San Francisco Apartment Rents Crater Up to 31%, Most in U.S.
bloomberg.com
bloomberg.com
Everyone who left gave the following rationale:
- we can work remotely so move wherever or nomad now
- SF is not very fun during the pandemic
- WFH in my tiny apartment is much less enjoyable than when I was working in the office and didn’t spend much time in the apartment
- therefore I’m moving for a year or so until things fully reopen
Now I think the question is what does the eventual full reopening look like and how long does it take?
Many people will move back, because many office jobs will return, and many people love city life and the office work environment (including me).
But the longer things take, the more people get established elsewhere, and the more companies decide to make remote permanent and don’t reopen an office, the more I think this market reset in SF will be long-lasting.
As other posters have said it’s a welcome relief though. Prices are still very high, and new construction remains far from sufficient to keep up with demand.
(edit: typo)
The demand was high for reasonably priced older units. "Just add new construction" doesn't work if all that gets built is luxury apartments.
If you build enough quality housing you end up with old crappy housing being impossible to rent out so it either gets abandoned or redeveloped. If you build enough housing the price floor that is rent control ceases to bind because market rates drop below the floor. There can absolutely be a “shortage” of a given combination of quality and price but that’s like saying there’s a shortage of Peter Norvig talented Computer Scientists who’ll work for $50K a year.
If you consider that a newly constructed 750 sqft 1BR apartment can easily run $800k-$1M, a buyer is looking at $4-5k per month to cover the mortgage, property taxes, insurance, HOA, maintenance, etc. Do you really think a buyer is going to turn around and rent it out for $2k/mo?
For buildings wholly owned by a leasing company, the economics are better, but still not to the point where they're going to rent that out for under $3-4k/mo.
That said, housing can be profitably built cheaper, but why would any sane developer make a low price house when there is more profit in luxury housing. SF has refused to allow enough construction to meet demand, and this has resulted in only luxury being built.
Cities with less growth than SF are building more than SF, and as a result all housing is cheaper.
Didn’t stop Elon...
:p
For well-studied examples of this, see Japan: https://www.wsj.com/articles/what-housing-crisis-in-japan-ho...
Building more luxury apartments creates more older units.
Do you see an end to this pandemic in the next year or so? A good percentage of people are still refusing to wear masks, we aren't anywhere closer to a vaccine etc. I am trying to be optimistic, but the situation isn't improving from any direction and we are already 10 months in :(
https://www.washingtonpost.com/health/2020/10/13/covid-vacci...
If it isn’t, the trial resumes.
I wasn’t speaking to the GP’s question about progress but to their “not following the news” comment.
I apparently should have made that clear.
0: https://www.uchealth.org/today/coronavirus-vaccines-101-what...
Expect a majority of the vaccines in trial to fail over the next 6 months, either for safety or efficacy.
For lack of economic need. Most coronaviruses only cause mild symptoms, so there's not been a need for one. SARS vaccine efforts died early because the disease itself died out and there was no impetus to continue searching. MERS is similar in that, even though it hasn't gone away, it burns itself out so quickly that the need for a vaccine is relatively small, and therefore research efforts have been limited.
> Drug development is hard. Most candidates never make it to market.
For vaccines, something like 80+% that make it past Phase 2 end up making it past Phase 3. Its unlikely for most vaccines that make it that far to fail. We already have half a dozen candidates around the world at that point, with more on the way. If anything, its highly unlikely we won't find some kind of vaccine. If not one that grants sterilizing immunity, one that provides enough protection that it makes the disease far less deadly, like the flu vaccine.
Exactly, and because of lack of economic need our experience with creating vaccines against coronaviruses is pretty minimal.
And yes, I agree that we'll get something, but people should be prepared for a few of the vaccines to fail, a few to be pretty mediocre (are they worth even getting) and a few that actually have some utility. The challenge is the ones in development are strung out along a pretty long timeline, so if we're lucky, one of the earliest ones works and we don't have to wait until late 2021 for something worthwhile.
And not only that, but people should expect something promising to be approved and then likely pulled off the market 6-9 months post-approval. It's just the nature of trying to accelerate a vaccine and then once approved, dosing tens of millions of people with it.
All had the same rationale: taxes and housing were simply far too high when they could work remotely and live anywhere else. Sure, you don't get the same outdoors, food or retail scene, but plenty of places have those things too.
I imagine the move to working remotely has made that move possible for more people than before, but those I know aren't making temporary moves, they are buying houses.
If you have employees who have been working productively remotely for a year, it's probably better to find a way to keep them happy and working than to have to find a new employee.
Keep a long runway in an emergency fund, keep your professional network warm, always be ready to bounce if your employer tries to change your quality of life for the worse (mandatory return to an office somewhere, for example). (Disclosure: This is how I operate, and have worked from home for over 7 years.)
[1] https://www.flexjobs.com/blog/post/companies-switching-remot... ("27 Companies That Have Switched to Long-Term Remote Work")
Certainly I believe that remote work was already on the way to becoming more and more accepted, but by moving out you're still limiting your employment prospects to those companies that decide not to focus more on in-person roles. Maybe that will still work out in the long-run, but I still think there's significant long-term financial benefit in maximizing your number of potential employers.
Plus, if you're expecting to move back to San Francisco at some point, right now is the time to do it while prices are through the floor. You're far better off moving in right now at a 35% discount—which is permanent given rent control—than trying to come back in another year when COVID-19 is (hopefully) over and people are flooding back in.
You apply at companies with remote roles. I haven't lived in SF though, and would never do so, so I can't speak to solving for timing the market there.
When you got major companies like Twitter, google, Facebook, and others already saying WFH is a permanent option that’s put pressure on others to figure out how to make it work.
Talent is needed at many, many companies and if the talent is a.) needed and b.) good enough the company will make “exceptions” to the rule.
Enough companies make enough exceptions and it’s a mainstay policy.
Overall, the other part is that companies that now offer remote work as a permanent option may not have to pay SF salaries so that’s a bonus to the company. It’ll go both ways, the company can say I’m not requiring you to live in high COL area and we have an office in X city, we pay 10% above the market average of ~35-40 cities so they’re still competitive on pay (assumption being that most companies move to this model, FAANG may overpay still but that’s always been the case) so now what do you do?
Literally the only thing keeping me from listing my house right now and moving to a different area is that not enough Bay Area companies have committed to permanent WFH yet. Once that happens, I'm gone.
If companies look like they're aligning on more of a hybrid model where you can WFH but they expect you to show your face in the office every so often, then I'd have to stick to $CA$ and maybe head out somewhere on US-50 between Folsom and Placerville, or maybe way up I-5 somewhere towards Shasta.
there is a huge difference, not only in the kinds of work you can put on your resume, but in the quality of co-workers, and what you can learn from them.
You can approximate that experience in some other areas (Provo, Boston, Austin, San Luis Obispo, etc) but a LOT of American cities are still technological backwaters, and there's nothing available but garbage jobs that will drain your soul and turn you into a code zombie.
It’s great when you have a family with kids and you’re less career focused. But I noticed my comp increased almost 2x their’s over the same timeframe.
If the commitment is there for WFH to become an option for all, corporations will promote one or more WFH VPs to send the message that it’s OK, as occurred for women and minorities. I’d guess they’d choose rising stars with personal commitments that make WFH the obvious humane and moral choice.
This is also true when you're at a home office, and you get acquired, and it becomes a remote office. Your career gets fucked.
I've had it happen to me over and over again; and it's very different when you work at the headquarters.
It's my biggest worry about 'permanent WFH'. It's that I'll end up being like the remote-office nightmare all over again.
In my experience this is becoming less and less true, smaller cities are really catching up, it's not 2010 anymore. My pet theory is that social networks like Instagram have done a good job spreading fashion and food experiences/expectations that were previously exclusives to big city centers.
As one example, NYC opens Governor’s Island to the public for only part of the year. Food service comes in the form of a “food court” made up of a bunch of food trucks/container kitchens.
I haven't found it to be even remotely true for the food my family is inclined to eat. Every time I've gone to visit hip small college towns for the last 5 years, I've eagerly sought out the talked-about eateries, and they were all... distinctly mediocre compared to NYC or Bay Area or LA food.
You still can't find anything but Americanized Asian food, even the California-cuisine upscale places are decidedly mediocre, and the food trucks are... fine.
Certainly, it's better than it was at the margin, but it really depends on what your baseline is.
But even if we expand the statement to "outside a major city" or even "outside a major metro area", I think a lot of places are culturally devoid suburbs (though I probably would have picked a nicer way of putting it).
I would wager that the majority of suburbs in the US don't have much variety in cuisine, and while communities will certainly have a few stand-out restaurants, there will also be a lot of mediocre fast food, fast casual, and pizza shops. I grew up in places like that, some of my family lives in places like that, and some friends who used to live in cities, but moved out for more space, also live in places like that.
Get too far outside Seattle, Portland, the SF bay area, greater LA, Chicago, Boston, NYC, DC, Austin, Dallas, Nashville, and even many smaller cities, and there really isn't much to write home about when it comes to food. And for some of those cities, "too far outside" can be as little as a half hour drive.
From that perspective, eating out in SF always felt like a good deal because for $15 you can get some truly exceptional farm to table food.
Los Angeles and New York City have a substantially larger cultural footprint than other cities.
Even though the variety of food, music, etc. is growing quickly elsewhere, it’s really not the same.
That's a poor choice to judge a restaurant on. You need to base your judgement on things you can't or won't cook at home because it takes too much time, is too complicated, or uses ingredients that are difficult to get.
