Is It Different This Time?

[WanderingFar]

One key difference is that tech has already proven itself as an established industry and the demand for technology innovation isn't slowing down. That doesn't mean the markets aren't cyclical and that this boom won't be followed by the inevitable bust. But the established companies -- the Googles and Apples of the industry -- will almost certainly weather through (even if they take temporary hits to their share prices.) Not to mention the highly-specialized, industry-specific tech companies in industries like healthcare.

That's why the comment about buying in Hayward is probably spot on. Unless something catastrophic happens, it's going to take a long time for that bust to trickle down enough so the "ordinary" Bay Area household begins to feel a difference.

Home prices eventually came down after 2000, but only about 10% before the subprime lending frenzy began. And I wouldn't expect another 2009. That wasn't just your run-of-the-mill recession; that was shockwaves that ran through our entire financial services industry and drove lending to a halt. You had entire banks going under. That's the kind of event that will needed to drive down home prices to affordability here. Otherwise, tech is what -- 8% of the workforce? You've got plenty of other high-earners -- a second-tier, if you will -- of doctors, dentists, professors, accountants, etc., who have been just waiting for that minor market correction so they can swoop in. And they're going to keep things afloat in the immediate aftermath of a tech correction.

[Perma Bear]

Originally Posted by WanderingFar

One key difference is that tech has already proven itself as an established industry and the demand for technology innovation isn't slowing down. That doesn't mean the markets aren't cyclical and that this boom won't be followed by the inevitable bust. But the established companies -- the Googles and Apples of the industry -- will almost certainly weather through (even if they take temporary hits to their share prices.) Not to mention the highly-specialized, industry-specific tech companies in industries like healthcare.

That's why the comment about buying in Hayward is probably spot on. Unless something catastrophic happens, it's going to take a long time for that bust to trickle down enough so the "ordinary" Bay Area household begins to feel a difference.

Home prices eventually came down after 2000, but only about 10% before the subprime lending frenzy began. And I wouldn't expect another 2009. That wasn't just your run-of-the-mill recession; that was shockwaves that ran through our entire financial services industry and drove lending to a halt. You had entire banks going under. That's the kind of event that will needed to drive down home prices to affordability here. Otherwise, tech is what -- 8% of the workforce? You've got plenty of other high-earners -- a second-tier, if you will -- of doctors, dentists, professors, accountants, etc., who have been just waiting for that minor market correction so they can swoop in. And they're going to keep things afloat in the immediate aftermath of a tech correction.

Actually places like Hayward take hits far worse because the values only inflate once the other areas begin to fill up/

[TheGreatCurve]

Originally Posted by WanderingFar

One key difference is that tech has already proven itself as an established industry and the demand for technology innovation isn't slowing down. That doesn't mean the markets aren't cyclical and that this boom won't be followed by the inevitable bust. But the established companies -- the Googles and Apples of the industry -- will almost certainly weather through (even if they take temporary hits to their share prices.) Not to mention the highly-specialized, industry-specific tech companies in industries like healthcare.

That's why the comment about buying in Hayward is probably spot on. Unless something catastrophic happens, it's going to take a long time for that bust to trickle down enough so the "ordinary" Bay Area household begins to feel a difference.

Home prices eventually came down after 2000, but only about 10% before the subprime lending frenzy began. And I wouldn't expect another 2009. That wasn't just your run-of-the-mill recession; that was shockwaves that ran through our entire financial services industry and drove lending to a halt. You had entire banks going under. That's the kind of event that will needed to drive down home prices to affordability here. Otherwise, tech is what -- 8% of the workforce? You've got plenty of other high-earners -- a second-tier, if you will -- of doctors, dentists, professors, accountants, etc., who have been just waiting for that minor market correction so they can swoop in. And they're going to keep things afloat in the immediate aftermath of a tech correction.

Yeah, but look at the auto industry and the Detroit area. The auto industry isn't dead but the Detroit area certainly is.

There's no reason why the tech industry needs to stay in Silicon Valley forever.

[WanderingFar]

Originally Posted by TheGreatCurve

Yeah, but look at the auto industry and the Detroit area. The auto industry isn't dead but the Detroit area certainly is.

There's no reason why the tech industry needs to stay in Silicon Valley forever.

Trying to draw an analogy to Detroit is SUCH a straw man argument. Of course tech doesn't have to stay here. But plenty of people actually WANT to be here. First of all, this is just a special place. I know some of the long-timers are too jaded to see it. But how many people on the General U.S. board are looking for a place just like this, only more affordable? Seems like everyone wants our weather, scenery and access to nature; you can't replicate those things elsewhere. Then there's the romanticism about SF. San Francisco was San Francisco loooong before the tech boom. Finally, tech might be the dominant industry these days, but it's not the only one.

