Mission Rental Market is in a Churn

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En Español.

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The following graphs plot a now familiar curve. Rents in the Mission are continuing the upward trend that began three years ago. The number of units for rent as listed on Craigslist.org have nudged up from the tightest of times in the fall of 2011. I said to myself, “It’s about time for supply to take control and for the rate of rent increases to moderate.” So far, that hasn’t happened. I decided to check around a bit.

Average rent amount listed by room configuration

Average rent amount listed by room configuration

I looked for an example, and found Vara, a nice apartment complex at 1600 15th street, a 202-unit building with 40 below-market-rate units. The apartments are being occupied now. Two hundred new units surely should have changed the supply/demand calculus — especially when the market-rate units begin at $2,675 for a studio and $4,800 for a three-bedroom. The apartments are expensive, have clever floor plans and are filled with amenities. All that said, 200 apartments is a lot of space to rent. To my amazement I found that, as of yesterday, all of the three-bedrooms and studio apartments were “unavailable” and on “availability alert.” In fact, only 14 market-rate units remain unrented. The below-market unit lottery list had been capped at 500. So Vara is, for all practical purposes, rented and the paint is barely dry. Meanwhile, the overall availability numbers in the Mission seem to have experienced a slight uptick, that’s all.

stacked-w

Current logic suggests the shortage has its roots in the 2008 real estate collapse. Demand was low, financing was impossible and construction costs were increasing five to eight percent per year. The availability graph shows a lot of apartments for rent in 2009, which made 2009 a bad time to start building new apartments. Evidently, thoughtful people purchased derelict buildings or underutilized land and waited for things to improve before starting the permitting process. That time has come. So has a wave of multi-unit residential building.

All posted apartments plotted independent.

All posted apartments plotted independent.

According to the San Francisco Business Times, almost 8,000 new apartments will be ready for occupancy between now and 2015. An amazing 3,500 will hit the market in 2015 alone. The article argues that those numbers exceed all new apartment construction for the past 15 years combined. Planning Department requirements ensure that below-market-rate apartment construction be financed by and keep pace with new developments — and while that doesn’t happen, more will be coming.

Economists expect that this year San Francisco employment will climb to the 2007 peak. It is further expected that San Francisco will have 17,000 new households by 2017. If history is a predictor, 63 percent of those people will be renters. Dan Deibel, formerly head of Urban Housing Group, said, “There will be a small oversupply but the expanding economy should be able to absorb what is in the pipeline.”

Just when I thought logic had been found and the fog of the future was lifting, I noticed a new dynamic. On the anniversary of the 1906 earthquake, Mayor Lee signed AB094 into law. This legislation requires property owners to make mandatory seismic improvements to their buildings. This is a good thing. Making the city safe is a primary responsibility of government and “soft story” residential buildings are a proven seismic vulnerability.

The subject properties are defined as: Wood-frame structures, containing five or more residential units, having two or more stories over a “soft” or “weak” story, and permitted for construction prior to January 1, 1978. The city’s listing of potentially vulnerable structures named 6,206 buildings, throughout San Francisco. An article in the Huffington Post suggested that 3,000 buildings needed structural upgrade.

 Chapter 37 of the San Francisco Administrative Code, known as The Residential Rent Stabilization and Arbitration Ordinance, applies to buildings constructed before June 13, 1979. Seems to me that the time just before 1980 must have held some cosmic inflection point for multi-unit residential structures. The buildings demanding review by AB094 are almost uniquely subject to the city’s rent control ordinance as well.

At a meeting last week, city officials told property owners that if the structural retrofit creates conditions that negatively affect health or safety, the residents must be asked to leave during construction. This eviction would be accompanied with a moving stipend from $4,500 to $13,500, depending on the status of the residents to be displaced. A significant debate on every element of this newly enacted legislation has been heard. The details have been ironed out and all of the property owners have been told to get an architect or engineer and start the process.

The city estimates that 58,000 San Francisco residents are housed in this type of building. Some buildings meet current structural requirements and will not need work. Many of the retrofits can be accomplished with minimal disruption and no displacement. The fact remains: between now and the mandatory completion date of September of 2020, there is going to be a lot of structural retrofit work undertaken in the Mission and some people will be temporarily displaced and looking for a place to live.