I don't go to restaurants to be entertained by the food or "impressed" by the "creativity" of the chef, and I'd wager neither do most people.
There are plenty of “sit down” restaurants that aren’t fancy, but are more than “solid takeaway” that fit in this picture. And these are what most folks actually think of when they picture dining out.
In a sign of the crazy times we live in, Chez Panisse has started doing takeout. First time I tried it, I got a BLT sandwich. Exactly what it says on the tin: bacon, lettuce, tomato, no weird spices or creative takes or deconstruction. Just a stock BLT sandwich—except better in every way. I'm not even sure how. I would not have thought there was that much room to improve on a BLT through better ingredients and execution, but apparently there is.
Anyway, if you're in Berkeley, I would highly recommend giving it a try.
Dropping 50$/person on dinner & drinks in sf isn’t that much money when your rent is 50x+ that figure.
If you want a great literal hole in the wall, try Yamo in the Mission. Burmese food, grand total of 6 seats (all at the bar) in the restaurant, and the entire kitchen is right in front of you. $6 entrees.
While I haven't been up to SF proper for food and barhopping in a few years now, the Lark up in the financial district is much more of what I'd call a good cheap bar. I tend to bristle a bit at people dissing the SF food and drink scene, but I have to remind myself that with few exceptions my favorite places in the Bay Area aren't actually in SF itself. The metro area as a whole has virtually everything you can imagine at a very wide range of price points. I suspect one could make a case that the most interesting stuff happening is in the East Bay and South Bay, though.
Within a narrow window. The diversity and turnover of New York or London’s food offerings compared with the Bay Area’s is on par with the latter’s offerings in relation to Fresno’s. If anything, the Bay offers its uniqueness in the middle tier of immigrant fusion.
Anecdotally, I moved from the bay area to somewhere near los angeles a while ago, and the americanized chinese food here sucks compared to what I could get in the bay area. And it costs twice as much! :(
The difference in food options between SF (where I am now) and OC (or LA vs OC) is absolutely astounding. Its really not even close. Its gotten better but large cities are still orders of magnitude better.
Sincerely, the League for Reducing Hyperbole on the Internet
PS: “Everybody else”, “absolutely astounding”, “its [sic] really not even close”...sit down and have a nice glass of warm milk and think about what you wrote. :-)
The quality is what it is, but at least someone is trying to give you something interesting to do.
Or at least that was the case in 2019. I really hope we return to valuing in-person interaction when it's safe to do so.
[1] The "Chili Monster" at the Dillinger in Boulder City, NV, in case you were wondering. https://www.thedillinger.com/ (Not to be confused with Boulder, CO.)
Going out of your way to not eat local stuff is completely pointless to me. People take quite a lot of pride in having good stuff specific to their area.
The ingredients are sourced locally for the most part, and the imports are about as good as they can get, and substitutions are sober.
It's hard to share scales with Americans.
I can't imagine there were very many Indian people there, but the food was amazing.
Crime and homelessness, while problems, aren't major factors for people in my experience. After all, those two things haven't really changed.
https://cdn.abcotvs.com/dip/images/5380756_sanfrancisco2019....
I disagree. Its consistently brought up, along with high rent, as one of the worst parts of living in the area. In my experience, the people who stay in SF are willing tolerate it for access to all the amenities there. When the pandemic makes it difficult to enjoy those amenities, it will drive people away.
[1]: https://abc7news.com/renaming-sf-public-schools-school-name-...
What did Diane Feinstein do? :)
I'll add, the fact there are people who downvote information is quite possibly another strike against SF.
My personal opinion is that some of the renaming is a bit over the top, but I'm glad we're re-examining our historical "heroes"; most of what kids read in their US history classes paints an idealized, unrealistic picture of these figures, and ignores real harm they caused, both by their actions and attitudes. Regardless, I just frankly do not care whether a building is named Lincoln High School or John Doe High School. If ditching Lincoln's name makes a bunch of people feel more comfortable, it's no skin off my back.
What's actually important is that we teach the truth, and all of it. When we teach kids about Thomas Jefferson, we should certainly give him credit for the statesman he was, and for what he did to free the US from England. But we should also teach how he owned slaves throughout his entire life and saw no problem with that, and how he was a rich, elite landowner who believed that only a very small, single-digit percent of the population should be allowed to vote. Even Washington, who seemed not entirely comfortable with slavery, owned a slave that was only set free upon Washington's death. And Lincoln... well, his main concern was keeping the Union together. If that ultimately meant allowing the South to keep slavery intact, he was fine with that.
I don't bring all that up to say that they were awful, irredeemable people with no positive qualities. Some of them, if born today, might grow up with very different attitudes. But I think it's reasonable to suggest that quite a few people, especially non-white people, might not be particularly comfortable sending their kids to schools named after these people. And it's perfectly ok that they feel that way.
https://www.city-journal.org/california-race-coding-criteria...
End of lockdowns in CA are being tied to vague "racial justice" goals. These things are all connected. Renaming a high school says "we consider this the most important thing we could be working on right now" which is clearly absurd when you consider the real problems CA has.
But despite being a lifelong Democrat there is a certain level of concern over purity that makes me uneasy. All my Jewish cousins who were in Europe mysteriously disappeared during WWII. Yet, I own and enjoy a German car whose corporate origins are very intertwined with the history of that period of time. I think the Apollo program was pretty cool, and that was fundamentally rooted in the exploitation of German expertise from rocket research involving Nazi slave labor during the war.
So, if someone is disgusted with these things and personally avoids them, that's cool. But if they are on a crusade to purify society from them, I probably don't want to be neighbors.
And you're discounting the fact that they will still be living in a tiny apartment compared to other areas with much lower housing prices.
My favorite restaurants are all closed and you have police state ensuring you don't use public facilities. Why would I pay $4000 a month for housing with none of the benefits?
Especially as Arizona has become more and more liberal/left leaning, you got less folks viewing it as hostile & enjoying the fact you have a lot of hiking/outdoor activities, rivers, lakes and camping all within a short driving distance.
I think the weirdest and most noticeable thing is people riding motorcycles without helmets.
That said; yeah, the heat is not really that bad (it took me about 2 years to acclimate), and there are options for relief. Surprisingly, I think we get more rain in Arizona than in California (not this summer though), and winters are definitely much colder in Arizona than they are in California.
I think they're leaving for places where lower land prices mean homes with more space - which could mean the suburbs, smaller towns, or could even mean moving back in with their parents.
I know people, in London, where three 20-something couples were renting a three-bedroom house, living 2 people to a room. They barely had room to set up comfortable desks and chairs for everyone, let alone things like exercise equipment. Some of them decided temporarily moving back in with their parents wasn't such a bad idea after all...
If you take what a typical couple pays for SF rent you can buy two houses in most of the US. So... if you're going to be spending a lot of time at home, for many people it makes sense to move out to a cheaper and more spacious locale, at least for now.
Though SF is no New York, it is notably more urban than Portland. San Francisco is physically more strikingly beautiful than Portland, with magnificent views of the bay and ocean from the hills. Portland is surrounded by beautiful forests and parks, but so is SF - you can get from downtown SF into the middle of a quiet redwood forest in about 25 minutes, and the coast, north and south, is far more accessible than it is in Portland[1]. While SF has a severe problem with street addiction and mental illness, so does Portland, and SF does still have extensive walkable urban and semi-urban neighborhoods. Golden Gate Park, the Presidio, and Crissy field are just a few of the outdoor options within the city. There are also plenty of options to live in lower density, SFH neighborhoods with small backyards. Culturally, San Francisco is much more diverse than Portland - SF actually ranks first among US cities in the number of languages spoken by 1000+ households. Portland is overwhelmingly white and has a historical hostility toward ethnics and immigrants (some believe that the anti-Californian sentiment has roots in hostility toward Catholic and darker skinned immigrants) - and, ironically on the other side of the political spectrum, a lot of immigrant or first generation communities are actually uncomfortable with predominantly white, left wing progressive politics. Immigrants may be more likely to find a community in SF than Portland.
[1] I surf, which makes Portland a hard pass for me, though that's a bit too niche for a general comparison.
I think the only things you omitted are the differences in weather and the size of the cities.
- Portland is a fairly small city (especially inner portland) with a long history of anti-growth sentiment. The result is very rural agricultural areas _just_ outside of Portland.
- The weather patterns bring different wildlife and kinds of beauty. While the forests outside SF are quite pretty, they are also very different than the wet douglas fir forests up north. Beauty is in the eye of the beholder -- Portland also extends into the hills and provides famous views of Mt. Hood from the SW hills. The portland zoo for instance, is like going from a city into a rain forest.
The oregon coast is cold and rainy 95% of the year, not the most fun place to visit.
Austin is nice, but comes no where close to the natural beauty of Colorado. I'd put it 2nd the West Coast.
Texas is just flatness and trees. The rivers are nice though.
SMATTERING OF QUOTES FROM THE ULTIMA VII TEAM
"Looks like shit... could be west Texas."
- PHILIP
The hard bit is the live+work space. I was incredibly lucky that I moved to a larger place right before the shelter-in-place order hit (from a loft to a condo with walls and doors!), but I know a lot of people who have been working on dining tables and sub-optimal improvised desks for the past seven months. If you live in a loft-style place with another person, the lack of personal space can really get to you.
Per Wikipedia, Chicago's record extreme low is -25°F.
Wear layers. A scarf makes a huge difference. Probably larger than you would think.
