I’m kicking myself for not buying earlier, but not a chance you’d get me to buy in now. We’re in a bubble that’s ready to burst IMO.
I don't think people really fathom how big of a deal this is. When was the last time a group of heavily concentrated companies were so flushed with cash sitting in banks? And also who's most coveted asset was highly paid white collar workers? Wall Street in the 80's maybe?
SB 827? That's what's kept me from buying. The fact that housing in the Bay is political scares me off. I'll bet on economics every day, but not on politics.
Out of curiosity - is there anywhere in the US in history where housing that had the highest value in the country was affected massively (negatively) by regulation?
(I wouldn't wish the anxiety around this decision on anyone, least of all future generations, which is why I've resolved to buck the trend of homeowner NIMBYism.)
[1]: https://www.mercurynews.com/2017/10/19/housing-economist-pos...
[2]: https://www.mercurynews.com/2018/01/11/unpacking-the-bay-are...
The bay area, specifically San Francisco, is one of the best real estate purchases anyone can make. It's geographically constrained and has historically shown to gain value over the past 100 years CONSISTENTLY.
There will be some small bumps in the road here or there, but when you look back in 20, or 30 years, I can almost guarantee you're going to see pretty solid returns. At least you can rest easy knowing it was perhaps the safest real estate investment anyone (who can afford it) could make.
Want to get REALLY depressed? Consider this FACT:
Foreign investors (rich people) can purchase homes in the US (San Francisco), and have no requirement to live in them, or use them. They can be purchased as purely speculative investments and it happens ALL THE TIME.
I spoke with a real estate agent at a major SF firm, and asked them point blank - WHO can afford these insane home prices? He generated a nice little chart for me of the buyers by career. Software Engineers was number 4.
#1 - Foreign Investors (mainly Chinese) #2 - Trust funds #3 - I forget (this was 4 years ago) #4 - Software Engineer
How / why it's legal for foreign investors to hold onto homes that people could be living in is beyond me. It destroys communities, and seriously hurts everyone.
Not necessarily. Bubbles are based on speculation. The last bubble was powered by sub-prime mortgages, which is what burst.
The Bay Area has the problem of ongoing immigration, a very highly paid demographic, and housing market that isn't keeping up. Simply, Offer < Demand.
Offer isn't looking to catch up any time soon [1], and demand crashing would mean the tech economy will have crashed as well (or, you know, The Big One).
[1] I'll have to sleuth up the link from 6mo-1y ago about how maximizing consctruction at this point would only keep up with demand, effectively only preventing a further increase.
SF home prices went from an indexed 219 in Mar 2006, down to 120 in May 2009. That's a 45% decrease over two years.
Right now the index is at 259 and that's inflation adjusted.
[1] https://www.advisorperspectives.com/dshort/updates/2018/03/2...
Not saying it is gonna burst, and i see the factors, but theyw ere there in 2008 too.
Funny somewhat related story; just as the downslide started in that market we made an offer on a house 50k below asking. The owner, an investor, laughed at us. After the bust, we had already moved away at that point, we saw the house finally sold for something like 100k to 150k less than our low-ball offer.
Another somewhat related funny story; went to an open house and told the realtor I was worried over falling house values before deciding to buy. We were told house values don't fall. Didn't bother to point out to her that the for sale sign out front had a "reduced" sticker on it.
I have more, but I don't won't to be a bore.
I hear "low inventory, high demand" all the time, and while it is true, the part that most people ignore is, it is still possible that older buyers still have a ton of profit, while recent buyers can be under water
But then it depends on which timescale we're talking about.
The movie The Big Short explained this pretty well.
https://en.wikipedia.org/wiki/Subprime_crisis_impact_timelin...
People have been saying this every single day since I moved to San Francisco in 2009. I guess if you keep predicting it eventually, you might end up being right, but its not exactly insightful.
Why do you think that, though? Is it solely because prices are rising very quickly? There's no indication whatsoever that people will stop buying any time soon. Homes are selling >110% of asking price for all cash within days, and supply is essentially fixed.
Not saying a crash is imminent, but prices are even higher than before last crash, even taking inflation into account.
People were buying overvalued homes they couldn't afford in the middle of nowhere on subprime adjustable mortgages, which caused the crash of '07 when the ARM rates kicked in and they couldn't afford payments. This is a fundamentally different situation.