Then I took a walk around Mission Bay. There are lots of new buildings under construction. How many people will be needed to provide the ancillary services and where will those folks live? A strong economy is great but is always accompanied by collateral requirements.

So, I end where I started. I have no idea what is going to happen long or short term. Will the current tech/bio bubble pop and take us back to 2009? Will there be unbridled economic growth extending as far as the eye can see? What do you think? What have I misstated? What can you clarify? Your civilized comments are encouraged, including my favorite of all, conspiracy theorem.

Please remember, should you wish to use the graphs for commercial purposes, request written authorization from both missionlocal.org and craigslist.org.

And for you dot fans out there, here is my favorite graph. This puppy plots every unit that has been listed for rent since 2009. The listings were ranked first by number of bedrooms, then by monthly rent and color-coded by sample time. The resulting array shows multimodal distributions within apartment configuration.  The red balls are the most recent listings — November 30, 2013. I found that if you take your glasses off the distribution looks like holiday lights.

Every unit listed since 2009 grouped by number of bedrooms.  The first clump are studios.  The second are one bedroom and so on.  The larger red balls are those listed as of November 30, 2013

Every unit listed since 2009 grouped by number of bedrooms. The first clump are studios. The second are one-bedroom and so on. The larger red balls are those listed as of November 30, 2013

 

52 Comments

  1. KB

    This may explain why there are so many buildings undergoing expensive foundation retrofits. I’m talking about the process where a building is emptied out, jacked up by house movers, a new foundation/garage is dug out and then the place is completely remodeled. I have seen 3 on Dolores street recently and others are going on in Noe Valley and Dolores Heights.

    Consider, the property owner gets to ditch the rent-controlled tenants, add more space to the building and completely remodel it too all topped by the fact the building is, in fact, safer when done.

    • Valenchia

      What you are seeing may just be people expanding existing buildings. There are lots of houses and 2-3 unit buildings in this area that can be expanded further into their back yards under existing regs. However, if one does any significant expansion, one is required to seismically retrofit the building. So my guess is that the motivation is more expansion than the new law.

  2. John

    Some good points in this article, but I’ve personally never trusted the rents asked for on CraigsList. My sense is that many of the ad’s quote a wildly inflated rent in the hope that some sucker will pay it. I believe the actual rents that are agreed are somewhat lower than the CraigsList average.

    The seismic changes, if mandated, will lead to a lot of temporary evictions, as you note. But every landlord knows that one of the best ways to get a permanent eviction is to start out with a temporary one. Once the tenant has moved out, a landlord than has various options for taking longer for the work and, one way or the other, a lot of those temporary tenants never come back. Just look at fire-damaged buildings to see that trend.

    And of course an Ellis eviction is easier to process if the tenants are already out of the building – it’s incumbency that is the problem and not theoretical entitlement.

    But yes, rents are rising sharply and personally I doubt that the new supply will manifestly change that, although it will have some impact at the margin. Many of these new rentals will go to new arrivals, who can afford these higher rents, and who are probably happier with new construction anyway.

    Many of us landlords feel that times like this make all the hassle with rent control worthwhile. For all the rules and restrictions, we live for periods like this where we can make back what the city takes away from us.

    • nutrisystem

      Translation: “oink, oink, oink, snort”

      • John

        So, nutrisystem, asking for a market rent is being greedy?

        But demanding a below-market rent is not?

        I am jealous of your ability to see the world in such a simplistic and moralistic way. It must be very comforting for you, I feel sure.

        • jessa

          I just don’t understand how property owners only see landlording as a business venture.

          If grocery store owners had the ability to jack prices up to the point where only 10% of the people in a city could afford to buy the food, and others were just expected to leave and go live somewhere where food was affordable for them, would that be acceptable?

          As a landlord you’re providing something that is a basic human need. Your business practices have a major impact on peoples’ actual lives. People can become homeless, you can break families apart, you can mess with children, all because of how you choose to manage your business.

