Wages aren’t keeping up. Fundamentals are all out of whack. Yet this continues. Is there truly no end? https://www.cnbc.com/2018/07/06/san-francisco-house-prices-grew-fastest-ever-in-the-first-half-of-2018.html
/r/ThanosDidNothingWrong Also curious to know the take of those who think it's different this time.
It’s not the same asset bubble as last time which was built on pure fraud. But it is an asset bubble. The downturn will happen but it won’t be quite as disastrous IMO. Plus multiple new economic factors are fueling it, such as a massive influx of foreign money. I like to use Sydney as a comparison to the Bay Area because it’s housing bubble just never ended because of foreign money from all over the world. But now Sydney is even showing signs of finally deflating its housing bubble.
Wages and demand are way up.
Are wages (base salaries) driving it or is it RSUs? If the latter then you can expect the Nasdaq and local housing to have a correlation coefficient close to 1. If that’s the case then housing speculation is completely dependent on the performance of the tech sector. Which begs the question how long can RSUs continue to increase in value at this rate and will they ever go down in value? If you believe they can’t and never will then buy. If not then hold tight
Its RSUs. With the base pay, most people wont qualify for 1+ million loans. There are eveny shady mortgage agents who factor in RSUs to get that approval.
Here’s a fun fact. Nearly 2 million people live in San Francisco and San Jose combined. If you believe the data on Zillow there are just over 1000 homes for sale currently between the two markets. If anything ever opens a flood gates on the supply side we can expect a dramatic decrease in value regardless of wage income. Right now you have lack of supply driving prices. That can quickly unwind and create a herd mentality affect toward the exit. Which begs yet another question. What sparks the mass exodus out of real estate? Already “hearing” of people start to place their properties up for sale with plans to move away. Mostly baby boomers that bought in the 70s and 80s. They are ultimate y the ones that own the vast majority of real estate in the Bay Area. They will dictate what happens in real estate. It’s going to be an interesting few years. I’m going to continue to watch from he sidelines. I have no choice since my rent is way less than the carrying costs If I were to purchase a similar property.
Simple supply and demand rule. The demand side has money so prices get appreciated more.
Thats already acknowledged. The question is where does this money come from in tech sector?. Its mostly RSUs.
Housing costs go in only one direction. Up!!!!
You will be posting similar article next year. And a year after that...and so on. No supply and unlimited demand.
Many have and many will. The question is when will it end and what causes it to end short term. No argument that long term it will go up. Only 13% of residents have the income to qualify for a median priced home in SF. It will “reset” at some point.
I think the crash won't come until the big earthquake hits, at which point since everything will be wrecked, they'll fast-track new building permits and we'll see denser housing built
Even just FB and Google HQs by themselves employ 10,000 people who can easily save 100k/y after taxes and living expenses. they can all easily afford a 2m house same way that most Americans can afford a 200k house. Not a bubble, just a big income gap. TC doubled in many tech companies in the last five years, housing kept up.
So you’re saying the TC will continue to grow at this rate and there’s no chance of a reversal? Keep in mind shareholders expect roi and the biggest line item expense are salaries which they’ll happily pay so long as they see returns. You don’t think shareholders, VCs, etc. will want high cost employees to be replaced with cheaper alternatives as they materialize?
As long as tech is hiring and making money, its capital (silicon valley) is the most desirable place to live and invest, so the prices will continue appreciating. Especially considering the very low inventory.
That's exactly the problem, and why the bubble will burst.