Chicago will probably get a "polar vortex" in February or March. It will be a week of really cold weather and then it will be over. You'll probably find that November and December are warmer than you expected. January is a bit dreary, but only because of the reduced daylight hours (compared to LA). Chicago is just a bit further north than NYC, but compared to Paris or London it gets a lot more winter daylight.
The think I've noticed about winter since moving to Chicago is that the really sunny days are the coldest and the cloudy days are warmer. If you've got large south-facing windows, you might need to close the shades or even open the window slightly when it is really cold. That sun can be intense!
For the two hours a day it's out!
Obviously an exaggeration but you can go to work in the dark and drive home in the dark on the shortest days of the year. Can be a real bummer for those that didn't grow up like that.
Then there's the humidity with 100+F days in the summer. And mosquitoes.
The other problem was I grew up in a reasonable, livable suburb, and now, when I go back there, I see that rents and housing are really extremely expensive compared to salaries. Jobs suck (there's no real tech industry anymore). And traffic in the suburbs is constant gridlock wherever you go. It's become a real horror show and I couldn't ever contemplate moving back. Weather/Climate is not even the consideration.
Take your pic. CA folks seem to think the rest of the world is an inhospitable wasteland. Sure, CA is a bit more mild, but it's not perfect.
Maybe once or twice per decade is the AQ so bad in CA you have to stay indoors. As opposed to weeks or months every winter (depending on your tolerance - I hate cold).
We definitely had stay-inside days this year and last year, and I could have sworn we did the year before as well. That blew through your per-decade quota in recent consecutive years.
I fully expect we'll have some stay-inside days next year too.
But I do agree that the number of days the air quality is bad just does not come close to the number of days where it's really cold or really hot in other places.
The advantage with cold is that it’s possible to do something about it. You can always layer up and get better materials for your layers. I spend hours skiing outside at like -15F and am actually comfortable. In hot weather though, once you’re sprawled out naked on the ground, you’ve exhausted your means to get cooler without some kind of machine.
The problem is environmentalists don't want to do planned/controlled burning anymore, hence, the things burn by themselves on their own schedule now, out of our control.
This is a fundamental shift and broadening and many people lived in the city for access to jobs that now they can live elsewhere for.
My understanding is that at Github working remotely is the norm, while I believe the changes Microsoft announced require manager approval if you want to work remote > 50% of the time.
I did the math for SF and IIRC ~2mo was equal to a 15% discount. if it sits empty for longer than 2mo, you should have just given the 15% discount. if you let is sit for 2mo AND have to give a 15% discount, now you've really fucked your finances up.
If market rate was 3k a few months back, but is only 2k now, if you take a 15-year view, it's still cheaper to let your rent-controlled unit sit unrented for 12mo than rent it at just 2k for 15 years provided the 3k/mo rates recover in two years.
Basically, that's one of the major reasons why rent-controlled units aren't going down in prices. Bundle in Prop 13, and you aren't even paying any real property taxes on those units to sting your finances.
In my experience, most market rate units turn over every 2 or 3 years. 15 years in sf apartment leases are unusual except for people who cannot afford to move out.
If you assumption, as a landlord, is that the next person into your unit isn't moving for 15 years, then yes, the cost calculation moves. However, that calculation is very different from a 7 year calculation, which is very different from a 2 year calculation. So how much are you going to hedge against not losing money in the future, when you're losing concrete money right now?
I'm a little confused here. If your rent is 1.2k for a 2bd in SF (because resident since 2000s), whereas market rate for a 2bd now is 3.9k in SF -- what is your determination -- is a person able or not able to move-out?
Why would anyone move out every 2 to 3 years if they're rent-controlled, and they'd have to pay significantly more for any new place?
Likewise, if you've been owning a property since the old times, and it's fully paid off, the property tax liability in Cali is tiny, and for older owners perhaps entirely a wash-off due to infamous Prop 13. Which is part of the reason that many owners don't even bother renting their properties.
The companies that manage these properties acquire/refinance loans based on the value of their assets and the value of their assets is mostly determined by the rent they ask for, much less the rent they are actually getting. This leads to commercial landlords refusing to budge on a ridiculous price that was determined in different market conditions and as a result will opt to leave it vacant.
Taking the lower price would adversely affect their access to financing and could put them under water (they already were) on their loans.
Why these agreement/loans don't take this problem into account to prevent this situation is a total mystery though.
Edited to add to this, see the spread in June:
https://www.renthop.com/studies/nyc/renthop-2020-subway-rent...
West 4th = West Village, up 7% YOY mid pandemic, even as other neighborhoods saw more drops.
Also see the trend here as editorialized around NYC on pace to overtake SF as the most expensive rent market: https://www.zumper.com/blog/rental-price-data/
A better graph near the bottom of this article to show how small the dip is for rentals: https://streeteasy.com/blog/august-2020-market-reports/
You can get a recently renovated 3 bedroom with laundry and dishwasher, in a desirable area for $4500. Those bedrooms weren't going for less than $2k a year ago.
This is all from my casual observations on craigslist and Zillow, I would love to see broader data and analysis if anyone has any
E.g. https://www.cityrealty.com/nyc/market-insight/rental-buildin...
What little I understand is if a landlord is leveraged (?) up the wazoo, the lending bank can make the landlord pay a lump sum if the revenue projections on which the loan is made shrink, since the risk is higher. Somehow, free months don’t count against these revenue projections (assumed a one-off?), through what I imagine is the magic of contract law. The higher end, nicer real estate is probably more highly leveraged. Someone in RE can probably clarify this better.
If that’s the true reason for an exodus, then I hope it benefits the city to have residents that want to live here.
(I spend most of my city time in miami, nyc, and montreal)
- You'd have to include SF, San Jose and Oakland together to equal the size of NYC (and much of that SF metro area is single family home suburbs with no one on the street at night)
- Tech workers concentrate in SF proper because there is not much outside of it (yes, there is, but SF is the core)
Just my take, but SF seems to revolve around tech, while finance is big in NYC, it's not the dominating industry like tech is in SF.
you ignore a lot of other industry around the bay and around nyc. Neither Queens nor Fremont are representative of the other areas, neither is Brooklyn or Oakland. Or Berkeley. Or Bronx.
One might say that something that could be considered a fairly good indicator of a "good" food-scene would be this: https://www.statista.com/chart/16308/michelin-restaurant-us/ Where SF is no 2 in the country for number of Michelin star restaurants. Again as the first sentence states; one might argue this is not the indicator of a "good" food-scene but I guess we'll have to take what we can in terms of objectivity to try to judge a city on different things, and for food this is at least for high earners, probably a somewhat good indicator.
The question we aren't asking is, what happens when the economy recovers and these people move out of their parent's homes? Will they go back to the "destination" cities or will newer, smaller cities be the target? Will they crave experiences or space more?
[1] https://www.marketplace.org/2020/07/28/millions-of-americans...
Destination cities will still be desirable, however there will be a very slow rebuilding of demand. The magnitude of that demand will never reach the same height. The entire world was forced to work from home for an extended period of time, introducing those from industries that would scoff at the idea to a different lifestyle. Sure some people don’t like it, they will be the ones moving back to cities, but I think enough find it vastly favorable to the grind of commuting too and from a physical office that it will have some stickiness once social distancing can safely be stopped.
This general shift in attitude will make it far more realistic to work where you actually in your heart of hearts want to live. I’m excited for this change, I live in downtown San Francisco right now and it’s not BAD— life is fine, we’re making due with the times. But I never wanted to permanently live here, and now there is this perfect chance to move out of the city, you bet your ass I’m taking it when my lease is up :)
I don't believe this; very few companies are okay with permanent remote work after the pandemic is over, even though they are very notable exceptions, eg Facebook.
This also assumes the population of people interested in living in destination cities is constant, but it's been growing every year the last decade except this one. COVID and the possibilities of remote work and COVID will dampen growth, but when we get through COVID, I expect demand to be higher than ever. It's not like SF will solve their systemic housing problems in the next 20 years, or our lifetimes.
By a long shot, the largest expense for large companies in employee salaries - rent, by comparison, is a drop in the bucket. What follows is that companies should be most concerned about employee and team productivity rather then office expenses.
I know companies in Canada that are way ahead of the curve on this: they've been consulting for American companies for years, meaning they can afford way more person hours than american counterparts given a US dollar contract size solely because of the salary gap difference.
The US vs. not-US gap is certainly larger, but I expect that US-based companies would much rather hire someone 3 timezones away than 8 or 12. Having to be on conference calls at 7am or 8pm gets old real quick.
I haven’t heard of one, and I would think this would be a huge selling point so anyone doing it would want to advertise it to engineers.
On the other hand there are plenty of companies transparent about their policy to match pay to cost of living, for instance gitlab publishes their conversion percentages for different cities. Many places in the US they pay ~60% of Bay Area.
https://www.levels.fyi/comp.html?track=Software%20Engineer&s...
https://www.levels.fyi/comp.html?track=Software%20Engineer&s...
Can companies measure productivity of knowledge workers to that granularity?
Office expenses make a relatively small fraction of employee overall expenses. Say 10% to be extremely generous. NYC five-borough average back in 2015 was around $15K per year [1]. A fully-burdened employee expense is around 2X base salary, so a $100K salary position clocks in around $200K fully-burdened, or around 7.5% of that 2015 NYC average figure. I don't currently see companies wholesale changing employment strategies for 10% differentials.
I'm not sure companies can measure productivity down to that expense detail level for knowledge workers.
[1] https://www.marketwatch.com/story/heres-how-much-your-compan...