          If you have no understanding of that, and if you think it’s just a game to see how much money you can make, then I think you are an unethical person. Why is this so hard to understand?

          • John

            Jessa, your analogy with food falls down quickly. Any produce store is free to increase their prices but then they would get no business because of the competition.

            But under rent control there really isn’t any competition, and so landlords can charge whatever they want for a vacant unit and get it.

            If you were correct, we would have “food control” legislating the price of food but, outside of wartime, the US has never had that.

            You assume that anyone who wants to should be able to afford to live in SF. Why, given that it is an expensive and desirable town?

  3. Your friend

    Thank you for the thoughtful article.
    I would add that many of the wood-framed building built before 1979 (and under rent control) are not code-compliant in other ways. The series of fires on Valencia St. in which adjacent buildings were also damaged, points out the need, over time, to renovate these buildings as well. How will this be paid for?

    • ThatGuy

      Good point. This is where some folks on here get disillusioned when it comes to the cost and risk of being a landlord.

      (not a troll comment)

    • John

      The way that remediations to buildings, or for that matter any other necessary capital improvements, are paid for is typically via a passthrough to the tenants.

      Unfortunately this requires a mass of supporting documentation and a hearing at the Rent Board, but there are businesses who will handle all that for the landlord.

      This means, of course, that many tenants may actually oppose such mandates, as it means rent increases.

      Of course, another idea would be for the city to provide the funds for this work, if they think it is that important, But the city will always make demands without funding them.

      There is also a paradox here. When the city demanded upgraded fire protection for SRO buildings, including very expensive sprinkler systems, more than one SRO “mysteriously” caught fire, thereby letting the building owner off the hook, as well as vacating the tenants and enabling a big fat insurance payout.

      That law of unintended consequences yet again.

      • landline

        Nothing unintended about arson for profit.

        • John

          Landline, I’m sure if there were any evidence that these “accidents” were arson, then there would be prosecutions or lawsuits.

          But the fact that the city was very concerned about the fire risk to SRO’s shows that such buildings are more likely to have a fire. And especially given that the clientele isn’t the most risk-averse and cautious segment of the populace.

          But the real point being made here was that the city can pile more and more burdens onto property owners, but that cannot be without implications and consequence.

          Such mandates are just yet another reason to quit the business and Ellis. And how does that help tenants?

  4. John

    George, since you asked for a conspiracy theory, I have heard one of San Francisco’s more ridiculous progressives argue that there is a conspiracy among landlords to keep rental units off the market, with the aim of artificially raising rents.

    Of course, not a shred of evidence has ever been offered for this hypothesis. And as a landlord of many years, I have never been asked to join this exclusive club, nor have I heard anyone admitting to be a member or knowing someone who is. And I know a lot of landlords.

    But then the best conspiracy theories never allow reality to deter them.

    It is true that some landlords refuse to rent out their vacant units, sometimes for years, with all the obvious cost of that. I’ve seen estimate for such structurally vacant units as anything from 10,000 to 35,000. The actual number cannot be known since it is not required to report who, if anyone, is living in an owner’s units.

    From the cases of this I am personally aware of, the reason is always rent control. Exempt units are rarely kept vacant. They get used for friends and families, get rented short-term via something like AirBnB, or get sold as TIC’s.

    So perhaps there is a conspiracy after all, but it is by the non-profits and tenant activists and advocates, who of course need a large underclass of impoverished tenants to feed their habit.

    • Larry Landlord

      On my (one SF) block alone, there are at least 7 empty units that landlords refuse to rent out and have pulled off the rental market for the long term. The reason is that they do not want to deal with the restrictions of rent control – the laws in SF have simply gone too far in regulating what landlords can and cannot do with their property.

      I also have a second unit on my property which I have rented out until the tenants moved recently. Even though I could command very high rent in this rental market, I am also pulling the unit off the market. I don’t want to deal with the drama involved with renting it out, and I am unhappy about the recent anti-landlord changes to rent control laws.

      This is a very real trend, and anyone who thinks that more eviction restrictions don’t have this impact is mistaken.

  5. Mark

    “If history is a predictor 63 percent of those people will be renters.”

