The real housing crisis is the inability of cities like SF to approve redevelopment projects to tear down single story structures and build multistory structures as fast as is needed by the growth of the economy.
We might not like to admit this but part of this problem is us: people vote against putting up an apartment complex across the street from them while claiming that "affordable housing" should simultaneously exist. This leads to all sorts of bad decisions like restricting this building, but when we do build it, setting aside two apartments for "low income" occupants that is intellectually dishonest at best.
To add to this, it's not just that restricting the housing supply results in a shortage. Also, because there's systematic restrictions on construction, speculating on a continued housing shortage (and hence consistently high housing prices) is a surefire bet if the housing supply never increases.
If people somewhere nearby were building a lot of housing, an individual would feel a lot less certain about committing 7 figures of debt to own a dinky 3 bedroom house built last century, because the value is derived entirely from scarcity.
On the other hand, going housepoor on a six figure salary seems like a reasonable choice when you see articles like this https://www.mercurynews.com/2018/06/28/map-shows-it-may-take... and think that you might not have another chance in your lifetime to afford a house in the area.
There’s also a lot of corruption in low income housing. Just about a month ago, a housing program in Bellevue, WA came under fire because over 90% of the subsidized renters made $100k or more (some of which worked for the WA state social services).
That isn't the problem everywhere. There are places where the lack of planning or zoning results in less than equitable and ethical development. Building lowest-bidder style "luxury" apartments that just start falling apart after move in day with the developer moving to the next construction project the next week.
There's a line between freezing a city as is, and overly aggressive development where the buildings you build are blights in less than a decade.
I always see this parroted. But there is two facts that come into play that are ignored biy this bit of propaganda.
1. It's not just housing but transportation infrastructure. Of which SF has developed nothing other than the 3rd St light rail and the Central Subway. After that there is _nothing_ in the pipeline. Which means nothing will be built for the next 15-20 years.
2. They are building new multifamily. Cost is about $700-1000 a square foot. Unlike you I had a talk with my insurance agent. Guess what, _rebuilding_ costs between $600-1000 a square foot.
Really the solution is not more housing in SF but to move tech bro jobs elsewhere more affordable. Like Detroit.
Aren’t you possibly doing the reverse with your anecdote?
The points raised: higher interests rates, higher construction costs, flat home building stats, slower price growth, and historically low homeownership rates are countrywide facts, not specific to San Fran.
If it's a problem that will follow anywhere experiencing strong economic growth, that's a problem that can affect everyone indirectly. It probably hurts young opportunity-seekers most though.
In my metropolitan area being 10 minutes from downtown via bus is much different than being in downtown. Our public transit system is such that going from downtown to any other location serviced by the transit system is easy. But if don’t start from downtown then you first, usually, have to go downtown and then catch the bus to the location you want. This makes using the public transit system a burden for anyone who doesn’t live downtown.
The author is the Chief Economist for Moody’s Analytics, I believe he’s located in New York. Your point still stands but I’m hoping someone with such an influential position is skilled at taking a broader perspective.
Brewing? We have had a national housing crisis since the bubble around 2005 made housing unthinkable to a generation and then the crash destroyed those who did manage to wedge into an overpriced house. Since then we've reinflated to sacrifice the young to the baby boomers, and now it looks like another crash is looming. The housing market hasn't been sane in 20 years.
Brewing? Seriously? People wonder what is fueling populist rage and a desire to basically fire everyone in any position of authority or expertise...
I think it'd really be better if young people stopped getting student loans, and just didn't go to college, so they wouldn't have this problem. Eventually, the problem of overpriced housing will correct itself.
Anecdata, so please take with a grain of salt- in the past 5 years of my life I've spent significant time in Pittsburgh, DC, central NJ, and NYC. In each of these areas I've seen large luxury apartment projects, but not one project for affordable housing.
If you create high priced housing that no one (including students paying off massive ampunts of debt, where the min payment + rent = a mortgage payment) can afford, your high-priced housing will stay empty. Developers beware.
definitely this. i can already afford a house, but getting the down payment saved up without crippling my social life (which is more important to me) is difficult (not impossible, though) b/c of student loans.
There's a couple reasons it could be over priced. If it's a bubble, then we could be due for a correction. If it's a shortage, and it certainly looks more like a shortage from my vantage point in California, there wont be a huge fall in prices unless there's a large economic decline.
Overlay the graphs to see the relationship. IMO, one of Quantitative Easing's chief purposes was to keep the artificial housing debt taken on in the run-up to 2008 in place by having the Fed pay what the original borrowers could not. That QE money is now floating around the system, keeping all kinds of asset prices high.
