These 2 Forces Will Crush the San Francisco Housing Bubble (opens in new tab)

(wolfstreet.com)

19 pointskdsudac9y ago18 comments

18 comments

I was expecting "tectonics" and "drought" to be the forces.

"And this crushed the SF housing market."

As far as I know even in the previous dotcom burst the housing market went down just a little, something around 10%. In some neighborhoods rents have been increasing more than that per year in the last 3 years. So even if there is a tech burst the size of the 2000 dotcom burst, I don't expect real estate prices to suffer that much.

edit: here is a good analysis; http://www.paragon-re.com/3_Recessions_2_Bubbles_and_a_Baby

xbmcuser9y ago

  The previous dotcom bust happened when the property bubble was just building in most of the US which crashed in 2007-8. So in a dotcom bust property prices might not follow the same pattern as previously. In todays silicon Valley most people apart from the tech workers have been priced out of the market and they have left. Now a bust won't have the support these buyers or renters to stave off a collapse.

jwise09y ago

I think there is a fair bit of "how to lie with graphs" here going on. For instance, the 'housing construction boom' very carefully does not show any context before 2014, and although it rockets up from the bottom left of the graph to the top right, that's only a delta of 25%, because the bottom is not zero. It also doesn't show how many housing units ever make it /out/ of the pipeline -- a perennial issue in San Francisco.

It also seems to declare that employment is the only source of housing occupancy. This is less true if you consider, for instance, real estate speculators (and with China's economy as well as it is and is expected to be, I don't foresee that slowing down), and also if you consider the new short-term rental market.

So, maybe the housing bubble will collapse. But I'm not convinced that either of those forces are as powerful as the author claims, and the author doesn't really give any text considering and dismissing other known forces, so you can consider me unconvinced by this article alone.

sobellian9y ago

Not to mention that the employment graph doesn't support their conclusions at all. To say that a small negative slope at the end of your dataset suggests an upcoming negative trend is classic bad statistics.

I don't really know one way or the other what the ultimate trend will be for tech in the next few years but this is just numerology.

technofiend9y ago

As a counterpoint although the article also mentions Manhattan's alleged drop in condo pricing, one could argue that San Francisco is smaller and therefore more constrained. It's my understanding that much more real-estate in SF is under rent control, so overbuilding is also less likely. And if Vancouver is any indication there still seems to be plenty of money interested in real estate coming out of China.

Kinnard9y ago

SF is actually bigger—

San Francisco: 46.9 square miles

Manhattan: 22.8 square miles

SF is a lot less tall than Manhattan all around too.

Did I mention that SF is hilly?

technofiend9y ago

Interesting! Not sure what's constraining supply to the point that SF's average cost per SQFT is so much higher than Manhattan's? Restrictions on building up? Rent control limiting supply?

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ktRolster9y ago

When comparing employment and housing in San Francisco to predict future housing prices, I don't think you can consider San Francisco in isolation (like this article does). You need to consider it in terms of the surrounding metro, because a housing boom in Belmont can reduce the demand for houses in San Francisco.

dbroockman9y ago

The city doesn't have enough room to add many more jobs. This is like saying a restaurant that fills its tables every night must be in a bubble because it hasn't grown past its capacity. Right? (Not saying it shouldn't have more room (building). But as a descriptive matter...)

dmoy9y ago

What percentage of SF people work in startups? What percentage of people living in SF work in SF and not a surrounding burb (and v versa)?

geggam9y ago

Not sure who is living in SF unless you have rent control and have been here for a bit.

I live in Fremont ( 45 minute BART ride ) and work in the city. I expect to leave the bay area when my lease is up because I expect the rent to climb to $STUPID

I could afford to live in the city if I was single. Single kids out of college don't make what I make nor would I spend that much on a place to live. Regardless of how much I like the City.

Edit : the rent I have paid in the last 6 years would have paid for a home... nice one in an HOA in most markets ... and my rent is 33% below market

Kinnard9y ago

Where will you go?

When is your lease up?

>"I could afford to live in the city if I was single."

You're married with children?

#hungryfordata

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18 comments

ucaetano9y ago

I was expecting "tectonics" and "drought" to be the forces.

gorkemyurt9y ago

"And this crushed the SF housing market."

edit: here is a good analysis; http://www.paragon-re.com/3_Recessions_2_Bubbles_and_a_Baby

xbmcuser9y ago

  The previous dotcom bust happened when the property bubble was just building in most of the US which crashed in 2007-8. So in a dotcom bust property prices might not follow the same pattern as previously. In todays silicon Valley most people apart from the tech workers have been priced out of the market and they have left. Now a bust won't have the support these buyers or renters to stave off a collapse.

jwise09y ago

sobellian9y ago

I don't really know one way or the other what the ultimate trend will be for tech in the next few years but this is just numerology.

technofiend9y ago

Kinnard9y ago

SF is actually bigger—

San Francisco: 46.9 square miles

Manhattan: 22.8 square miles

SF is a lot less tall than Manhattan all around too.

Did I mention that SF is hilly?

technofiend9y ago

Interesting! Not sure what's constraining supply to the point that SF's average cost per SQFT is so much higher than Manhattan's? Restrictions on building up? Rent control limiting supply?

1 more reply

ktRolster9y ago

dbroockman9y ago

dmoy9y ago

What percentage of SF people work in startups? What percentage of people living in SF work in SF and not a surrounding burb (and v versa)?

geggam9y ago

Not sure who is living in SF unless you have rent control and have been here for a bit.

I live in Fremont ( 45 minute BART ride ) and work in the city. I expect to leave the bay area when my lease is up because I expect the rent to climb to $STUPID

I could afford to live in the city if I was single. Single kids out of college don't make what I make nor would I spend that much on a place to live. Regardless of how much I like the City.

Edit : the rent I have paid in the last 6 years would have paid for a home... nice one in an HOA in most markets ... and my rent is 33% below market

Kinnard9y ago

Where will you go?

When is your lease up?

>"I could afford to live in the city if I was single."

You're married with children?

#hungryfordata

1 more reply

j / k navigate · click thread line to collapse