I personally don't know of any large corporations that track it well enough on a corporation wide level to be able to tell you if any change significantly affected developer productivity.
But the check they write every month for rent is very easily measured and reduced.
Also I was specifically told by the VP who was in charge of making the decision for his division why he was doing it, and it was costs savings.
Will young people suddenly not want to live in close proximity to other young people? Will that become another luxury item for the well-connected?
I’d counter that many young people permanently leave their “hometown” for financial opportunities that are currently only available away from that “hometown”.
For privileged young folks who are “amenity migrants”, your statement would be admittedly true. It might be a bit classist to extend that assumption to all young people.
Sure, people who grew up in $COOL_PLACE but moved to $OTHER_PLACE for a job might want to (and be able to) move back to $COOL_PLACE now, but I don't think that generalizes to most of America.
Every one since then was someone I knew online for many years first.
The US is expected to add 80m people in the next 30 years. So that seems very unlikely, even if there is a shift in behavior.
Edit: reduced the population estimate with newer numbers from the census bureau.
Step out of your bubble and think about all of the people making the goods you order, maintaining your roads, construction workers that fix your home, the workers at the grocery store, the person that delivers your packages, the warehouse workers, etc etc etc.
The world runs on people being physically present working jobs that can’t be done from home... that must continue so that you CAN work from home. Until robots can do those jobs, it'll always be the minority that works from home.
If you reduce the need to maintain both a worksite for people and a home, while you will increase the need for labor to maintain/service the home and supporting infrastructure somewwhat, it will probably be less than the reduced demand for labor to maintain and service the worksite. The initial effects of a large scale shift to telecommuting is going to include a lot of net physical service/maintenance/support jobs lost.
Step out of your bubble and think about what it would mean if 40% of Americans worked from home full time.
It can be done, we've seen that, now people are running the numbers and seeing what that means. Pre-covid it was something like 3% that worked from home at least half the time.
If 3% turns into 40% - or even 20% or 6% - that starts to change things.
Remote collaboration tools like GH have been crucial for remote work for software developers, but that's a really small slice of the pie.
The whole WFH discussion is an upper-middle class discussion. Low income workers don't have the option of working from home.
Growth of cities and the increase of wealth of cities is 5,000 year trend, that includes in its history pandemics and plagues.
Given that we've had multiple localized epidemics or global pandemics in the last two decades alone (SARS, Ebola, Swine Flu/H1N1, etc), the likelihood of more seems increasingly high. Perhaps it doesn't even matter whether the next one will have a higher CFR; whether large cities prosper depends not only on whether people believe it will, but also on how well the cities do in many other respects, such as crime, taxes, pollution, trash, homelessness, etc. SF is not only suffering because of the pandemic: the pandemic just put an extra sense of urgency on the snowball effect that was already happening.
When cities are safe, healthy, clean and beautiful, they're great and everyone is happy to live there, but now? Not so much.
It’s important to note also that sanitation, preparedness, and scientific knowledge will all continue to improve over time. Pandemics may become more common but that doesn’t necessarily mean that they will be as deadly or effective as the current one.
1. The growth of information/knowledge (the Information Age) jobs, which are now the majority of all jobs in the U.S.
2. The growth of remote work tools (the jury is out on how productive people are remotely at the moment, but new tech will drive this soon so that you will be just as or almost as effective in your kitchen or local coffee shop)
3. The growth of global transportation (the Jet Age) that allows previously localized diseases to spread globally in hours, instead of months or years
These factors are new and together likely presage a historic shift in how and where people work.
Ironically, except for this market adjustment in larger cities, the ability for people to work productively in other locations will put continuing downward pressure on the cost of living in cities as people leave, and probably hit some sort of equilibrium at some point soon.
... all this to mean that you should sell your investment properties in the Tenderloin ;)
To me the question is whether companies/employees will continue letting/wanting to work remotely in the future. I am certainly not concerned about a population collapse in big cities because many companies and people want to live there and don't because of cost.
1.) There are too many people who dont have strong preference and thus go for salary because why not. Or follow friends. The higher salaries also go with bigger social status, often better negotiating position. There are people who do need money. And yes, there are many people who measure worth in salary too.
2.) Historically, people move that way. When programming turned out to be good job, students started to be way more interested in that. When you look at which majors students pick, they generally go for the ones that sound practical and earn money. Yes, some people go for antropology or history of art, but not nearly as many of them.
People moved to San Francisco in the first place because they followed opportunities. People moved out of Detroit because they followed opportunities.
They don't explain why rents in SF are falling more than anywhere else.
To be fair, the article only says 31% is the most. If other cities are around 29-30%, forget what I said.
Everyone I know in the service industry left. I doubt they ever come back. COVID was the nail in the coffin for most bars, restaurants, and clubs in SF that were already struggling. The city isn’t going to be the same after this.
When things fully reopen there’s gonna be a sort of boom in entertainment/restaurant/travel industry
Many parts of the US will definitely go back to normal, but maybe not everywhere. It may be a permanent structural change in laws and government approaches.
If trump wins, then who knows.
30% of people will never take a vaccine [0]
The first couple vaccines will be 40-60% effective [1]
Similar vaccines never exceed 70% effectiveness. [2]
It's unclear how many boosters you'll need, etc.
I hope someone out there is crunching the numbers and seeing the issue.
[0] https://news.gallup.com/poll/317018/one-three-americans-not-... [1] https://www.npr.org/sections/health-shots/2020/09/12/9119879... [2] https://www.cdc.gov/flu/vaccines-work/vaccineeffect.htm
Why? No reason at all beyond managers wanting to see people physically in the office working. The management class rarely takes a page from science and reason when making decisions, gut feelings are king, and the gut feeling in many boardrooms right now is that people are slacking off working from home. Whether that is true or not in real world productivity isn't considered. That's why I think not much will change ultimately once things do eventually return to normal, whenever that may be. People will go right back to living conveniently to work.
Combine that with companies pushing more remote work, or setting up satellite offices, and you may see a slight decline in urban areas for a few years until it is in fashion again.
SF, for example, was a popular place to live before it was a tech hub. Even if all the companies go away (they won't), there will still be plenty of demand. Maybe it will be a healthier sort of demand that doesn't push lower-income residents out of their homes. But there will still be demand, and it will grow as COVID becomes further behind us.
For a lot of the people who moved back in with their parents, I think social circles will be an important factor. I know if I'd moved away, I'd be anxious to see my friends again, and live close to them. That doesn't mean everyone will end up back where they started, but some will. Others might band together and pick a new, smaller city or town to live in. Some social circles won't get back together, and some will split into new combinations. Some might see it as an opportunity to move to a new city where some old friends have lived for years. Still others might decide to stay with their parents, especially if they're older and may not be around much longer.
Also consider that only something like 30% or 40% of the workforce has been working from home during COVID. Everyone else works in restaurants, bars, state and local government agencies, retail and grocery stores, hospitals, universities, and a host of other things that require a physical presence everywhere. There's no "grocery hub" like there's a "tech hub" or "entertainment hub". Every city and town needs a hospital or clinic and people to staff it, telemedicine notwithstanding. Those professions will continue to grow with the US's population, which will drive more demand everywhere, including cities.
I am skeptical. Yes a lot of Bay Area companies are allowing work from home for now, but are people really weighing that so heavily that they’re moving? If we’re blaming the pandemic, maybe it’s that fewer people want to move to the city because they can’t enjoy it (bars, restaurants, etc)
I mean places like Flagstaff Arizona, or Temecula California, etc.... In the cities listed in the first paragraph there are, unique bars (not sure what word to use) and interesting restaurants. In most cites there are just places like AppleBess and the local versions of same. If that makes me a bar/food snob okay but what's available in many cities is just not comparable in random small city.
And frankly, let’s not let SF off the hook for its large proportion of mediocre restaurants and bars. IMO they are a another sad consequence of Prop 13: old businesses with low property taxes don’t need to be much good to survive, but the cost of starting a new business is spectacularly high.
SF culture was on life support, now it’s dead.
It is the marginal buyer, not the entire population, that swings the price. It's the last few properties for sale that swing the price.
Someone downthread explained it very nicely:
"Rent is like a traffic jam. The market collapses on the margin. You don't need to remove 30% of the cars to reduce freeway congestion by 30%, and you don't need to remove 30% of the residents to lower asking rents by 30%, either."
imo, it's best for cities not to try to influence the price of housing in the first place. but if you really want to bring down prices in a tight market, the best solution is to make it easier to build new (and especially denser) stuff. many cities could achieve this "simply" by relaxing zoning restrictions, but if necessary, they could go so far as to subsidize high-density developments. in the much more rare case that prices are collapsing, a city could be more aggressive in condemning dangerous structures.
Dropping property prices shouldn't even be an issue for owners. Property value and thereby property taxes should also go down. As long as they can cover that, then they can continue to own the property. Except in reality everyone is actually leveraged against their property and don't own outright. In which case, sounds like their leveraged risk failed and losing the property is supposed to be the outcome of that. And the new buyer can get it at a cheaper and more maintainable price.
I want to be clear that I'm discussing business owners of commercial property -- including residential rentals. Obviously the above is less desirable when we're talking about real people becoming homeless. But no one is going homeless if a business loses a leveraged property to another buyer.
I'm sure there are some subtleties I'm missing, but this has always struck me as a little odd. why do we subsidize agricultural production and then turn around and also pay farmers not to use fields to stop the price from falling too low?
also a price collapse isn't necessarily cataclysmic for someone with a mortgage. as long as they can keep making the monthly payments, nothing immediately changes. it's only a problem if you need to sell or if the prices never recover.
