San Francisco braces for commercial real estate crash • Hacker News Board

Re: San Francisco braces for commercial real estate crash

#511

Post by potatochup » Tue, Sep 06, 2022, 9:59 PM UTC

cjbgkagh wrote: post #54

onlyrealcuzzo wrote: post #14

Earlier quoted context omitted.

I'd argue that a "crash" isn't really a "crash" if it comes after a 50% increase in 2 years. Anything short of a 20% correction is simply a reversion. If prices shot up 100% in 1 year, and then were down 3% in two months - no one would be talking about a crash.

I generally have the same rule of thumb; not a crash until down 50% from peak. But housing is leveraged. It’s not like stock where few people have margin accounts, a 20% reversion sends most people who bought recently underwater. Plus the size of the real estate market is much bigger than the stock market. The flow-on reverse wealth effect will feel like a stock crash to many people.

For the USA specifically, does being underwater actually matter as long as you can afford the repayment? It's my understanding that most mortgages are fixed for 30 years so your interest rates won't be changing?

Re: San Francisco braces for commercial real estate crash

#512

Post by [deleted] » Tue, Sep 06, 2022, 10:02 PM UTC

ryanSrich wrote: post #18

ryandrake wrote: post #6

Residential crash is potentially already upon us, at least in the outskirts (East Bay for me). We've had our house on the market for over a month now, and nobody else in the neighborhood is selling either. Big changes from only 3 months ago, when sellers were closing in days.

Turns out prices have to go down when the fed doubles rates. By my math, a 30% correction is needed to make up the difference in terms of monthly affordability - meaning a $500k house at 6% is the same as a $750k house at 3%.

[deleted]

Re: San Francisco braces for commercial real estate crash

#513

Post by [deleted] » Tue, Sep 06, 2022, 10:03 PM UTC

mortenjorck wrote: post #147

ptmcc wrote: post #32

Earlier quoted context omitted.

But that is also key to the problem: the cost to convert these buildings is already prohibitively expensive, and converting them into dormitories cannot possibly recoup the cost. It's like how sometimes it just doesn't make sense to refactor code because it is fundamentally designed for a different purpose. Sure you can grind it out but will it be any better or cheaper than starting fresh?

> converting them into dormitories cannot possibly recoup the cost Once we start talking easing housing code requirements, especially if it's done in the name of increasing access to housing, the conversation becomes about just how much conversion is really necessary, and how little can be done to break even. And there's a big continuum. If one end of this continuum is a standard college dorm setup, the other is lite…

[deleted]

Re: San Francisco braces for commercial real estate crash

#514

Post by acchow » Tue, Sep 06, 2022, 10:05 PM UTC

gumby wrote: post #474

diebeforei485 wrote: post #443

Earlier quoted context omitted.

What % of office buildings do you think can be converted into residential?

Seems to me the main constraint would be floor/window ratios. Apartment buildings often have windows just along one wall, and that works. So I don't see why 100% of class A office space couldn't be converted, not that I'm any kind of expert. Actually that's extra optimistic. Perhaps most skyscraper office buildings, but not the "strip mall style" office buildings common in the Valley. Other commercial space (retail,…

> Seems to me the main constraint would be floor/window ratios

Also the location of plumbing.

The buildings with smaller floors can convert fine (for example, see 100 Van Ness). The ones with larger floors much harder

Re: San Francisco braces for commercial real estate crash

#515

Post by inferiorhuman » Tue, Sep 06, 2022, 10:06 PM UTC

fakethenews2022 wrote: post #462

fakethenews2022 wrote: post #459

Earlier quoted context omitted.

Read the article. It disproves your point completely. The commercial property owner is paying taxes and very high ones at that if it is recently purchased property. Do you know what the rents were per sq ft in SF? They were Manhattan level. SF was collecting on that. According to your notion, why isn't the town the employee resides also collecting commercial property tax on where the employee works? That town provide…

Do you know the transportation agencies were regionally paid for? It wasn't just SF that was paying for BART or CalTrain.

Muni is entirely owned and operated by the city and county of San Francisco and larger than both BART and CalTrain. Muni's got 150 trams, 27 cable cars, a handful of vintage trams, and however many hundred buses. CalTrain has 29 locomotives, BART aims to have 775 cars (around 75 trains).

Re: San Francisco braces for commercial real estate crash

#516

Post by TedShiller » Tue, Sep 06, 2022, 10:07 PM UTC

yazaddaruvala wrote: post #143

TedShiller wrote: post #48

Earlier quoted context omitted.

Free drugs of course, supported by the tax payer

I can't tell if you're being serious or not, but I feel it needs to be clarified. The reality is free drugs at safe injection sites, supported by the tax payer, is cheaper for the tax payer. Overdoses and emergency services for overdoses cost a LOT of money. "a period of 2 years and 3 months", "with a savings of over $2.3 million for the lifetime of the program"[0]. Roughly $1 MM per year for just the 1 city in this…

Of course I’m serious. The best way to stop using drugs is to have access to even more free drugs

Re: San Francisco braces for commercial real estate crash

#517

Post by hn_version_0023 » Tue, Sep 06, 2022, 10:28 PM UTC

pessimizer wrote: post #96

hn_version_0023 wrote: post #33

Earlier quoted context omitted.

