4 ms·

The price will hit a ceiling at the exact time demand = supply, and not a moment before. A worldwide markets for these homes now exists, which means the number

by cubano 10y ago

The price will hit a ceiling at the exact time demand = supply, and not a moment before. A worldwide markets for these homes now exists, which means the number of people who both want and can afford them is huge, and therefore the price will rise until that condition is no longer true. Also, I believe we are again seeing signs of loan company shenanigans which, if so, will allow easy-to-game capital to continue to chase prices upwards as well.

tomp 10y ago
The "demand=supply" argument doesn't exactly explain why a foreign billionaire would want to own an appartment exactly in San Francisco. Personally, I would buy a flat in Ibiza, Barcelona or Hawaii way before even considering SF.
- steffan 10y ago
  I suspect it is less about the “foreign billionaire” and more about the single-digit millionaires worldwide looking for an ostensibly safe place to park some money and be assured of a healthy return (or at least not a loss). It's a self-perpetuating cycle¹: people invest in real estate; prices go up; it becomes a more attractive investment. ¹Sometimes known as a “bubble”
nugget 10y ago
Given that people don't want to leave the Bay Area and don't want to be homeless, prices seem to be largely determined by how much firepower the demand side of the equation has. In the absurd scenario of 0% mortgage rates and a 100% LTV interest-only mortgage you could theoretically occupy any house you wanted indefinitely for the price of the property taxes and maintenance (and turn a profit by subleasing to roommates or tourists). 0% is an extreme but how close could we get? Japan is already close to 1%. At which point it costs $10k/year or just a bit more than $800/month for every million in housing cost. It doesn't seem fiscally healthy (but who knows), and if any significant number of people started to consume housing in this way I can't see how we avoid another 2008 style housing collapse in those areas if rates ever rise.

by cubano 10y ago

tomp 10y ago

The "demand=supply" argument doesn't exactly explain why a foreign billionaire would want to own an appartment exactly in San Francisco. Personally, I would buy a flat in Ibiza, Barcelona or Hawaii way before even considering SF.

steffan 10y ago
I suspect it is less about the “foreign billionaire” and more about the single-digit millionaires worldwide looking for an ostensibly safe place to park some money and be assured of a healthy return (or at least not a loss). It's a self-perpetuating cycle¹: people invest in real estate; prices go up; it becomes a more attractive investment. ¹Sometimes known as a “bubble”

nugget 10y ago

Given that people don't want to leave the Bay Area and don't want to be homeless, prices seem to be largely determined by how much firepower the demand side of the equation has. In the absurd scenario of 0% mortgage rates and a 100% LTV interest-only mortgage you could theoretically occupy any house you wanted indefinitely for the price of the property taxes and maintenance (and turn a profit by subleasing to roommates or tourists). 0% is an extreme but how close could we get? Japan is already close to 1%. At which point it costs $10k/year or just a bit more than $800/month for every million in housing cost. It doesn't seem fiscally healthy (but who knows), and if any significant number of people started to consume housing in this way I can't see how we avoid another 2008 style housing collapse in those areas if rates ever rise.