    The city should work to increase the number of homeowners. A city of renters is, by definition, transitory and insecure.

    • bp

      Yeah, the city could have been working more aggressively to help transition employed but lower-income tenants into TIC arrangements a while ago (long before that passed the threshold and became totally financially infeasible), and there’d probably be a lot fewer people being kicked out on the street now.

      But sometimes this city seems to have an odd contempt for the aspiration to own the place you live in.

      • John

        I was a little confused about whether these 3,000 new apartments are all for rental? Or whether some are for owner occupation, partly or wholely. f the article differentiated that, I missed it.

        The most obvious indicator would be whether or not they are condos. That would indicate owner occupation, although of course the owner may then turn around and rent them out anyway.

        Either way, all these units are exempt from rent control.

        From what i am seeing, these new buildings going up, particularly along Market Street, in SOMA and in the Mission, are a mix, so not all of the cited number may be available fpr renting. And some will help soak up the seemingly limitless demand for home ownership over the vagueries and uncertainty of renting.

        • “According to the Real Estate Research firm Polaris Pacific http://www.polarispacific.com/ nearly 8,000 new apartments, mostly in mid-rise and high-rise buildings, will come on line between now and 2015 with 3,498 in 2015.” was what I quoted from the SF Business Times article noted above. Condos and TIC are probably not included in these numbers. The lead photograph, the Vida development at New Mission Theater will be 114 modern Condos.

    • two beers

      “The city should work to increase the number of homeowners”

      Yeah, landlords really need more help the public sector to subsidize their businesses and artificially push their asset values up even higher.

      How about lowering the cost of higher education and health care, and raising the incomes of the working and middle classes, and see how organic demand for housing develops? Or, we can just take marginal tax rates back to their 90% levels under the GOP president Eisenhower, and use the unneeded Louis Vuitton excesses of the oligarchy to house the under-employed and under-compensated workers who create the wealth the rich vacuum up like the useless and unproductive sponges they are?

      • John

        Leaving aside all the hyperbole there, is your argument that in fact we should NOT have more homeowners?

        Do you prefer a large, permanent, tenant underclass for some ideological reason that I cannot comprehend.

        In real life, people appear to have a real motivation to own their own home, even if there are some places where that is an economic challenge.

        • Jacob

          There are real reasons to prefer tenancy (or at least to subsidize homeownership less than we presently do).

          The most important is simple economics. A homeowner frequently has a disproportionate amount of her savings tied up in a single investment — the home. We saw how that worked out for homeowners on the margin in 2007-2010. A diversified investment strategy is much safer. (On the other hand, if buying a home is the only way to convince Americans to save money…)

          The second is that the transitory nature of tenants is probably actually beneficial to the larger economy. When there are economic changes — downturns or structural changes in the labor market — tenants can go where the jobs are much more easily. Economic growth is negatively correlated with homeownership rates, both for metro areas within the U.S., and among OECD nations.

          • John

            Jacob, If renting were really transitory in SF, as of course it is supposed to be, then I’d agree with you that that is desirable, allowing flexible responses to the inevitable ebb and flow of the economy and the markets.

            But SF has a system whereby a tenant can end the lease but a landlord never can. So even in bad times, the rental market doesn’t contract much, and the turnover that you’d expect doesn’t happen. (Although it probably will with these new units as they are not rent-controlled).

            To your other point, the reason why homeownership is encouraged via the tax code is fairly well understood. It is predicated on the belief that homeownership adds stability to a community, and leads to beneficial effects within that community.

            It’s fairly well known that crime is higher in neighborhoods with more rentals. Home owners tend to make more effort to look after their homes and their blocks.

        • two beers

          Owning a home makes sense for some. It doesn’t for others. Artificially inducing increased home-debtorship only leads to speculative bubbles and their consequent collapse.

          “It’s deja vu all over again.”

          John, I know it was a very long time ago, but do you remember the years from 2002-2009? If you do remember those halcyon days, do you take any lessons away from it?

          I actually agree with Jacob below, that because of the weakness and evanescence of the job marker for the actual producers of American prosperity (i.e. the working middle class), renting makes more sense.

