patrick.net

1sfrenter says

Will SF homes ever retreat to pre-bubble prices? 1998 prices? Seems unrealistic to me, but some insist that is what will happen.

Watch and learn... "people got crazy" to expect 10-20% annual appreciation ...

Robert Shiller - On Home Prices Always Going Up

http://www.youtube.com/embed/d__GPqOVNbE&feature=related

U.S. house prices not at "catastrophic" levels says Shiller

Robert Shiller 9 years up and 9 years down!

http://www.youtube.com/embed/Psx3rhX3euc

1sfrenter says

Presently I see that vacancies are down and rents are way up in the city. Crazy way up. I have lived here since 1989 and have never really seen the rents go down. Maybe for about a month right after Loma Prieta. For a second when the dot.com boom collapsed.

Already posted a few weeks back SFGate article (2003-4?) .. Prime SF rents went down 25-30% for several years starting in 2000.

So where is SFBA ? No where to go but back to the RED Line...

Buddy of mine is a property manager in the Haight.
He rented a 1bd for $2,200 about 6 months ago, said there was huge demand from new Google/Facebook/Zynga employees. Another 1 bd apt has opened up and they're gonna try to rent it for $2400 this time around.

1sfrenter says

Folks on various housing blogs insist that housing in general, including rents, must come down. Is that really true in places like Manhattan (where I grew up) and SF (where I live now)?

Rents are trending up nationally, especially in San Francisco through San Jose. In 2012, there is essentially no new housing built in San Francisco, which will mean another two years of 5-10% rent increase.

1sfrenter says

How much more will SF housing prices come down? In some neighborhoods they are rising again, after what I would not characterize as anything close to a bursting bubble. Little air let out, maybe. In some neighborhoods, SFH are almost to 2002-2003 prices.

They are definitely rising again on certain zip codes. There has always been tremendous demand in San Francisco, but now the supply for sale is pathethic, especially single family homes. I would guess that prices will neither rise or fall in San Francisco for the next 12-18 months.

1sfrenter says

Will SF homes ever retreat to pre-bubble prices? 1998 prices? Seems unrealistic to me, but some insist that is what will happen.

No chance.1sfrenter says

And if the median income in the city is 67K, how the heck are all these people affording 3K a month in rent or 800K houses?

Because the median household is not buying 800K house. 2/3 of the city resident rents or live in some government assistance. and of the homeowners 2/3 of the homewowners already owned their home for 30+ years and/or are already millionaires.

GoranK says

I can't believe you were paying $3,000 a month for 700sq. I would just live in the East Bay.

And all of us commute over the bridge every day? And not be able to jump in my car and go surfing when the surf is good because the bridge is backed up? And switch my kids' schools?

Again, the "just move to the East Bay" works for some - many of my friends have done so. Quite a few have done so and moved back (even after buying). Life's choices are different when you have kids and secure jobs (yes we are those blood sucking city workers that are bringing down the American way of life #$@^*& public school teachers) and roots.

Did I mention surfing?

1sfrenter says

Will SF homes ever retreat to pre-bubble prices? 1998 prices? Seems unrealistic to me, but some insist that is what will happen.

When people say retreat to pre-bubble 1996-1998 prices... You can't look at what it sold for in 1996 and wait for that price.. With each passing year you have to add atleast 2-3% normal appreciation to that 1996 price. So if you are predicting a bottom in say 2017...

Then you take the 1996 price point... add 3% inflation per year to that price... And say 2017 is the bottom year... that's 21 years of normal appreciation baked in since 1996 bottom. (Or roughly a minimum 63% appreciation over 1996 bottom).
If you calculate other factors such as interest rates.. median income change since 1996... monthly nut formulas. An argument could be made we are already at 1996 prices in terms of out of pocket housing costs per month.

But then again, our society as a whole is at a crossroads economically and politically... So things could collapse and none of this math could matter. But the odds of a total collapse WITHOUT the government swooping in to pass huge policies that prop up housing and the middle class is highly unlikely.

