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It’s both. There clearly is a bubble. The Fed has essentially dumped easy money into the economy since the dotcom bust. 2008 saw another crash and again the

It’s both. There clearly is a bubble. The Fed has essentially dumped easy money into the economy since the dotcom bust. 2008 saw another crash and again the spigots were opened. It only seemed to flow to certain areas though as top down economic policy tends to do. Now as the Fed raises rates, people can borrow less and thereby afford less. We may see zero percent interest rates forever and the government stepping in to prop up asset prices like Japan, but who knows for sure. [1, 2] But California also has a unique factor, proposition 13. [3] This drastically disincentives people from moving. Palo Alto has the lowest property tax rates in the state.[4] Why move when you will pay significantly more monthly. This is especially pertinent to retirees. So no one moves which destroys market liquidity. Combine this with NIMBYism, an over abundance of protected lands, rent control, affordable housing measures and piss poor public transportation, and you get the shit storm that is the Bay Area housing market. Tech is simply a convenient excuse. There’s a reason California is building a bullet train between SF and LA, but no public transportation from the east bay to the peninsula which would help an enormous number of workers and the environment. Despite lofty rhetoric, people vote their self interests. [1] https://www.wsj.com/articles/bank-of-japans-50-billion-question-when-to-stop-buying-stocks-1515973533 https://www.wsj.com/articles/bank-of-japans-50-billion-quest... [2] https://www.zerohedge.com/news/2017-09-11/wtf-chart-day-boj-now-owns-75-japanese-etfs https://www.zerohedge.com/news/2017-09-11/wtf-chart-day-boj-... [3] https://medium.com/@michaellevinson_64108/landlords-and-heirs-why-prop-13-isnt-just-unfair-it-s-un-american-20a8597cb37b https://medium.com/@michaellevinson_64108/landlords-and-heir... [4] https://www.mercurynews.com/2016/12/01/high-priced-california-coastal-homes-have-lower-tax-rates-than-inland-houses/ https://www.mercurynews.com/2016/12/01/high-priced-californi...

icantdrive55 9y ago
The Bay Area has been increasing in value since the 70's. 1. Your bosses want to live in the better parts of San Francisco, Marin County, and certain parts if the east bay. Why--because they want only the best, and there's usually a rich daddy helping Jr. out in business, and housing. The workers will follow. 2. It has nothing to do with Prop 13. 3. The Bay Area is a nice place to live if you are wealthy. 4. The beach 45 miniutes away. Mountains are 45 minutes away. A city hootenanny is 45 minutes away. The wealthy/celebrities can go anywhere, and no one cares. It's land locked--yes. People don't want building--yes. Schools are safe. Why wouldn't property values go up? Buying real-estate in the Bay Area is as close of a sure thing as anything I betted on. It's no wonder Chinese buy our homes off the Internet.
taurath 9y ago
Prop 13 doesn't exist in Seattle, yet prices are rising as fast or faster than the bay (on a percentage basis). There the lesson is supply/demand - there is only 1 month or less of housing stock available, when 6 would be a historically median market. Everyone is going crazy to buy something as fast as possible before they get left behind. Absolutely though Prop 13 hurts liquidity in California though. There's a lot of factors, nobody can agree on them, so we're stuck with this massively overheated market.
- xapata 9y ago
  It's easy to have high percentage growth when you start from relatively small magnitudes. When I moved to Seattle from the East coast, I was surprised with how cheap everything was given all the complaints I'd heard. Seattle is catching up with the other big cities, but it's still lower cost. Especially given how new the buildings are.
- reilly3000 9y ago
  The growth management act seems to engender a similar effect. It primarily limits new construction. I think Seattle’s charms also make it sticky for its permanent residents.
  - taurath 9y ago
    The housing stock here is too low to not just hold on. There’s no guarantee you’ll get another desirable place if you sell, unless it’s for an upzone in which case you can move up from developer money.
    - deleted 9y ago
      [deleted]
- nwah1 9y ago
  Yep, Prop 13 is flagrantly unfair, but the general mechanisms by which land value rises is intrinsic to our system of land tenure. However, these windfall gains can be recycled into public coffers via the tax system and lighten tax burdens on productive activity. As a nice bonus, it would make it much harder to be an idle landlord in a prime area... the physical equivalent of a patent troll.
Bucephalus355 9y ago
Would also add that the era of “easy money” even predates 2000 and the dot-coms. You could trace this back to the Southeast Asian financial crisis of 1997, and just generally all the emerging market crises of the mid to late 90’s (Mexico, South America, Southeast Asia, Russia). One of the reasons we got the dot-com bubble, even though the Fed was aware of it, was that they were more afraid of instability from the emerging markets than a domestic bubble. That fear was certainly justified, but nonetheless the dot-com bubble was still enormous.
nradov 9y ago
Proposition 13 doesn't really discourage most retirees from moving because Propositions 60/90 allows homeowners over age 55 to transfer their base year value once. http://www.boe.ca.gov/proptaxes/faqs/propositions60_90.htm http://www.boe.ca.gov/proptaxes/faqs/propositions60_90.htm
- taysic 9y ago
  They're only able to carry that over into 11 other counties in CA that are basically the most expensive ones.
  - DrScump 9y ago
    10, effective this November.
jpster 9y ago
There is a mooted ballot initiative which could free homeowners who want to move from the financial disincentives of Prop 13. https://www.sfchronicle.com/business/networth/article/Could-a-tax-incentive-pry-empty-nesters-from-12795189.php https://www.sfchronicle.com/business/networth/article/Could-...
nxmehta 9y ago
Prop 13 is perhaps the biggest reason for the lack of supply. The other reasons you mention (zoning, NIMBYism, etc.) are also big contributors. But tech is where the demand comes from. The median home price in Santa Clara county is almost $1.3M, and ~20% of residents can afford that price. Those are tech workers. Supply has been steadily decreasing for years and years, so I don't see that problem getting solved. Therefore I think we'd need to see a significant drop in the tech industry for prices to slow down.