Basically, you don’t want to pay 1$ to farmers per ton of corn just to lower the price of a ton of corn by 1$. The goal is to hand that dollar to the farmers not the general public.
Farm fields need to be left fallow every four years or so to replenish the soil
https://en.m.wikipedia.org/wiki/Fallow
>Fallow is a farming technique in which arable land is left without sowing for one or more vegetative cycles. The goal of fallowing is to allow the land to recover and store organic matter while retaining moisture and disrupting the lifecycles of pathogens by temporarily removing their hosts.
Fallow fields also tend to be good habitat for small mammals, which in turn draws in birds of prey and stuff and provides habitat for them.
These guys go a step further
They work with farmers and pay them to actually plant native grasses and nitrogen fixing cover crops for a couple years to allow natural habitat to develop.
As far as I remember, those farmers tend to have a couple fields they rotate every 4 years or so. Leaving one fallow with natural grasses while planting the others with crops.
Our generation is unique in the history of the world in the social and cultural chasm between the vast majority of first-world people and the agricultural systems that generate their food. Practically everything written off-the-top on agricultural sciences and practices by this generation by the average smart person on these sites, although it sounds simple and logical, is somewhere between naive and wrong. A hundred years ago this wasn’t true. It is now.
As analogies, it is not worth the off-topic thread to clarify things.
On actual practices, farmers have better things to do than correct posters on these sites. It’s harvest season for most of them, they have enough problems. Although bean prices are up, so many are smiling...
I think a good example of a highly elastic good is hamburgers. Is McDonalds raises burger prices by 300% there a ton of other options for consumers to switch to and sales will drop.
The problem we have then is that it's getting paid for by insurance, and we don't have a good mechanism to distinguish between essential things and merely new things. If somebody comes up with the cure for cancer, letting them soak the insurance companies for 20 years is a fair trade. If somebody comes up with a pill that does the same thing as the combination of two pills that had been standard practice previously, but can convince doctors to prescribe the new thing, letting them soak the insurance companies for 20 years is some kind of regulatory failure.
You'll notice that even over the counter non patented brand name drugs are more expensive than the generics - brand loyalty breeds inelasticity
The problem is that the cost savings of moving is so great that it was cheaper to pay to break the lease than it would be to stay. We saw the reverse of this before: when landlords were paying people $8,000 to move early because rent inflation meant they could charge much more than that to the next tenant.
SF is an outlier because of the income disparity, relatively low housing density, and unique climate & economic opportunity available there.
What's the law on this? I've read that the landlord is required to make a good faith effort to replace you, but if they can't (or if they can't recoup the costs), you are on the hook.
So if the cost is 32% lower and the landlord can only find a tenant willing to pay that much, it seems like you are responsible for the 32% for the remaining months of the lease - which is no better than if you just hadn't moved. And that's not even including the fact that the place might be on the market for months.
Most leases in SF do not have buyout clauses of this form I believe.
I know more than a few people from SF who were paid to break their leases. More churn means more "market adjustments" for rent prices, and market adjustment historically favored landlords.
Buyout clauses are not symmetric and are uncommon in SF.
In the context you described, both the tenant and the landlord have incentives: the landlord wants to pay you to break the lease so they can charge higher prices, the tenant might want to accept the money. The landlord doesn't have to have any clause in the lease whatsoever to make this offer because you aren't obligated to accept it.
On the other hand, in the current market the landlord has no incentive to accept an offer that is less than what they feel like they will lose by you leaving. Since the market has collapsed, they'll lose quite a bit.
I don't see the math adding up to making money by breaking out of the lease in SF - unless the prices fall considerably more.
Right, which is why it makes sense that landlords would allow tenants to break leases for a fee. The landlord gets two/three months of rent from the current tenant, plus they have a waiting list of people and will have the unit moved into within a few days paying higher rent.
So the benefits to the landlord is more money. They get to legally double-charge for rent and raise rent prices on an accelerated schedule at the cost of one or two days of lost occupancy.
The only time this doesn't benefit the landlords is when rent prices collapse. But considering SF rent prices have been inflating at a double digit annual clip for a decade or more now, I doubt any landlord considered a drop in rent prices to be possible.
Here's the difference: the landlord can already choose release you from your lease if you pay a fee, there doesn't have to be a clause about that.
Adding a clause to the lease forces the landlord to let you leave if you pay the money, which in situations like this can hurt the landlord quite a bit.
So there's really no upside and only a downside. The only time you'd need to include a clause like that is to make the lease more attractive, which in SF until recently has not been necessary.
Your understanding is correct, at least in general. If the tenant moves out and stops paying rent, the landlord has a claim for breach of contract. The landlord, however, must try to mitigate his damages by renting the property to someone else. The breaching tenant will be liable for vacancy costs as well as costs of finding a new tenant. If fair market value has gone down and the landlord can’t find a new tenant at the old rate, then the breaching tenant will be liable for the difference in the remainder of the lease term.
There may be statutory exceptions that allow a tenant to break a lease without liability in some circumstances. They’re things like military service, domestic violence, unsafe property, or landlord harassment. See this article for more info for California: https://www.nolo.com/legal-encyclopedia/tenants-right-break-...
You'd need inelastic demand for this, not inelastic supply.
That's a fair point. With inelastic demand and elastic supply, you'd expect to see expanding supply, not skyrocketing prices.
But if we're defining the circumstances to be a "shortage", are we defining away the possibility of expanding supply?
Demand is also elastic at least in the sense that people get bigger houses / move on to their own earlier / get roommates depending on the situation.
And geographically people spread out further if prices get high or move in from neighbouring locales which can be seen as demand elasticity if looked at from pov of a local housing market.
For me and most people I know when the landlord came asking about renewal (London is all about yearly contracts) for a similar price or more, he was told to f* off. When everybody is doing that, rent is going down.
In a sense the perception of the market is driving the market. The virus is affecting 90% of the population, it's not just hitting the margin.
I say landlord but it's very often a letting agency (taking commission for finding tenants), the landlord is someone abroad or an investment company that's nowhere to be seen. They don't have each other interest at heart.
The lifestyle advantage to walking around as your primary source of commute is so significant that I couldn't imagine ever going back.
If the bars, clubs, gyms, and even beaches shut down why stay if you are renting at market rate. It’s literally cheaper to move your belongings into storage and move into a vacation home with friends.
Also most sf apartments don’t have office space for all the tenants.
I don't live in the bay area and pay half the rent for three times the space in Boston... not exactly a small town... the Bay Area was already unattractive for me financially and I have an advanced degree in an engineering field.
Your effective rent _did_ drop, but landlords did it by offering 2-3 months of free rent on a one-year lease (with old rates applying.) It doesn't take Nostradamus to see what happens in 12 months: maximum allowed rent increase and no more sweetheart deals, meaning an effective increase of like 35% (or move again to try and get another deal somewhere else.)
It wasn't worth it to me, so now I'm paying less than half my previous rent for around 2x as much space in SLC.
Given region as a large portion of young/single professionals, I believe it. What you pay to move/break a lease is a fraction of what you’d save after a few months of “normal” rent. Or no rent if you’re going to stay with your parents. It will be relatively easy to move back when they need to, and prices will be better. This group has no deep local community dependancies (eg family, childcare, ete). and is still probably rather nomadic from their college days.
I personally live in Texas, lower COL, but I am tied into my local community due to family, owning my home, and general entrenchment type stuff that comes with age. Otherwise I’d have bailed in April for a rural or expat setting.
I work locally and telecommute now, but I used to commute regularly to the Boston and NYC metro areas with commute times similar to what I hear about from some colleagues in the Bay area. 2 hours on Amtrak (+10m drive) is much more pleasant than 90 minutes in the car to me. The haul to Boston was truly awful, but the pay was too good to pass up.
As for the costs -- I cheat a bit. I've been able to build more equity over the years and refinanced into lower LTVs as time and rates went down. I bought my first house as a student at a SUNY school -- my mortgage was about the same as a "student ghetto" apartment. This house I bought about 15 years ago. In my urban neighborhood, houses sell for about $135 sqft today. In the suburbs, it's about 30% more, and you are basically paying for better schools.
You can get a small, nice house in a place like Fairport, NY for $150k. I don't know that area super well, but you might find lower costs in an adjacent county without the tax/infrastructure burden of Rochester.
However, for a long time SF has been a place of extreme price distortion because of low (~no) new construction and huge concentration of high paying jobs. The result is many many people feeling trapped there way beyond where it makes sense for their lives. If you are single and living with roommates, making $200K at Twitter, then great! SF is awesome! But when you have two little kids, and/or you just aren't making that much, in a place where small houses are > $2M things are very different. That's me BTW. We hung on for 6 years after having kids and in that time almost all couples with kids we were friends with left. The people we knew who stayed were either much wealthier (had nice exit from previous company) or were really trapped and talked constantly about leaving.
So honestly it does make sense to me. Somewhat anecdotally, I personally know about 15 people who have left since April (including me, SLC is freaking awesome!). For comparison, I personally know exactly 2 people who've had covid. So yeah lots of people really are leaving and the closed bars are just a small factor (IMO), being able to finally move is the much bigger change driving this migration.
I don't think SF will die but rents and home prices coming back down to earth will be a very good thing for the city (my landlord bought the building in 1981 and was charging us $4K/mo for our 900sqft 2br flat, I won't feel bad for him if that deflates to $2500/mo where it should be). The ultra high prices have slowly gutted large parts of the city of anyone but the young or wealthy, mostly tech people. Maybe in a few years SF will be more affordable and consequently a much more diverse city again. That would be great IMO.
