
House Prices Drop Again in San Francisco and Silicon Valley - jameslk
https://wolfstreet.com/2019/08/15/housing-bubble-2-in-san-francisco-bay-area-silicon-valley-is-cooked/
======
asabjorn
SF Bay Area still has a fundamental problem with a decades long backlog in
building new housing supply. Until the fundamentals are solved prices will
continue to closely track the max capability of normal working class people to
pay for existing supply.

This is unfortunate, since this is money better spend on innovations and
people getting enough wealth to start their own thing in their garage.

~~~
oppositelock
Starting your own thing in your garage is one thing, but we have a much bigger
problem, in that service industry workers simply can't afford to live within a
reasonable distance of this area, so there's a shortage of that form of labor,
despite paying well over minimum wage.

Local stores, bakeries and restaurants, are closing down at a fast rate. I've
been living here for a long time, and I'm sad to see small businesses being
displaced by upscale chains. Downtowns areas which used to be a mix of small
businesses and restaurants, are turning into chains of upscale restaurants and
shops that are out of my price range (mid range tech worker)

We're going to find out what an industry town looks like when all industries
but one or two are priced out, and the initial indications aren't very nice.

~~~
echelon
I don't know why SF is so popular. It smells bad and is always cold.

Atlanta, for instance, has way more culture (rap, hip hop, country, hollywood)
and diversity (of race, wealth, background, career, etc). The food scene is
phenomenal - I follow people on Instagram to find out where the trendiest
midnight pop-ups are. Music is everywhere. Art permeates. It's about as far
from a monoculture as you can imagine.

I own a huge home in the city and pay less on my mortgage than people in SF
pay for rent. It's a cool hipster place too - 1800s cotton mill with 20 foot
ceilings. A couple of my coworkers have fairly large machine shops in their
homes. Space is practically unlimited here.

Food is cheap, rent is cheap, but the experience and lifestyle exceeds
expectation.

I work for a tech company and make the same wages y'all do.

The only thing that sucks here is transit, but I live on the Beltline and
walk/bike everywhere, so it's not so much a problem for me.

I feel like tech needs an exodus from SF. A lot of the money for innovation is
just being handed over to landlords.

~~~
notyourwork
SF is popular because the weather is incredible. The bay area has cultural
diversity beyond what most cities aside from New York can offer.

If you can afford it, SF is a wonderful place but it does have problems big
cities with large homeless populations have.

When you say "I work for a tech company and make same wages y'all do", I'd be
interested in what that number is.

edit: To clarify on wages, I'm not trying to have a pissing contest. I'm
curious what you consider wages that are same as SF. Frankly, I wouldn't stay
here if I didn't make what I make but I also know you won't make the same in
most tech companies. I'd leave if compensation was sub $200k.

~~~
Reedx
> SF is popular because the weather is incredible

If you like cold summers and fog over much of the city... Otherwise you'd
likely prefer the weather in the peninsula, which is sunny and warm almost
every summer day. In fact Redwood City's slogan is "Climate Best by Government
Test", heh. But SF gets surprisingly cold even in the middle of summer.

~~~
chrisseaton
> If you like cold summers and fog over much of the city... Otherwise you'd
> likely prefer the weather in the peninsula, which is sunny and warm almost
> every summer day.

Why do people assume everyone wants nothing but sun sun sun? It's so boring. I
like a bit of cold, fog, and rain.

~~~
ulfw
Then Seattle is a much nicer city if that’s what one is after

------
lovfishing77
Prices are definitely softer than they were a year ago, but they appear to
have flattened. Note: Summer of 2018 was the highest. Prices reached euphoric
levels as people overbid on homes. I'm not certain many of those buyers will
recover those costs anytime soon.

Here's the median sale price from Trulia:
[https://www.trulia.com/real_estate/San_Jose-
California/marke...](https://www.trulia.com/real_estate/San_Jose-
California/market-trends/)

We've also done some analysis on home prices in the popular cities. Compared
to 6 months ago:

 _Fremont_
[https://agentsunlocked.com/trends/Fremont](https://agentsunlocked.com/trends/Fremont)
Single family homes in the 1500-2000 sqft range are down by about 1%

 _San Jose_ [https://agentsunlocked.com/trends/San-
Jose](https://agentsunlocked.com/trends/San-Jose) San Jose is up by about 2%

 _Palo Alto_ [https://agentsunlocked.com/trends/Palo-
Alto](https://agentsunlocked.com/trends/Palo-Alto) Up by 4%. Inventory in PA
is usually quite thin.

