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Bay Area housing... what is going to happen?


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2020 May 22, 5:32pm   7,360 views  69 comments

by krc   ➕follow (0)   💰tip   ignore  

So - any predictions for SFH prices in "fortress" areas of SF bay area?

1) Perhaps millions square feet of commercial real estate will convert to apartments and condos? Hard to see how commercial prices hold up when many companies are comfortable with majority of workforce working from home. Already FB has scaled down its recent buildout proposal by 30%. Will that pressure real estate downward?
2) Fortress areas were typically those areas with good school districts - immune to most downturns. What most parents failed to realize is that the state government has gone to a different model for school funding (Local Control Funding - under Brown) - which is actually not local control at all but a diversion of local taxes to a general pool where funds are allocated based on need. Most states fund students equally - but that is not California. As a result, even previously strong districts (performance) are not receiving nearly the funding in years past. Ironically, funding doesn't necessarily have anything to do with results; nevertheless, it is hard to believe these once revered districts can compensate for the drastic reduction. Basically, schools that get funded are those with high numbers of illegals and those eligible for school lunches. Rich folks seem to believe they are paying taxes to support their "local" school - but that is not true except in the most general sense.
3) Encampments in most major cities that mar the general public use. I am not happy trying to go anywhere near Civic Center now. It was a cesspool before - it is even worse now.
4) Overbearing government control over daily life (state is very slow to re-open)
5) Continued NIMBYism that uses Covid-19 to restrict non-locals from visiting beaches, enjoying parks, and so forth. Of course, this also helps those who are rich and settled to not move if they can keep the "low life" out and enjoy a better quality of life. (Note - Tahoe area still restricting short term rentals and discouraging "second home owners" from visiting, Santa Cruz fining out of town interlopers).
6) Telework has proven that remote teams can work successfully. For me, I think a 3-office/2-home day week is ideal, but it seems some are comfortable never interacting in person with their teammates.
7) Mass transit is a riskier way of traveling in the post covid-19 world. Will that mean a flight to suburban and rural areas where density is less?

Thoughts?

Any time I think housing will go down, I am reminded of IWog who always felt that housing would stay strong after the crash and used that downturn to buy properties at a ridiculous price. His main point is that US housing is cheap by international standards and will always be a place that is a comparably better investment than london/tokyo/moscow/etc...

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1   B.A.C.A.H.   2020 May 22, 6:14pm  

krc, from what perspective are you asking?

Are you a "local kid" or did you move to here from somewhere else? If moved to here, from where, and when?
2   SoTex   2020 May 22, 10:07pm  

Soon nobody will be willing to live there. Not just due to the high prices but also due to the culture.

Except for relatively few who intend to impale themselves with that culture.
3   SoTex   2020 May 22, 10:10pm  

krc says
6) Telework has proven that remote teams can work successfully. For me, I think a 3-office/2-home day week is ideal, but it seems some are comfortable never interacting in person with their teammates.


In the mid to late 90s there was already talk about internet-2. It was to be so good that malls, strip-malls would be disassembled and turned into, "Some place you walk to in order to plug-into work", which would be semi-VR. Maybe through a nice park on your way.

Real estate prices would plummet in high end (due to jobs) areas.

Perhaps this will push us along that road more quickly.

All I know is I'm glad I'm gone and don't miss it one bit. Initially I missed the trees and my friends.
4   anonymous   2020 May 22, 11:16pm  

I suspect there will be a decrease in rent due to the lockdown and layoffs happening in March, April, and May. Hiring hasn't picked up for the service sector and I suspect there is at least a 15% unemployment rate in the Bay Area. The lockdown came at a key point in the rental season as most people are renewing or signing leases, suddenly a fair amount of people have no jobs, so why sign? Additionally, there might be a slight decrease in properties in the Bay Area due to overleverage homeowners/investors. I'm not too sure on on a decrease in property values in the Bay Area, but I'm fairly confident rental prices will decrease.

You might like the google trend of Uhaul searches in California...The Bay Area seems average compared to prior years.

https://trends.google.com/trends/explore?date=today%201-m&geo=US-CA&q=uhaul
5   SunnyvaleCA   2020 May 23, 1:45am  

From what I see here in Sunnyvale, enormous numbers of condos, townhouses, and apartments are going up all over. However, I don't see any single family home construction. I'm not sure how much extra group-living supply will affect SFHs. For sure, the quality of life will decrease further for everyone with the extra quantity of people, so that will probably make some difference.

You're right about the ridiculous school-funding model. However, the quality of the schools is mostly related to the quality of the parents of the students and has little to do with the money. The high-quality schools will still have high-quality parents even if all the sports and art classes are cancelled. I'm not sure the high-quality teachers will pick up and move to a lousy school with more money, since they probably won't be getting that extra money.

