patrick.net

How about considering the average income in the Bay area?

APOCALYPSEFUCK is Shostakovich says

Heraclitusstudent says

How about considering the average income in the Bay area?

wow what kind of commie duck asshole does that?

QUACK!

This article talks about demand, but not supply. What would happen if SF changed its zoning laws to allow taller construction? If 3-story structures were replaced with 40-story structures, housing supply might increase tenfold. A tenfold increase in supply might meet the demand at a much lower price point.

To put it another way, the presence of venture capital in SF has increased the price of housing, but not the price of blueberries. Why? Because people can always bring in more blueberries. The mere presence of demand does not, by itself, guarantee higher prices; the issue in SF is the intersection of high demand with artificially restricted supply.

SF is nice for a visit when the weather is nice (which is rare) but live there? - yuk.

SF has changed its laws to allow for taller construction; http://www.sfgate.com/bayarea/place/article/Transbay-plan-is-new-skyline-worth-more-shadows-3581101.php

"The increased heights would allow for a half-dozen towers of 700 to 850 feet clustered around a 1,070-foot skyscraper at First and Mission streets. That's 217 feet taller than the Transamerica Pyramid, the downtown skyline's summit since 1972."

Buster says

SF has changed its laws to allow for taller construction; http://www.sfgate.com/bayarea/place/article/Transbay-plan-is-new-skyline-worth-more-shadows-3581101.php

Where do you see a report that the laws changed? The linked article says, "a neighborhood plan as ambitious as the one that goes to the Planning Commission on Thursday...." These plans get kicked around for decades, like a soccer ball for competing patronage networks. Campaign contributions, revolving door jobs, architects in faraway places with lax accounting rules, union endorsements, NIMBY protests, etc. Even if that one neighborhood plan ever gets built, maximum value will have been extracted in the game, leaving only the minimum for actual construction quality. One neighborhood plan cannot solve the citywide supply shortage, so prices can remain artificially inflated, which is the point as far as TPTB are concerned. It's like Jenga: each player's goal is to extract more revenue and pile prices higher, until the whole thing collapses.

Buster says

Folks often make illogical comparisons. Such as why does average real estate cost upwards of $1000/SF in San Francisco, but $80/SF in a place such as Nashville, TN? Many think that because RE costs 10x more in SF vs Nashville, that real estate here is over-priced. But when you consider that venture capital investment here is hundreds of times more, than it puts a different spin on things....

(1) why not make the comparison to prior decades.. why not ask why prices are still high above the historical average. did you consider when prices were 100/sq ft. not that long ago before the bubble.

It wasnt that it was underpriced.. fact is at 100/sq ft pre bubble was priced where it should be without any self interest hype or government intervention.

(2) venture capital has been around since the 60s even as priced were more rational. Therefore there is no connection to VC capital.. unless you intend to rob them. Frankly there is little connection to SF and Santa Clara County Tech Industry at all.. people who speak of it are more likely to be migrants from East Coast big cities.

Frankly it was AFTER the great multi decade tech boom ending in year 2000 did people notice SF and Santa Clara County Tech Industry.

(3) The reason we had a Silicon valley in Santa Clara was because of Cheap land.. and labor. Today given high home prices, it makes more sense to set up shop in Tennessee or any other cities ... and certainly many Tech leaders have exactly that... that is why we have a few employees in SFBA and far more in other cities.

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The start up listed are not "Tech" .. they are Media companies.. their use of tech products are no different than a Banking/Finance.. yes even Banks use programers... Had any tech company wanted to move to SF.. they would have done so decades ago.. but we have not seen one do so.. its just not practical.

There has been a big push by vested interested both private and government to push people back in the cities.. "the great inversion"... but this is nothing more than hype.. there is nothing SF can provide what we already have in Santa Clara county.

.
.
.From the article ..

"The venture capital funds he runs are based 30 miles north, in a San Francisco building with views of the Golden Gate Bridge. A number of highly publicized start-ups like Twitter, Square, and Pinterest are also located in the heart of urban San Francisco. As Twitter co-founder Jack Dorsey tweeted last February from his new headquarters in San Francisco’s Mid-Market neighborhood, "I love the idea of an urban corporate campus with all the energy and variety that provides."

To what extent have clusters of venture capital and start-ups shifted from their traditional locations in suburban nerdistans to urban tech in bigger cities and denser urban districts?"