icantdrive55 9y ago

The Bay Area has been increasing in value since the 70's. 1. Your bosses want to live in the better parts of San Francisco, Marin County, and certain parts if the east bay. Why--because they want only the best, and there's usually a rich daddy helping Jr. out in business, and housing. The workers will follow. 2. It has nothing to do with Prop 13. 3. The Bay Area is a nice place to live if you are wealthy. 4. The beach 45 miniutes away. Mountains are 45 minutes away. A city hootenanny is 45 minutes away. The wealthy/celebrities can go anywhere, and no one cares. It's land locked--yes. People don't want building--yes. Schools are safe. Why wouldn't property values go up? Buying real-estate in the Bay Area is as close of a sure thing as anything I betted on. It's no wonder Chinese buy our homes off the Internet.

taurath 9y ago

Prop 13 doesn't exist in Seattle, yet prices are rising as fast or faster than the bay (on a percentage basis). There the lesson is supply/demand - there is only 1 month or less of housing stock available, when 6 would be a historically median market. Everyone is going crazy to buy something as fast as possible before they get left behind. Absolutely though Prop 13 hurts liquidity in California though. There's a lot of factors, nobody can agree on them, so we're stuck with this massively overheated market.

xapata 9y ago
It's easy to have high percentage growth when you start from relatively small magnitudes. When I moved to Seattle from the East coast, I was surprised with how cheap everything was given all the complaints I'd heard. Seattle is catching up with the other big cities, but it's still lower cost. Especially given how new the buildings are.
reilly3000 9y ago
The growth management act seems to engender a similar effect. It primarily limits new construction. I think Seattle’s charms also make it sticky for its permanent residents.
- taurath 9y ago
  The housing stock here is too low to not just hold on. There’s no guarantee you’ll get another desirable place if you sell, unless it’s for an upzone in which case you can move up from developer money.
  - deleted 9y ago
    [deleted]
nwah1 9y ago
Yep, Prop 13 is flagrantly unfair, but the general mechanisms by which land value rises is intrinsic to our system of land tenure. However, these windfall gains can be recycled into public coffers via the tax system and lighten tax burdens on productive activity. As a nice bonus, it would make it much harder to be an idle landlord in a prime area... the physical equivalent of a patent troll.

Bucephalus355 9y ago

Would also add that the era of “easy money” even predates 2000 and the dot-coms. You could trace this back to the Southeast Asian financial crisis of 1997, and just generally all the emerging market crises of the mid to late 90’s (Mexico, South America, Southeast Asia, Russia). One of the reasons we got the dot-com bubble, even though the Fed was aware of it, was that they were more afraid of instability from the emerging markets than a domestic bubble. That fear was certainly justified, but nonetheless the dot-com bubble was still enormous.

nradov 9y ago

Proposition 13 doesn't really discourage most retirees from moving because Propositions 60/90 allows homeowners over age 55 to transfer their base year value once. http://www.boe.ca.gov/proptaxes/faqs/propositions60_90.htm http://www.boe.ca.gov/proptaxes/faqs/propositions60_90.htm

taysic 9y ago
They're only able to carry that over into 11 other counties in CA that are basically the most expensive ones.
- DrScump 9y ago
  10, effective this November.

jpster 9y ago

There is a mooted ballot initiative which could free homeowners who want to move from the financial disincentives of Prop 13. https://www.sfchronicle.com/business/networth/article/Could-a-tax-incentive-pry-empty-nesters-from-12795189.php https://www.sfchronicle.com/business/networth/article/Could-...

nxmehta 9y ago

Prop 13 is perhaps the biggest reason for the lack of supply. The other reasons you mention (zoning, NIMBYism, etc.) are also big contributors. But tech is where the demand comes from. The median home price in Santa Clara county is almost $1.3M, and ~20% of residents can afford that price. Those are tech workers. Supply has been steadily decreasing for years and years, so I don't see that problem getting solved. Therefore I think we'd need to see a significant drop in the tech industry for prices to slow down.