          • John

            two beers, I do recall the 2002-2009 RE boom, although in fact I would date it earlier than that. It started around the mid-1990′s. One rental building I bought in 1996 was, just ten years later, worth three times what I paid for it.

            A bubble? Perhaps so. But that same building did nothing between 1989 and 1996, and again from 2007 until now. So it has also “only” tripled in 25 years, and that doesn’t sound so excessive.

            On the other, yes, rental makes sense where people need flexibility and have short-term needs. The sad thing about SF is that renting has become a lifetime state for many. I have one tenant who has, by now, paid me more in rent than I paid for her unit. Fine for me, but how can that make sense for her? After buying my unit for me, she has nothing to show for it other than a home that is cheaper than most others.

            There is a better way.

    • sflover2

      This is not entirely true. If you look at Germany and Berlin in particular you have less than 15% home ownership. This is because home ownership in Germany is not conferred with the same benefits that we have here. As in interest deductions for example. In the case of Germany at least renting is good.

  6. two beers

    What bubble-booster zealots from the developer-landlord-realtor complex well know, but hope no one else figures out, is that this building frenzy is creating its own demand and is pushing up the price of housing even more. Massive amounts of speculative liquidity is sloshing after housing right now, making it the new get-rich-quick scheme — Wall St liquidity-lappers are piling into housing, creating yet another bubble.

    • Hi Two Beers, When do you think the new bubble will pop?

      • two beers

        The bubble will inexorably pop if/when the Fed takes the $85 billion.month liquidity punchbowl away from Wall St and its parasite offshoots, so don’t count on the Fed dialing back substantially anytime soon (whenever trial balloons at ending QE2 are launched, Wall St throws a hissy fit, and Washington takes notice). The Fed has painted itself into a liquidity trap corner, and it has only two choices: end the bubble or keep blowing. Either path leads to disaster, but the longer we wait, the worse the collapse will be.

        Eventually — but I sure don’t know when — the Wall St boys will learn of impending critical mass, and they will be bail out en masse. When that will be, I don’t know.

        The other inevitability — also impossible to time — is an exogenous systemic shock (war, natural disaster, etc).

        If you really want to understand what’s happening right now, read Michael Hudson, Mike Whitney, Rob Urie, and Dean Baker.

        • two beers

          Nouriel Roubini is also worth reading, as is anyone who was castigated for his early call of the previous bubble.

          • John

            Some of those cited have predicted ten of the last three bubbles.

            How disappointed will you be if the good times continue, and these doomsters are proven wrong? You come across as being very vested in this being a false dawn, but sometimes they are real.

          • two beers

            Hilarious, John: “This time it’s different!”

            I was told the exact same thing in 2003, 2004, and 2005. In 2006, people (i.e. landlords, developers, and used-house salesmen), stopped telling me that.

            “This time it’s different!”

          • John

            What would be “different”, two beers, would be if a prediction of a bubble actually proved to be true. Usually they are not and some growth is real growth.

            Of course, if you keep saying the same thing for long enough then you might be correct eventually, in the same way as a broken clock is still right twice a day.

            But you seem waaay too vested in the “doom and gloom” narrative. I guess some people are only happy in recessions and collapses.

            Of course, the real test is how your investments do. Anyone who followed the doomsters would have missed out on massive gains. The market is up 150% since Greenspan’s “irrational exuberance” speech, for instance. And SF RE is now significantly higher than the last peak in 2007.

            I know, i know, you’re never wrong, just too early.

          • two beers

            It only seems like I’m “invested” in the “doom and gloom” because the current extractive system which funnels wealth from the creators at the bottom to the asset holders is hurting the vast majority of Americans.

            This is why you’re hearing so much about increasing inequality. It’s inherent in all systems of wealth-extraction (as opposed to wealth creation).

            The extractors, such as yourself, have never had it so good, but you’re oblivious how this system which is enriching you, is dragging the country as a whole down. This increasing inequality makes for an increasingly fragile, volatile, and untenable situation.