I don't know of any "regular" people who stayed in the bay, except for a relative who's stuck there because of shared custody over kids with an ex and can't practically move. She'd like to though.
Disclaimer: I'm from the Denver metro so am obviously biased here. Also please don't move here because housing is expensive enough ;)
https://www.sfgate.com/renotahoe/article/bay-area-transients...
Changing your question a bit: Given that prices here in Portland (and Seattle) are relatively high now (though not nearly so much as SV) what are some other lower cost alternatives on or near the west coast? Maybe Spokane. Possibly Olympia. Eugene? Though now we're getting into smaller urban areas.
If SV workers move to a state that welcomes newcomers instead of punishing them don't expect the same meteoric property increases.
For us, a lot of our family actually is in SF or Seattle. We're a skiing/biking family and I need to be in SF pretty regularly (but not daily) so SLC was the obvious choice. Portland was a candidate because it also has short flights to SF but I figured if we were going to move I wanted world class skiing and biking, in my backdoor, not just decent skiing 1.5hrs away.
A major advantage of renting (over owning) is being able to move when your lease is up. If the WFH thing blows over you can always move back at that point but at least you'll have saved yourself X months of expensive rent.
I don’t get it. The pandemic will get under control, and people will go back to offices. Will employers require 5x per week in office, or 2-3x per week, or perm WFH?
Personally I'm already out in an exurb and had given up a permanent desk. But I don't expect to ever be in a permanent office again.
https://rentals.ca/national-rent-report
(Detached home prices? Up 10.8%, to an average of $1.14 million CAD. Sigh.)
Not surprised to see Ottawa up a bit. Still pretty flat, but I have definitely known people who have moved there for the rent, or to buy.
On the plus side, our landlord is doing everything in his power to keep us happy, for the first time.
https://www.seattletimes.com/seattle-news/data/more-than-1-i...
I wouldn't be surprised if this is how people in South Seattle deal with living in South Seattle, or in downtown (e.g. capital hill), the schools really aren't great there. The schools don't get good until you hit Queen Anne, Magnolia, Ballard, Wallingford, Green Lake, north of UW (Roosevelt is where all the UW professors send their kids), but then they aren't so great again in north (of 85th) Seattle (not as bad as South Seattle, however). I'm not sure how even the reputation of South Seattle is either; my cousins went to West Seattle high school and they had pretty good experiences.
For SF / SV readers: Ballard is a hip Seattle neighborhood, somewhat like Hayes Valley but also near a beach and bike paths. My house is new construction and walking distance to everything. I paid list price.
And yet the skyscrapers and office buildings are still going up. The construction boom hasn't mitigated. Seattle isn't doing a good job at chasing money away.
> People are growing tired of the messy streets, needles are tents are spreading as the city ignores the problem.
It's just a handful of streets. It's certainly not endemic to the city. 99.99% of seattle doesn't have that issue. Unfortunately for seattle, that problem is concentrated around the touristy section.
> On the plus side, our landlord is doing everything in his power to keep us happy, for the first time.
Is he lowering the rent?
I don't have skin in the game here, but I noticed this statement, which I think isn't right. You need to consider that commercial construction, skyscrapers no less, take years. From conception to funding to planning to approvals to building, the lag is long.
So long, in fact that some have come up with the (controversial, not saying it's correct) "Skyscraper Index" which argues that historically, peak skyscraper height correlated with the worst economic dips in the economic cycles.
Latency is huge. No one thought up COVID, WFH or even CHAZ when they were standing around plastic models of plastic buildings.
> So long, in fact that some have come up with the (controversial, not saying it's correct) "Skyscraper Index" which argues that historically, peak skyscraper height correlated with the worst economic dips in the economic cycles.
Considering that none of these buildings are very tall, we are fairly safe then.
But I think this slow down will be useful in the long run: Downtown Seattle is currently turning into office space for Amazon without much for anyone else anymore. Especially compared to downtown Portland, which is a much better place to live (more retail and services, better access MAX). The boom was really going in the wrong direction, it would be nice if it could be corrected.
I was trying to figure out how something "craters" up
We have 3 kids and we were in a rent controlled 2BR in the Richmond district, but we had no w/d and the landlord was increasingly hostile.
At the end of the day my mortgage is $4200/mo which is about what we would have paid for an okay 2BR, probably without a yard.
My wife does not work right now and a house in SF was out of reach. We did see one 850 sq ft house in Portola District sell for below 850k in the between May and September. Everything else under 900k is either 1BR, 650 sq ft 2BR, or a TIC.
Quote from the article, Google translation:
> Jayson Hill recently stopped by his old apartment. He didn't feel sad that he hadn't lived in San Francisco since the end of August. Instead, he thought of all the things he won't miss: the dealers on every corner who go about their business so bluntly that passers-by can see money and drugs change hands. The syringes lying around everywhere. The human feces on the street and the unbearable smell of sewers. Hill once saw a corpse on the sidewalk who had obviously died of an overdose, a coroner had just come to the scene. Hill ran into drug addicts so often that he learned how to give Narcan, an antidote to heroin and other opiates.
> Hill was once threatened on the street and was increasingly afraid to leave his house in the dark. "It was starting to feel like a terrible nightmare," says Hill. During a farewell visit to his old apartment building, he heard that ten other former neighbors had given up their apartments.
> Nevertheless, some companies are now adjusting to the fact that they will need less space in San Francisco in the future than expected. Pinterest has accepted a contract penalty of almost 90 million dollars to get out of a rental agreement in a new office building. Twitter has just offered part of its headquarters to sublet. CEO Jack Dorsey has already said before that he no longer wants to be as focused as he has been in San Francisco. Other companies are also loosening their ties to the city. When the software company Oracle announced that it was relocating its annual mega-conference "Open World" to Las Vegas, the reason for this was not very flattering: It was not only the costs that were decisive for this decision, but also the desperate conditions on the streets of San Francisco.
[0] https://www.faz.net/aktuell/wirtschaft/obdachlose-und-drogen...
Having a serious problem with drugs in your area does not mean some people buying weed every now and then. It infects and ruins entire communities due to the effects of extremely addictive narcotics.
These are not intersectionally-educated feminists in coffeeshops distributing sustainably-sourced organic heroin at cost, here.
There's no 'lesson to be learned' from observing a drug transaction or living next to a drug corner, which is impled by your statement of knowing about society's failures.
Portland uses a combined sewage overflow system (CSO). When there is a heavy rain, it used to be sewage would pour into the Willamette river.
However, for the past 10 years the city has been installing rain gardens that contain water storage devices that allow flash rain to be collected like a capacitor and then slowly drain into the ground after. [1]
These have had a big impact, not only in reducing or eliminated sewage spills into the river, but also reducing the amount of storm water being processed by sewage treatment plants.
As kids we'd boogie board and paddle in these.
Once the buffer is gone, the whole system dramatically collapses to stop-go traffic jam.
It's why (theoretically) automated highway driving can increase the car throughput: they can gain foreknowledge and better "system planning" via mesh communication and consensus (they are motivated because without consensus the system crashes to traffic jam), and probably/possibly follow each other much more closely to maximize the use of the concrete geography.
There is a smaller group of buyers, investors, of the inelastic type - who if they run away, will cause a market to plummet. They are the opposite of price sensitive, they're maybe from overseas snapping up property at 'above asking' because they need to get $1M out of their countries and they're looking for any kind of return that's reasonable.
Consider 1% interest rates in a foreign country (or region within the country) and possibly a government who may come and confiscate wealth? This is a risky proposition for the burgeoning international middle class.
And of course, the cohort of 'IPO winners' who are less elastic in their acquisitions as well.
These 'inelastic buyers' (local, regional, foreign) are important because they are 'strong signals' to the market for price validation. Consider that nobody knows objectively how much a home should be valued at. Everyone is 'looking down the street' to see how some other property sold which is used as a primary reference. In a 'sea of ambiguity' then the 'inelastic/confident' buyers will anchor the prices. And if they don't care (i.e. inelastic), then then prices go up, way up.
The confluence of:
a) Low interest rates b) Globalism c) The 'belief' that real estate will never go down d) Lack of capital controls and tons of corruption in one regime exporting to another with a different set of rules which creates huge asymmetries (really part of #2) e) Expanding local economy.
Means real estate will go insane.
The numbers for SF are 4-6% [1] which is actually quite high, similar numbers for Vancouver and Toronto - and this only includes international buyers, whereas in the Valley there is obviously a cohort of IPO Winners.
It also means: there will be no local culture. Almost all citizens who were born and raised in an area will be pushed out over the course of their lives so local ideas, customs, language, norms etc. go away. This is not accounted for in our economic models. Edit: FYI the newcomers in the expanding economy won't be these 'inelastic buyers' who are a small cohort and may not be residents anyhow - newcomers will be regional/national/international workers, but the side effect is the same. The Silicon Valley is not a normal community, it's more like a 'workplace residence'.
2)The issue with the traffic analogy - is that some drivers are considerably more likely to cause problems than others.
2-3 break-heavy drivers who are slow to catch up can cause a backlog.
[1] https://www.sfweekly.com/news/how-much-s-f-real-estate-do-we...
[2] https://phys.org/news/2020-09-foreign-homes-impact-prices.ht...
