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San Francisco's Housing-Bubble Keeps Going and Going and ...

By bill   2013 Apr 18, 11:33pm   958 views   6 comments   watch (0)   quote      

http://www.huffingtonpost.com/2013/04/16/san-francisco-housing-bubble_n_3088591.html

According to The Huffington Post, real estate in San Francisco is priced out of the reach of the people who are supposed to buy it.

If San Francisco Real Estate is a bubble waiting to pop -- then the only real question is ... WHEN?!

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1   bill     2013 Apr 19, 12:27am  ↑ like   ↓ dislike   quote    

Well, the aforementioned article says San Francisco is a bubble ... "Unless you happen to be a billionaire, you should probably steer clear of shopping for a new home in the city," Movato writer Kristin Crosier advised. "Even then it would be an unfortunate way to spend your piles of money."

In a typical real estate bubble, individuals put all their money into buying property on the assumption that they can later sell it for a profit. But market forces cause home values to eventually decrease. When that happens on a massive scale, the bubble pops, a large amount of money suddenly evaporates, and a trail of economic destruction ensues.

2   mell   63/63 = 100% civil   2013 Apr 19, 12:59am  ↑ like   ↓ dislike   quote    

donjumpsuit says

However, according to a recent investigation by real estate site Trulia, buying a home is still cheaper than renting in every major American city, San Francisco included.

That depends from place to place and its flat out wrong for a lot of places I have looked at in SF. But the main problem is that even if this is the case for every suitable place someone is looking for, it doesn't mean that they can afford to buy. But they can rent to see whether they can make it up the corporate ladder fast enough or move away to a cheaper area if not - something they cannot do easily if they buy. It's about options and buying is a commitment one needs to be able to afford.

3   evilmonkeyboy     2013 Apr 19, 2:19am  ↑ like   ↓ dislike   quote    

bill says

I don't think a regular working guy can afford to touch a home in San Francisco. The houses are still going up faster that workers incomes ... at some point maybe the SF market will run out of rich foreigners and CEO's or whoever ...

If the trend continues you will see young professionals leave the area, young couples making 2x the median household income are completely prices out unless they have rich families.

4   bmwman91     2013 Apr 19, 3:13am  ↑ like (1)   ↓ dislike (1)   quote    

evilmonkeyboy says

If the trend continues you will see young professionals leave the area, young couples making 2x the median household income are completely prices out unless they have rich families.

SF will just be a playground for the rich. The cool bohemian crowd that made SF a uniquely quirky place is already being forced out by young techies that are determined to live in "The City" at any cost, and they are unlikely to raise the funds to buy a house (long term) as the truly wealthy gain even more interest in the place. SF is in a permanent cultural change cycle with it being overrun with high-functioning-autistic programmer types and mega wealthy individuals, domestic and foreign. The long-time residents that will never sell as SFace notes will remain, but I don't necessarily see their heirs sticking around because you either need to be an only child or well-off enough to buy-out your siblings. If they liquidate, it will be for a premium to a wealthy person. I imagine that SF will end up very much like Manhattan...high paid folks scraping by in rentals, pockets of multi-generation rent control and the mega wealthy actually owning everything.

The irony in it all is that many of the mega wealthy, particularly foreign ones, are very socially conservative.

5   curious2   538/538 = 100% civil   2013 Apr 19, 4:08am  ↑ like   ↓ dislike (1)   quote    

SFace says

the MID is the most lucrative in the country.

What does "MID" stand for in this context? Seattle has a MID ("Metropolitan Improvement District") but that's 800 miles north.

bmwman91 says

I imagine that SF will end up very much like Manhattan...high paid folks scraping by in rentals, pockets of multi-generation rent control and the mega wealthy actually owning everything.

Prop 13 can extend alas to multi-generational heirs and applies even to business ownership and commercial property, trapping a sort of 'landed gentry' who are locked into the golden handcuffs of their tax break. They can't sell or even improve their properties, but they can rent.

Rent control applies only to primary residences and only so long as an original occupant (from the origination of the tenancy) continues to reside primarily there. That is how Prop 13 should work also, IMO.

SFace's analysis of the sale market is right. Most people in SF rent, and the small number of sales reflects the bidding power of the high-end buyers who are competing for houses as if they were trophies. It's the same in the high-end art market. It's a side effect of globalization and the Bush tax shift: concentrating economic resources at the high end enables the lucky recipients to overpay for the same trophies. It's the same Klimt or Van Gogh at $100 million that it was at $1 million, the painting or house has not changed, but the price fluctuates with the bidding power of the relevant market segment.

BTW another factor in SF is the homeless industrial complex. Each vagrant can generate $500k/year in revenue, mostly in "free" medical bills. (For example, when it rains, a panhandler may develop phantom chest pains, resulting in an ambulance to the hospital and several days of "observation" including "free" meals, though it's hospital food. The panhandlers don't really benefit, but a huge amount of money changes hands, and the major recipients make sure the game continues.) By day, panhandlers scare pedestrians, and at night they sleep in doorways and drive away tenants. A contractor explained to me recently that as rents have increased, turnover has increased also, because people don't want to pay $3k/month to rent a place where they don't feel safe.

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