San Francisco 2.0 – HBO housing bubble documentary

[kev374]

Read about this on another forum, anyone seen this?

http://www.hbo.com/documentaries/san-francisco-2-0

[Jazzman]

You’d think many of those tech companies must be considering relocating if they can’t pay their employees enough to service extortionate RE prices.

[kev374]

a lot of these tech companies are fluff… yes some of them produce something of value but for each company producing something valuable there are 10 other tech companies doing nothing.

Example – that company called Bebo, the 25 year old sold it to AOL for $850 million, AOL was stupid enough to pay that much for it, he collected the money and walked away and then AOL realized that product is nothing but sh!t. He then bought it BACK from AOL for $1 million LMFAO!

[moneymaker]

I see it is directed by Nancy Pelosi’ daughter. I think it gives me relief that I don’t live there.

[Jazzman]

Obviously not the kind of “fluff” that is going to cushion a hard landing …looks inevitable. Any predictions on how this one will play out?

[Coronita]

Silly valley will always have cycles of boom and bust….Unless something drastically changes such that silly valley is no longer the center of high tech, I don’t think this cycle will really change. It will fall, and it will come back….
Check this out.

And the reason is probably because in every tech bust-boom-bust cycle, Silly Valley is the first to go through it. A lot of money flows throw the Valley. Not everyone is able to make it up there (most aren’t). And the ones that usually stay are the ones that have made it (in some shape or form). So it’s a like a gold rush. The majority of the people go their hoping to strike gold, some do, most won’t. But as long as you have that gold rush continuing, you’ll have these cycles.

And unlike other areas, they really are running out of places to build homes in silicon valley. A lot of the old cherry farms and other agricultural places have gradually been replaced by high density housing. So if anything, the land of your house is sitting on is way more valuable than the building itself.

Recently on craiglist, I got someone who asked “I’m interested in renting your place if there’s an option to buy… I said, no I never plan on selling”….

[joec]

I just looked up a lot of old places I was looking to buy back in the early 2000s and things have close to tripled. Much faster appreciation than in SD.

I agree that there is no place to build and unless SF falls into the ocean or a nuke goes off, with cash doing what it’s doing, holding bay area real estate seems not the riskiest assuming you can afford it (no crazy loans) and bought at a good time.

Course, a crash can trigger a pull back now that we are definitely at a peak, but assuming the job market doesn’t go to zero (then everyone all over the US will probably be affected in some way), you’re probably ok with holding and waiting there…at least preferably over any other place in the US…

[Coronita]

It seems like in silly valley, while there are periods of correction, the correction was nowhere near the appreciation that happened during the boom cycle prior. At least it hasn’t happened so far over the past 3 decades. Maybe some of you might be right this time. Maybe it will be different this time…or maybe not.

[Jazzman]

If you look at the Case Shiller chart for the same period as the chart above, it doesn’t look as dramatic. What is interesting is that prices have been increasing exponentially even since the 2006 peak build up.

1980-1996 = 7% pa
1996-2006 = 12% pa
2012-2015 = 24% pa

Total increase = 593%

Mortgage interest has gone in the opposite direction.

1980-2015 = -78%

In 1980, you paid around $3,000 pm for a $250k home
In 2015, you pay $7,000 for the same home now valued at $1.48m

Home prices have nearly sextupled
Interest payment declines nearly quadrupled
Mortgage payments only little more than doubled

The question is whether the inevitable crashes that follow boom cycles will eventually burst from this exponential build up exponentially.

Source: back of cigarette packet calculations publications 2015 all rights reserved

[Coronita]

You guys keep trying to rationalize and irrational market that is based on IPO/stock option wealth known in that area, more so than what mortgage interest makes a huge difference.

There’s a shitload of money flowing through the Valley, and that’s an understatement. There’s a lot of people moving there, still, and young tech people will always gravitate to that area, trying to hit the big one there. Supply of housing there is constrained, because there really isn’t that many new places to add more homes… What does supply and demand tell you in this situation? Silly valley real estate is less impacted by mortgage interest rates, and more impacted by the valuation of the “Yo!” app. Bluntly put, “poor” people rent there, and slightly less poor people depend on mortgages. My 25 year old cousin banked $1.2 million by selling his LinkedIn stock recently. He’s like a system admin. And I think that’s totally fvcking cool. Because, unless he’s an financial idiot, he did pretty well for a techie, that doesn’t have a masters, phd, mba, MD, or law degree. He’s set.