            Your Randian, sociopathic answer is that everyone should pull himself
            up by his bootstraps, and become a landlord himself. hey, genius — if everyone’s a property owner, who the hell are you going to rent to?

        • John

          Since I disagree with your premise, i.e. that inequality is a bad thing, it follows that I disagree with the conclusions that you draw from that.

          I happen to think that inequality is a good thing, because it means we are rewarding our winners and deterring losing.

          I also disagree that wealth is created from the bottom up. The only people who made Gates and Buffett wealthy are Gates and Buffett. Wealth is created by risk-taking owners and investors, and not by a burger flipper or janitor.

          • two beers

            Gates was made wealthy by taxpayer-funded research, taxpayer-funded infrastructure, and taxpayer-funded monopoly protection, and taxpayer-funded patent protection. MS was crappy software, and only outlasted better programs because of taxpayer-funded protections.

            Gates is the ultimate welfare queen.

            John– Your copy of Atlas Shrugged is on the way for Christmas—Amazon will be drone delivering. Enjoy!

          • John

            But Gates made a lot of money for me because I owned MSFT stock from the early days.

            You can speculate about whose shoulders Gates stood on but the result was real wealth. And that is repeated in many successful corporations.

            You love to criticize the capitalist system. But what have you got to replace it with? And how successful have your efforts been to establish that?

            Or do you just enjoy taking shots at the successful to assuage your envy?

    • Jacob

      You are simply wrong when you describe this as a “building frenzy.” 3500 new units in 2013 is something like a 0.9% increase in housing stock in the city.

      Given that demand to live in the Bay Area is growing far faster than that for economic reasons, this pace isn’t even treading water. (Of course, you are correct to feel that it is unusually high, but the real problem is that baseline development is so low.)

      By the way, the reason housing in SF is such a good investment is because there’s little chance that you’ll have much competition in the form of new housing!

      • two beers

        You can look at all the cranes looming over the city and honestly claim this is not a building frenzy?

        This is the biggest building boom I’ve seen since I came here in the early ’80s. Real old-timers tell me it’s the biggest they ever seen.

        My unsubstantiated guess is that this is the biggest building boom since WW2, and possibly since the Quake of ’06.

        • John

          two beers, both you and Jacob can be right at the same time. These thousands of new units. may be the highest ever. But Jacob’s point is that it is still woefully inadequate to meet the demand, and so while it is a “frenzy”, it may not in fact be frenzied enough to stop rents and home prices to continue going up and up.

          We need tens of thousands of new units, not just thousands, to really move the needle on housing costs.

  7. John

    I’m not clear what you are claiming there two beers.

    How does a building “create it’s own demand”? Are you suggesting that people who previously had no intention to move to SF suddenly see some marketing materials for one of these new buildings and decide to relocate here on that basis?

    Isn’t it more likely that the people who buy or rent these units are already part of the existing demand but, due to lack of supply, have not yet secured a place they like?

    As for this being a “bubble”, I’m afraid that word has become so over-used at this point that it is almost meaningless. Every time some market is doing well, other people claim that it is obviously a bubble. But not all up markets are accompanied by a corresponding down market. Over longer periods, stock and RE markets appreciate.

    Then again, if prices do collapse downwards, then there is the affordable housing that you presumably favor.

    • two beers

      This current housing boom functions much like the tech startup stocks that Wall St and Wall St liquidity-lappers (eg hedge funds, REITs) are so eager to pump their $85 billion/month of Fed Reserve free money into. _Some_ of the current demand is organic, i.e. the influx of tech workers cutting into supply, but much of the new housing stock is just being built to meet the demand from the liquidity-fueled speculators. Not to mention the newly-minted millionaires from mainland China piling onto the frenzy, buying units as pied a terres, investments, or safety exits.

      Historically, housing tracks inflation. It has only become a bubble investment, like tech stocks, in the last twenty years.

      • John

        It’s speculation if these units are bought for the purpose of then re-selling at a profit. That can happen, of course, but even when it does it is still providing liquidity to the market and ensuring that the developer gets funding.

        But I think George was trying to say that most of these new units are rentals, and so flipping isn’t really an option then. With rentals, if the demand isn’t there, the rent will have to be dropped.

