5 ms·

Sell. Seriously. If you own one of these, sell. Then laugh. This real estate hyperinflation is going to destroy the very engine of class mobility and youthful

by api 13y ago

Sell. Seriously. If you own one of these, sell. Then laugh. This real estate hyperinflation is going to destroy the very engine of class mobility and youthful enthusiasm for a better life that powers the Valley. When that's gone, the Valley will decline. When the Valley declines, the local real estate bubble will pop. Want a historical example? Detroit. It once had the highest average income in the U.S., and now look at the property values there. The reasons for its collapse are different and it's unlikely that SF (which is desirable for other reasons like climate and landscape) would ever fall as far or as fast as Detroit, but it's illustrative nonetheless. It shows that one should be cautious about long-term value in overinflated one-horse-town economies. And if SF is not a one-horse-town, it soon will be. Industries other than tech will succumb to the lure of lower costs of doing business and leave.

cpursley 13y ago
As an appraiser, I agree. SELL SELL SELL. Rent in the meantime if you'd like to stay put. The economics make more sense.
- toomuchtodo 13y ago
  I wish I could short real estate.
  - codegeek 13y ago
    You can. Just short the stocks of REITs
  - btian 13y ago
    you could short real estate derivatives. just keep in mind that Federal Reserve is on the other side of the contract
  - absherwin 13y ago
    http://www.cmegroup.com/trading/real-estate/files/spcaseshiller_fact_card.pdf http://www.cmegroup.com/trading/real-estate/files/spcaseshil... Beware. The liquidity of these markets is vastly lower than that of equities. Also remember Keynes: "The market can remain irrational longer than you can stay solvent" or in this case longer than the contract durations offered.
    - phunge 13y ago
      Last I checked the Case Shiller futures are so illiquid that they're a bad trade in almost all circumstances. I believe they just never caught on.
jzawodn 13y ago
Totally. We had a townhouse in the South Bay (which has been going up very quickly too) that we sold a few month ago. We got $100k more than we would have about 9 months earlier. It's madness. (We moved a few hours away a couple years ago and had been renting it...)
timcederman 13y ago
You could sell and laugh, but then where would you live? You either get a ridiculous commute, or you have to pay exorbitant rent. Something decent runs for over $4k/month everywhere in the valley these days. Everyone said the same thing about the Valley during the last 2 bubbles, but it keeps going up. People need somewhere to live - selling now on some hypothetical crash makes living your life very difficult.
- Domenic_S 13y ago
  I sold my place in the east bay and now rent in Morgan Hill. $2900/month gets me a 4 bedroom place in a 10 year old neighborhood. My commute to SJ is 30 mins up 101.
- nawitus 13y ago
  I guess the idea is to sell, live on rent for a while, and then buy a new home after the crash. Easy to make a decent profit if house prices crash by 30%.
  - lsc 13y ago
    >I guess the idea is to sell, live on rent for a while, and then buy a new home after the crash. Easy to make a decent profit if house prices crash by 30%. yeah, if you can time markets, there's all sorts of ways to make money. Me? I refused to buy when I got my first "real job" in '98, because clearly we were in a tech bubble and a real estate bubble. I should have bought then. Even if I then sold at the depth of the crash in '08, I'd have still been ahead. I mean, I'm not saying that the current bubble is similar; all I'm saying is that seeing that it's a bubble is easy; timing that bubble is /hard/
- numbchuckskills 13y ago
  Over time however more founders might start their companies in places that are more reasonably priced and have a growing tech community (Austin/Kansas city). Investors may begin to set up a presence around these hubs outside of the valley, and eventually a shift could take place, leaving the valley a great place to live for employees of tech giants like Google, Apple etc.
UVB-76 13y ago
> When that's gone, the Valley will decline. When the Valley declines, the local real estate bubble will pop. I wouldn't be so sure of that. The appeal of a particular location as a place to live will usually long outlast the activities or culture that put that location on the map in the first instance. San Francisco is a strong brand, and demand for housing in the city is going to remain strong for a long time to come.
- afterburner 13y ago
  Yes; San Francisco was probably an interesting and desireable place to live even before anything tech related happened there.
  - Zimahl 13y ago
    Agreed, but the OP's point was that while obviously desirable it wasn't at the price that it currently stands.
    - dragonwriter 13y ago
      > Agreed, but the OP's point was that while obviously desirable it wasn't at the price that it currently stands. Median home prices (which are actually median prices of homes sold, which is important to keep track of) in California are deceptive right now because there is very little inventory for sale. What is being sold is mostly being sold at high prices, because very little is being sold at all, what is being sold tends to be sold by people who are fairly well off (and thus, to be high end) because the collapse hollowed out much of the rest of the market, and banks are a lot more reluctant to loan than they were before the crash, so the people that are able to buy tend to have lots of money. Its not a rapid rise in market value of existing real estate, or even a rapid rise in the price for like real estate.
- tomkarlo 13y ago
  It's worth noting that SF is already on it's 3rd or 4th major evolution; between the Gold Rush, the big shipbuilding days, the 1906 earthquake, the WWII period and 90's tech bubble, it's survived a series of major changes and collapses and rebuilt successfully. I don't know Detroit's history that well, but it seems like it's basically had one major act (the auto industry) and that's still playing out.
muzz 13y ago
Comparisons to Detroit have been the case for longer than I can remember. The formula appears to be: Recession -> Area is becoming Detroit Boom -> Area will be Detroit There are newspaper articles comparing Silicon Valley to Detroit going back to at least 1985...