It's true that investors are attracted to Bay Area real estate, because the government has dedicated itself to making real property have outrageous risk-free returns, but putting "foreign" in front of "investors" is just baseless. Go look at the press release from when Dinerstein bought several large apartment buildings in Berkeley a year ago. Why did they do it? Quoting the buyer, they wanted to be "in a market that has historically had a very high barrier to entry.” In other words, in a market where the government is too stupid to build houses. This has nothing to do with money laundering.
My aunt in West Seattle had people make unsolicited bids for her house (that wasn’t in the market), but these people were Indian (and they could have as easily been Chinese, Russian, American, etc...).
If you got a racist narrative out of my comment, you were completely missing the point.
That there are 'differences' in are world is the uniquely qualifying aspect of diversity itself. 'Diversity' is not 'racist'.
2) That foreign ownership is a primary factor in the rise of home prices in SF, Van, Toronto is completely unambiguous. There's plenty of evidence. The degree of impact is still debatable, but not that it's a major influence. [2]
From those articles you can see the type of demand is 'inelastic' - this is key to understand because it's not just 'a few more buyers'. 2-8% foreign ownership wouldn't mean much at all if they represented the 'same type of buyer' as local buyers. It would be just a small nudge in demand. But the terms they are seeking are completely different and the inelasticity is what makes their kind of demand potent.
3) 'Yellow Peril' (?!?) holy camole. There are foreign buyers from all over the world, it's a big place.
4) This is not just an SF phenom. New Zealand has banned foreign ownership [3]
[1] https://vancouver.ca/home-property-development/empty-homes-t...
[2] https://phys.org/news/2020-09-foreign-homes-impact-prices.ht...
[3] https://www.thestar.com/opinion/contributors/thebigdebate/20...
'Foreign' mostly means 'Foreign'.
There just aren't a ton of Texans looking to buy up property in SF because 1) inequality, much as we may not think it's good in the US, is actually not that extreme and 2) places with extreme inequality and hyper concentrations of wealth tend to also be very corrupt places where private capital is likely to take flight.
The 'non resident buyers' in SF/Van/Toronto are going to be from China, India, Russia, some other places like that, not Texas.
Obviously, it takes on different characteristics, depending on.
Florida is a domestic getaway and retirement spot for Americans, so it's a different kind of place.
Non high-growth places like Van and Toronto have large foreign populations which act as points of entry. Chicago, Montreal, Portland ... do not.
SF/Valley has a very unique characteristic of IPO Winners and 'local super high net worth' individuals that's hard to factor - and of course, it's not NY with the possibility of rapid expansion.
I mean, are we just ignoring REITs for the purposes of this thread? TPG and Dinerstein and other domestic interests (I only chose these two because they are from Texas, to directly address your point) have dumped tens of billions of dollars into SF property holdings.
Like jeffbee says below: if you take just a little supply or demand out of the system, it can massively swing. As an example, in addition to the flight of many renters, single-family homes are up year over year.
But the longer I've worked for big companies, the less I think a big company needs these.
There are departments for new ideas, they can be calculated for profitability by a different department.
An engineer has a great idea from brainstorming with coworkers, how often does that make it into production? Instead of focusing on the job, the Engineer is working on a project that never happens.
I guess that sounds pessimistic, but I've rarely seen anything come from the bottom up.
That's what the cycle will look like.
Like everything else in tech, the overzealousness about remoting is a partial fad, that will swing too far, and then you'll have to endure 487 articles on HN about how remoting was the wrong way to go ("Why remoting was the wrong choice for us" says the future Medium post) and in-person dynamics are superior in every way. Tech is nothing if not a fad chasing perma teenager constantly repeating the same mistakes over and over again.
There will be a lot of anecdotal evidence presented over the next few months, but I suspect it will be tied to political agendas. There’s a lot of money and economic dislocation at stake if downtown real estate, or commercial real estate in general, suffers a structural drop in value, so I’d expect those interests, along with mayors, will marshal their direct or indirect PR minions to talk down WFH.
Cutting through that fog will be worth it for those parents who, saved from (some of) the commute, have the energy and time to build a better family life.
On the other hand, there are some benefits to formalizing things. For example, by being more rigorous in defining an approach to a problem you can more easily identify roadblocks. Also I think some people I work with prefer articulating themselves over text as opposed to face to face, so for them serendipity (in terms of creative output) is probably actually improved.
We have tried to "manufacture serendipity" by having unstructured video chats but it usually ends up feeling cliquey (too small groups of friends, people feel excluded) or too awkward (too many people, not enough rapport for conversation to flow easily). I think the problem of building rapport is the biggest issue.
[0]: https://www.rentcafe.com/average-rent-market-trends/us/wi/ma...
Just because your tastes are different, it doesn't mean most other people agree with you. For some it does make rational sense to stay, and for others rationality isn't the driving force, and there's nothing wrong with that.
(Though I guess you said "SFO". I wouldn't want to live in that airport either.)
Name another major city where you can get amazing food, have a bonfire on the beach with your dog, and enjoy views of the ocean and bridges like you can here. Its really the most European of the US cities.
It is expensive. It is dirty and dingy in places. It does have a homelessness problem (what major city doesn't?). It is all these things and still one of the most desirable places to live in the US. It must have a lot to offer to outweigh all those cons - and does.
Asking out of cluelessness and as a non-Californian: why is this better?
LA is 4 million people, SF 800k people. There are very different cities.
I did not know that SF was actually that tiny. I guess influence is not necessary proportional to size.
[1] https://www.sfchronicle.com/business/article/Yes-people-are-...
Also, the article never stated if neighboring counties had decreased or increased aggregate tax receipts-- it only talked about online sales tax, which is a subset of all sales taxes collected:
> But eight of the counties — everywhere but San Francisco — saw major jumps in online sales taxes, as high as 36% for Contra Costa County.
When the businesses closed it became the opposite of a fun city. Restaurants and bars have been shut down and only a few have started to reopen. Many Parks outside of The city have had their parking lots closed. The city itself started doing massive road renovations which seem to be in every neighborhood. Helping the homeless seem to become less of a priority. All of the real problems that people covered up by going to shows and having a good time at restaurants and parks and bars became quite apparent.
I don’t think San Francisco will recover for a long time.
Housing prices, local politics, just about everything is gonna suck real bad for the people in the destination locales because a bunch of people with more money than them are showing up and trying to tell them what to do.
Weak topsoil because of too few roots leads to a dust bowl like scenario.
Because for a long time it was cheap by California standards. Same story with Denver, Boulder, now Boise, etc. etc.
I know it's a sentiment I've expressed to friends and family: I bought a house last year and I've repeatedly thought "boy I'm sure glad I'm trapped in a single-family home with a nice backyard for a year, rather than in my old apartment for a year". I would have been climbing the walls there.
Of course there are more factors in single-family home prices as well: interest rates are directly tied to how much money people can afford to borrow, so the rate reductions this summer drive a surge in housing prices, and generally the fed injected a ton of money into the financial system that is sloshing around looking for safe places to park, and housing is a very safe place to do that. There are a lot of properties being bought up by investment firms to rent out.
I'm from Texas, moved to CA for a number of years, and have since returned to TX. Things like no state income tax and lower sales tax are major attractions, add to that the dirt cheap prices of property in comparison to CA. There are other things that are cheaper that just make day-to-day life easier. Fuel prices are much cheaper in TX. Auto registration fees are cheaper. In TX, my Corolla was <$75 per year while in CA it was >$400. When I registered my car in CA, I was required to pay taxes on something purchased in another state. (Why CA limits this tax/ransom to cars is a real question. Why not any large ticket purchases like computers,washer/dryer,fridges,etc.)
TL;DR - It's pretty widespread. TX population is rapidly increasing
Technically they do. You’re supposed to declare purchases on your taxes and pay the “use tax” on them. It’s just that you can’t get away with not paying the tax on a car so it’s easier to enforce.
Not having any protections or laws supporting laborers help make things cheaper too. No parental/sick leave, no per day overtime maximums, no mandatory break times, no non compete ban, lower minimum wages, etc.
Not that it’s the only reason, but I notice it to be a trend in “low cost” states. The exception seems to be WA, which has decent labor protections, but not quite as good as CA.
Theoretically, I agree it's possible to have too much worker protection, but it's a laughable notion in the US where pretty much all but a handful of states have no protections and "too much worker protection" is not even a remote concern.
I have a family member complaining that they cannot eat and have to stand for 8+ hours straight, a pharmacist because who is enslaved by their student loan debt, and are on the wrong side of supply and demand and there is no law that says employers need to give their employees the ability to pause and eat. So they snack on junk food in their pockets while they work.
Yes, trees regrow, but global warming is shifting rainfall away from California so trees won't regrow at the same rate as before.
To think that even in the midst of a pandemic these are the prices is patently insane. This is significantly above the median monthly wage where I live.
I've even heard of some people with roommates, which seems extraordinary to me for an adult to be doing that in a Western country.
My particular unit-type, on another floor, has fallen ~$700... I was a fool for renewing the lease.
1) Convincing company to let me work remote full time in a much cheaper city.
2) Commit to learning how much it's gonna cost me to break my lease.
Before the factors was: "This is a lot of talk in SF about falling rent, but, what, a 10% savings?" (It's a lot larger than that, even locally. Knowing I'm overpaying in my locality is enough frustration that it makes me want to move, or get a new lease, or something) And how well the company was going to handle WFH, and they've been doing fine, so, good opportunity to find a cheap place to live.
I guess I should have googled:
https://www.sfchronicle.com/business/article/SF-tenants-brea...
