
Markets, Rent and WFH - macrocrunch
https://macrocrunch.substack.com/p/markets-rent-and-wfh
======
dang
Related from yesterday:
[https://news.ycombinator.com/item?id=23705741](https://news.ycombinator.com/item?id=23705741)

------
itake
Many people I talked to in the bay area temporarily left b/c housing is
unnecessarily expensive and the apartments there are not great to WFH.

Most of those people fully plan on returning to SF once their offices open
back up, because they feel that they need to be in the office in order to grow
their career.

I think its a bit presumptuous that tech workers are perm leaving the city.

~~~
ixtli
For 15+ years I have noticed a certain set of people trying to make a claim
that people are leaving or desire to leave "the cities" for the suburbs or
rural areas in America. NYC growth has slowed since 2017, and certainly there
will be a rush for cheaper housing as a result of COVID, but the physics that
have driven people to urban centers hasn't changed at all.

~~~
akamia
I've noticed the same thing and especially in tech. I have a few friends who
are engineers and have this idea that if everyone went completely remote,
cities would clear out as everyone rushed to buy acres of land in the country.
I always find it a bit funny that these friends are also the ones who seem to
have the most city oriented lives. They are going out to bars and restaurants
all the time. They get their coffee from local artisanal coffee roasters and
their beer from the many local microbreweries. They don't seem to recognize
that the cities they think people want to flee offer more than just career
opportunities.

~~~
xyzzyz
They are most likely also childless. When you have young children, your demand
for fancy restaurants, artisanal coffee roasters and visiting local
microbreweries diminishes, as there are now more things that occupy your time
and attention, and are not very conducive for above-mentioned entertainment
venues. The trend of delayed or foregone childbearing is also contributing to
increase in interest in urban life.

~~~
ghaff
With very few exceptions, most of my cohort who went to NYC after graduation
to work in finance moved to a suburban bedroom community around the time they
had kids--or at least by the time the kids were going to need school. The
alternative as they saw it was to upgrade their expensive Manhattan apartment
or condo and to enroll their kid in an expensive private school.

I think I know one couple who stayed in the city and they were very well off.

~~~
otoburb
>> _The alternative as they saw it was to upgrade their expensive Manhattan
apartment or condo and to enroll their kid in an expensive private school._

Those that might have been thinking of enrolling their children in private
schools can do so more affordably outside of NYC. As an example, most top tier
private school base tuition in the city is around $55K/year/child (not
including "suggested donations") while most great private schools outside of
the city are sub-$30K/year/child.

>> _I think I know one couple who stayed in the city and they were very well
off._

Public school is an option too, as long as one can navigate the byzantine DOE
processes. From a housing/apartment perspective, if more people flee the city
then there is a delicate balance where prices may come down for families to
once again find them more affordable.

------
raiyu
A lot of companies didn't take remote work seriously. They used it for small
teams and specific areas but as the pandemic forced everyone to adopt WFH and
remote every company has had to become efficient at it.

I think a lot of the survey is accurate. There will be a lot of people that
decide to permanently relocate. It's already visible in the market data from
rent because even as people are considering leaving, the second side of the
equation is that people have stopped moving in.

These two factors together will create a shift whereby for the next two years
rents will drop, however after that, as the world moves forward and recovers,
SF will ultimately rebound as other metro areas as well.

This will be a short term solution, to a long term problem, in that there
isn't enough housing supply in SF for the next decade unless this trend is
permanent, which I don't believe that it is.

~~~
xfour
Yea, I have a similar take on it that as this WFH drags on, I mean most
companies have said until the end of the year. It's been 4 months and feels
like forever, add at least another 6 months and we're going to back into the
new normal.

If for example Newsom or SF pushes back dates or asks for draconian style
"masks all times, 2 people per conference room" or whatever vs. what has been
forced to "work fine" for all these companies, people will just realize this
is silly to try and put the "genie back in the bottle".

Status quo pull works against returning to offices I believe more and more as
this drags on.

------
ixtli
I've lived in NYC for nearly 10 years, have no plans to leave, and would
really, really welcome a rent or apartment price reduction. However, I've been
promised this magical thing every time there's some sort of disaster or
terrorist attack and it never seems to happen! Curious!

