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The Housing Market With Nowhere to Go but Up

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Re: The Housing Market With Nowhere to Go but Up

#61

Post by nerfhammer »

greenyoda wrote: post #11

"Nowhere to go but up"? How quickly we forget the last housing bubble. If the price of housing goes up faster than the salaries of the people who want to buy it, eventually we'll get to the point where demand will drop sharply: someone with a $100K income and $100K in student debt just won't be able to get a mortgage for a $2M condo. As demand drops, housing prices will drop, and people who bought into the market at…

People shout "bubble" every time they hear about a price increase these days. Education getting more expensive? Education bubble! Actual "bubbles" are ALWAYS driven by speculation - people buying assets they have no intention of using but instead quickly flipping to a bigger fool / another speculator. The mid-2000's housing bubble, the 1980 gold bubble, the dot-com stocks, the dutch tulip craze all had this in common. Misuses of the term "bubble" do not. I could be mistaken but I have not seen evidence that the SF housing market is driven up by speculators.

The mid-2000's housing bubble was characterized by rising prices and rising supply. The SF area housing supply is artificially and stupidly constrained by highly restrictive popular regulations in the bay area. There is no reason to believe that it will suddenly collapse, because people actually need these homes and not because they're making trying to flip it to a bigger fool. Nor can they build new ones (which would undermine the price floor).

Even if all those regulations were to suddenly go away all at once (wouldn't that be nice?) what you would probably see is gradual price normalizing over many years and you would probably still ultimately end up with a price level above normal.

In a bubble the price collapses all at once from speculators all trying to dump the asset that they didn't even have any use for otherwise, but the people who had been buying the asset before were other speculators who are now also trying to sell, so you see a sudden market collapse. Speculators know this so even the expectation of a market downturn can trigger the collapse. If people actually need the homes they aren't going to try to sell them the moment they see or expect the market to soften, precluding a such a momentary collapse.

Re: The Housing Market With Nowhere to Go but Up

#62

Post by LogicX »

dfc wrote: post #48
LogicX wrote: post #7

I'm hoping some people start to wake up and realize they don't have to be in SF or Silicon Valley to be successful entrepreneurs or technologists. Between the harsh northeastern winter, and whats happening in San Francisco, we're making a big push to attract folks with low cost of living and high quality of life in Myrtle Beach, SC through http://WhyNotTheBeach.com . With so many companies becoming more and more open…

WhyNotTheBeach.com? Answer: * The first link in the list of what you "offer" is broken * Hurricane Hugo * Hurricane Hazel

Fixed the link; thanks!

You're correct -- on average, there's a major hurricane every 25 years: http://www.dnr.sc.gov/climate/sco/Education/facts/historical...

Re: The Housing Market With Nowhere to Go but Up

#63

Post by _greim_ »

bilbo0s wrote: post #60
_greim_ wrote: post #26

Earlier quoted context omitted.

Yes but hysteresis effects likely come into play where actual price points can't keep up with ideal market price points when the ideals change quickly. E.g., residents would balk at a $30 Chipotle burrito (I'm guessing here) even if that's the price it would need to be for a Chipotle owner to break even. By the time residents update to the "new normal", the damage is already done.

I think you may be missing the point... there would be no Chipotle if the housing prices kept going up. Or if there was, it would be a tourist stop and would certainly make its money on volume. Basically, it would be like that god awful McDonald's on the Champs Elysee. In any case, the price for it's burritos would, in all likelihood, not rise to an unaffordable number. At the same time, local residents would not mak…

> there would be no Chipotle if the housing prices kept going up.

I don't follow this at all. Are you suggesting that restaurants would simply disappear from SF entirely? Or that locals would never go to restaurants? It seems much more likely that restaurants would just get more expensive during which time there would be some churn and turnover in the market.

Re: The Housing Market With Nowhere to Go but Up

#64

Post by mindslight »

_greim_ wrote: post #26
steven2012 wrote: post #9

My wife and I are technically 1%-ers, and we could not oompete enough to buy a house in SF. We gave up and moved to the peninsula. As the article described, one house we bid for had 20 bidders. We bid over $200k above asking, and we were 10th out of 20 bidders. The winning bid was $400k over asking. But am I resentful? No. It's the reality of the situation. For those that are bitching and moaning about not being able…

Yes but hysteresis effects likely come into play where actual price points can't keep up with ideal market price points when the ideals change quickly. E.g., residents would balk at a $30 Chipotle burrito (I'm guessing here) even if that's the price it would need to be for a Chipotle owner to break even. By the time residents update to the "new normal", the damage is already done.

Don't worry, Chipotle will weather the storm just fine. However, the good burrito places will have a very hard time.

It makes me cringe that one would even think of Chipotle as an acceptable place to eat in fucking San Francisco.

Re: The Housing Market With Nowhere to Go but Up

#65

Post by supersystem »

rdl wrote: post #10

I wonder what the impact of a marginal $150-250k/yr single person who lives in a high-rise and rides a company shuttle to work (or wfh) is, on city services. Roads would be a big one, but if someone uses a company shuttle and/or drives at off-peak hours, it's not that big a deal. Mass transit and roads are sized for peak-time use. Water (although SF residents use about 10% as much water per person as people with lawn…

Infrastructure generally doesn't scale linearly. So while one person doesn't have much of an impact, at some point you're going to have to invest a lot of money scaling.