Unless you’ve lived there and have experienced how quickly some people’s fortunate can change, you just won’t understand. What is “hot” in creating millionaires there might come and go, but just as fast as something falls out of fashion, something usually starts up and replaces it a few years later. Naturally, there is a washing out/weeding out process in that eventually people who haven’t made it move out, and/or a down cycle forces them out, but those boom bust cycles do create a demand for (1) people want want to be there to catch the next craze, and (2) a select few people who have made it an can actually afford to live there.

Just ask around here in San Diego. Despite, how insanely expensive things are, you do have plenty of people from San Diego relocating back to the bay area simply because Apple or Google or Facebook threw them a pretty big bone. Ask some of the qualcomm folks that moved there, even before the layoff. Ask some of my old broadcom colleagues that did the same thing.

Is it insane and completely irrational, yeah probably. Will prices correct there, probably. Will it significantly decline, probably not. Why are you guys trying to predict when the insanity will stop? Have we not learned that as rational as we would like think things should work, the shit doesn’t always work that way. Unless the tech scene changes such that Silly Valley is no longer the tech hub, this area won’t ever stop being an expensive place to live. It would be like expecting Del Mar /LJ will correct 30-40%+, which let’s face it, those you that were expecting that to happen were pretty much wrong about that too…Come on, let’s be realistic.

[Jazzman]

^^^I think you’ve given very good reasons for why things could go pear-shaped, but your conclusion seems more influenced by lost hope.

[Coronita]

[quote=Jazzman]^^^I think you’ve given very good reasons for why things could go pear-shaped, but your conclusion seems more influenced by lost hope.[/quote]

And I think you will be wrong (again). But we’ll see. I’m not doubting there will be a correction, but you folks thinking of a massive correction I think will be disappointed (again), in as much some of you were trying to second guess the RE correction here in San Diego and thinking that the best coastal parts of SD would fall 30-40% during the RE meltdown, despite prices had already gone down 20-25% in those parts of town. Wrong there too. I find it funny you guys are so convinced of a doomsday scenario, it’s almost comical. Do you really think there won’t be some intervention if things start to do south (again)?

‘Lost hope?’ I don’t personally care either way, because personally my cost basis there is so low and I don’t care since I don’t plan on selling, ever.

[flyer]

Corrections are always possible, and, being a native Californian, I have seen many. With family all over the state, including the Bay Area, we have all been watching this show for years.

As flu said, most of us who purchased property here long ago are OK with whatever fluctuations occur, but I can completely understand how anyone(including young people who haven’t been able to buy homes here–even though they were raised here) would be hoping for one, especially in desirable areas, but I seriously doubt that it will be great enough to turn the tide enough for them to do so.

It’s great to see all of the money being made in the tech industry–especially in the Bay Area.
Several of the kids in our extended family have taken that path–but I always remind them that money can’t buy time–and that life is short–so enjoy.

[The-Shoveler]

IMO any crash were it to happen would not be near as severe as the last time

Everyone keeps thinking we are doomed to repeat the last crash when there is almost none of the conditions that really caused the last crash occurring right now (that was truly a once in a life time event).

what we have going on now is more like what happened in the 1980’s when the boomers were coming of age to buy homes, only this time its millennials.

and Please STOP BLAMING BOOMERS, look across the Aisle at you old classmates.

[spdrun]

Millenials can’t get loans that easily. And — OOPS! — looks like Fannie Mae is bleeding again. So much for those 3% down loans for everyone. Mel the Skell is begging Congress for a bailout. Something a GOP Congress isn’t likely to want to give to Obama’s stooge…

http://www.marketwatch.com/story/fannie-freddie-may-need-to-tap-treasury-fhfa-director-says-2015-11-03

Note that I’m usually liberal, but I don’t think that your average Joe is cut out to own a home, or a dog shack for that matter.

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