Leave it to the Bay Area and Silicon Valley to outshine us in Southern California when it comes to commutes. San Francisco has already shown us how certifiably insane real estate prices can go. Now we find out that Silicon Valley and the Bay Area have a higher percentage of commuters stuck in what we call mega commutes compared to the Satan inspired roadways of SoCal. A mega commute is cutely described as one that takes you 90 minutes or more each way to complete. First of all, we already have an army of people that take mega commutes from the Inland Empire into LA and OC all for the sake of owning a piece of real estate in what essentially is a hot desert. Even if this means sitting for unhealthy lengths of time clutching a steering wheel or starring at the tail pipe of cars for hours on end. Humans are not meant for this. We didn’t evolve to sit in nice leather seats in a BMW moving along at an average rate of 5 MPH. Hence the number of road rage incidents are now up along with YouTube views. Frankly, driving up in the Bay Area and Silicon Valley I see little difference in traffic congestion. This is one award that you probably don’t aspire to have.
When it comes to all cash buying people usually think of select housing markets in expensive cities. While this is true in places like San Francisco or San Marino, there are currently some lower priced markets where all cash buying is massive. Many cities in Florida have close to half of all home purchases being made by all cash buyers. Cleveland is also seeing a similar trend as well. Investors are aggressively targeting lower priced housing markets to load up on properties. Investors in large numbers pulled away from expensive cities in California over a year ago. Value is being seen in other areas where all cash buying is dominating.
It appears that rental Armageddon has now gone mainstream. Nearly a decade ago when the first housing bubble was taking off, cautious buyers lamented about the high prices in many coastal areas as they do today. “But real estate is the only way to get rich!â€Â Okay. Then why not buy rental properties out of state? Of course this largely fell on deaf ears since house horny people only wanted to out compete their neighbors in the race to foreclosure glory. After 7,000,000 foreclosures and with 1,000,000 of those happening in California, most people have forgotten the past. Now we’re left with wonderful selection bias where those who timed the market (either by luck or foresight) are telling others that timing the market is impossible. Some people did buy investment properties out in Nevada and Arizona during the early days of the last bubble but these were largely flippers or people who thought they were wealthy enough to have a second home. Rare was the person looking to buy-and-hold for income purposes. So it comes as no surprise that there are now companies catering to high income coastal investors who realize a bubble is occurring but still want the benefits of owning real estate.
Anyone that thinks SoCal housing is nutty need only look at the Bay Area for how crazy things can actually get when it comes to real estate. The Bay Area has seen some of the wildest real estate speculation and mania that we have ever witnessed in California and that says a lot. We are professionals for chasing fads and spending well beyond any reasonable budget. So it should come as no surprise that the Bay Area housing market is now facing a wall. In general home sales are hitting a big slowdown and house horny buyers are not willing to pay $1.3 million for a crap shack if there is no other lemming in line that will pay more just a few months later. So long as this narrative plays out, the one that proclaims prices keep going up, then the mania will continue. We even see it in the comments here via examples. “Just look at this place†and of course it is some junky World War II built place but the price is astronomical. The underlying message is “see, there are still plenty of suckers that will buy therefore prices will go up.â€Â The Bay Area is now seeing that the pool of lemmings is drying up.
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