1996 prices in LA and SF by the way were LOWER than what the same homes sold for in late 80s and early 90s... and may just as easily been a short term reverse bubble bear bottom.. just as 2006 was a short term bubble peak).

I would guess that many people are using dual incomes to afford the house payment.

If previously people were using 1 income for housing and are now using 2 incomes it's the same effect as incomes doubling. prices can go higher.

toothfairy says

I would guess that many people are using dual incomes to afford the house payment.

Bingo...

Los Angeles Owner says

When people say retreat to pre-bubble 1996-1998 prices... You can't look at what it sold for in 1996 and wait for that price.. With each passing year you have to add atleast 2-3% normal appreciation to that 1996 price.

The housing bears will take issue with the idea that 2-3% is a normal appreciation rate for housing (esp. when you factor in taxes and maintenance).

I personally do not have a strong opinion (or a crystal ball), but have been a long-term SF renter paying a good chunk of my paycheck for rent for decades. Been waiting for the bubble to pop while paying a lot of rent and getting older.

I appreciate everyone's input.

When it comes down to it, what's going to happen economically in the next 12 months is a mystery to everyone. If I put on my tinfoil hat I might say that there is a small group of people pulling the strings of the entire world economy and they have already decided all of our fates.

Why are we in this handbasket and where are we going???

The way I look at it is that SF might as well be lumped in with Silicon Valley/ Peninsula. The bay area in general is crazy as far as rents and home prices. But SF and the Peninsula are on an alternative orbit. My take is that there's simply way too many people who simply cant bear the thought of living anywhere else except these two specific areas. In their minds the east bay might as well be Kansas. Hence they pay out the nose, which is fine with me.

toothfairy says

I would guess that many people are using dual incomes to afford the house payment.
If previously people were using 1 income for housing and are now using 2 incomes it's the same effect as incomes doubling. prices can go higher.

Lol!

Dual income families have been around for the past 40 years.
Where have you been ?

1sfrenter says

The housing bears will take issue with the idea that 2-3% is a normal appreciation rate for housing (esp. when you factor in taxes and maintenance).

I'm not saying the homeowners net worth increases 2-3% every year.. But the home should at worst keep on pace with inflation... which can be better than money in the bank once home prices stop falling.

I know many arguments have been had about housing as an inflation hedge... But it seems a long low-interest 30 year fixed mortgage would be worth it's weight in gold when inflation hits.

People seem to like using 1998 as the baseline because it was before the internet existed and about the last time housing was semi-rational.

Maybe if the internet never existed than I would tend to agree that housing prices in the bay area would behave nicely and only keep pace with inflation.

Los Angeles Owner says

But it seems a long low-interest 30 year fixed mortgage would be worth it's weight in gold when inflation hits.

This is the thing people aren't getting. What inflation? Is our income inflating?

You'll be paying the same 30 year note on even less dollars, as the price of everything inflates but your wage remains stagnant.

Wages won't inflate with 20% unemployment.

CrazyMan says

This is the thing people aren't getting. What inflation? Is our income inflating?

You'll be paying the same 30 year note on even less dollars, as the price of everything inflates but your wage remains stagnant.

Wages won't inflate with 20% unemployment.

I'd rather have debt than cash in the bank if we have massive inflation. I'd rather have debt AND a place to live if we have massive inflation.

But what I really want is to be able to buy a house that I can pay off and live in and raise my kids and have dogs and retire. And maybe get a few more dogs. And a pygmy goat. Maybe two.

toothfairy says

Maybe if the internet never existed than I would tend to agree that housing prices in the bay area would behave nicely and only keep pace with inflation.

Greenspan once said, home prices went up because the Berlin Wall and USSR collapsed. Anyway... people were using AOL, Compuserve, BB as far back as 89-90.

there's no rule that says home prices will track inflation. Inflation is national home prices are local. maybe national home prices keep pace with inflation but not local. Otherwise a house in Detroit would cost the same amount as a house in Palo Alto. Always.