Again, I'm not saying that tech and the economy in general won't have their cycle. But you overstate the impact if you think we're at risk of being Detroit 2.0.

Also, as much as I've been disparaging Detroit, it's been making no small comeback of its own. If you think it's "dead," you haven't been paying attention.

[WanderingFar]

Originally Posted by Perma Bear

Actually places like Hayward take hits far worse because the values only inflate once the other areas begin to fill up/

Right, that's my point. A recession might allow some of the rich-but-not-rich-enough to buy in desirable areas of the city and the Peninsula, and the upper middle class to take a stab at places like Fremont, but the middle class is still going to be deciding between Hayward and Union City. Even if Palo Alto drops 20% in the next bust, it'll still be out of reach to almost everyone. Maybe a few more Stanford elites will be able to get in instead of settling for Mountain View, but not the rank and file.

[lorieidmw]

Originally Posted by WanderingFar

TSeems like everyone wants our weather, scenery and access to nature; you can't replicate those things elsewhere. Then there's the romanticism about SF. San Francisco was San Francisco loooong before the tech boom. Finally, tech might be the dominant industry these days, but it's not the only one.

Again, I'm not saying that tech and the economy in general won't have their cycle. But you overstate the impact if you think we're at risk of being Detroit 2.0.

Also, as much as I've been disparaging Detroit, it's been making no small comeback of its own. If you think it's "dead," you haven't been paying attention.

The last time (3 months ago) I was in SJ, I noticed a lot of decay. Rotten Robbie looked like he lived up to his name. I live down the road a piece in CA by some trees and rocks in Pac. Parts of SJ just look run down too me now.

Austin and Texas took a lot of smart people from the area, and still are to this day. So did downtown SanFran. And now you got Boulder and Seattle, so it's unclear how much the valley can offer the next FB or Google or Apple.

[abqcd]

Originally Posted by WanderingFar

One key difference is that tech has already proven itself as an established industry and the demand for technology innovation isn't slowing down.

What do you mean by "tech has proven itself as an established industry" in the past 20 years? Technology has been around for millennia. At one time, it was irrigation and crop rotation, then electric lighting, telephones, refrigeration, automobiles, jet aircraft, transistors, microprocessors, software, the internet, etc.

People in the Valley literally believe that the Internet constituted the beginning of human technological innovation.

There were boom/busts/bubbles in rail roads, for example. I have a feeling Theranos is going to set off the next bust.

[Perma Bear]

Originally Posted by abqcd

What do you mean by "tech has proven itself as an established industry" in the past 20 years? Technology has been around for millennia. At one time, it was irrigation and crop rotation, then electric lighting, telephones, refrigeration, automobiles, jet aircraft, transistors, microprocessors, software, the internet, etc.

People in the Valley literally believe that the Internet constituted the beginning of human technological innovation.

There were boom/busts/bubbles in rail roads, for example. I have a feeling Theranos is going to set off the next bust.

The prices sure beat the fuzz out of everywhere else. We're in the future alright. Too bad I'm not making 2050 dollars.

[lorieidmw]

Originally Posted by abqcd

I have a feeling Theranos is going to set off the next bust.

In my view what happend here is actually worse than a bust - Instead of a company trying a failing, which is somewhat admirable, this is a case of trying to dupe the public, government, and put us all at risk. This is fraud and was backed no doubt, by the druggie, immoral, startup culture in the valley.

To that I say not only we need a bust, but simply shut a lot of the valley down. Time to look at that ocean front property in AZ if you live in SJ.

[dburbs1975]

we are in for some kind of correction. we are actively looking for a home, the prices keep going up due to all cash offers, sometimes 300K + more than sales < 6months ago of homes in better condition, on better lots, same small hood. some homes have deals that fall through due to not appraising out, and the buyer loses their deposit, but no worries, the agents don't really care. I am certain they are taking a cut of the deposit as well. All agents we have dealt with say they will put any offer we want to put in, but strongly advise (talking out of both sides of their lying mouths) well over listing with zero contingencies leaving the buyers high and dry if the mortgage does not pan out - which, hello, this is already happening...

we saw a really nice home with days on market > 20 days and lying agent in the home said the person offered over list and then lost his job at Apple and could not complete the sale. Poked around in the situation to find that the home did not appraise for anywhere near the offer. So buyers lost > 50K deposit. He did not lose his job at all, just walked from the "deal."

stay tuned.

Something tells me this will not end well.