Teleworking poses a challenge to home prices. But I don't think that a company that allows 3 teleworking days per week is going to hurt local housing much. It's not like I would move to Nevada if I "only" had to get to the office 2 times per week. Maybe I'd live a little farther out, but I don't think it'll make a huge difference. As you mentioned, mass-transit has now been shown to be risky; that will put a damper on people moving to, say, Livermore and commuting 2 times per week (2 hours each way door-to-door!).

30-year mortgages are now at the lowest ever recorded without considering inflation. If you consider inflation, you probably won't beat the Carter era, but you're still looking at near-zero "real" interest rates. Writing off mortgage is still possible (but limited), but you won't be writing off property taxes. That said, AMT often meant you couldn't effectively write off property taxes anyway.

Looking at properties that have sold in the last year in my area, I don't really see a downturn. There isn't yet enough data about how things have been going in the last two months.

Jobs... Apple, Google, and Facebook — three enormous employers and windfall wealth generators — are at or near all-time highs right now. Amazing, really. The rental market might suffer, but it seems like those 3 are minting plenty of new millionaires who are perhaps willing to squander it all on a $2MM SFH crap shack.
6   SoTex   2020 May 23, 11:44am  

The FED is just delaying the inevitable. It can only delay the business cycle not prevent it. Every recession I lived through in the bay area resulted in an affect as if, "Someone picked the bay area up and shook lots of people out of it".

The roads cleared up. Sometimes over half of my apartment building tenants cleared out at which point my requests for rent reductions were honored.

I don't think it'll be any different this time, just delayed.
7   krc   2020 May 23, 1:24pm  

To be clear, I purchased a house in livermore back in mid 90s. We then purchased in danville area in 2010. We were barely able to also hold onto the house in livermore and that has been a rental for the last 10 years. Prices even in livermore seem very high, but I am just thinking that if companies get comfortable with remote workers (which they are already do as they send much work to their India locations for much cheaper rates), then maybe commercial real estate will convert over. When to sell and get out is the real question I guess....
8   SoTex   2020 May 23, 1:26pm  

krc says
if companies get comfortable with remote workers


I'm in San Diego and I get several recruiters a week lately asking me if I want to work remotely for SF bay area companies. A bit of an uptick after the Rona but had already started early 2019.
10   BayArea   2020 May 23, 1:58pm  

Published real estate data typically trails real-time by a quarter. I think what we see in Q3 and Q4 will be very telling.

Buying and selling real estate isn’t like buying and selling a stock. We won’t see any revealing real estate data until 2H2020.
11   Patrick   2020 May 24, 12:45pm  

https://www.cnn.com/2020/05/21/success/real-estate-home-sales-drop/index.html

Sales of previously owned homes fell 17.8% from March amid stay at home orders across the US, with the biggest dips seen in the West. Sales were down 17.2% from a year ago, NAR reported.


And that's the NAR, who always spin and sometimes lie.

It's not necessarily about the Bay Area in particular, but is about the west of the US.

https://www.icis.com/chemicals-and-the-economy/2020/05/debt-deflation-demographics-and-brexit-set-to-challenge-london-house-prices/

London property websites haven’t used the word “reduced” for many years. But it’s starting to appear again on homes for sale and rent, even in core city postcodes. And in another sign of the downturn, homes can now be on offer for months without moving.

The problem is that prices were already ready to tumble before Covid-19, as I discussed in July:

All in all, it would therefore be surprising if prices didn’t continue falling, back to the average house price/earnings ratio of the pre-2000 period. A temporary over-correction, where they went even lower, would also be normal after such a long period without a major fall.


San Francisco is likely subject to similar pressures, except Brexit.
12   SoTex   2020 May 24, 12:59pm  

8.8% of homes were in forbearance as of last week. That's 4.7 million homes (and counting) potentially heading towards foreclosure. That's (so far) 1.5 million more than 2008.
14   krc   2020 May 24, 1:22pm  

I think the commercial real estate will be under pressure and converted to apt/condos in cities. That is best case scenario - that people still want to live in a cesspool and will pay to do so even if they don't have to show up to work in an office.

I also foresee, though, that tahoe, san luis obispo, paso robles, and other premium locations will get even more expensive. Why? I think many will be comfortable - especially those in their mid-fifties - working remote and so will buy now so they can get their choice of property before others do the same. They only have to work another 10 years or so.... I am looking in Tahoe and ed dorado area as we speak.... BUY NOW OR BE PRICED OUT FOREVER! :)

Lots of folks have talked about moving out of state. Maybe. But there are MANY that are here simply for the weather. I lived in Seattle for two years. Too much rain, and homeless is bad there as well. Washington DC - spent two years there as well - very cold in the winter, hot/humid in the summer. Florida? I spent a lot of time in St Pete/Clearwater. Unless you can live right on the water it is miserable half the year. Not to say that some people don't enjoy "weather". I don't.