I know that this should be common sense but you keep posting that graph so I have to wonder.

toothfairy says

there's no rule that says home prices will track inflation. Inflation is national home prices are local. maybe national home prices keep pace with inflation but not local. Otherwise a house in Detroit would cost the same amount as a house in Palo Alto. Always.

It is clear and self evident that over the long term price appreciates at rate of inflation.

Robert Shiller was correct in his studies, many during the boom and even today, expect some crazy high apprecition to occur yearly. Look at his video above.. its pretty clear...

In the 1950-60-70s, home prices and UNION income were much higher in Detroit than Palo Alto. No one even heard of PA until the mid 90s. But the auto industry imploded and tech grew in the 80s and 90s. So far we are today facing similar declines that Detroit faced.

I dont see any "common sense" to the point your trying to make.

1sfrenter says

GoranK says

I can't believe you were paying $3,000 a month for 700sq. I would just live in the East Bay.

And all of us commute over the bridge every day? And not be able to jump in my car and go surfing when the surf is good because the bridge is backed up? And switch my kids' schools?

Again, the "just move to the East Bay" works for some - many of my friends have done so. Quite a few have done so and moved back (even after buying). Life's choices are different when you have kids and secure jobs (yes we are those blood sucking city workers that are bringing down the American way of life #$@^*& public school teachers) and roots.

Did I mention surfing?

That's true. I guess if you really love surfing then living next to a beach might be important.

700 sqft just seems really small for a family. I guess if you guys can work it without being in each other's hair all the time, more power to you. I personally couldn't do it.

GoranK says

700 sqft just seems really small for a family. I guess if you guys can work it without being in each other's hair all the time, more power to you. I personally couldn't do it.

Actually, it was someone else you were quoting. We pay $2500 for an 1100 sq. ft SFH with an equally large (unfinished) garage/basement and a yard.

We could conceivably buy something similar for a couple hundred more (total PITI) per month, which is why we are looking to buy.

If we find something that comes close to our current rent and we like it, then we are jumping in. If we don't, then we keep looking and maybe in that time (next fall?) if the SF market has another leg down we'll be in an even better spot, having saved even more for a down payment.

1sfrenter says

Did I mention surfing?

+1

I was at Ocean Beach for the first time a few weeks ago. Had NO IDEA you could catch such nice surf, and have a view of the Golden Gate at the same time - lol.

Ever surf Moss Landing? Gets pretty heavy - but on the right days you get killer offshore winds, double overhead barrels etc... Tough paddle though.

1sfrenter says

if the SF market has another leg down we'll be in an even better spot,

Forget about that scenerio, my prediction (Very comfortable) will be SF housiing market will be up (1%-2%) in 2012.

I think people here getting insensitive to price. Younger generations, if 25 yet makes 6 figure or close in high tech, no kids, are much more willing to pay more for rents. Family with kids have with similar incomes can't compete with those. Silicon valley folks are pretty young (after all, how many years can one be at software). Think the housing/renter prices are sometimes not dictated by the median incomes, and 67k sounds to low as ones are considered low-income and eligible for housing subsidy if make less than 85k+.... At least according to south bay rental offices. One more reasons California is broke!

SparrowBell says

if 25 yet makes 6 figure or close in high tech,

Thats dreaming.. if you think anyone with zero experience, 25, is going to make that kind of pay. You really think someone who is hiring manager and with 15-30 years on their own, is going to hand out 6-f salaries just like that?

SparrowBell says

Silicon valley folks are pretty young (after all, how many years can one be at software).

No they are not.... after nearly 3 decades of working in SV.. I can still say 35 is still considered young.

thomas.wong1986 says

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SparrowBell says

if 25 yet makes 6 figure or close in high tech,

Thats dreaming.. if you think anyone with zero experience, 25, is going to make that kind of pay. You really think someone who is hiring manager and with 15-30 years on their own, is going to hand out 6-f salaries just like that?