Every place I've ever lived had plumbing in the walls. Now, it also had it in the floors, so your point is well taken. But I seriously doubt that a central plumbing stack is a serious holdup on plumbing out an entire floor. Then again, I don't have any real experience, so I'm very much being optimistic here without actual hands-on knowledge. I could be very wrong, and would love to hear why!

> Every place I've ever lived had plumbing in the walls. In every wall and under every floor? How many sinks did you have?

Sorry, I wasn’t clear. Every house had plumbing in the walls & under the floor, but not in every wall. Normal houses, not.. a showroom for fountains!

Re: San Francisco braces for commercial real estate crash

#518

Post by abeppu » Tue, Sep 06, 2022, 10:45 PM UTC

inferiorhuman wrote: post #508

abeppu wrote: post #467

Earlier quoted context omitted.

Ok, but San Francisco also seems to be spending a lot more per person than any other consolidated city and county, so while that may explain part of SF's budget, it doesn't seem like a complete explanation. In that list, the next consolidated city/county is Honolulu, and SF was at that point spending close to 50% more per person. (I think that specific example also suggests that SF's spending is not just because loca…

First off – nobody, not even me, is claiming that San Francisco spends a small amount of money. However you're not comparing like for like here. The San Francisco expenditures are a combination of factors including high cost of living, high level of infrastructure and social services, and state funding. Honolulu is expensive mainly because of the Jones Act, not because they're providing a particularly high level of s…

I'm not convinced that we're getting what we pay for, or that we're funding the most important things -- no one's life is being ruined by an insufficient quantity of library books, or access to too few museums.

I'm glad we have the hetch hetchy water we do. I'm glad when the East Bay has brownouts SF often doesn't. The botanical gardens are _nice_. But again: ~$16k per head.

For comparison, I checked and Denver is presently at 2.04B for ~740k people. The _difference_ in per-capita budget between these two consolidated city-counties is _almost_ the same as a year of in-state tuition at a UC. Think about that -- people save for years to send their kids to college, and for every single resident, we're spending a sum comparable to tuition at a competitive research university.

Perhaps your way of living in the city is fundamentally different than mine, and you extract a commensurate amount of value out of the public services here. I think it indicates there must be a lot of waste.

Other things SF has:

- the highest paid mayor in the country

- an endless parade of corruption revelations that don't even feel scandalous anymore

- safe sleeping sites that cost more per tent than a 1BD apartment

So if, as the article says, the city has a 4% drop in revenues, I feel like we have a lot of non-critical stuff that we should be able to cut.

Re: San Francisco braces for commercial real estate crash

#519

Post by cjbgkagh » Tue, Sep 06, 2022, 10:50 PM UTC

potatochup wrote: post #511

cjbgkagh wrote: post #54

Earlier quoted context omitted.

I generally have the same rule of thumb; not a crash until down 50% from peak. But housing is leveraged. It’s not like stock where few people have margin accounts, a 20% reversion sends most people who bought recently underwater. Plus the size of the real estate market is much bigger than the stock market. The flow-on reverse wealth effect will feel like a stock crash to many people.

For the USA specifically, does being underwater actually matter as long as you can afford the repayment? It's my understanding that most mortgages are fixed for 30 years so your interest rates won't be changing?

Of course it matters, losing wealth matters even if it’s not ‘crystallized’ by selling. Your options are much more limited. Fixed low rates are only helpful so long as you can maintain sufficient income which in a severe recession becomes more difficult. Additionally if the property continues to depreciate it may be wise to cut one’s losses go bankrupt and start over. Historically those who held on were bailed out in short order by the inflation of subsequent bigger bubble. The size of this recession may get too big to bail out so we could enter new territory. Or maybe we kick the can down the road again, I don’t know, but it’s a risk.

Re: San Francisco braces for commercial real estate crash

#520

Post by koheripbal » Tue, Sep 06, 2022, 11:04 PM UTC

silicon2401 wrote: post #80

ethbr0 wrote: post #19

Earlier quoted context omitted.

Maybe SF should relax the legal requirements of residential space, then? If they choose not to build sufficient housing... they can at least choose to use what they have. A windowless room with a community bathroom doesn't sound appealing, but at a certain price point it's better than nothing.

> Maybe X should relax the legal requirements of Y That's a slippery slope. Lots of legal requirements exist to protect someone. Legal requirements for windows are pretty reasonable to ensure people have at least some bare minimum of access to natural light in their home, rather than just living in a box.

In general, that may sometimes be true, but in the SF Bay Area, those restrictions on residential development have always been excessive and about protecting property values for existing home owners.