Sarcasm aside, when we will we start to hold people like this accountable for
the implicit and explicit predictions that are so easy to make? How can we
even evaluate if this ever came to pass?

~~~
chadlavi
As a fellow New Yorker, I think probably a much bigger impact for us is
tourism and foreign wealth parking. People coming to NYC and staying in
AirBnBs and Russian/Chinese/Saudi wealth dropping cash for properties to give
their children pieds-a-terre have a way bigger impact than other middle/upper-
middle income tech workers.

~~~
pclmulqdq
I'm also in NYC. If AirBnB went under, the real estate market here would be in
deep trouble.

~~~
xyzzyz
Sure, but that’s the point: a deep trouble for property owners is a boon for
non-owners.

~~~
neutronicus
It's only deep trouble if they're over-leveraged, it's only a boon for non-
owners who can afford to buy, and it only remains a boon as long as deep-
pocketed buyers with long investment horizons stay out of the market.

------
andy_ppp
I’m really worried that we haven’t even seen the start of this financial
unraveling yet. I’m sure tech workers like us will be okay, but essentially
everything else is broken. If the rest of the economy is falling apart tech
won’t be far behind. Is there anything that can alleviate my concerns?

~~~
troughway
A bit of therapy might help. Getting off of HN and other sources that cause
you anxiety would be a good start.

~~~
Der_Einzige
Such a terrible response to someone venting out their economic anxieties.

~~~
troughway
Terrible or not, it should be a stock response to these kinds of questions. It
would not surprise me if HN turned out to have an abnormally high amount of
people with GAD and/or undiagnosed anxieties, especially in the wake of
COVID-19 which was just a shitshow of one doom porn article on another.

So yes, go see a therapist if you're having trouble coping with the situation.
You can thank me later for my "terrible response".

------
magneticnorth
The author says the stock market rallies are "Not suprising when you take into
consideration the amount of liquidity being injected into markets by the BOJ,
ECB, FED and PBOC."

Have we ever seen this happen before - either in the US or another country in
a similar circumstance? What are the medium- and long-term consequences of
this amount of liquidity being artificially introduced?

I'm finding the longer-term market behavior basically impossible to predict &
understand; I expect I'm not the only one but would love it if anyone can shed
some light on what to expect in the next few years.

~~~
credit_guy
Cheap money is addictive. Japan has had cheap money (basically zero interest
rates) for decades. It appears very difficult for them to get out of that
place.

Cheap money (very low interest rates) means cheap mortgages, and in turn this
means high real estate prices. So high that you produce a trap. Housing
becomes an investment vehicle, and increasing rates means you are destroying
savings for millions and millions of people. Millions of people who are
politically active. Whatever measures someone tries to enact that result in
their real estate depreciation, they'll make sure to oppose.

Raising interest rates then requires fortitude. Generally, a developed
country's central bank is independent of the other branches of the government
(executive, legislative, judiciary). It has so much power, that it should be
recognized as the fourth branch - monetary. Being led by technocrats who, in
principle, should not care about voting arithmetics, the central bank should
not hesitate to raise rates when the economic stimulus is not needed anymore.

But theory is theory, and practice is practice. In real life, you may have a
president who threatens the central bank governor via twitter, and the
governor all of a sudden decides to cut rates instead of increasing them. And
that was before Covid19.

Prediction (and not only mine): we'll be stuck with these close-to-zero or
negative rates for decades to come.

That means real estate will continue to be sky-high. That kills mobility, that
makes it hard for the young generation to get jobs in the main metropolitan
areas.

Maybe working from home will be an antidote to that.

~~~
davidw
Japan has very much not treated homes as an investment vehicle though.

[https://www.vox.com/2016/8/8/12390048/san-francisco-
housing-...](https://www.vox.com/2016/8/8/12390048/san-francisco-housing-
costs-tokyo)

I do have some recollection of commercial real estate being bonkers there for
a while, so maybe they've managed to treat one as an investment and the other
as something necessary for people to live in.

~~~
credit_guy
Japan has not treated homes as investments _lately_.

This was not always the case.

