Buying a home in San Francisco is about to get even harder

I know @sfdragonboy has already linked to this. But this is too important not to have its own thread.

http://m.sfgate.com/business/article/America-s-priciest-housing-market-shows-no-signs-12528327.php

“The scale of the wealth created here and the scale of the technology sector is going to outweigh the effect of the tax plan,” said Patrick Carlisle, chief market analyst with Paragon Real Estate Group in San Francisco. “The Bay Area is unique because we have companies that didn’t exist five years ago and that are now the biggest the world. There’s no place on Earth that has a similar dynamic.”

Home prices will keep rising as more startups go public or sell shares privately, generating cash for tech investors and workers, according to Carlisle. Dropbox, the San Francisco-based file-sharing company valued at $10 billion, has filed confidentially for an initial public offering and aims to list in the first half of the year, according to people familiar with the matter. Investors led by SoftBank Group this month completed an $8 billion purchase of stock from Uber Technologies Inc. shareholders, bringing a flush of money to early investors in the massive startup. The Japanese conglomerate, meanwhile, is hungry for more deals.

At the high end of the market, with prices above $3.5 million, there’s already preparation for IPOs, said Gregg Lynn, an agent with Sotheby’s International Realty in San Francisco. Several executives with high-tech companies have hired agents at his brokerage to locate homes for them in anticipation of “liquidity events” in the near future, he said.

“They want properties ready to go,” Lynn said.

The ultimate effect on people’s taxes might be close to zero, however, because homebuyers in the Bay Area tend to be wealthy individuals who also stand to benefit from reductions in their federal tax rate, said Ralph McLaughlin, chief economist for Trulia. In addition, these people may make homebuying decisions on other factors, such as family and status, he said.

“We have a healthy economy, with a healthy, often well-compensated workforce boosting demand,” McLaughlin said. “Unless there’s a major correction in the tech sector, we’ll see prices continue to go up.”

I too expect tax reform will have close to zero impact on our housing market. Inventory is simply too tight.

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As long as 2% of the bay area keeps getting rich each year, home prices will increase. That’s all it takes with so little inventory changing hands.

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What’s the SF employee count at Dropbox and Uber? What percentage of Dropbox and Uber would like to live in SF? And what other cities?

We need to get prepared to buy the houses Dropbox and Uber guys like

You should have bought them a few years ago.

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Can’t turn the clock back. IPO should still give a bump to SF and maybe Daly City?

:rofl:

Which translate to:
Buy not rent
Single Family Home not condo or townhouse or apartment
Fortress!

That’s why primary home in top neighborhood sells for top dollars but the rent yield is super low

The directors and VP’s may buy for status. But the rank and file who got 100s of K’s instead of millions may buy less fancy ones like condos.

Many SMs of FAANG own SFHs in Fortress.

Somebody will buy condos. Otherwise their price would be zero?

SFH in good neighborhoods of SF all have massive negative cashflow. If you buy to live in that’s one thing. But as investment it’s hard to defend in downturns. I think it makes more sense to buy condos for investment.

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Some condos are much more expensive than SFHs

I’m not sure about the whole bay area, but in SJ ~40% of condos are rentals. That creates an impression landlords are a big portion of the buyer pool, so cap rate matters. I do wonder how many were people’s first home purchase, and they upgraded later while keeping the condo as a rental. Current cap rate matters less then. I can’t imagine investors buying rentals right now at the current buy vs.rent ratio. You’d have to put a lot of money down or be willing to lose money every month hoping appreciation is worth it. Eating negative cash flow on rentals definitely limits how many you can buy.

According to Redfin, 9 of the 10 hottest neighborhoods are in San Jose metro.

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Redfin is only using their own data. I wonder how much of that is tech savvy people in the bay area are far more likely to use Redfin to search for homes. In other areas, people probably go to a realtor to do all the leg work. Also, the Redfin rebate is far more material for pricey bay area homes.

Which brings up the point, Redfin missed the boat on their business model. They created the best website for looking at home listings. Yet, they don’t monetize the website at all. Their monetization is the traditional RE agent and transaction model.