by api 13y ago

cpursley 13y ago

As an appraiser, I agree. SELL SELL SELL. Rent in the meantime if you'd like to stay put. The economics make more sense.

toomuchtodo 13y ago
I wish I could short real estate.
- codegeek 13y ago
  You can. Just short the stocks of REITs
- btian 13y ago
  you could short real estate derivatives. just keep in mind that Federal Reserve is on the other side of the contract
- absherwin 13y ago
  http://www.cmegroup.com/trading/real-estate/files/spcaseshiller_fact_card.pdf http://www.cmegroup.com/trading/real-estate/files/spcaseshil... Beware. The liquidity of these markets is vastly lower than that of equities. Also remember Keynes: "The market can remain irrational longer than you can stay solvent" or in this case longer than the contract durations offered.
  - phunge 13y ago
    Last I checked the Case Shiller futures are so illiquid that they're a bad trade in almost all circumstances. I believe they just never caught on.

jzawodn 13y ago

Totally. We had a townhouse in the South Bay (which has been going up very quickly too) that we sold a few month ago. We got $100k more than we would have about 9 months earlier. It's madness. (We moved a few hours away a couple years ago and had been renting it...)

timcederman 13y ago

You could sell and laugh, but then where would you live? You either get a ridiculous commute, or you have to pay exorbitant rent. Something decent runs for over $4k/month everywhere in the valley these days. Everyone said the same thing about the Valley during the last 2 bubbles, but it keeps going up. People need somewhere to live - selling now on some hypothetical crash makes living your life very difficult.

Domenic_S 13y ago
I sold my place in the east bay and now rent in Morgan Hill. $2900/month gets me a 4 bedroom place in a 10 year old neighborhood. My commute to SJ is 30 mins up 101.
nawitus 13y ago
I guess the idea is to sell, live on rent for a while, and then buy a new home after the crash. Easy to make a decent profit if house prices crash by 30%.
- lsc 13y ago
  >I guess the idea is to sell, live on rent for a while, and then buy a new home after the crash. Easy to make a decent profit if house prices crash by 30%. yeah, if you can time markets, there's all sorts of ways to make money. Me? I refused to buy when I got my first "real job" in '98, because clearly we were in a tech bubble and a real estate bubble. I should have bought then. Even if I then sold at the depth of the crash in '08, I'd have still been ahead. I mean, I'm not saying that the current bubble is similar; all I'm saying is that seeing that it's a bubble is easy; timing that bubble is /hard/
numbchuckskills 13y ago
Over time however more founders might start their companies in places that are more reasonably priced and have a growing tech community (Austin/Kansas city). Investors may begin to set up a presence around these hubs outside of the valley, and eventually a shift could take place, leaving the valley a great place to live for employees of tech giants like Google, Apple etc.

UVB-76 13y ago

> When that's gone, the Valley will decline. When the Valley declines, the local real estate bubble will pop. I wouldn't be so sure of that. The appeal of a particular location as a place to live will usually long outlast the activities or culture that put that location on the map in the first instance. San Francisco is a strong brand, and demand for housing in the city is going to remain strong for a long time to come.

afterburner 13y ago
Yes; San Francisco was probably an interesting and desireable place to live even before anything tech related happened there.
- Zimahl 13y ago
  Agreed, but the OP's point was that while obviously desirable it wasn't at the price that it currently stands.
  - dragonwriter 13y ago
    > Agreed, but the OP's point was that while obviously desirable it wasn't at the price that it currently stands. Median home prices (which are actually median prices of homes sold, which is important to keep track of) in California are deceptive right now because there is very little inventory for sale. What is being sold is mostly being sold at high prices, because very little is being sold at all, what is being sold tends to be sold by people who are fairly well off (and thus, to be high end) because the collapse hollowed out much of the rest of the market, and banks are a lot more reluctant to loan than they were before the crash, so the people that are able to buy tend to have lots of money. Its not a rapid rise in market value of existing real estate, or even a rapid rise in the price for like real estate.
tomkarlo 13y ago
It's worth noting that SF is already on it's 3rd or 4th major evolution; between the Gold Rush, the big shipbuilding days, the 1906 earthquake, the WWII period and 90's tech bubble, it's survived a series of major changes and collapses and rebuilt successfully. I don't know Detroit's history that well, but it seems like it's basically had one major act (the auto industry) and that's still playing out.

muzz 13y ago

Comparisons to Detroit have been the case for longer than I can remember. The formula appears to be: Recession -> Area is becoming Detroit Boom -> Area will be Detroit There are newspaper articles comparing Silicon Valley to Detroit going back to at least 1985...