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To me there's nothing really surprising here. Prices in SF are down just 5%. The pandemic is a massive negative economic event. You would think it would impact

To me there's nothing really surprising here. Prices in SF are down just 5%. The pandemic is a massive negative economic event. You would think it would impact markets like SF much stronger (50%+ drops in value considering the insanely high prices), but that just goes to show how in demand living there is. I also don't see any companies leaving, so why would residents leave? Just because of remote work? I don't buy it. Additionally, it seems there's some underlying mechanism sustaining the economy from completely collapsing. Whether it's just a factor of time, or something else I don't understand. But the stock market is sustaining, and the housing market seems to be even improving in certain areas. The bottom has to fall out from under this thing at some point, but who knows when. Impossible to tell.

deleted 6y ago
[deleted]
bpodgursky 6y ago
I think it's worth acknowledging the mental lag involved in falling home prices. If you are selling a house in SF, you're not going to sell for 50% below what the market was in Feb, six months into this crisis. Ever. It doesn't matter what the buyer thinks the fair price is -- that house is going to stay on the market for a while. Even a 5% drop is 50k or 100k at current prices. That HURTS to admit. Expecting someone to sell a house at -30% is crazy, if they have any hope of a market recovery. It will drop 5% at a time, as inventory piles up, and sellers a year into selling realize -- maybe they're not actually going to sell that house at the price they expect. Or hey, maybe none of this will happen, and the market will rebound by January. Who knows.
- hkmurakami 6y ago
  This is assuming the seller can maintain the carrying costs of the house, an assumption that is currently holding true.
  - dredmorbius 6y ago
    Which is a reason for downward-sticky moments to end in a capitulation: psychological denial prevents early sale, liquidity crunch and insolvancy necessitates a later one. Even non-distressed asset classes can be swept up in the quest for liquidity, an observation of J.K. Galbraith's in The Great Crash: 1929.
  - bluGill 6y ago
    The few who can't are those who sell for 5%, supply and demand, price drops make the supply drop. Those who can afford carrying costs seems to be selling but in practice are not because they won't accept any offers.
- claydavisss 6y ago
  You don't put your home up for sale in a falling market unless you understand where the market rate is headed - your realtor will surely discuss this early on. Home owners who "hold the line" on their home value don't have a FOR SALE sign posted during a recession! For those that are selling in a dismal market, they have surely accepted the new market dynamics. Look at it from a buyer's perspective - there's just no reason to overpay.
tinyhouse 6y ago
It's hard for many people to leave. They already built a life and probably like it in SF. But that's not the key factor. The key factor is how many new people will move in to SF in the next few years. That's a number that would be highly impacted by remote work. I don't know anything about SF but I assume it's a nice place to live. The weather is not bad, there are great universities in the area, etc. Hence it's likely that we won't see any huge drop in demand. But we're likely to see some drop in the next few years. In all major tech hubs.
aidenn0 6y ago
Right now assets valuations are sustained at least partly because the wealthy still have wealth to inveset and There Is No Alternative(TINA). If you don't buy stocks, bonds or real-estate, the only other option is to hold cash. Holding very large amounts of cash can be inconvenient for various reasons. Gold is often proposed as an alternative, but it's value is already quite high, and it's an inflation hedge, while recessions tend to be deflationary. The fact that the majority of US taxpayers got a big check, and are expected to get a second one soon is also a boost to the economy. However, mortgage delinquencies more than doubled this past quarter, so we are getting close to the point where foreclosures will happen, which will lower the prices of real-estate.
- claydavisss 6y ago
  Gold investors (like myself) assume that The Fed can only stimulate further in order to stave off deflation...but (crucially) with no hope of raising rates later, even in the face of the inevitable resulting inflation. A rise in rates would simply crater everyone who has come along with The Fed so far - virtually all consumers and corporations holding high levels of debt. In such an environment of obvious inflation and Fed paralysis, gold could go much, much higher.
  - aidenn0 6y ago
    The Fed is paralyzed in both directions though. They can't really lower the rates much either. Obviously the fact that you hold a lot of gold and I hold little gold tells a lot about which direction we think is going to matter, at least in the medium term.
  - valas 6y ago
    How do you invest in gold?
    - aidenn0 6y ago
      I don't know how GP does, but if you don't trust certificates: https://www.jmbullion.com/kilo-pamp-suisse-gold-cast-bar/ https://www.jmbullion.com/kilo-pamp-suisse-gold-cast-bar/