Maybe Atlanta or the Carolinas...
15   SoTex   2020 May 24, 1:44pm  

Yeah, commercial is going to crash way harder than retail. However sub-primes are back in a big way in retail. Also the CDO's the killed the whole thing are back as well. They just renamed them 'Bespoke Tranche Opportunities':

https://www.bustle.com/articles/136706-what-is-a-bespoke-tranche-opportunity-the-big-short-ends-with-a-big-warning

Most of the lenders have reset lending requirements by now. Over 700 credit score, 20% down mins etc.,. This right before a bunch of variable rate loans are about to reset and so those people will be fukt if prices start to drop and they can't sell.

Repeating the past...
16   B.A.C.A.H.   2020 May 24, 1:47pm  

krc says
I think many will be comfortable - especially those in their mid-fifties - working remote and so will buy now so they can get their choice of property before others do the same.


Please share with us some anecdotes on this point.
17   krc   2020 May 24, 2:03pm  

I have a few team members already asking what will be the long term policy for the company I work for in terms of any mandates as to "how far" one can live. Most of these are folks that work for me and have kids out of high school and are in their fifties. Granted, the staff is probably averaging late 40s - so not sure if younger folks would think the same way. Our company will not even THINK about going into the office until NEXT YEAR - this is because our team is a development shop and not operations. Operations will go back to a physical location.

I do remember though that Yahoo had a policy change to direct people to work in office. Idea was to get rid of folks that had moved away and had no interest working for the company anymore. So there is a risk. Most companies will probably say that you can move where you want but telework can be "dropped" as a perk.

Some companies do have mileage restrictions as to how far away you can live from the office you are hired into. Others are okay with moving beyond that range but you don't get locality pay adjustments (bay area always had a high locality adj).

I am thinking about this myself. Which is why I am wondering what to do with the two house I have in the bay area (primary, rental). Going to SLO area in the next couple of weeks to look around.... Hence the original question. :)
18   SoTex   2020 May 24, 2:50pm  

I kept typing 'retail' when I meant 'residential'.
19   SunnyvaleCA   2020 May 24, 2:50pm  

krc says
Some companies do have mileage restrictions as to how far away you can live from the office you are hired into. Others are okay with moving beyond that range but you don't get locality pay adjustments (bay area always had a high locality adj).
Mileage restrictions for full-time workers who commute to the office on their own dime? I'll bet this runs afoul of "Fair Housing and Equal Opportunity" laws. Maybe I don't quite understand what you are saying. Are you saying at my job interview the HR lady asks where I live (probably illegal) and I tell her; then she says I must move as a condition of the job offer?
20   SoTex   2020 May 24, 2:52pm  

B.A.C.A.H. says
anecdotes on this point


krc's experiences are similar to mine and things I've heard from recruiters. I know of a company in SSF that has a guy working for them who's part time in Florida.
21   SoTex   2020 May 24, 2:53pm  

krc says
I think the commercial real estate will be under pressure and converted to apt/condos in cities.


If this happens it'll put more downward pressure on residential.
22   krc   2020 May 24, 3:00pm  

I am frankly not sure of the law. I would expect the company would set the expectation that at any time they can require you to report into an office. I suppose this could be litigated as a change of work conditions if you had "always" worked from home. I would have thought the whole "yahoo" "back to HQ" directive would have been litigated if this was truly illegal (to force people back to the office). At least I didn't hear about any legal problems ....I do know that locality pay is based on where you "do the work". If you were assigned the SF office but chose to do your work out of your house in Sacramento, you would not get the SF location because you are now "remote" and in Sacramento. I hear companies are saying if you move then they will adjust salaries - why would facebook and others make that claim if it was not legal to do so (though I agree this is not the same as a job offer restriction)?

Interesting questions though.... I don't see why companies wouldn't have a vested interesting in ensuring their employees worked a reasonable commute from the office, but not sure of the laws. Note that a reasonable bay area commute would probably seems extreme elsewhere (maybe 1 and a quarter hour each way? ). Agree is subjective...
23   SunnyvaleCA   2020 May 24, 4:03pm  

krc says
I would have thought the whole "yahoo" "back to HQ" directive would have been litigated if this was truly illegal (to force people back to the office).

