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When will the real estate market correct in the Bay Area?

By Bm05211983 following x   2015 Jul 5, 9:03pm 31,096 views   19 comments   watch   quote     share  

I'm interested in hearing people's opinion about when the real estate market will correct in the Bay Area. Serious comments only please.

#housing

1 E-man   2015 Jul 5, 11:02pm   ↑ like (1)   ↑ dislike (1)     quote        

If history is any indication, the Bay Area will likely go into a recession in the 2nd half of 2017 or 2018. The bottom of the next real estate market will be around 2020-2022. However, the correction will not be very steep. 20%-25% maximum is my guess. This has been my guess for a couple of years now. Right or wrong, this is only one man's opinion.

Good luck.

2 hanera   2015 Jul 7, 5:11pm   ↑ like (0)   ↑ dislike (0)     quote        

Average appreciation in SFBA is 6-7% p.a.
From now to middle 2017, normalized price is 115% (current price = 100%, appreciation = 7%).
20% haircut, normalized price in 2022 would be 91.6%.
Ok, sound like worthwhile to wait... meanwhile rent.

From another perspective, those who have bought in 2009 to 2014 as owner-occupied, no point selling.

3 Heraclitusstudent   2015 Jul 7, 5:21pm   ↑ like (1)   ↑ dislike (1)     quote        

There just isn't enough housing for the demand, and there are many many people with cash ready to buy if prices ever went down 10-20%.

More likely prices this high will end-up hurting the economy and people/companies will leave.

In other words, it will correct when you don't want to live here anymore.

4 Strategist   2015 Jul 7, 6:40pm   ↑ like (0)   ↑ dislike (0)     quote        

Heraclitusstudent says

There just isn't enough housing for the demand, and there are many many people with cash ready to buy if prices ever went down 10-20%.

We have a severe shortage of homes to begin with. Demand would have to take a severe hit for prices to correct 20%. It would take a catastrophic event to make that happen.

Heraclitusstudent says

More likely prices this high will end-up hurting the economy and people/companies will leave.

In other words, it will correct when you don't want to live here anymore.

Why do you want to live there Herac? Austin has beautiful new homes at fourth of the price. If I was 20 or 30 years younger and could not get the home I wanted in SV, I would just pack up and leave. Your jump in the standard of living will take a quantum leap. Go take a vacation out there, look around, and decide for yourself.

5 lostand confused   2015 Jul 7, 8:09pm   ↑ like (0)   ↑ dislike (0)     quote        

I read somewhere that Austin is the most overpriced market of all??

6 indigenous   2015 Jul 7, 8:28pm   ↑ like (0)   ↑ dislike (0)     quote        

The Smaulgld guys said some thing interesting about this the other day. Which was that the driving force behind RE prices was IPOs for companies in the bay area that are not making money.

7 SFace   2015 Jul 7, 8:33pm   ↑ like (0)   ↑ dislike (0)     quote        

There's just no seller right now, regardless of the stupendous price. There are too many reasons to hold on to homes forever. My best guess is price comes down ahead of the next recession, around 2H of 2017. That would make it 5 up years which is always followed by 3 lean ones.

8 indigenous   2015 Jul 7, 8:37pm   ↑ like (0)   ↑ dislike (0)     quote        

My guess would be that it will be coincident with the stock market reconciliation.

9 Strategist   2015 Jul 7, 9:09pm   ↑ like (1)   ↑ dislike (1)     quote        

lostand confused says

I read somewhere that Austin is the most overpriced market of all??

Not sure how they came up with that conclusion, but an overpriced Austin is no match for even an underpriced BA.

10 hanera   2015 Jul 8, 12:38am   ↑ like (0)   ↑ dislike (0)     quote        

lostand confused says

I read somewhere that Austin is the most overpriced market of all??

Strategist is thinking of absolute price of housing. Using the metric, price of house vs income, Austin is even more overpriced than SV.

11 hanera   2015 Jul 8, 12:46am   ↑ like (0)   ↑ dislike (0)     quote        

indigenous says

The Smaulgld guys said some thing interesting about this the other day. Which was that the driving force behind RE prices was IPOs for companies in the bay area that are not making money.

Plus employees from Google, Facebook and Twitter. Employees prefer to cash out of RSUs and park in RE.

12 hanera   2015 Jul 8, 1:00am   ↑ like (0)   ↑ dislike (0)     quote        

One more thing, property tax in Austin is very high. Cost of living isn't that cheap... frankly comparable to SV. Good thing is state income tax is 0, ideal for those who are very rich.

13 marco   2015 Jul 8, 2:19am   ↑ like (2)   ↑ dislike (2)     quote        

"When will real estate market correct in Bay Area?"

When no water comes out of the faucets ?

14 HEY YOU   2015 Jul 8, 8:18am   ↑ like (0)   ↑ dislike (0)     quote        

Immediately after the Global Financial Cataclysm.

15 Heraclitusstudent   2015 Jul 8, 9:53am   ↑ like (0)   ↑ dislike (0)     quote        

Strategist says

Demand would have to take a severe hit for prices to correct 20%. It would take a catastrophic event to make that happen.

Catastrophic events happen all the time. The economy goes down, startups go belly up, people move out, homeowners decide it's a good time to sell and so on.

Though I agree you can't count on that. Things may continue as now for 5 or 10 more years for all I know. If so housing will become so absurdly expensive, many people will just be forced to move out. The steam escaping the pressure cooker.

Strategist says

Why do you want to live there Herac?

I don't really want to live here. I agree with you. Except Austin is everything that's wrong with comatose American suburbia, driving cars to malls giant parking lots and so on. And populated by a lot of shallow republicans and Bible study groups.
But the world is larger than that.

16 dublin hillz   2015 Jul 8, 11:41am   ↑ like (0)   ↑ dislike (0)     quote        

If we go back to bubble days, renting was a good deal while homes were overpriced. Then, home prices crashed and rents fell a little bit. That was followed by home prices rising and rents rising even more to the point where annual rent ratios are now more reasonable than they were during bubble days mainly and predominantly as a result of rising rents. Luxury apartments now are in some cases up to 70% higher than they were in 2010. I would expect that if a crash occurs again that the leading indicator would be a fall in rental prices and that can occur if and only if there will be job losses in SFBA. Absent job losses, rents will never drop around here and neither will home prices.

17 Heraclitusstudent   2015 Jul 8, 11:47am   ↑ like (1)   ↑ dislike (1)     quote        

dublin hillz says

that can occur if and only if there will be job losses in SFBA. Absent job losses, rents will never drop around here and neither will home prices.

Or maybe with a big earthquake killing 10,000?
Or maybe when China starts bombing the west coast?
Or maybe when sand comes out when you open the tap?
Or maybe when the jobs are there but don't cover half the rent?

18 SFace   2015 Jul 8, 3:04pm   ↑ like (3)   ↑ dislike (3)     quote        

Right now, It's damned if you buy and more damned if you rent. That's what make Patrick.net so devastating and ruin a lot of people the last 4 years and why I commented as much as I did and debunked Patrick's "xx" book and gave Thomaswong a hard time since Dec 2009.

19 hanera   2015 Jul 8, 4:01pm   ↑ like (0)   ↑ dislike (0)     quote        

SFace says

Right now, It's damned if you buy and more damned if you rent.

I think you get that right. Perfect :).

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