Its not surprising that hipsters and creative people want to live in the city.
So thats where the venture money flows.
The real Silicon valley has become home of h1b workers from India. That's just not as sexy of a story to invest in.

curious2 says

Where do you see a report that the laws changed? The linked article says, "a neighborhood plan as ambitious as the one that goes to the Planning Commission on Thursday...." These plans get kicked around for decades, like a soccer ball for competing patronage networks

Transit Center District Plan Approved by Planning Commission

http://www.spur.org/blog/2012-06-05/plan-new-transit-center-district-moves-toward-adoption

Update: Mayor Ed Lee signed the Transit Center District Plan into passage on August 8, (2012) after unanimous approval by the San Francisco Board of Supervisors.

http://www.sf-planning.org/index.aspx?recordid=94&page=2719

http://commissions.sfplanning.org/cpcmotions/2012/R18630%20TCDP_GenPlanAmendments.pdf

This is the dumbest argument that I've ever heard. Detroit has 1000 times more car factories than San Francisco. Does this mean, prices should be higher?

dunnross says

This is the dumbest argument

Not sure what you are referring to. However, vc investment is not flowing to Detroit. It is however, flowing to produce Tesla cars.

http://blogs.wsj.com/venturecapital/2009/09/15/the-money-keeps-raining-down-on-tesla-motors/

Tesla, btw, is located in Palo Alto, not in Detroit.

And how many workers has Tesla hired in SF vs. GM in Detroit?

Are these houses going to be bought by the workers or the VCs?

And, BTW:

"GM sold 2.5 million vehicles globally in the second quarter, while Tesla set a sales target of selling about 5,000 cars during the same quarter. "

And, also, keeping with the style of just about everything being overpriced in SF:

"The share price of Tesla (TSLA) has more than tripled so far this year and the company now has a market value of $14 billion. GM (GM, Fortune 500)'s market value is $50.6 billion."

thomaswong.1986 says

(1) why not make the comparison to prior decades.. why not ask why prices are still high above the historical average. did you consider when prices were 100/sq ft. not that long ago before the bubble.

What year were prices 100/sf?

thomaswong.1986 says

(2) venture capital has been around since the 60s even as priced were more rational. Therefore there is no connection to VC capital..

VC capital has increased by epic proportions since the 1960s. And as such, there is a correlation between vc money and the price of real estate in the SFBay area. thomaswong.1986 says

Frankly there is little connection to SF and Santa Clara County Tech Industry at all.

The original article states otherwise. thomaswong.1986 says

Today given high home prices, it makes more sense to set up shop in Tennessee or any other cities ... and certainly many Tech leaders have exactly that... that is why we have a few employees in SFBA and far more in other cities.

http://techcrunch.com/2012/08/27/san-francisco-tech-job-data/

http://www.techamericafoundation.org/cybercities2010-executive-summary

http://www.techamericafoundation.org/cybercities

High-tech Employment
The New York metropolitan statistical area, which includes counties from New York, New Jersey, and Pennsylvania, led the nation in high-tech employment, with 317,000 tech workers in 2009, the most recent data available at the metropolitan level.
Washington, DC, which includes counties from three states and the District of Columbia, ranked second with 293,000 tech industry workers in 2009.
San Jose/Silicon Valley, the heart of the tech industry, while not as large a metro area as New York or Washington, DC, was the third largest cybercity by number of tech industry jobs. In this report, San Jose/Silicon Valley, San Francisco, and Oakland are all considered to be separate cybercities.
Boston and Dallas-Fort Worth completed the list of the nation’s top five cybercities by employment, with 219,800 and 174,800 tech industry workers in 2009, respectively.
San Jose/Silicon Valley had the nation’s highest concentration of tech workers with almost one in three private sector jobs in the technology industry.
Huntsville ranked second by concentration of tech workers with 23 percent of its private sector workforce in the tech industry.
Boulder, Durham, and Palm Bay-Melbourne, FL rounded out the top five cybercities by concentration of high-tech workers with 22, 17, and 15 percent of their private sector workforce in the tech industry in 2009, respectively.

dunnross says

And how many workers has Tesla hired in SF vs. GM in Detroit?