[https://en.wikipedia.org/wiki/Japanese_asset_price_bubble#As...](https://en.wikipedia.org/wiki/Japanese_asset_price_bubble#Asset_prices)

In the '80s until about '91 there was a huge real estate bubble in Japan;
house prices tripled or quadrupled over less than one decade. Could it be a
coincidence that the short-term rate set by Bank of Japan went from a 9% in
1981 to 2.5% in 1991?

Your link shows that real estate prices remained nearly flat in Tokyo since
1995, but at that point Japan was already in the trap of zero rates and sky-
high house prices. Prices simply couldn't go any higher. People were already
taking 100-year mortgages in Japan in 1995 [1]. Salaries were not going up.
Nikkei was going sometime up, more often down; and kept doing that for 2
decades.

On a comparative basis, real estate in NYC and London were much cheaper in
1995. But they steadily went up, and up, and up. Now they exceed Tokyo. Rates
are about zero too. We are where Japan was in 1995. Except for the 100-year
mortgages. Don't be surprised if they'll make an appearance though.

[1] [https://homeguides.sfgate.com/longest-
mortgage-7677.html](https://homeguides.sfgate.com/longest-mortgage-7677.html)

~~~
davidw
The post I was responding to said that cheap money would drive people into
real estate. That's clearly not the case in Japan. Cheap money has coincided
with flat home prices.

They could go higher, but they aren't.

I've read that there's also a cultural component, that people treat housing
more like a consumption good ... a car, say, something that they value less
the older it gets.

~~~
SenHeng
Part of it was regulation where properties will lose value over time, and
after 30 years it is considered worthless. The value of the land may have gone
up in price if you live somewhere desirable like Tokyo but the building that
sits on it is considered worthless, possibly of negative value even as it
costs around 1 million yen (10kUSD) to knock it down.

This was intended to promote new construction of housing, the unintended
consequences is that homes are thus not built to last and home maintenance is
rarely performed.

Though in recent years, there has a been a slight boom of people purchasing
second homes to renovate rather than build new.

> _Doomed from the moment construction begins, the average Japanese home
> depreciates from Day 1 — losing half its value in 10 years and becoming
> almost entirely worthless in 25. This depreciation comes hand in hand with
> the infamous mantra that a Japanese home is limited to a lifespan of 30
> years and causes somewhat of a chicken-and-egg conundrum._

[0]: [https://www.rethinktokyo.com/2018/06/06/depreciate-
limited-l...](https://www.rethinktokyo.com/2018/06/06/depreciate-limited-life-
span-japanese-home/1527843245)

[1]: [https://www.rethinktokyo.com/faq-secondhand-homes-
renovation...](https://www.rethinktokyo.com/faq-secondhand-homes-renovation-
japan)

------
0_____0
I'm not sure how seriously I would take survey data from Blind. IME Blind's
population tends to be the crankiest and most reactive people in tech. It's
not surprising that they're unhappy on the whole.

------
maire
I have a rental property in Santa Cruz county that came up for rent in June. I
talked to the property manager about the rental market and he said he was
getting calls from people who work in San Francisco but want to live in Santa
Cruz! So yes - Santa Cruz is benefiting from the new work at home policy.

------
jedberg
I commented on this yesterday:
[https://news.ycombinator.com/item?id=23706268](https://news.ycombinator.com/item?id=23706268)

"I think some of this is temporary. My friend just left NYC. They loved it
there, but since everything is closed, there was no reason to stay. The bars,
clubs, and restaurants were the main reasons they were there.

They figured they might as well save money and move back home with their
parents until everything opens again. Then they'll probably go back.

I suspect things will pick up in SF as the bars and clubs and restaurants open
again."

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njsubedi
More companies are now hiring remote staff, so this is certainly going to have
a long term effect. The rent might keep dropping, and at some , will there be
an equilibrium because more people might start moving in because of the
reduced cost of living?

~~~
x87678r
Yeah if housing dropped to something sensible I'd probably move there. Which
is why they'll never be sensible. :)

------
12xo
SF has seen its economy and population ebb and flow a lot over the last 50
years. The city in the 70's was full of empty buildings and houses. Then the
Gay boom of the 80's changed the population and gentrified a lot of the
dilapidated communities. Then the Savings and Loan crisis led to another
slump... Fast forward to the late 90's and everything was booming. Real estate
exploded with the Dot Com boom. And then....

If you were around SF in 1999-2001, you know how fast things can change. There
was a mass exodus back to the east coast. Rentals that used to garner 40
applicants were vacant. Things were ugly until a few years later when the next
boom hit.

Will this one be any different? Maybe. They built a lot of office space but SF
is and will always be a highly desirable city. Santa Clara or Fremont? Not so
much...

