As I listen to the weather news, I hear that it is 105 degrees in Sacramento, and then look at my car’s temp gauge to see it’s 65 degrees in San Francisco. My superior mathematical skills allow me to quickly compute a 40-degree difference. Good Grief, Charlie Brown!
The dollar may be up versus most other currencies, but that doesn’t stop the hordes of tourists dressed in shorts and T-shirts from visiting our shores. They come not only to see the beautiful Bay and Bridge views but to also see the turn-of-the-century architecture (the last century thank you) and to see the birthplace of brands they know well like Facebook, Google, Twitter, Tesla, Yelp, et al. This is ground zero!
And then – the Cost of Housing
“Gee honey, let’s think about living here. But it’s so expensive.” Indeed, it is. I spoke to a woman this past week who now lives in St. Louis. Why? She said she lived in San Francisco for 10 years and left to buy a house with a backyard, etc. (Sounded like my daughter who absconded with my granddaughter and moved to Seattle 10 years ago).
Recently, each year some 70,000 folks move into the city while some 60,000 move away. So there is a net influx of some 10,000 who are part of the reason for increased prices. Jobs are plentiful, and pied-a-terre and empty-nester buyers push prices up as well.
Did you read about the robot-powered burger joint that creates and serves hamburgers with all the trimmings and replaces two or three full time line cooks in the process? If Tesla or Google can create driver-less cars, then……………..
The Housing Crisis
There is indeed a housing crisis for people who work in restaurants, the first responders, nurses, school teachers, and younger tech employees who have not, and maybe never, cash out at the thousands of start-ups that will never make it. Yes, they can rent, but rents are exceedingly expensive as well.
Though my crystal ball tells me that housing (and rent) prices have moderated, in the long-run, San Francisco will continue to remain one of the most expensive cities in the U.S.
The following table speaks volumes. Real annualized house appreciation, 1950 – 2000
Top and bottom 10 metro areas with 1950 population > 500,000
Annualized growth rate, 1950-2000
Top 10 MSAs by Price Growth Bottom 10 MSAs by Price Growth
San Francisco* 3.53 San Antonio 1.13
Oakland 2.82 Milwaukee 1.06
Seattle 2.74 Pittsburgh 1.02
San Diego 2.61 Dayton 0.99
Los Angeles 2.46 Albany, NY 0.97
Portland 2.36 Cleveland 0.91 Rochester, NY 0.89
Bergen-Passaic, NJ 2.19 Youngstown-Warren 0.81
Charlotte 2.18 Syracuse 0.67
New Haven 2.12 Buffalo 0.54
Note: Average = 1.70
Source: Joseph Gyourko, Christopher Mayer, Todd Sinai
*The rates above are for the San Francisco metro area, which comprises nine Bay Area counties and not for the city of San Francisco itself.
The six cities with the highest appreciation are all on the west coast. With the exception of San Antonio, all of the lowest growth cities are former centers of the industrial age.
The Pulse of the Market book (edited Pulses from 2005 to 2015) is available in paperback and Kindle at Amazon.com. It offers insights and perspectives on what has made San Francisco residential real estate tick in the past 10 years. Let me know if you would like a personal autograph.