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Comment by Retric | Hacker News Reader

People blame stimulus spending, but the reduction in real economic output from COVID also has knock on effects.

Expensive condos etc derive most of their value as a symptom of a much larger and extremely productive economic system which got disrupted. Suddenly people start reevaluating basic assumptions and markets adjust in ways more complex than a simple boom bust cycle.

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(Archive link for parent article, for anyone who cant get past the paywall: https://archive.ph/uk2L8)

I agree with you, and in particular I have a worry that corporate real estate is a bloodbath whose extent is not yet revealed. WFH has destroyed the need for knowledge workers to cluster in a downtown office and all CFOs must be wondering how they can get out of their leases as soon as they expire, not only to save some costs but also to keep workers who like WFH happy (played right between HR head, CEO, and CFO, it could be touted as a benefit to employees that also saves the company money)

SFO vacancy rates are about 15% right now (source: https://www.nar.realtor/blogs/economists-outlook/metro-offic...). NYC, 13%, double pre-COVID. See the link for the data source.

There will be many ways to read this data and if I knew which way the wind was blowing I'd obviously be out there making a killing on CBRE instead of typing this post, but if this trend stays, then cities will undergo huge shifts again. I don't predict the death of the city (cities have gone from being based on geographic confluence, to defensive importance, to transport hubs, to industrial centers, to mercantile centers, to confluences of knowledge workers, and they will adapt again) but it's goijng to be a bumpy ride.

Given how behind so many metro areas were on building housing, the thing that makes the most usage sense is conversion of less in demand office space into residential space. That will eventually balance the office rents too. WFH is less of an influence if you can get office space close to residential space. Particularly in cities where a lot of people do enjoy the city social scene anyway.

great point. it seems only natural these should be converted to residential

It does, but it can be expensive enough as to be prohibitive [0]. For example, offices tend to have fewer water hookups, fewer breakers (meaning high construction costs to repurpose) and wide floors (meaning lots of windowless units).

[0]https://cre.moodysanalytics.com/insights/cre-trends/office-t...

And back to disease and drug vectors

Some of those who checked out never re-entered the productive economy. There seems to be a change in morale and motivation as well. The young professionals are paid way beyond their value just to get them on board.

how do you figure their value independent of what they're paid?

You just found out how supply and demand works

I do not believe our economy’s output exceeds that of 2019, pre-Covid. We still have supply chain issues up the wazoo. We still have disease taking out employees en masse, and for weeks at a time. Potential customers are generally in worsening financial condition. I simply can not believe that conditions are such, that the stock market should have a higher valuation than it did in 2019.

A dollar today is worth ~15% less than a dollar from 2019 so a stock that’s nominally worth the same today would actually have taken a significant hit. Which really should be part of these comparisons.

Which was at the tail end of an 11 year bull run.

Yet the dollar is absolutely crushing other currencies. Funny how that works...

The other currencies are weakening faster than the dollar. You care about what you can actually buy with a currency not just it’s exchange rate.

Which diseases?

You forgot to adjust for inflation. Take the additional 10-15% haircut off of stock prices and we’re basically right at pre-COVID peaks in the general indexes.

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