I don't know about SF (I have no first hand experience there) but I can say that the market in the Boston area seems similarly overpriced and not very sustainable. Maybe for some different reasons, maybe some are the same. It's to the point where mediocre 3br suburban homes even far from the city are 500k+. It makes me very hesitant to purchase a home right now because I don't see how the value could do much anything besides decrease from here. That's my gut feeling. Would love to understand better how prices could continue to increase still.
Define "far from the city". A 3br for 500k is available (if on the low-ish end) for Whaltam, which Boston folks consider to be in the middle of nowhere, but if it wasn't for traffic/transportation problems, wouldn't be all that far (it's not very far at all if it wasn't for the traffic issues). A friend of mine just got a 1BR 50 minutes away for <150k (and it wasnt even a fixer upper, and is on the commuter rail).
50 minutes is "far", but it's far from insane...
IMO Boston has a lot of places that can be developed within 30-45 minutes before we really need to start tearing everything down. (There's 3 high density development in construction literally in my backyard, so I'm not saying that because I have anything to gain from it, either).
The biggest thing to fix about the Boston area right now is the entrance from the suburb into Cambridge...the Alewife area is ridiculous, but that's what happens when you built a ton of mid/high rise without proper planning of infrastructure.
As another Boston resident, I'm extremely hesitant to purchase because I'm fairly confident current prices aren't sustainable and I want to be there to purchase if prices do go down.
I've kept my eye on real estate prices for the past few years and we definitely hit a plateau around summer 2018. Nowadays I see a lot of properties sit on the market for months - quite the opposite of how this "red hot" market is supposed to behave.
I just don't see the fundamentals supporting current prices. A lot of properties are going for 20-50% more than they were previously sold for (in 2012-2014 usually).
On the other hand, rent has NOT increased by 20-50% in that amount of time, and (in my own experience) rent has been pretty flat for the past year or two, except for a few neighborhoods like Allston that have definitely gone up. If rent in a unit stays flat for a few years it's basically impossible for that home's price to keep going up, and since we didn't pick up amazon HQ2, and have tons of luxury development coming in to absorb any other top earners entering the state, I personally doubt there will be much room for rents to grow.
That said, we're no SF. If you work in tech there's probably properties out there you an afford. It just might not be in Somerville or Cambridge where everyone wants to live. Some suggestions: Decent single family in Wollaston neighborhood of Quincy goes around 600k, and further down towards Quincy Adams theres a whole bunch of options. There are occasionally good deals that pop up walking distance to the T in Malden. West Roxbury has good deals almost always. Roslindale isn't totally gentrified yet so you can always jump on that bandwagon and look for a property near Forest Hills. Condos are pumping out in East Boston too although I haven't checked prices lately they might already be too expensive.
Agreed. I recently moved from the Midwest to Boston and the housing and rent prices are giving me major sticker shock. My rent has tripled and looking at the housing prices, looks like they have too. Who's buying these 1 million dollar homes?
I think there will be problems in housing, but not the problems this article describes. (Yes, I am over 40. And no, a 5% mortgage is not remotely problematic.)
With increased automation and wage stratification, there will be fewer jobs and fewer good-paying ones to allow people to buy houses. The price of housing has always marched upward, but it will get to the point where only the wealthy can afford a house.
[+] [-] outside1234|7 years ago|reply
We might not like to admit this but part of this problem is us: people vote against putting up an apartment complex across the street from them while claiming that "affordable housing" should simultaneously exist. This leads to all sorts of bad decisions like restricting this building, but when we do build it, setting aside two apartments for "low income" occupants that is intellectually dishonest at best.
[+] [-] helen___keller|7 years ago|reply
If people somewhere nearby were building a lot of housing, an individual would feel a lot less certain about committing 7 figures of debt to own a dinky 3 bedroom house built last century, because the value is derived entirely from scarcity.
On the other hand, going housepoor on a six figure salary seems like a reasonable choice when you see articles like this https://www.mercurynews.com/2018/06/28/map-shows-it-may-take... and think that you might not have another chance in your lifetime to afford a house in the area.
[+] [-] dabockster|7 years ago|reply
[+] [-] ascales|7 years ago|reply
[+] [-] Gibbon1|7 years ago|reply
1. It's not just housing but transportation infrastructure. Of which SF has developed nothing other than the 3rd St light rail and the Central Subway. After that there is _nothing_ in the pipeline. Which means nothing will be built for the next 15-20 years.
2. They are building new multifamily. Cost is about $700-1000 a square foot. Unlike you I had a talk with my insurance agent. Guess what, _rebuilding_ costs between $600-1000 a square foot.