        And sure, QE is a factor but the alternative was much, much worse. If these units are being occupied, and the signs are that they are, then clearly the real demand is there and clearly there are enough people who can afford them

        • two beers

          The demand is a byproduct of QE2.

          Wall St is selling $85billion/month of worthless paper to the Fed. This money has to go _somewhere_.

          Most of the money is being used to paper over the losses from the previous collapse (i.e. the banks are still insolvent). The rest of the money is being used to fuel global speculative bubbles. How else can you explain the record high stock market in an otherwise stagnant national economy?

          The QE2 money pumping up Wall St spills over into start-ups and IPOs. How else can you explain a multi-billion dollar evaluation for a company like Twitter which loses hundreds of millions of dollars per year? Every last one of those newly-minted Twitter millionaires pumping up local housing rates is a byproduct of excess Wall St liquidity sloshing around, seeking somewhere to land.

          Twitter = Pets.com

          It’s just another bubble, just even bigger.

          If you know your (recent) economic history, you should know how bubbles end.

          • John

            Markets have been growing for centuries and, while there has been the odd “crash” here and there, overall the tend is up.

            Now Twitter doesn’t make a profit, it’s true. But that is 1,600 new millionaires in SF and they have real money. They can buy these units with cash, and not with paper.

            Sure, some Twitter shareholder in Charlotte or China might lose money on it in the end, but that’s in the nature of equity investing anyway.

            The point for SF RE is that there are thousands of people who can pay a million for a home, or 5K a month in rent, and that wealth is real enough.

            But hey, if you are so sure it will all collapse then that’s fine – don’t buy a home. That’s the beauty of the markets – you can bet on your viewpoint and it is the market that decides whether you were right or wrong.

            If you are typically right about these things then no doubt you are very wealthy.

          • two beers

            Of course I’m not wealthy. Timing is an insider’s game. All others get crushed.

          • John

            Predictions without timing are meaningless. I can predict that there will be another major war, but without any sense of where and when, it is mere conjecture.

            I think the truth is that you want to believe that we are teetering on the brink of doom, for whatever reason that is. Unless you are a short-seller, you will not gain from any such collapse.

            Indeed, it is the poor who usually suffer the most in recessions. The wealthy will be just fine, so don’t expend time and energy worrying about their portfolios.

          • two beers

            By the definition of ‘bubble”:

            f we’re not in a bubble, there won’t be a collapse.

            If we are in a bubble, there will be a collapse.

            I say we are in a bubble, and therefore, there will be a collapse. I can’t say when. Maybe next week. Maybe tow years from now, three at the outmost.

            John, the only people who can predict when this bubble collapses are the bankers on Wall St from whom the Fed gets its marching orders. How can I possibly know when Blankfein and Dimon decide it’s time to bail, or when they tell Yellin to raise rates?

          • John

            But, again, you make a fundamental assumption there which is that IF markets are going up THEN there will be a bubble.

            If by that you mean that markets are essentially cyclical and that there are always bull and bear markets, then that’s fine.

            But the more common and hysterical definition of it is that all asset price increases are fake, and therefore all market gains are from bubbles which must inevitably crash.

            History proves you wrong. We have been at all-time market highs hundreds of times and, on each occasions, either we carried on going up, or we did go down and then went on to hit higher highs later on.

            Other than a vicarious sense of glee from saying “I told you so” what do you hope to gain from a collapse? What did you gain in 2000 and 2008?

            Or is it just good old fashioned schadenfreude?

  8. Hi Commenters. I want to thank you all for such a lively and intellectual discussion. I’m really kind of a numbers guy so my viewpoint can be kind of dry. Your comments really breath life into and uncover the dynamics that surround this topic. Thanks to you all and please keep it up. Everyone who reads your thoughts benefits.

  9. InSF

    Boy, that two beers dude sure is a nutter!

  10. two beers

    Coming from a used-house salesman, I take that as a complement.

    • InSF

      Wrongo. I don’t sell anything, much less some failed, third rate, regurgitated socialist propaganda. You must really like misery!

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