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


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2020 May 22, 5:32pm   7,359 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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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?
41   AD   2020 Jun 1, 2:50pm  

krc says
https://wolfstreet.com/2020/05/31/san-francisco-epitome-of-everything-bubble-faces-fiscal-chaos-boom-and-bust-always/


Depends on how Work From Home (WFH) policy is enacted and how widespread it is.

If they end up paying a lot less such as based on zip code to WFH employees, then perhaps there will not be as much of a quick exodus from the high priced residential areas.

Perhaps a lot of decision making by those who qualify for full-time WFH positions is the equity they already have in their homes, and if bailing quickly to Boise, Phoenix, Nevada, Utah, Florida panhandle, etc. would be an economic option.

I'm also not sure how many of those living in high-priced residential areas like Belmont, CA would qualify for WFH, or would be interested in it.

Many perhaps that own +$1.25 million dollar homes are high level managers and executives, and are not the worker-bees who would easily qualify for WFH.

.
42   B.A.C.A.H.   2020 Jun 1, 3:12pm  

Newbie123 says
Wolf street is a little bit like zerohedge.

We have record low inventory and extremely low interest rates. Yet, there are people who have money and can afford to buy


Newbie, is your spouse a ®ealtor? Just asking.

Note, Wolf's source is from a MSM source that gets a large portion of its ad revenue from ®ealtors: https://www.sfchronicle.com/bayarea/heatherknight/article/SF-s-top-money-man-grapples-with-dire-forecasts-15304610.php?fbclid=IwAR3Fcp43a5kyZFu_kdiDyD6Jj6vjkTorhJ0NkiYsL8x-j0Uw1GpsaZcMtVg
43   krc   2020 Jun 1, 4:44pm  

What I thought was good about the article is the financial crises that I think the city is just starting to enter. Even before covid, the streets were inhospitable to tourists. I would always go to oracle world but it was getting worse every year. I don't buy that Oracle moved it to Vegas for cheaper hotels - a lot of Oracle tech folks will have to fly out from the bay area, etc... The homeless crises was ridiculous - anywhere around civic center especially is a complete disaster. I just don't see why people would want to live there anymore. Sure - just like any city there are good and bad areas, but Marina is not all that appealing either anymore (Chestnut St is not great now either). And, with covid, don't you think it argues against city density, mass transit, and high density restaurants?
44   SunnyvaleCA   2020 Jun 1, 5:09pm  

Newbie123 says
Man, I wish prices would go down. I would love to jump in and buy another rental.
If you're thinking of buying a rental in the bay area, I'd love to see the financial numbers! In my area, even if I could buy a shack at 1/2 the current price and rent it out at full current market price it would be a very high risk and low return investment.
45   Patrick   2020 Jun 1, 5:27pm  

krc says
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?


Wife and I went up to SF on Saturday just for something to do. Impressions:

- the homeless have spread out and occupied more of downtown with tents, trash, people "sleeping" in weird positions mid-day, more human shit on the sidewalks
- lots of shops boarded up, some workers putting up plywood, some taking it down, which was confusing
- felt distinctly less safe downtown, not many pedestrians
- police cars all over, and two helicopters hovering continuously (we didn't know about the riots at that point)
- extra police downtown did not give a warm fuzzy feeling, more like "shit, let's get out of here"
- we bought sandwich stuff at Trader Joe's and had a nice picnic at Ft. Mason, tons of people there definitely not "social distancing" but they looked happy
46   Patrick   2020 Jun 1, 5:30pm  

SunnyvaleCA says
Newbie123 says
Man, I wish prices would go down. I would love to jump in and buy another rental.
If you're thinking of buying a rental in the bay area, I'd love to see the financial numbers! In my area, even if I could buy a shack at 1/2 the current price and rent it out at full current market price it would be a very high risk and low return investment.


From studying the numbers in the Bay Area for years, I can say that it's basically impossible to make money from the rents alone because they don't cover the mortgages, much less the property taxes etc. The only way to make money as a landlord is significant appreciation, which now seems unlikely.

The best rent/price ratios were in the worst neighborhoods, but then you have the problem of collecting rent from armed and hostile tenants...
47   B.A.C.A.H.   2020 Jun 1, 5:36pm  

This one in today's SF Chronicle, which gets lots of advertising from realtors

https://www.sfchronicle.com/business/article/San-Francisco-Silicon-Valley-rents-saw-sharp-15307118.php
48   B.A.C.A.H.   2020 Jun 1, 6:13pm  

Patrick says
I can say that it's basically impossible to make money from the rents alone because they don't cover the mortgages, much less the property taxes etc.


Yup, Patrick.