deleted 6y ago

[deleted]

bpodgursky 6y ago

I think it's worth acknowledging the mental lag involved in falling home prices. If you are selling a house in SF, you're not going to sell for 50% below what the market was in Feb, six months into this crisis. Ever. It doesn't matter what the buyer thinks the fair price is -- that house is going to stay on the market for a while. Even a 5% drop is 50k or 100k at current prices. That HURTS to admit. Expecting someone to sell a house at -30% is crazy, if they have any hope of a market recovery. It will drop 5% at a time, as inventory piles up, and sellers a year into selling realize -- maybe they're not actually going to sell that house at the price they expect. Or hey, maybe none of this will happen, and the market will rebound by January. Who knows.

hkmurakami 6y ago
This is assuming the seller can maintain the carrying costs of the house, an assumption that is currently holding true.
- dredmorbius 6y ago
  Which is a reason for downward-sticky moments to end in a capitulation: psychological denial prevents early sale, liquidity crunch and insolvancy necessitates a later one. Even non-distressed asset classes can be swept up in the quest for liquidity, an observation of J.K. Galbraith's in The Great Crash: 1929.
- bluGill 6y ago
  The few who can't are those who sell for 5%, supply and demand, price drops make the supply drop. Those who can afford carrying costs seems to be selling but in practice are not because they won't accept any offers.
claydavisss 6y ago
You don't put your home up for sale in a falling market unless you understand where the market rate is headed - your realtor will surely discuss this early on. Home owners who "hold the line" on their home value don't have a FOR SALE sign posted during a recession! For those that are selling in a dismal market, they have surely accepted the new market dynamics. Look at it from a buyer's perspective - there's just no reason to overpay.

tinyhouse 6y ago

It's hard for many people to leave. They already built a life and probably like it in SF. But that's not the key factor. The key factor is how many new people will move in to SF in the next few years. That's a number that would be highly impacted by remote work. I don't know anything about SF but I assume it's a nice place to live. The weather is not bad, there are great universities in the area, etc. Hence it's likely that we won't see any huge drop in demand. But we're likely to see some drop in the next few years. In all major tech hubs.

aidenn0 6y ago

Right now assets valuations are sustained at least partly because the wealthy still have wealth to inveset and There Is No Alternative(TINA). If you don't buy stocks, bonds or real-estate, the only other option is to hold cash. Holding very large amounts of cash can be inconvenient for various reasons. Gold is often proposed as an alternative, but it's value is already quite high, and it's an inflation hedge, while recessions tend to be deflationary. The fact that the majority of US taxpayers got a big check, and are expected to get a second one soon is also a boost to the economy. However, mortgage delinquencies more than doubled this past quarter, so we are getting close to the point where foreclosures will happen, which will lower the prices of real-estate.

claydavisss 6y ago
Gold investors (like myself) assume that The Fed can only stimulate further in order to stave off deflation...but (crucially) with no hope of raising rates later, even in the face of the inevitable resulting inflation. A rise in rates would simply crater everyone who has come along with The Fed so far - virtually all consumers and corporations holding high levels of debt. In such an environment of obvious inflation and Fed paralysis, gold could go much, much higher.
- aidenn0 6y ago
  The Fed is paralyzed in both directions though. They can't really lower the rates much either. Obviously the fact that you hold a lot of gold and I hold little gold tells a lot about which direction we think is going to matter, at least in the medium term.
- valas 6y ago
  How do you invest in gold?
  - aidenn0 6y ago
    I don't know how GP does, but if you don't trust certificates: https://www.jmbullion.com/kilo-pamp-suisse-gold-cast-bar/ https://www.jmbullion.com/kilo-pamp-suisse-gold-cast-bar/