Really the solution is not more housing in SF but to move tech bro jobs elsewhere more affordable. Like Detroit.
[+] [-] slenk|7 years ago|reply
In my city, affordable housing isn't available downtown, but it's not more than a 10 minute bus ride away.
[+] [-] moorhosj|7 years ago|reply
The points raised: higher interests rates, higher construction costs, flat home building stats, slower price growth, and historically low homeownership rates are countrywide facts, not specific to San Fran.
[+] [-] xvedejas|7 years ago|reply
[+] [-] skh|7 years ago|reply
[+] [-] jdlyga|7 years ago|reply
[+] [-] in_cahoots|7 years ago|reply
[+] [-] magduf|7 years ago|reply
[+] [-] api|7 years ago|reply
Brewing? Seriously? People wonder what is fueling populist rage and a desire to basically fire everyone in any position of authority or expertise...
[+] [-] jeletonskelly|7 years ago|reply
[+] [-] magduf|7 years ago|reply
[+] [-] murph-almighty|7 years ago|reply
If you create high priced housing that no one (including students paying off massive ampunts of debt, where the min payment + rent = a mortgage payment) can afford, your high-priced housing will stay empty. Developers beware.
[+] [-] nunez|7 years ago|reply
[+] [-] olivermarks|7 years ago|reply
[+] [-] epistasis|7 years ago|reply
[+] [-] pjmorris|7 years ago|reply
Overlay the graphs to see the relationship. IMO, one of Quantitative Easing's chief purposes was to keep the artificial housing debt taken on in the run-up to 2008 in place by having the Fed pay what the original borrowers could not. That QE money is now floating around the system, keeping all kinds of asset prices high.
And what can be done once can be done twice.
[+] [-] bradleyjg|7 years ago|reply
Does Moody’s stand to benefit more or less directly from the policy changes being advocated here?
[+] [-] apearson|7 years ago|reply
[+] [-] cherrygarcia|7 years ago|reply
[+] [-] shados|7 years ago|reply
50 minutes is "far", but it's far from insane...
IMO Boston has a lot of places that can be developed within 30-45 minutes before we really need to start tearing everything down. (There's 3 high density development in construction literally in my backyard, so I'm not saying that because I have anything to gain from it, either).
The biggest thing to fix about the Boston area right now is the entrance from the suburb into Cambridge...the Alewife area is ridiculous, but that's what happens when you built a ton of mid/high rise without proper planning of infrastructure.
[+] [-] helen___keller|7 years ago|reply
I've kept my eye on real estate prices for the past few years and we definitely hit a plateau around summer 2018. Nowadays I see a lot of properties sit on the market for months - quite the opposite of how this "red hot" market is supposed to behave.
I just don't see the fundamentals supporting current prices. A lot of properties are going for 20-50% more than they were previously sold for (in 2012-2014 usually).
On the other hand, rent has NOT increased by 20-50% in that amount of time, and (in my own experience) rent has been pretty flat for the past year or two, except for a few neighborhoods like Allston that have definitely gone up. If rent in a unit stays flat for a few years it's basically impossible for that home's price to keep going up, and since we didn't pick up amazon HQ2, and have tons of luxury development coming in to absorb any other top earners entering the state, I personally doubt there will be much room for rents to grow.
That said, we're no SF. If you work in tech there's probably properties out there you an afford. It just might not be in Somerville or Cambridge where everyone wants to live. Some suggestions: Decent single family in Wollaston neighborhood of Quincy goes around 600k, and further down towards Quincy Adams theres a whole bunch of options. There are occasionally good deals that pop up walking distance to the T in Malden. West Roxbury has good deals almost always. Roslindale isn't totally gentrified yet so you can always jump on that bandwagon and look for a property near Forest Hills. Condos are pumping out in East Boston too although I haven't checked prices lately they might already be too expensive.
[+] [-] leongrado|7 years ago|reply
[+] [-] robterrin|7 years ago|reply
I buy the story about rates and mobility falling in general, although I think this a longer term trend.
Mostly, if wages stagnate, people don't buy homes. Not rocket science. Been going on for nearly 50 years now.
[+] [-] RickJWagner|7 years ago|reply
With increased automation and wage stratification, there will be fewer jobs and fewer good-paying ones to allow people to buy houses. The price of housing has always marched upward, but it will get to the point where only the wealthy can afford a house.
That's my guess, anyway. Time will tell.
[+] [-] CHsurfer|7 years ago|reply
This sounds backwards. If housing prices stop going up, won’t it be easier to make the jump from renter to buyer?
[+] [-] forgingahead|7 years ago|reply
[+] [-] unknown|7 years ago|reply
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