Our prop-13 tax bill from a 1980's assessment, with other ownership costs, on a mortgage free SFH doesn't come close to penciling out better as a rental compared to just selling.

We don't sell out because we're Homies. But it's a sunken capital. We know that.

We can share this perspective because we don't have Egos and Face all wrapped up in it.
49   SunnyvaleCA   2020 Jun 1, 6:42pm  

B.A.C.A.H. says
the prop-13 tax bill from a 1980's assessment, on a mortgage free SFH doesn't come close to penciling out better as a rental compared to just selling.
One consideration with selling is the enormous tax bill. Maybe that and the effort of selling convinces some old owners to just rent their places out for income, even if it isn't all that much. But that seemingly minor amount of work really ads up over decades compared to a big hassle just one time.
50   EBGuy   2020 Jun 5, 3:27pm  

Coronavirus lockdowns no match for Bay Area home buyers
Bear in mind that median is affected by mix. Bay Area April rise in Case-Shiller home price index is looking more likely.
51   SunnyvaleCA   2020 Jun 5, 6:49pm  

Patrick says
The best rent/price ratios were in the worst neighborhoods, but then you have the problem of collecting rent from armed and hostile tenants...

I had a girlfriend who bought a rental unit in East Palo Alto in 2009. I think it was about $350k and already came with a section-8 "single mother" with 2 or 3 kids in their early teens. I can't remember the address, but I'd love to know how the house is doing now. Supposedly, people on section-8 make fairly good tenants: the taxpayers are footing a decent part of the bill (so you'll at least get paid that part) and the renters behave OK because they don't want to lose their section-8 handouts.
52   Hircus   2020 Jun 8, 4:04pm  

"Wealthy buyers reportedly in 'mad rush' to leave San Francisco"
https://www.sfgate.com/living-in-sf/article/Wealthy-buyers-in-mad-rush-to-leave-SF-15324574.php


Amid the depths of a global pandemic and financial downturn, the demand for real estate is unexpectedly rocketing in wealthy regions outside San Francisco, reports Bloomberg. Agents say that demand is soaring in affluent areas around the Bay Area such as Napa, Marin and further afield in Carmel, as people who have the means look to get away from the city. Meanwhile, the market in San Francisco and Alameda County is still well below where it was last year.

Elsewhere, Lake Tahoe has also seen a surge in real estate interest. The prospect of living out of the city on an alpine lake while maintaining a career is appealing for a new generation of young buyers, as many tech companies have signaled that remote work may be the new norm for a long time.

“I’ve never seen the demand higher for Marin County real estate than when COVID-19 hit,” Sotheby's Josh Burns told Bloomberg this week, as real estate agents see a surprising uptick in wealthy buyers leaving San Francisco.

Agent Katrina Kehl of Compass warned her sellers not to expect much interest in their recent Mill Valley listing, as the country moves through an economic crisis. To their surprise, the couple received 13 bids and the home went over the $1.7 million asking price by "a lot," Kehl told Bloomberg. Sotheby’s agent Ginger Martin added that “there’s a mad rush to get out of the city.”

Meanwhile, the rental market in San Francisco has dropped significantly, with rates for one-bedroom apartments in the city dropping by 9.2% since June 2019, and hitting a three-year low.

However, buying a new home in an isolated haven in a nearby bucolic county is not an option for lower-income San Francisco residents, and some believe the trend is only exacerbating the wealth divide.

“This is an example of another way the most advantaged, the most affluent have isolated themselves from this latest crisis,” Patrick Sharkey, a sociology professor at Princeton University who focuses on urban inequality, told Bloomberg. “It’s a very small segment of the population that has another home that they can go take off to.”

Whether this change in demand away from San Francisco and into the suburbs is a short-lived reaction to the pandemic, or a more permanent change, remains to be seen.
53   Ceffer   2020 Jun 8, 4:14pm  

The asking prices seem as high as ever, including my crap shacks neighborhoods. Very low interest rates. I don't understand these prices, either. Time will tell, but I sure wouldn't buy into this market because it needs to digest the manufactured recession, which could take a while. A couple of pricy shacks in Santa Cruz haven't sold for a couple of months in places where they usually fly off the market. Also, foreclosures are popping up. I don't really look at real estate that often.
54   exfatguy   2020 Jun 8, 4:17pm  

I want to buy, but I'm definitely holding out a bit to see how work-from-home gets adopted/accepted in Silicon Valley. I realize that salaries will adjust downward depending on cost-of-living, but even a 50% salary reduction will still afford me a tremendous house in a few of the areas I'm looking. The houses I can get here in San Jose are seriously depressing.
56   mell   2020 Jun 13, 8:52am  

With the defunding/reform of police in SF prices will tumble as even families and other trusts trying to keep houses as long as possible due to prop 13 will become nervous and sell.
58   Shaman   2020 Jun 16, 6:49pm  

mell says
With the defunding/reform of police in SF prices will tumble as even families and other trusts trying to keep houses as long as possible due to prop 13 will become nervous and sell.