 _San Francisco_ [https://agentsunlocked.com/trends/San-
Francisco](https://agentsunlocked.com/trends/San-Francisco) SF is flat.

~~~
sjg007
A recession resulting in job losses in tech would probably drop house prices.
Still at 1.5 million there’s a long way to decline.

------
mdorazio
Based on the charts, this looks more like a cyclical bounce rather than a
long-term trend. Even at "9.5% below the peak in May 2018", that's only a
little over a year of downward pressure. The question is if an economic
downturn combined with new housing starts can actually upset the long-term
upward trend for more 18 months.

~~~
lallysingh
$100-200k of depreciation in a year is rather steep!

~~~
AdrianB1
No, it is all relative. $100k of depreciation of a $200k house is huge, on a
$5 million is peanuts.

------
gumby
I don't know why the article title (and therefore this post's title,
currently) says "House prices drop" as the article specifically says the
opposite:

> In California overall, there is now a bifurcation: Condo prices are already
> falling on a year-over-year basis, and house prices are still rising.

~~~
asdf333
in sf bay area specifically it is dropping. as the title says.

in california (which i am sure you know is different from the sf bay area)
house prices are slightly up.

------
samcheng
Note that the lockup for the recent spate of IPOs hasn't expired yet. It's
possible that there will be a small recovery/bounce in the coming winter and
spring. We'll see.

~~~
mr_tristan
It's weird, but I wonder if people may be holding on to supply with this in
mind. Or even waiting until next spring.

~~~
dougmwne
But decreased supply from buyers waiting to list should increase prices, not
decrease them.

~~~
refurb
Indeed.

However, I wonder how median price is impacted by a shifting mix of the houses
that change hands?

If buyers were moving towards the lower end of the market and away from the
upper end, you could see the median price decrease when in fact any given
house has actually gone up in price.

------
WheelsAtLarge
Over the years I've constantly heard about how expensive X city is. But you
look 10 years later and it's even more expensive.

If the city has jobs and the weather is relatively nice versus the rest of the
country then don't expect the home prices to drop for any long period of time.

What ends up happening is that a set of people that can't get the right paying
jobs get priced out and those that have the right skills move in. We see it
over and over again. You would think that technology would have disrupted the
situation but it has not.

My thinking is that with the deliver anything in 2 hours apps. It will be
easier for people to move into an area where they don't have all the
restaurants and small shops people usually like in the neighborhood. They can
just order it. Therefore, making it easier for prices to stay up as long as
there's a way to pay.

Los Angeles is one of those cities that has long ago priced many people out of
being able to buy a home. So what has happened is that people commute into the
city from cities around LA. I don't expect that to change in most of our
lifetimes.

~~~
make3
"If the city has jobs and the weather is relatively nice versus the rest of
the country then don't expect the home prices to drop for any long period of
time."

people move there because of the companies and their HQs, and how the density
drives the salary up, it has very little to do with the weather?

"My thinking is that with the deliver anything in 2 hours apps. It will be
easier for people to move into an area where they don't have all the
restaurants and small shops people usually like in the neighborhood. They can
just order it. Therefore, making it easier for prices to stay up as long as
there's a way to pay." Again, what does this have to do with the primary
motivations to move?

~~~
scruple
I moved to LA for work, but I've stayed for the weather.

------
AdrianB1
The title of the article is misleading. First, is not a serious drop and it is
also heavily influenced by seasonality, so "drop again" is kind of pointless,
it will drop every year in the low season.

~~~
awolf
The article is comparing year over year. July 2019 to July 2018.

------
diogenescynic
Because the general quality of life here is miserable and it’s a filthy area.
For instance, in recent events the DA is fumbling the prosecution of a
homeless attacker and the judge said jail wasn’t always the solution... I saw
a guy pull his penis out on the BART escalator and rub it on 3 women! I saw
another guy with a huge knife walking around the BART platform. Anyone who
took the Civic Center BART would remember the hallways of heroin addicts with
needles in their arms. And then houses cost $1M for a house where cops won’t
do anything about people shitting on your property or camping on your property
unless you have a restraining order... and then you a job you work 9-17 hour
days at? It’s just not worth it. I just wish I knew where I wanted to escape
to. Seattle, Portland, Denver are all nearly as bad and getting worse. Where
are the normal people fleeing to? Is there refuge somewhere? Austin is
seemingly more appealing all the time, but the weather and politics of Texas
are turn offs.

~~~
privateSFacct
I'm also curious where people are going - one place is out on the BART
extensions. Public schools 9's and 10's, reasonable police response to violent
behavior etc (I saw guy spit on old women on BART, she was near tears, she'd
asked him to move his feet (he had them out across the handicapped seats). No
one even blinks - my guess is he could punch but not kill her without
consequence.

------
repsilat
Not that I think much of technical analysis, but from eyeballing those charts
it looks like we're right on the (upwards) trend that has held all decade,
with the exception of people getting a bit over-excited in 2018.

I'm quietly hoping for it to flatten off or drop, but I don't see it in those
charts.