~~~
dragonwriter
> If you were around SF in 1999-2001, you know how fast things can change.

I was, and I remember it being specifically noted in local media shortly
afterwars that while the same was not true of some parts of the Bay Area, SF
_did not see a decline in housing prices_ as a result of the bust, though it
did see a temporary decline in the rate of increase.

~~~
12xo
Well to be fair the interest rates were halved during the post 9/11 / dot.com
bust. Which to many, is the reason the prices didnt fall as buying power
increased.

~~~
dragonwriter
> Well to be fair the interest rates were halved during the post 9/11 /
> dot.com bust.

There was no “post-9/11 bust”. 9/11 happened toward the _end_ of the 2001
recession (March-November 2001)

The post-9/11 _expansion_ had particularly poor distributional
characteristics, with, IIRC, the bottom 3 quintiles losing ground, the fourth
quintile flat, and virtually all the gains in a narrow slice at the top (not
just the top quintile, but the top 5% or so.)

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seibelj
High-taxation states that rely on their highest-income citizens to pay for
massive pension obligations and bureaucracy are in for a rude awakening. Short
of making it illegal to move out-of-state, I don't see how they can stop this
from blowing a hole in their finances. I consider this a good thing - it
(hopefully) will enforce some fiscal discipline - and the fallout will be
interesting to watch.

~~~
cptroot
I mean, doesn't California tax you even if you live somewhere else but work in
California?

~~~
steffan
People will just transfer to satellite offices / companies will establish a
presence outside of California. I'm sure at some point the CA legislature will
attempt to tax any "work that has a material benefit to a California
business", but that is a shaky legal argument.

~~~
qppo
After MD v Wynne, I think they'd have to give tax credits to income tax paid
in other states if they tried that.

~~~
ninkendo
Yup, this is what happened to me this tax year, but only for stock options,
not for regular income.

I work for a CA company, but remotely from the midwest (home office), and I
pay CA taxes for the stock vests I got from my company last year (because I
lived in CA when the grant occurred.) But I also paid taxes in my home state
for the same stock. I just filed an "Other State Tax Credit" in CA (form 540
Schedule S), which effectively made CA give me a refund equal to the amount I
paid in my home state. Same thing would happen if my regular salary was taxed.

It effectively means you pay the higher tax of the two states: if the state
you live in has higher taxes (NY for instance), CA would have to essentially
refund you all the taxes you paid; whereas if you live in a cheaper state
(more likely), you effectively pay a CA income tax rate overall, since CA is
keeping the remainder after refunding you for the other state.

------
conanbatt
Human behavior is always complex and is rarely capture merely by a single
number like "Rent".

Yes, rent is the #1 problem in San Francisco and maybe even California, but it
is high because there is a lot of demand. Even building a million units might
not make a serious dent in the rent pricing, because as the housing quality
would improve more people would move in, and end up like New York: high rents
and high density.

There are some unique features of the SF market: 25% of immigrants that will
show a different elasticity (they literally cannot move to another state, it
would be illegal), but at the same time immigration hostility means that
people running out of visas will not be renewed, and then the general
situation that moving out is more cumbersome, risky, and uncertain meaning it
happens a lot less.

I wouldn't count on this to mean that rents will crash a lot more, but there
might be a new equilibrium that is a bit lower.

------
rhacker
I don't understand the post-covid question. If they are moving away from the
bay area, are they planning on driving 2 to 3 hours a day to get to the office
to show up?

~~~
chaostheory
If they only have to show up 1-2 days a week or 1-2 days a month, yes. This is
what happened at one of my old companies in the SF Peninsula. Most of the
employees lived in Walnut Creek or further. This was pre-COVID.

Not everyone wants to move out of California, but there are a lot of people
who don't want live in the Bay Area; but want it easily accessible during the
weekends.