Are these houses going to be bought by the workers or the VCs?

http://en.wikipedia.org/wiki/Tesla_Motors

Tesla currently employs almost 3,000 full-time employees[2] and is recruiting employees for positions in the headquarters in Palo Alto, California, at its European headquarters in Maidenhead, UK, and at an increasing number of sales facilities throughout North America and Europe.[25]

Yep, it's too bad none of these new employees can afford to buy a house anywhere close to their new job.

dunnross says

"The share price of Tesla (TSLA) has more than tripled so far this year and the company now has a market value of $14 billion. GM (GM, Fortune 500)'s market value is $50.6 billion."

GMs market cap has been rather stagnant for years and their market share is at an 88 year low. Tesla, otoh, has grown from nothing to estimated delivery of 21000 units next year.

dunnross says

Yep, it's too bad none of these new employees can afford to buy a house anywhere close to their new job.

Source?

SF property overpriced???

Property or anything is worth what someone will pay for it. There is no way I'd pay what is being asked (and paid) for the real estate in SF or LA or NY or a ton of other places I could name. However, if I ask what I consider to be a high price for my house and someone is lame brained enough to pay me that amount. Good for me, and I hope they have money left over for a good shrink.

This, of course, is one of the causes of bubbles. Someone asks a certain amount, another person buys - and often thinks they can ask more and do. The next buyer does likewise till we reach the end of the row where people finally run out of money and gain some sense and the newest owner can't find anyone willing to pay $2 million for the 900 sq foot house, in fact he can't even sell if for the $1.8 million that he bought it for. No one else wants it, it starts spiraling down until values settle to what they should have been all along. Is SF property over priced - pretty much yes.

Buster says

Source?

You mean to tell me that you need a source to show you how an automobile factory worker can't afford to buy a house in Palo Alto? Are you kidding me?

dunnross says

Buster says

Source?

You mean to tell me that you need a source to show you how an automobile factory worker can't afford to buy a house in Palo Alto? Are you kidding me?

An autoworker might be able to "afford" East Palo Alto

Buster says

GMs market cap has been rather stagnant for years and their market share is at an 88 year low. Tesla, otoh, has grown from nothing to estimated delivery of 21000 units next year.

Because some fool estimates that their sales are going to go up 10 times in the next year, I need to fork over 84 years of my life (their forward-looking PE ratio is 84), to lend them this money by buying their stock (which btw, pays $0 divident), right? And your average Tesla worker who works in Palo Alto, is supposed to buy into this story, that somehow his stock options are going to make him a fortune one day, even though he can't afford to buy anything, will rush out and buy a house in Palo Alto.

New Renter says

An autoworker might be able to "afford" East Palo Alto

Nope, I don't even think he can. The company expects him to commute from Detroit.

BTW - the Tesla factory is in Fremont (the old NUMMI plant that made Toyota corolla and Pontiac Vibe)

Buster says

dunnross says

"The share price of Tesla (TSLA) has more than tripled so far this year and the company now has a market value of $14 billion. GM (GM, Fortune 500)'s market value is $50.6 billion."

GMs market cap has been rather stagnant for years and their market share is at an 88 year low. Tesla, otoh, has grown from nothing to estimated delivery of 21000 units next year.

Yes, and when this happens (if it ever does), Tesla market cap would be higher than that of GM (which would still be selling over 500 times as many cars as Tesla), just so that their factory worker can afford to buy in East Palo Alto. Yes, you bulls are surely making lots of sense these days.

dunnross says

Nope, I don't even think he can. The company expects him to commute from Detroit.

It's not only that he can't even buy the house anywhere close to where he works, he can't even afford to buy the same car that he is building, so that his commute becomes a little bit more economical for him. The lowest priced car that Tesla has is $63K.

New Renter says

An autoworker might be able to "afford" East Palo Alto

Yes, with termite infested shacks selling at $454/sq ft, East Palo Alto has suddenly become the affordability capital of the Bay Area:

http://www.redfin.com/CA/East-Palo-Alto/2148-Ralmar-Ave-94303/home/865217

These guys are also looking for VC funding, to pay for their heroin addiction.

San Francisco will continue to be the most lucrative housing market in the country.

Heraclitusstudent says

How about considering the average income in the Bay area?