~~~
wahern
Here's a site graphing in different ways 30+ years of SF and SF Bay Area
market data: [https://www.marymacphersonsf.com/30-years-of-san-
francisco-b...](https://www.marymacphersonsf.com/30-years-of-san-francisco-
bay-area-real-estate-cycles/)

The pattern has been the same since the 1980s.

~~~
rficcaglia
Stanford is not going anywhere. UCSF is not going anywhere. UC Berkeley is not
going anywhere. VC not going to completely uproot anytime soon. Can’t build
much farther out in the suburbs due to water shortages, and not making more
land. NIMBY prevents higher density housing projects.

Apart from fires and earthquakes, I don’t see why the trend will change.

------
lordnacho
Seems to be really strong seasonality. How does that make sense? Wouldn't
people put off their purchases until -it looks like- the end of the year?

~~~
i_cant_speel
Summer is generally the busiest time of year for real estate purchases and
Christmas/New Years is generally the slowest.

~~~
bitbckt
Summer is the slow season for real estate in SF. The peaks are in Spring and
Fall.

~~~
hackin247
Maybe for SF. But for outlying areas, summer is still peak because parents
don't want to move when kids are in school.

------
smaili
Yet from what I've seen rent prices continue to hold or rise. If I had to
guess, more and more people may be opting away from home ownership so the
charts on demand for purchasing homes may be trending downward as demand for
renting trends upward. Would've been interesting of the article juxtaposed the
two but it could help explain why prices for one has gone down as the other
goes up.

~~~
dba7dba
>>> more and more people may be opting away from home ownership

I don't think people are _opting away_ from home ownership but rather forced
away from home ownership due to high down payment requirement and lack of
enough jobs that allow someone to save enough.

Who has $100,000 in cash to put down 10% downpayment?

It is a vicious cycle.

Less people are able to afford downpayment. So more people are crowding into
rental market. But affordable rental supply is decreasing as more rental units
are converted into condo/house AND more people are forced into rentals.

It is really a vicious, destructive downward spiral.

------
not_a_moth
Having boots on the ground here, have to wonder if related to all the
increased Austin emigration.

~~~
nostrademons
I'm seeing significant migration to basically any liberal city with a decent
quality of life. I've lost friends to Boulder, Toronto, Boston,
Raleigh/Durham, Seattle, and Sydney (Australia).

~~~
hombre_fatal
> Sydney (Australia)

Do you think people on HN don't know where Sydney is?

------
PaulHoule
What is the seasonality?

It looks like prices peak in the summer and bottom out in the winter. The
difference in price isn't far off from what a Realtor would charge in
commission (otherwise there would be arbitrage.)

Am I right about that?

------
droithomme
I think the most important principle here is that no reasonable and
compassionate housing reform should be attempted until I, I mean, until
people, until people have a chance to cash out at the peak.

------
outside1234
There aren't enough 1%ers being minted by things like Google and Facebook IPOs
to drive purchases.

(Winter is coming)

------
forbin_meet_hal
Left Bay Area in mid-2000s. Cannot go back. Not sure if I want to.

------
pascalxus
SF median price is 1084$/sq ft. It still has a long long way to drop before it
gets anywhere close to the 128$/sq ft nationwide average. At the rate of -6%
per year, it would need to continue dropping at that rate for 35 years before
we reach the national average. So, one way or another, we're going to be stuck
with extremely high housing prices for a really long time.

~~~
GuiA
Why would one ever expect the median price per square foot in San Francisco, a
metropolis with high economic activity, to ever approach that of the US on
average?!

If we’re going to pick targets, then comparing it to other large metropolises
in the US makes more sense (LA: $678, Seattle: $526, San Diego: $447)

~~~
pascalxus
Those are more examples of over-regulated over-zoned blue state cities that
have done it wrong.

Take a look at a city that knows what they're doing with housing, like Chicago
or Houston (population 2 million and over, and Houston growing x4.5 faster
than SF!). Houston added 364K people in the last 8 years. How many did SF do,
a pathetic 80K in a city that has sooo many tech companies and soo much money.
SF and other blue cities have a lot to learn about how to grow, and how to
create the type of policies that allow them to do so (some of the population
is hellbent against that).

Know how much housing costs in a city twice as large as SF, growing x4.5 times
faster, Houston is 143$/sq foot and puts the entire West coast and every other
blue state/city to shame.

~~~
gamblor956
Better to regulate than to let developers build in a designed flood zone, as
Houston did.

They're stilling tallying the damages from the recent flooding there and it's
in the billions.

Also, Chicago is one of the bluest cities in the country. It's even bluer than
Los Angeles or San Diego, both of which have sizable conservative populations.

~~~
jschwartzi
That's one of the first things I check when I'm renting. I don't live in flood
zones, even if they're levee'd.

