4 ms·

San Francisco's housing bubble is collapsing under its own weight

wahern 10y ago
The author's numbers don't add up: * "In San Francisco, the median house price – half sell for more, half sell for less – is $1.37 million" * "The monthly mortgage payment for the median house in San Francisco, after a 20% down payment and at the prevailing rock-bottom mortgage rates, is $6,740 per month" Bankrate.com says the average (not rock bottom) 30-year fixed-rate jumbo mortgage is about 3.9% today (August 17th). Wellsfargo.com actually quotes an APR of 3.6% on a 30-year jumbo, which corroborates as that's probably closer to rock bottom. Using Google's mortgage calculator, a 30-year mortgage @ 3.9% on a principal of approx. $1.1m ($1.37m - 20%) comes to a monthly payment of approx. $5,200. The quoted figure couldn't have been inclusive of taxes, because in the next paragraph he emphasizes that monthly payments would be even more with tax and insurance. But in any event, the rate in SF is about 1.18% (at high end) which brings a monthly mortgage + tax to approx. $6600 (rounded up). I don't mean to contend with his main point, but it's sloppy and disingenuous to fudge and exaggerate these numbers. It also calls into question his other numbers. And as a rhetorical matter there's hardly any need as nobody disputes the severity of the situation. Maybe I missed something. But even so, San Francisco offers other options. For example, it's one of the few places in the country where a bank will finance the old common law form of ownership, tenancy in common (TIC). TIC is similar to a condo, but you own the building in common with the other tenants, and use collateral contracts to stipulate that each tenant is limited to occupying his portion of the property.[1] This happened because San Francisco restricts the number of condo conversions each year, so lawyers and banks revived the TIC concept as a sort of legal hack. A TIC unit will sell for considerably less than a comparable condo. [1] A condo is the reverse: each owner has title only to his unit, and contracts and other entitlements are used to spread responsibility for maintenance of shared spaces and the building as a whole.
- dllthomas 10y ago
  I don't think it makes sense to expect the median mortgage to be for the median home. For one, all cash sales would appear in the latter data set but not the former.
  - wahern 10y ago
    That's a good point. But in that case the author's phrasing is very misleading. "The monthly mortgage payment for the median house in San Francisco" implies he's calculating the payment from the median price he quoted in the previous sentence. But maybe he's making the same assumption regarding whatever source he's relying on.
    - dllthomas 10y ago
      Fair.
gozur88 10y ago
The title is very misleading. If San Francisco's housing bubble was really "collapsing under its own weight" prices would be falling, and he's provided no indication that's the case. Yes, teachers can't afford to live in SF unless they're bringing in a lot of equity from somewhere else. They're probably doing the same thing everyone else without at least a mid-six-figure household income is doing - commuting from the East Bay.

The author's numbers don't add up: * "In San Francisco, the median house price – half sell for more, half sell for less – is $1.37 million" * "The monthly mortgage payment for the median house in San Francisco, after a 20% down payment and at the prevailing rock-bottom mortgage rates, is $6,740 per month" Bankrate.com says the average (not rock bottom) 30-year fixed-rate jumbo mortgage is about 3.9% today (August 17th). Wellsfargo.com actually quotes an APR of 3.6% on a 30-year jumbo, which corroborates as that's probably closer to rock bottom. Using Google's mortgage calculator, a 30-year mortgage @ 3.9% on a principal of approx. $1.1m ($1.37m - 20%) comes to a monthly payment of approx. $5,200. The quoted figure couldn't have been inclusive of taxes, because in the next paragraph he emphasizes that monthly payments would be even more with tax and insurance. But in any event, the rate in SF is about 1.18% (at high end) which brings a monthly mortgage + tax to approx. $6600 (rounded up). I don't mean to contend with his main point, but it's sloppy and disingenuous to fudge and exaggerate these numbers. It also calls into question his other numbers. And as a rhetorical matter there's hardly any need as nobody disputes the severity of the situation. Maybe I missed something. But even so, San Francisco offers other options. For example, it's one of the few places in the country where a bank will finance the old common law form of ownership, tenancy in common (TIC). TIC is similar to a condo, but you own the building in common with the other tenants, and use collateral contracts to stipulate that each tenant is limited to occupying his portion of the property.[1] This happened because San Francisco restricts the number of condo conversions each year, so lawyers and banks revived the TIC concept as a sort of legal hack. A TIC unit will sell for considerably less than a comparable condo. [1] A condo is the reverse: each owner has title only to his unit, and contracts and other entitlements are used to spread responsibility for maintenance of shared spaces and the building as a whole.

dllthomas 10y ago
I don't think it makes sense to expect the median mortgage to be for the median home. For one, all cash sales would appear in the latter data set but not the former.
- wahern 10y ago
  That's a good point. But in that case the author's phrasing is very misleading. "The monthly mortgage payment for the median house in San Francisco" implies he's calculating the payment from the median price he quoted in the previous sentence. But maybe he's making the same assumption regarding whatever source he's relying on.
  - dllthomas 10y ago
    Fair.

gozur88 10y ago

The title is very misleading. If San Francisco's housing bubble was really "collapsing under its own weight" prices would be falling, and he's provided no indication that's the case. Yes, teachers can't afford to live in SF unless they're bringing in a lot of equity from somewhere else. They're probably doing the same thing everyone else without at least a mid-six-figure household income is doing - commuting from the East Bay.