By 2025, the population of the Bay Area will have grown by another 1 million people, a large number of whom will choose to live in San Francisco to avoid long commutes and rising gas prices.
According to The Wall Street Journal (June 17, 2008), “….trends are dovetailing to potentially reshape a half-century-long pattern of how and where Americans live: The drivable suburb – that bedrock of post-World War II society – is for many a mile too far.” Source
And The New York Times (June 25, 2008) asserts that “Across the nation, the realization is taking hold that rising energy prices are less a momentary blip than a change with lasting consequences. The shift to costlier fuel is threatening to slow the decades-old migration away from cities, while exacerbating the housing downturn by diminishing the appeal of larger homes set far from urban jobs.” Source
There is no way to predict what the price of oil will be in 2015, nor which of the City-approved SOMA developments will actually be built, but there are a few current trends that are almost guaranteed to continue in the medium term.
The price of single-family homes took a hit in 2009 along with condominiums, TICs, apartment buildings, and all other kinds of residential real estate. Notwithstanding the immediate past and current real estate downturn, single-family homes, over the long-term, will continue to appreciate faster than condominiums. With more condominiums being built and fewer new single-family homes, and as the population of the City increases, the demand for housing will push single-family home prices higher, widening the percent spread between single-family homes and condominiums.
Interstate highway development since 1956 has allowed the growth of suburbs but has also contributed to the cultural decline of urban centers in the U.S. The rising cost of oil is making suburban living and long commutes less attractive. While ostensibly single-family homes may be the “better investment,” life is not all about investments. Many people prefer walking to shops, entertainment and restaurants, contributing to the growing appeal of urban living. A certain segment of the population also wants the enhanced security offered by condominiums, on-site fitness facilities, and doormen or concierges, e.g. more amenities.
We will continue to go vertical, and this trend will continue for quite awhile. Regardless of what happens to the price of oil or the Dow Jones average, there are a few things that do not go out of style. In real estate, these are prime location, amenities and quality of construction.
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