I'm guessing that a hiring requirement that you come in to the office every work day would be completely different than a requirement that you live in a certain zip code, which is what you seemed to be implying by "Some companies do have mileage restrictions as to how far away you can live from the office you are hired into." In the Yahoo case, this would seem to be merely a change in work requirements that creates a work situation unlike what you originally signed on for ... like if a company phases out a department and assigns you to a different department doing a different job. I suppose you could say the new job requirements are fundamentally different and demand to be laid off — with full unemployment benefits.
24   krc   2020 May 24, 5:06pm  

Agree - not sure on pre-employment check of distance to the "to be assigned" workplace. Anyone know for sure? I mean, I would expect a hospital could demand that an ER physician live within 15 minutes of the hospital - or does the employer have to allow shift work and everything is scheduled? I know that residency usually demands logistically (not legally?) that you are right near the hospital.
25   Patrick   2020 May 27, 8:05pm  

https://www.mba.org/2020-press-releases/may/mortgage-delinquencies-rise-in-first-quarter-of-2020

WASHINGTON, D.C. (May 12, 2020) - The delinquency rate for mortgage loans on one-to-four-unit residential properties increased to a seasonally adjusted rate of 4.36 percent of all loans outstanding at the end of the first quarter of 2020, according to the Mortgage Bankers Association's (MBA) National Delinquency Survey.
26   EBGuy   2020 May 28, 2:14pm  

S&P Case Shiller San Francisco Home Price Index hits an all time high in March. As a reminder, the index includes five Bay Area counties (San Francisco, Marin, Contra Costa, Alameda and San Mateo counties) and is an average of the last three months. Most March closings would have originated in February (pre-pandemic). Will be interesting to see if it continues to rise in April.
27   SunnyvaleCA   2020 May 28, 3:09pm  

Zillow said my shack increased in value marginally last month, for whatever that is worth.
28   mell   2020 May 28, 3:23pm  

Commercial more so than residential housing will be fucked. The SF tyrants won't let most offices operate for a long long time, and general real estate open houses not until mid July. This is insane lol:

https://abc7news.com/san-francisco-sip-order-london-breed-texts-summer-camps-shelter-in-place-ends/6217318/
29   mell   2020 May 28, 5:09pm  

OccasionalCortex says
mell says
Commercial more so than residential housing will be fucked. The SF tyrants won't let most offices operate for a long long time, and general real estate open houses not until mid July. This is insane lol:

https://abc7news.com/san-francisco-sip-order-london-breed-texts-summer-camps-shelter-in-place-ends/6217318/


...SF just extended it to 'indefinitely' which somehow translates from Libtardese as "Aug 7"


Glad I don't have a dog in this fight but it's going to be disastrous for SF.
30   SoTex   2020 May 28, 6:59pm  

EBGuy says
Will be interesting to see if it continues to rise in April.


It won't. Did you sell yet? I'm not going to, I've planned all along for my rental values to drop some. I'm looking forward to decreased property taxes! I don't care what the value is for at least 2-3 decades... Lower is cheaper for me.
31   BayArea   2020 May 28, 7:18pm  

I watch the real estate market closely, review data periodically, and don’t see any impact at all to Bay Area real estate as a result of Corona Virus.

I expect that to change in 2H2020. We’ll see.
32   AD   2020 May 28, 8:04pm  

With the work from home (WFH) trend like with Twitter, what will happen to the tech workers.

Will they move out to less costly areas since they can work from home ? How would that affect residential real estate in the San Fran Bay Area ?

Also, what will be the impact on more WFH policies on the east coast as well to commercial real estate (ie.. office complexes, etc.) ?
33   FortwayeAsFuckJoeBiden   2020 May 28, 8:19pm  

APOCALYPSEFUCKisShostakovitch says
Most of it will be broken up and used as heating fuel to warm the survivors.


What survivors?
34   FortwayeAsFuckJoeBiden   2020 May 28, 8:20pm  

ad says
With the work from home (WFH) trend like with Twitter, what will happen to the tech workers.

Will they move out to less costly areas since they can work from home ? How would that affect residential real estate in the San Fran Bay Area ?

Also, what will be the impact on more WFH policies on the east coast as well to commercial real estate (ie.. office complexes, etc.) ?


Every techie I know dreams of this. Take SF bay pay, move to cheap state and live it up.
35   B.A.C.A.H.   2020 May 28, 8:47pm  

OccasionalCortex says
WFH workers based on location and cost of living.

What's the cost of living in Bangalore?
36   anonymous   2020 May 28, 10:12pm  

I'm seeing an increase in rental listings in the Sunnyvale area...I'm looking at moving south in a month. I think prices are coming down some....
https://sfbay.craigslist.org/search/apa?query=sunnyvale&availabilityMode=0&sale_date=all+dates
38   krc   2020 May 29, 10:41am  

Anyone know what is going on in SF? Seems from media (over-exaggerating?) that SF is now filled with homeless tents "spaced" out across streets in tenderloin/civic area. Are people walking the streets now? Or have has the tech youth moved temporarily with this crises. Seems like SF is extending shelter in place order indefinitely?

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