Largely irrelvant. This is not a market driven by the average person.
* 65% are renters, so the average person is a renter
* of the home owned occupied, half are off limits forever which reflects the lowest housing turnover in the country.
* Buys are driven by wealth not income. Wealthy people just buy property straight up so income is not a significant factor. Homes are driven by income at the 80% tile which is the most lucrative in the country.
* the population in San Francisco was 750K in 1950, In 2013, it is about 850K. 5M people added in the region but 100K in San Francisco. It's been built out for six decades and there will be no new single family homes ever. It's been proven to build up in measured ways. I love owning land here.

Buster says

But when you consider that venture capital investment here is hundreds of times more, than it puts a different spin on things....

SFBA has taken approx 40-50% of the countries VC spend for decades now. San Francisco makes up a bigger slice of it. It's the transition from hardware/software industry.

Whether you think employees are overpriced is irrelevant. To build a company, you have to build a product first, and there is a reason nothing is built in Nashville vs. San Francisco. The end result is start-up have to built where the success is the most probable first.

Over the last decade, SFBA has expanded north of market with additions of Twitter, Yelp, Uber, Lfyt, Square, Airbnb, Instigram, Kixeye etc. These are all 1K-3K employer. Then south of market, you have the new office park expanding south on third ave, anchored by UCSF and biotech. San Francisco is benefitting from the new industry, high paying industry centered on research and product engineering, high value add things that are not easy to relocate. This is on top of the west coast finanical center for professional services, software, finance, and banking.

SFace says

* 65% are renters, so the average person is a renter

Hey, if 65% of us are renters, why don't we just vote these ass*hole home owners out of their price propping prop 13, and all the other tax advantages they are getting. Why not increase the margin requirements on RE down-payments by 100% like they did for silver. I vote YES on all these great ideas.

And, I will also vote YES on even stricter RENT CONTROLs, so that all these ass*hole investory/landlords can't milk us for all the rent money.

Yep, looks like Silicon Valley ventures are really ramping up now. While house prices are about double of what they were in 2000, VC capital is only 1/3 of what it used to be back then.

dunnross says

And, BTW:

"GM sold 2.5 million vehicles globally in the second quarter, while Tesla set a sales target of selling about 5,000 cars during the same quarter. "

And, also, keeping with the style of just about everything being overpriced in SF:

"The share price of Tesla (TSLA) has more than tripled so far this year and the company now has a market value of $14 billion. GM (GM, Fortune 500)'s market value is $50.6 billion."

Dunross,
You're assuming people will delve deeper into the figures. Good luck with that around these parts.

http://www.zerohedge.com/news/2013-06-03/how-many-cars-must-tesla-sell-interactive-calculator-has-scary-answer

APOCALYPSEFUCK is Shostakovich says

COMMIE FUCK SHIT! Their assets, their judgement, fuck all! If they buy every house in the valley and 10000x the rents, they should be applauded for their investment savvy and relentless pursuit of maximizing their investment's value. This is Freedom's promise and glory!

Notice how I said that I would VOTE for these appeals. Unlike your dictator Ben Bernanke, the head of the f*n bank MAFIA CARTEL coming in and ramming these stupid laws down the throats of all young people who are trying to put a roof over their heads, and manipulating the price of everything in sight.

OK, you filthy duck. How much of this do you think I could fake?

Let me see the same kind of graphic from you in the next 15 minutes:

And, BTW, your 15 minutes are up. Sorry, you lost! Better luck next time.

toothfairy says

13 years of inflation?

But we had the same 13 years of inflation in Detroit, Miami, Phoenix, Las Vegas and other cities too, where prices are about the same or even lower as they were back in 2000. In fact, the things that those cities make have gone up in price much more than the things Silicon Valley makes. And, mind you, all those cities were not even 1/2 as overpriced as SF was back in 2000.

Bigsby says

Why does someone who held half a million just in gold complain so much about house prices?

Because, thanks to the FED, and 30 years of price manipulation, gold is still underpriced while housing (especially in the BA) is way overpriced.

dunnross says

Bigsby says

Why does someone who held half a million just in gold complain so much about house prices?

Because, thanks to the FED, and 30 years of price manipulation, gold is still underpriced while housing (especially in the BA) is way overpriced.

But that hardly addresses my point. You had half a million in gold and yet you rent and complain about median house prices. Presumably you could buy a multi million dollar house in cash and could have done so back in 2010 and 2011 when prices were a fair bit lower in San Jose. And yet here you are...
And why did you sell half of your holdings if you thought it was underpriced?