Not everyone sees it my way, of course, but you don't need a large drop in demand to create a large drop in price.
Sure, winter gets cold, but it's easier to handle on the cities where downtowns have pedestrian subways, and the city clears the snow. Plus there are events like Luminary Loppet.
Sure, the summer is humid, but lots of folks have basements. And offices have AC. And the lakes are still cold once you get more than two feet down.
The only things it really needs are mountains and ocean nearby. Even then, it's got some excellent areas nearby
It's SF proper seeing these drops-- not surrounding areas in the bay (at least not to anywhere near the same degree).
And just like you see the benefit of being able to travel out to those things it's also possible to travel in to SF for the things that are there-- from my perspective the things that are good about SF (like a performing arts event or a fancy restaurant) are things which I'd only partake occasionally and not every day.
Some of it is just subjective: I think the SF weather is pretty terrible compared to anywhere else in the bay-- continually cold and foggy. I can't stand the constant mind numbing noise. I can't stand the traffic, the lack of parking, and the public transit necessary to deal with it but which stops running early and poorly connects significant parts of the city.
But I don't see a reason to argue it with you: Different people have different preferences and I don't doubt that SF is great in all kinds of ways that matter to you. For me not living in SF was a trivial decision that had nothing to do with real-estate prices, and so it's easy to me to imagine how things are for people who decided otherwise but with the pandemic are finding that the trade-off they made doesn't make sense.
My point was only that there were are many people who find it generally awful and only counterbalanced by factors that, at least temporarily, now don't apply.
> Show me a place with affordable real estate and I'll show you a place that not many people want to move to.
That is a misrepresentation of the economics. Prices can shoot to the sky based on relatively modest differences between supply and demand. Some places have affordable real-estate because they're a lot less attractive, but others have more affordable real-estate because they're only slightly less attractive or because they have slightly less constrained supply, which can just be a product of geography or differences in public policy.
San Francisco is actually quite a beautiful city in many respects, especially in the more northern parts of the city. The weather is usually quite nice. There is (was?) a really good restaurant scene with pretty good cuisine in pretty much any category you could want. There's great nightlife, with a strong music scene, good theater and some great museums. It's also proximate to a bunch of really cool areas (Tahoe, Napa/Sonoma, Marin). I think there are genuinely a lot of people who really enjoy living here.
That said, there are also a ton of folks that are effectively forced to be here for work and would leave if they could. I think there are enough of these folks that want to leave that if they could, it could have a pretty sizeable impact on the rental market and the whole economy. Remember that not everyone has to leave. Even a 10% outflow could potentially tip the balance back towards a real estate market crash (or at least a correction).
I'd imagine most San Fran companies aren't going to require anywhere near the same amount of commitment to living close to the office period so you might be able to get away with living in Sacramento and driving down for one Friday a month or something.
I'm more concerned with working class people though. Anyone working a service job is sol
https://sf.curbed.com/2019/7/12/20691973/san-francisco-avera...
I never realized how small they can be.
The lead time from idea to actual property being available is very long. That is to say it is literally impossible to flatten the curve.
So why not start planning and building?
This causes weird outcomes depending on the lease length, like 13 months being significantly cheaper per month than 12, or one month (if you needed some extra time before your next place opens up) being three times the cost per month as compared to a standard lease.
Contrast that with New York. It has—in my opinion—become a finer city since the pandemic for those with the fortune of continued employment.
QuickenLoans would be the biggest employer downtown right now, not the car companies, and other tech companies have been moving in as well. Rents were exacerbated by a shortage of apartment stock, homogeneous ownership of apartments (i.e. by Dan Gilbert), and lack of affordable parking in a city where cars are still required. Rents outside the downtown area can be almost half as much because of this, despite all still within a 10-20 minute drive.
Overall, I've seen most downtown rents drop by several hundred dollars, usually by maybe a fifth of the previous amount (which seems very close to the percentage mentioned). Outside of downtown, the drops have been MUCH less steep, if at all.
Such housing abundance would be good for everybody, but change is scary, and nearly all factions in SF oppose change of all varieties, even when it would benefit them materially. Don’t know as much about why NYC has not produced enough housing to support the number of people that would prefer to live in NYC.
Pensiontracker.org
This is why I left:
I’m bullish on the W2-pocalypse and bought Facebook, did you? Facebook twisted its earnings with W2pocalypse.
Silently through the night W2’s are being slashed, this is front running the onerous taxes, fees, and small scale apocalypse that has been accumulating in California.
Let me walk you through some metrics on California.
Min. wage $12/hr
40% of California’s income tax revenue is generated by .5% of the state’s population. (the wealthy)
California’s new tax bill targets the wealthy more on top of what they’re already charged.
1% for $1M-$2M
3% for $2M-$5M
3.5% for $5M+
The worst part is that these taxes are possible for the 2020 year retroactively, meaning if you decided to stay in California under the existing tax regime, they can come after you for the new rate hike. (assuming you’re wealthy)
California’s congress is single party and this bill will likely pass according to some friends of mine who sit in legal and policy spheres.
California is aggressive in collecting taxes from moving residents in all other 49 states.
$50,000/yr or less is 60 percent of California tax filings but ~2 percent of its income tax revenue.
SFBA makes up 40% of the state’s income tax revenue but makes up only 20% of the state population California has the highest average impact fees for construction of a single-family home, at $23,455. (up to 3 times higher than other states)
25-34 year olds can’t easily own homes in the state of California. ~500k+ is the minimum to purchase a home, at least 5-10 times a yearly salary.
7.25% to 10.25% is the sales tax depending on which county you’re in. https://www.cdtfa.ca.gov/formspubs/cdtfa95.pdf
The bottom 20% pay 7% of their <23k/yr incomes on sales tax.
The state’s pension unfunded liabilities are estimated to total $93.1 billion ($59.7 billion at CalPERS for state employee pensions and $33.4 billion at CalSTRS for teachers’ pensions) California has some of the highest electricity costs, it will go green and the price will go to $0.25-$0.40/kwh in the next 2-4 years likely.
In some cases, your electricity rate can be $0.54/kwh. CA taxes will be almost double the 2nd highest state. Free healthcare for everyone, including illegal alien immigrant violent criminals.
Gov. releasing inmates, defunding / slashing police forces, 3x the per capita welfare spending of the nation, sanctuary for illegal immigrant violent criminals, reparation bills coming, business-crushing regulations, huge secular departure of companies and individuals, and traffic/smog.
According to some of my legal friends and people who talk to city controllers, the forces that be will torch Prop. 13, double property taxes, and crush real estate values.
California has a 10% sales tax in many situations.
“California’s top rate is 13.3%, astronomical for a state…
In 2016, the top 1% paid 45.8% of the state income tax revenue while accounting for 23.1% of the personal income.
The top 10% paid 78% of the total tax revenues.
The bottom 80% contributed just 10.6%."
With that said, in California, there's a lot of problems that can't be solved by simply throwing more money at it -- for instance, homelessness.
I mean, tech companies have way more males than females, I would expect that areas full of tech employees like the Bay Area would not be ideal for males trying to find partners due to the bigger competition.
Is that the case? How is the male/female ratio in those areas?
If you’re an outsider you’re considered a gentrifying techie so you already eliminated mostly anyone who is from the Bay. So now you have to date other outsiders and guess what, most of them work in tech. Most people who work in tech are male.
Your mileage may vary.
Everyone else typically does not.
The expectation is apt.
I've learned to cut such people off immediately. Nothing good can come of attempting to offer sympathy, solidarity, or compassion to someone who views you as a mustache-twirling cartoon villain.
There’s a “you’ll never be one of us” sentiment.
But while I understand why being "political" may be part of someone's identity, I am more skeptical it is needed for a techie to have "tech" as part of their identity.
Plus if you are in Santa Monica or Venice the traffic to get to other cool places is not that bad.
I found it easy to get the landlords to drop the price $200. The few landlords who refused to play ball were messaging me a month later with discounts begging me to take the place.
hard to imagine a more awkward choice of words
When an airplane hits the ground, it leaves a crater. "To Crater" is to fall precipitously or crash. In this context, it is in the age-old tradition of financial journalism of selecting exaggerated descriptors of market movement.
"Pork bellies fry in early-market trading, fall 5%."
It is generally helpful to completely remove the descriptors and replace them with "increase" or "decrease".
"San Francisco Apartment Rents Decrease 31%"
That way, you can decide for yourself whether or not it is a big deal.
That's a strange/morbid example. I would have assumed meteor for the obvious example. An airplane leaves a trench since it's speed wouldn't allow it to bury into the ground, and it's trajectory is much more in plane with the ground. Meteors on the other hand plunge deep but do not travel far laterally.
It doesn't get used very often in my experience.
As mentioned in another post, "crater up to" is a bizarre formation of words. "Rents fall by up to 31%" is perfectly understandable phrasing, but replacing "fall" with "crater" makes it sound very strange.
"San Francisco Apartment Rents Crater, up to 31%"
meaning, the rents fell drastically, by as much as 31%.
No, it wouldn't. The comma makes the “up to” phrase bizarre and detached, and does nothing to improve things. It would only make sense if it was trying to say the rents both “cratered” and somehow went up (though what the % would be measured against in that case is hard to understand.)
As a sentence, it would read better with a “by” after crater, though it would be even better (and be a more accurate title) if it dropped the “up to” and just gave a single measure of the drop rather than one end of a range. “Up to” is a clickbait term that always obscured rather than clarifies.
And that impacts rental pricing... how?