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I remember hearing a variation of this claim by rationalizers for the dot-com stock market bubble in the 90's and the housing bubble in the 00's. I recognize y

I remember hearing a variation of this claim by rationalizers for the dot-com stock market bubble in the 90's and the housing bubble in the 00's. I recognize you're not trying to rationalize this, but you've identified the common factor to each bubble: a new and unsophisticated source of investors being aided by the financial industry. With the dot-com bubble, it was daytraders and online traders generally (including me). With housing bubble, new untraditional homebuyers who bought homes with exotic mortgages. With education, student who traditionally would not have gone to college going to college. These could have all been positive examples of American upward mobility at work. But as was especially evident with the housing bubble, the financial industry turned people looking to improve their lives into consumers and, in many cases, exploited them. With rents in metropolitan areas, it seems to be driven by wealthy investors (institutional investors and wealthy foreigners) pricing marginal middle class homebuyers (e.g. yuppie millennials) out of the market and then turning around to rent to them. Renters, like tech workers and young white-collar professionals generally, can stretch to afford these rents. But they definitely have a ceiling and all of this has been fueled by a growing economy. As soon as the economy falters, aid will dry up and the roof will cave in.

tsunamifury 10y ago
Thats not the case here. The financial industry is not driving up rents and costs in San Francisco. The pure amount of private wealth pouring into the area is. Thats the dramatic shift this time around -- this isn't a bubble propped up by lending -- this is a bubble due to the fact that we are living in a time where the rich _have so much money they dont know what to do with it._
- klenwell 10y ago
  Well, true, I suppose. Demand directly is driving up rents. And San Francisco is a special case because of its geographic constraints. It is almost like a literal geographic bubble that formed on the bay there. My conclusions reflect more generally I'm seeing and experience in Southern California, which isn't quite so geographically constrained. I agree it's not the same kind of bubble we saw when strippers (to borrow the example from The Big Short) were carrying 5 mortgages in Florida. And it explains why housing prices never fell there or really here in Southern California to the extent I was expecting (and really hoping) back after the crash. Still, I imagine most of that private wealth that is pouring in there and here is either connected with the financial industry directly or indirectly. At one end, you've got the financial industry financing everything, from mattresses to cars to college education, which spurs demand and price inflation. On the other end, you've got a global wealthy elite for whom all real estate is local. They are small proportionally but still large enough in aggregate to quickly exhaust limited edition luxury items like residential property offerings in San Francisco, Vancouver, London, etc. Anyway, that's the simplified model I've been operating on for the last few years. A weird combination of the super rich shopping where they please and local middle class Americans, hopped up on credit, trying to compete with them in select desirable areas.

tsunamifury 10y ago

Thats not the case here. The financial industry is not driving up rents and costs in San Francisco. The pure amount of private wealth pouring into the area is. Thats the dramatic shift this time around -- this isn't a bubble propped up by lending -- this is a bubble due to the fact that we are living in a time where the rich _have so much money they dont know what to do with it._

klenwell 10y ago
Well, true, I suppose. Demand directly is driving up rents. And San Francisco is a special case because of its geographic constraints. It is almost like a literal geographic bubble that formed on the bay there. My conclusions reflect more generally I'm seeing and experience in Southern California, which isn't quite so geographically constrained. I agree it's not the same kind of bubble we saw when strippers (to borrow the example from The Big Short) were carrying 5 mortgages in Florida. And it explains why housing prices never fell there or really here in Southern California to the extent I was expecting (and really hoping) back after the crash. Still, I imagine most of that private wealth that is pouring in there and here is either connected with the financial industry directly or indirectly. At one end, you've got the financial industry financing everything, from mattresses to cars to college education, which spurs demand and price inflation. On the other end, you've got a global wealthy elite for whom all real estate is local. They are small proportionally but still large enough in aggregate to quickly exhaust limited edition luxury items like residential property offerings in San Francisco, Vancouver, London, etc. Anyway, that's the simplified model I've been operating on for the last few years. A weird combination of the super rich shopping where they please and local middle class Americans, hopped up on credit, trying to compete with them in select desirable areas.