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

By krc follow krc   2020 May 22, 5:32pm 767 views   54 comments   watch   nsfw   quote   share    


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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15   just_dregalicious   ignore (2)   2020 May 24, 1:44pm     ↓ dislike (0)   quote   flag      

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.   ignore (0)   2020 May 24, 1:47pm     ↓ dislike (0)   quote   flag      

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   ignore (0)   2020 May 24, 2:03pm     ↓ dislike (0)   quote   flag      

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   just_dregalicious   ignore (2)   2020 May 24, 2:50pm     ↓ dislike (0)   quote   flag      

I kept typing 'retail' when I meant 'residential'.
19   SunnyvaleCA   ignore (1)   2020 May 24, 2:50pm     ↓ dislike (0)   quote   flag      

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   just_dregalicious   ignore (2)   2020 May 24, 2:52pm     ↓ dislike (0)   quote   flag      

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   just_dregalicious   ignore (2)   2020 May 24, 2:53pm     ↓ dislike (0)   quote   flag      

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   ignore (0)   2020 May 24, 3:00pm     ↓ dislike (0)   quote   flag      

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   ignore (1)   2020 May 24, 4:03pm     ↓ dislike (0)   quote   flag      

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   ignore (0)   2020 May 24, 5:06pm     ↓ dislike (0)   quote   flag      

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   ignore (1)   2020 May 27, 8:05pm     ↓ dislike (0)   quote   flag      

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   ignore (1)   2020 May 28, 2:14pm     ↓ dislike (0)   quote   flag      

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   ignore (1)   2020 May 28, 3:09pm     ↓ dislike (0)   quote   flag      

Zillow said my shack increased in value marginally last month, for whatever that is worth.
28   mell   ignore (4)   2020 May 28, 3:23pm     ↓ dislike (0)   quote   flag      

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   ignore (4)   2020 May 28, 5:09pm     ↓ dislike (0)   quote   flag      

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   APOCALYPSEFUCKisShostakovitch   ignore (53)   2020 May 28, 5:12pm     ↓ dislike (0)   quote   flag      

Most of it will be broken up and used as heating fuel to warm the survivors.
31   just_dregalicious   ignore (2)   2020 May 28, 6:59pm     ↓ dislike (0)   quote   flag      

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.
32   BayArea   ignore (1)   2020 May 28, 7:18pm     ↓ dislike (0)   quote   flag      

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.
33   ad   ignore (0)   2020 May 28, 8:04pm     ↓ dislike (0)   quote   flag      

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.) ?
34   Fortwaynemobile   ignore (3)   2020 May 28, 8:19pm     ↓ dislike (0)   quote   flag      

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


What survivors?
35   Fortwaynemobile   ignore (3)   2020 May 28, 8:20pm     ↓ dislike (0)   quote   flag      

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.
36   B.A.C.A.H.   ignore (0)   2020 May 28, 8:47pm     ↓ dislike (0)   quote   flag      

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

What's the cost of living in Bangalore?
37   rox42   ignore (0)   2020 May 28, 10:12pm     ↓ dislike (0)   quote   flag      

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
39   Newbie123   ignore (9)   2020 May 29, 8:42am     ↓ dislike (0)   quote   flag      

rox42 says
I'm seeing rent decrease....
https://www.rentcafe.com/average-rent-market-trends/us/ca/santa-clara-county/sunnyvale/


Per your link: “ The average rent for an apartment in Sunnyvale is $3,016, a 4% increase compared to the previous year, when the average rent was $2,896.”

Down here in SoCal I have not seen the slightest impact to housing. With an expected market time Of 76 days (same as last year) you are considered a sellers market. Yeah, less demand but way less inventory plus lower rates.
40   krc   ignore (0)   2020 May 29, 10:41am     ↓ dislike (0)   quote   flag      

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?
43   ad   ignore (0)   2020 Jun 1, 2:50pm     ↓ dislike (0)   quote   flag      

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.

.
44   Newbie123   ignore (9)   2020 Jun 1, 3:04pm     ↓ dislike (0)   quote   flag      

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. It’s easy to make 150-200k in the Bay Area. Now, if you have a spouse that makes the same you can easily buy within a decent commute.

Here in SoCal the RE market is doing really well. I am not a real estate agent. I would profit from a crash as I would add to my RE portfolio but expecting a big crash anytime soon might lead to frustration.
45   B.A.C.A.H.   ignore (0)   2020 Jun 1, 3:12pm     ↓ dislike (0)   quote   flag      

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
46   Newbie123   ignore (9)   2020 Jun 1, 3:34pm     ↓ dislike (0)   quote   flag      

B.A.C.A.H. says
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


Man, I wish prices would go down. I would love to jump in and buy another rental. I happen to track the data as a hobby. I have no incentive if the market goes up other than my RE value goes up. But so what? That doesn’t mean I use my houses as atm’s. Of course I am rather bullish than bearish but if I had a choice I would want lower prices to buy more.

Nope, none of my family are realtors. Wolf street has been saying “crash” for years. Many years. Look at inventory, demand and interest rates.
47   krc   ignore (0)   2020 Jun 1, 4:44pm     ↓ dislike (0)   quote   flag      

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?
48   SunnyvaleCA   ignore (1)   2020 Jun 1, 5:09pm     ↓ dislike (0)   quote   flag      

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.
49   Patrick   ignore (1)   2020 Jun 1, 5:27pm     ↓ dislike (0)   quote   flag      

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
50   Patrick   ignore (1)   2020 Jun 1, 5:30pm     ↓ dislike (0)   quote   flag      

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...
52   B.A.C.A.H.   ignore (0)   2020 Jun 1, 6:13pm     ↓ dislike (0)   quote   flag      

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.
53   Newbie123   ignore (9)   2020 Jun 1, 6:41pm     ↓ dislike (0)   quote   flag      

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.


Not Bay Area. A rental in SoCal, close to where I live.
54   SunnyvaleCA   ignore (1)   2020 Jun 1, 6:42pm     ↓ dislike (0)   quote   flag      

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.

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