Re: The Housing Market With Nowhere to Go but Up

#66

Post by greenyoda »

nerfhammer wrote: post #61
greenyoda wrote: post #11

"Nowhere to go but up"? How quickly we forget the last housing bubble. If the price of housing goes up faster than the salaries of the people who want to buy it, eventually we'll get to the point where demand will drop sharply: someone with a $100K income and $100K in student debt just won't be able to get a mortgage for a $2M condo. As demand drops, housing prices will drop, and people who bought into the market at…

People shout "bubble" every time they hear about a price increase these days. Education getting more expensive? Education bubble! Actual "bubbles" are ALWAYS driven by speculation - people buying assets they have no intention of using but instead quickly flipping to a bigger fool / another speculator. The mid-2000's housing bubble, the 1980 gold bubble, the dot-com stocks, the dutch tulip craze all had this in common…

Wikipedia defines a real estate bubble like this:

"A real estate bubble or property bubble (or housing bubble for residential markets) is a type of economic bubble that occurs periodically in local or global real estate markets. It can be identified through rapid increases in valuations of real property such as housing until they reach unsustainable levels and then decline."[1]

The rapid price increases might be caused by speculators, but they could also be caused by the availability of easy money, as was the major factor in the recent U.S. housing bubble (bankers handing out mortgages to people who were poor credit risks). There was rampant speculation in a few markets (e.g., Florida), but the majority of people bought houses with the intention of living in them, not flipping them. The market collapsed when it became obvious that a lot of these mortgages would be foreclosed, and the easy money dried up overnight.

In the case of San Francisco, the rising market is also being fueled by a huge influx of money: the money coming from rising tech salaries. And I think the key issue in this market is sustainability: if housing prices rise faster than salaries, the number of people who can afford housing would decline, demand would drop, and thus prices. And if salaries rise sharply to meet the rising housing costs, the companies who pay these salaries will have strong incentives to start moving out of the area; if that happens, the demand for housing would also decline. No matter how high housing prices go, a company can't afford to pay an employee more than the net earnings the employee produces, so there's a real limit on how high salaries can go.

[1] https://en.wikipedia.org/wiki/Real_estate_bubble

Re: The Housing Market With Nowhere to Go but Up

#67

Post by rdl »

supersystem wrote: post #65
rdl wrote: post #10

I wonder what the impact of a marginal $150-250k/yr single person who lives in a high-rise and rides a company shuttle to work (or wfh) is, on city services. Roads would be a big one, but if someone uses a company shuttle and/or drives at off-peak hours, it's not that big a deal. Mass transit and roads are sized for peak-time use. Water (although SF residents use about 10% as much water per person as people with lawn…

Infrastructure generally doesn't scale linearly. So while one person doesn't have much of an impact, at some point you're going to have to invest a lot of money scaling.

Yes, but it also usually has declining marginal cost across most of the curve. It's complex. It definitely gets expensive at the margin when growth requires new plant, but the big problem is when growth is unpredictable and may end; SF has a pretty safe long-term growth plan built in, so making 100 year investments (at muni bond rates!) is safe.

I just don't see even 100k rich non-services-intensive people as being likely to cause a problem. What SF should do is get rid of the previous stupid payroll tax and Ron Conway/Ed Lee's even worse gross receipts tax and institute an income tax of n% on residents or those working in SF. Maybe make it progressive (just set it as x% of someone's California state tax bill?, maybe +10% so it'd be about 1% of gross income?).

Then, having 100k people making ~$300k/yr (reflecting capital gains plus wage income) and consuming $300mm/yr in extra tax income would do a lot.

Re: The Housing Market With Nowhere to Go but Up

#68

Post by jessaustin »

coops wrote: post #47
jessaustin wrote: post #44

Earlier quoted context omitted.

I've never lived in either city, but while I've certainly heard a fair bit about San Francisco's idiosyncrasies, I have basically no impression of Myrtle Beach at all. In your estimation, what aspects of MB are as bad as the complaints I see about SF, and how do those stem from the governance model you describe?

This is a terrible question so I'm not going to answer it, but if you are interested in reading about the corrupt history of Myrtle Beach (and the greater Grand Strand area) I strongly recommend Will Murdock's Banana Republic: A Year in the Heart of Myrtle Beach. http://www.amazon.com/Banana-Republic-Heart-Myrtle-Beach/dp/...

Well, no, I'm not actually interested enough to do the homework you've assigned me. I guess I'll just have to take your unsupported assertions about Myrtle Beach at face value.

Re: The Housing Market With Nowhere to Go but Up

#69

Post by dfc »

LogicX wrote: post #62
dfc wrote: post #48

Earlier quoted context omitted.

WhyNotTheBeach.com? Answer: * The first link in the list of what you "offer" is broken * Hurricane Hugo * Hurricane Hazel

Fixed the link; thanks! You're correct -- on average, there's a major hurricane every 25 years: http://www.dnr.sc.gov/climate/sco/Education/facts/historical...

For those to lazy too click link:

  Hurricane  Hazel:  October    5-16,   1954
  Hurricane  Hugo:   September  10-22,  1989
  Hurricane  ____:   ________   ____,   2014
I realize this is not how storms work, but hurricane was the first word that came to mind when I read "Why Not Myrtle Beach."

Re: The Housing Market With Nowhere to Go but Up

#70

Post by joesmo »

With the median housing price being ~$825k and a mortgage qualification of $400k (that's pushing it) for an engineer with $150k yearly salary, that's still a gigantic gap. There's little difference in the coveted spots on the rest of the peninsula.

Where does the obviously wrong conclusion that tech workers themselves (engineers, scientists, etc.) en masse are the cause of such rising prices come from? What tech worker has ~$825k in cash that they can drop on a house (more like a one bedroom in SF)? It seems to me, people are simply ignoring the math because it's convenient and the idiots attacking google busses and such because they never learned it.

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