San Francisco real estate continues to operate in a land of full on self-indulged delusion and pseudo-tech worship. I travel to the Bay Area and San Francisco often and the amount of self-delusion when it comes to real estate is amazing. You will find all of these convoluted justifications as to why a crap shack should sell for $1.5 million and when some other chump takes the jump, they use this as some sort of reinforcement of their real estate buying acumen. You are the amazing market timer and they are the fool (at least that is the thought process). I’ve seen this with couples in the area where two professionals have sound financial judgment but then a kid is thrown into the mix and all hell breaks loose. “Well I don’t want my kid living in a rental!†or “I want them to have a piece of real estate when I turn over and pass on†as if your kid wants to chase the same Full House rat race. People are mistaking luck with skill but that is part of human nature. And a recent survey found that 83 percent of Bay Area renters are planning on getting out of the area to settle down.
A lot of people do not equate California with poverty. You certainly don’t think of poverty when you look at real estate values in places like San Francisco even though the homeless issue is right in your face.  The reality is that most people do not live lavish lifestyles. In fact, a new report highlights that more than one-third of California households have virtually no savings. These households would not have the ability to live at the poverty level for three months if one paycheck in the household was lost due to a job loss. You also have more than 2 million young adults living at home with their parents since the rent is too high. This isn’t the California that is presented in Hollywood movies.
The San Francisco housing market is the most inflated and delusional market in the United States. It does make sense though at least from a psychological perspective. You have many people that are cubicle or open space programming junkies working away to create the new app or new crypto currency and somehow, they feel that “tiny†spaces are worth lots of money. It is telling but no surprise given the environment many work in. Then you have the case of people doing mega commutes into the Bay Area from inland locations similar to the morning exodus of people from the Inland Empire to Los Angeles and Orange County. Yet the market does seem to be overheating and some reality is starting to creep in. Apparently, no amount of tech enabled photo filtering is going to turn a crap shack into the Cinderella of housing.
Older Americans own half of the houses in the market. Many are simply refusing to sell and others have adult “kids†moving back in since they can’t afford a place to rent or buy. It is a Catch 22 and many people are looking at countries like Italy where the number of adults that live at home is enormous. Multi-generational families just don’t coincide with the “rugged American†worldview where you go out on your own and you make it with your own two hands. Of course, many house humpers had mom and dad chip in but that doesn’t make for such a sexy story. In the end, however there are many baby boomers that simply are not selling. This is actually an interesting problem that is not going away.
Subscribe to feed