Now, a very small number of elite highly wealthy people from around the world are treating American housing stock as their investment vehicles since there is literally no other better option in 2018. Where we go from here in terms of affordable housing, nobody knows. But I really really doubt we're going to see a housing crash any time soon. It's just simple supply and demand.
That was the complaint in Vancouver until they actually started tracking foreigner purchases and it turned out it was 10-15% of purchases (higher in certain neighborhoods). That means the other 85-90% of demand was from Canadians.
I recall this specifically, as I was in the market for a house at the time. Fortunately, I didn't face much cash competition as I was shopping slightly upmarket. The line seemed to be $300-400k. Those folks would be seeing pretty good returns at this point as those houses are now typically worth $500-600k and might be renting for $2-3k.
I also think the tech sector in general (especially any company that is driven by ads) is due for a major correction soon, if not a full burst.
I can’t tell you exactly why I feel it, it’s more an emotional thing, but I don’t see a better strategy than that when trying to predict long-term housing prices.
Why?
HUGE influx of people into the field, fueled by government programs, people in tech pushing for more people to join (why they would ever do this is beyond me, say goodbye to your salary), education in high school and younger, wide availability to learn online, outsourcing, etc... The influx of workers will simply outstrip demand once worker influx hits it's powerband in 5-10 years.
Programming is on the same path that many craft careers have been on in years past. Mark my words - it's a blue collar job in the making.
If you aren't specializing in some niche field of programming right now, you will be kicking yourself in 10 years.
The problem with a bad hire in tech is that they can be worse than useless. Mentoring a junior software engineer can be very expensive and not many companies want to do that in an environment like the Bay Area where people hop between jobs frequently. Personally I think this is very short sighted and sad as I love mentoring junior engineers.
Thinking logically and being able to clearly articulate your thought process is a rarer skill than you would think.
I do a lot of teaching/consulting in the Bay Area. I see a lot of people coming out of bootcamps trying to get entry level positions.
Some of the candidates graduating from these bootcamps are awesome and have lots of potential but those are few and far between. Also, their is a shortage of entry level positions.
The best bootcamps filter heavily and generally only take people with a vaguely related college degree (Economics, law, physics, biology) or who have shown an aptitude (portfolio).
I’m summary, I wouldn’t be surprised if the growth in tech jobs outstrips the supply of quality candidates. If anything having years of relevant experience is going to become even more valuable as time progresses. It’s the entry level candidates that are going to have a harder time landing a job and paying rent in the Bay.
The difference between law and software engineering is that you can't really BS your way in software for too long without being caught. I knew a few friends who would never have been able to pass the math and engineering courses a decent CS program requires, but they were admitted and essentially paid a huge bribe (with loans) to get a law degree from a low-tier school, cram for months for the bar, and get certified.
But they never made much money in law, and probably would have been better off choosing another path.
My girlfriend is a lawyer who is transitioning to become a UX researcher via a bootcamp. The general standard of people in her bootcamp clas is quite high. On the young end you got recent grads from top tier schools (UC Berkeley English) on the older end of the spectrum you got a VP of marketing who’s worked at reasonably high profile consumer brands and who has a pretty good undergrad degree. Some of these bootcamps can be quite selective and aren’t easy to get into. They want highly motivated people who are smart. Those kinds of people are in short supply.
Why do you say that? Haven’t all the tech companies been performing well across a variety of metrics these last few years?
If property values goes up faster than salary per home, you'll end up with a precarious housing market subject to the whims of investor sentiment. Workers won't be able to move in and back up the house valuation if they are priced too high.
A few places along the peninsula had stagnant or slowly rising property values, like Palo Alto. Values in SF either held or declined very little. Places like Oakland lost a little value and Hayward, maybe one of the least desirable areas around the bay regained all of its lost value in just a few years.
From Jan 1987 to Jan 2018, prices in San Francisco MSA have gone up 5.0% a year, ((258.81-46.95)/46.95)^(1/(2018-1987)). The equivalent amount invested in the stocks over that time period would have yielded 10.3% a year[1], with dividends reinvested.
Unless you are planning to use it as an investment property and reinvest rents (net of property tax, maintenance) in other properties, it still doesn't appear clear that buying a home vs renting and investing heavily in the market is a better bet, not to mention other intangibles like upkeep and longer commutes.