SparrowBell says

Silicon valley folks are pretty young (after all, how many years can one be at software).

No they are not.... after nearly 3 decades of workin

I just recently moved back to bay area, to me, salaries here have skyrocketed with google and other companies. We all have different sample points, people we know, base salary offered for individual contribution, non-managerial or fellow levels, ranges from $150-180 (new offers in 2011). I know for a fact, PhD starting salary (engineering/statistics) are around $110K even in east coast for my field before I moved back last year. Why would that be so far-fetched for someone with a master degree to make close to $100K? For experience hire, google can easily grant 200K stock option for new hire (unless you don't bargain for it) ..... why would bay area housing so expensive if there is no demand, how could the price be sustainable (despite the fact I hope it would crash ...) ....

Anyway, my sample is also probably statistically biased to the people I know.

I am an engineer in the the high tech industry with 10+ years experience. It is quite possible to have 150k-180k salary+bonus+RSU.

Also, 25 y.o. with masters degree can easily get 80k+, maybe 100k if employed by Google/FB.

Nonsense, we had 400+ public companies back in 2000, up from 1994 when we had some 300, today, near 200. We lost half as many public companies and many many more new private startups. There is a glut of unemployed workers. If their salary is too low for you, there are 500 others behind you willing to work for less.

Vanishing Public Companies Lead To The Incredible Shrinking Silicon Valley

http://www.siliconbeat.com/2010/02/17/vanishing-public-companies-lead-to-the-incredible-shrinking-silicon-valley/

$150-180K.. your talking local directors/officers and non-CA regional sales people, not local staff and certainly not starting. PHD means nothing in SV or the East Coast, since you havent proven yourself.. whats your experience, accomplishments, project leadership skills.

Actual payroll records pretty much tell a different tale when it comes to compensation. Go talk to your HR or Finance people regarding compensation in 'general terms'. The longer history they have in SV the better analysis they can provide.

Further more, what exactly does a PHD in SW do?
There isnt any difference between 4 year codewriter and PHD...
Its code, a language, not Alchemy! There isnt any magic to this, either its your forte or isnt. What magic can you possible do on a website like Google/FB that requires that much compsensation ?? These comments regarding inflated compen dont make sense!

We already found out this past year, Google employees infact were underpaid, and pretty much every headhunter will tell you the same. Today, Stock options are far more rare, since they are expensed and there is no value proposition to the employer.

In the Tech industry/SV ...What can be done, has been done leading to the year 2000.

We live in a 2 bd townhouse in downtown San Jose. Our first years rent in 2007 was $2200 pr month. 2008 it went down to $1800 pr month. 2009-2012 $2000.00 pr. month. We just signed a new lease for $2443.00 pr month. It may be time to buy as I think it will continue to rise as the complex is full.

thomas.wong1986 says

Further more, what exactly does a PHD in SW do?
There isnt any difference between 4 year codewriter and PHD...
Its code, a language, not Alchemy! There isnt any magic to this, either its your forte or isnt. What magic can you possible do on a website like Google/FB that requires that much compsensation ?? These comments regarding inflated compen dont make sense!

Google has tons of PhDs and I know quite a few in FB as well. Scaling and latency are their main issues not website design. Most of their challenges are in the backend datacenters where computer systems PhDs that have experience across the stack can help. There are many PhDs in machine learning, language analysis, graph theory etc that drive many of the product offerings of these companies. Apart from these web companies there are a ton of other companies like Intel, TI, nvidia where its not just web development. A 4 yr codewriter cannot do everything once the low hanging fruits for system optimization have been covered.

A fresh grad out of PhD can easily start at 110-120K at goog, msft, intc and other places. Bonus+RSU can take that amount to 160-180K