Prop 13 beneficiaries will probably hold onto their shacks the longest. It’s going to be what delays the CATASTROPHIC price drops a bit longer, as these folks ride the price train down because they have low taxes.
By the time the houses which were bought in the last ten years have been sold or abandoned, the median price will be halved.

All this brought to you by Covid19 and work-from-home tech jobs that no longer need to live nearby the Bay Area.

At this point the prices might stabilize again. But a 50% haircut is more than most people are willing to tolerate.
59   SoTex   2020 Jun 16, 7:25pm  

Maybe... If I were a tech company owner I'd just think I'd be able to afford more employees for less. Bay area fills back up but I have an outlay now. Bay area report doesn't like lower pay, "You're fired!", ... continues to expand the outlay.
60   EBGuy   2020 Jul 1, 5:56pm  

just_dregalicious says
It won't.

Ess Eff Case Shiller Home Price Index hit a new high in April, up 0.7% month-to-month. Doubtful that there is much gas left in the tank, but we may have one more month of gains (where the previous two months do the heavy lifting).
https://www.spglobal.com/spdji/en/index-announcements/article/annual-home-price-gains-remained-steady-in-april-according-to-sp-corelogic-case-shiller-index/
61   AD   2020 Jul 1, 6:39pm  

.

Ceffer says
A couple of pricy shacks in Santa Cruz haven't sold for a couple of months in places where they usually fly off the market.


It is based on how much they motivated or desperate they are to sell.

You could get a retiree couple who live off of social security and a small pension that could tap into the equity of their California bungalow (+$650,000) and planning on living the rest of their lives there. If not able to get a home equity line of credit (HELOC) then they may get a reverse mortgage.

.
62   SoTex   2020 Jul 1, 6:45pm  

EBGuy says
ss Eff Case Shiller Home Price Index hit a new high in April, up 0.7% month-to-month. Doubtful that there is much gas left in the tank, but we may have one more month of gains (where the previous two months do the heavy lifting).


Yeah, I saw that on a few RE pro utube channels. They all called it misguided and misreported as per what to expect in the future.

Reason being it's a rolling average that only takes into account the first half of April. Goes all the way back to February. People were closing in April on properties they started to purchase at or before the shut down.

I expect the next 2 Case Shillers to look different although maybe not yet due to all the fucking free money.
63   SoTex   2020 Jul 1, 6:46pm  

Also, it's up all over.
64   Hircus   2020 Jul 22, 9:52am  

I keep hearing people who live in rural locations that are not too far from dense urban cities say that homes in their rural neighborhood are selling rapidly due to new demand from those fleeing liberal wonderlands. I've seen 3 different unconnected people say this in the past 2 weeks. These were all pacific NW.

I'm guessing those who have a rural property are scared of the videos they see, and want to hold on to their sanctuary. Sensible people in big cities are snapping up the few that go on the market.

It's hard to find data confirming this though, likely because the fleeing citizens probably reached tipping point just a few weeks ago after seeing the riots not get solved.
65   BayArea   2020 Jul 22, 10:46am  

Bay Area housing is on FIRE

Low interest rates, stimulus, low inventory
66   Ceffer   2020 Jul 22, 11:00am  

Shouldn't the Great Socialist Paradise urban shit holes be machine gunning the refugees as they try to flee to the suburbs? It's just not right to escape the all knowing, tender loving care of progressive progress!
67   Onvacation   2020 Jul 27, 4:41am  

BayArea says
Bay Area housing is on FIRE

Low interest rates, stimulus, low inventory

I hear Oakland, Seattle and Portland are on fire too.
68   Al_Sharpton_for_President   2020 Jul 27, 5:34am  

Onvacation says
I hear Oakland, Seattle and Portland are on fire too.
Condo prices seem to be dropping in Seattle city proper. But Eastside home prices are doing quite well. Commuting from Ithe Eastside into Seattle is a bitch and not getting any better, but wth folks working at home, no problema. The area has always been home to Redmond based Microsofties, which has propped up home prices. Woodinville has a very nice winery area and when the Covid war ends, Chateau Ste. MIchelle will once again host their summer concert series. If you have the coin, you can even own a lake view home on the Eastside. And ganja no problema.
69   EBGuy   2020 Jul 29, 2:34pm  

The S&P Case/Shiller Ess Eff Bay Area Home Price Index slipped 0.2% in May (weighted 3 month average). Assume the crash position.

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