be so freaked by the event, but I'm sure enough cold blooded investors would swoop in and purchase any distressed properties quickly.

[Ultrarunner]

Originally Posted by Chuck5000

I love posting this article - it illustrates clearly the many factors involved in high housing prices here: How Burrowing Owls Lead To Vomiting Anarchists (Or SF’s Housing Crisis Explained) | TechCrunch

The Burrowing Owls also derailed the expansion of the Fremont Nummi plant... Toyota was willing to spend lots of money expanding the facility which all came to a halt over a family of Owls..

Fast forward and the plant with the 5000 jobs is history...

True... Tesla is making a go... but, with far fewer employees.

[ny789987]

It's not just foreigners. You have a lot of hedge funds like Blackstone and other private equity firms buying up properties so that they can inflate and prop up a temporary bubble. Last one in left holding the bag is the fool.

[hsw]

Predictions are of/for/by fools; liquidity is what allows one to navigate an ever-changing, unpredictable world

But would observe SF apt psf/rents are <50% of cost of NYC (in those similar new upscale condo towers w/many money laundering 3rdWorld buyers/landlords driving up prices)

Rents in same upscale condo towers in SF or NYC are awfully cheap vs buying....perhaps imbalance of money laundering buyers vs fairly stagnant no. of creditworthy tenants...all vs lots of new supply still coming...can rent in latest new tower for ~5yrs and then move to next new, cooler tower and repeat 5y renting process...much like leasing new cars/iPhones every 1-2yrs....who wants to own an old, used, obsolete apt/car/phone?

And despite 0% int rates, another epic tech boom, etc.....an acre of premium land in Woodside is ~40% cheaper in real (inflation-adjusted) terms today vs '00; building costs are prob ~30% cheaper psf today vs '07

Also saw a recent stat that Class A office space rents in SF today are also ~40% cheaper (in real terms) vs '00

Need to do proper comparables analysis; factor in inflation; factor in illiquidity of real est; consider all the tax/broker/mtce capex aspects of real est; factor in SF/SV is a major quake zone; and consider opportunity costs vs where else one's capital can be deployed

IMO, residential real estate is a disposable consumable more like a car/phone...sure, every creditworthy family wants/needs to build/buy a new house in a desirable suburb nr desirable schools and offices, etc....but even after 10-20yrs of owning a well-built house in prime Atherton/Woodside, etc from when it was new/cool, would assume 1-2%/yr real appreciation (net) in any best case scenario....prob least productive, least liquid, most maintenance intensive "investment" vs many others anyone w/a few bucks can choose from, incl long/short stocks, bonds, indexes, etc etc

Can't predict but can look at appreciation (or lack thereof) of best land in Woodside/Atherton or resales of newer houses in prime parts of W/A or SF to see how they performed through 1 (or, now, even 2) major tech booms....all amidst historically low, favorable int rates....perfect conditions for maximal real est apprec....yet rather dismal returns to-date

[basehead617]

Chinese buyers are the biggest factor. Many real estate offices are 100% Chinese in SF and 100% all-cash bidding wars.

The tech only comes into play with people cashing out IPOs and that's a tiny portion. Even the average two-income tech DINK couple cannot afford the average house without massive down payments they likely don't have due to inability to save while renting. In Palo Alto most bidders on houses are wealthy investors.

The young techies may raise the rent of studios in cool neighborhoods but they're not buying many houses.

[Chuck5000]

Originally Posted by basehead617

Chinese buyers are the biggest factor. Many real estate offices are 100% Chinese in SF and 100% all-cash bidding wars.

The tech only comes into play with people cashing out IPOs and that's a tiny portion. Even the average two-income tech DINK couple cannot afford the average house without massive down payments they likely don't have due to inability to save while renting. In Palo Alto most bidders on houses are wealthy investors.

This is just wrong - go and ask peninsula realtors, for example, just how many DINKs are out there making 400, 500k+ annually. The answer is tons. The ones that have saved and have stock gains, from either IPO's or sales on the secondary market are the ones that can buy. Having family money helps as well; many people do and get over the hump to make cash offers that way. Family money plus a 200k income can go a long way, too.

Re: IPO's, that may have been true 10 years ago. Founders, early employees, and early investors of large late stage startups have many opportunities to cash out prior to IPO's. Companies are going public much, much later now, because investors can earn more this way. The game has changed a lot.

Re: chinese, just wrong. I personally know a caucasian VC who bought in Palo Alto recently (I am not wealthy at all, btw.) - no IPOs happened for him recently. Sure there are a lot of Chinese nationals buying in Palo Alto, a city of 75,000, and are driving prices there more significantly than elsewhere, but extrapolating that level of influence to all of SF or all of the Bay Area is a logical error.

I know quite a few non Chinese, non IPO-lottery winning younger recent owners in both SF and the Peninsula. It is *almost entirely* about tech.

[basehead617]

Chuck, you're talking about VC and management types. The average tech DINK couple makes more like $280k, have paid exorbitant rents their entire working lives, may even have undergrad and MBA debt. With kids they're even worse off, like private school payments in SF.

Without family money, they're not buying multi million dollar houses. The math doesn't work. And when we are talking about family money, that has nothing to do with tech and has happened as long as houses have been sold.

p.s. Of the desirable peninsula towns, the realtors I know claim 75% of bids are non owner occupiers, aka investors.

[Chuck5000]

Originally Posted by basehead617

Chuck, you're talking about VC and management types. The average tech DINK couple makes more like $280k, have paid exorbitant rents their entire working lives, may even have undergrad and MBA debt. With kids they're even worse off, like private school payments in SF.

Without family money, they're not buying multi million dollar houses. The math doesn't work. And when we are talking about family money, that has nothing to do with tech and has happened as long as houses have been sold.

p.s. Of the desirable peninsula towns, the realtors I know claim 75% of bids are non owner occupiers, aka investors.

I see - I think we're both saying different things that are valid. I'm not talking about the average DINK, you're right, they are screwed in today's market.

I'm talking about about the total population of potential buyers in the region and their relative wealth, with family help (lots get it) or not. Unless I've misunderstood you, I think you underestimate the number of DINK couples making much more than 280k. In a normal market, with many more homes for sale, it wouldn't matter as much, of course.

DINKs with money are indeed buying and moving into homes. I have no idea who is bidding overall, and I cannot believe that anything close to 75% of sales are going to non-occupying investors in the Bay Area at large. But I think we just differ on degree - some of this is definitely happening. Some percentage, and it's probably not healthy for the market. Agree with other poster that we should limit this somehow.

Vancouver-ization with tons of unoccupied ghost properties is not a good thing.