
San Francisco's housing bubble is collapsing under its own weight - rajathagasthya
http://www.businessinsider.com/san-franciscos-housing-bubble-collapsing-under-its-own-lopsidedness-2016-8
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gozur88
The title is very misleading. If San Francisco's housing bubble was really
"collapsing under its own weight" _prices would be falling_ , and he's
provided no indication that's the case.

Yes, teachers can't afford to live in SF unless they're bringing in a lot of
equity from somewhere else. They're probably doing the same thing everyone
else without at least a mid-six-figure household income is doing - commuting
from the East Bay.

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wahern
The author's numbers don't add up:

* "In San Francisco, the median house price – half sell for more, half sell for less – is $1.37 million"

* "The monthly mortgage payment for the median house in San Francisco, after a 20% down payment and at the prevailing rock-bottom mortgage rates, is $6,740 per month"

Bankrate.com says the average (not rock bottom) 30-year fixed-rate jumbo
mortgage is about 3.9% today (August 17th). Wellsfargo.com actually quotes an
APR of 3.6% on a 30-year jumbo, which corroborates as that's probably closer
to rock bottom.

Using Google's mortgage calculator, a 30-year mortgage @ 3.9% on a principal
of approx. $1.1m ($1.37m - 20%) comes to a monthly payment of approx. $5,200.

The quoted figure couldn't have been inclusive of taxes, because in the next
paragraph he emphasizes that monthly payments would be even more with tax and
insurance. But in any event, the rate in SF is about 1.18% (at high end) which
brings a monthly mortgage + tax to approx. $6600 (rounded up).

I don't mean to contend with his main point, but it's sloppy and disingenuous
to fudge and exaggerate these numbers. It also calls into question his other
numbers. And as a rhetorical matter there's hardly any need as nobody disputes
the severity of the situation.

Maybe I missed something. But even so, San Francisco offers other options. For
example, it's one of the few places in the country where a bank will finance
the old common law form of ownership, tenancy in common (TIC). TIC is similar
to a condo, but you own the building in common with the other tenants, and use
collateral contracts to stipulate that each tenant is limited to occupying his
portion of the property.[1] This happened because San Francisco restricts the
number of condo conversions each year, so lawyers and banks revived the TIC
concept as a sort of legal hack. A TIC unit will sell for considerably less
than a comparable condo.

[1] A condo is the reverse: each owner has title only to his unit, and
contracts and other entitlements are used to spread responsibility for
maintenance of shared spaces and the building as a whole.

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dllthomas
I don't think it makes sense to expect the median mortgage to be for the
median home. For one, all cash sales would appear in the latter data set but
not the former.

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wahern
That's a good point. But in that case the author's phrasing is very
misleading. "The monthly mortgage payment for the median house in San
Francisco" implies he's calculating the payment from the median price he
quoted in the previous sentence.

But maybe he's making the same assumption regarding whatever source he's
relying on.

~~~
dllthomas
Fair.

