Bay Area home prices continue to slip

[manch]

Which one is bigger? 100% of 1x? Or 80% of 3x?

[marcus335]

Random math proves?

[Whoami]

I think it means that even if a fraction of funds are outgoing, the piece of the pie which stays in CA (or west coast) greatly exceeds the VC funding of other regions.

@manch

Note that among CA regions, only SF and SV are separated out. Just these two regions account for close to half of ALL VC funding in the US. If you add in SoCal and Sac we may be close to 60% as a state.

[manch]

At least there are some numbers instead of hand waving.

[notabene]

I’d like to believe the money keeps growing in other parts of US as frankly, California is the most inefficient government I’ve experienced -and I’ve been around places like Quebec, UK, and other socialistic states.

Funny side story - I went to an OH recently and there was a loan agent who wanted to “take the gains in Bay Area and retire early in Malaysia”. And I thought these guys were supposed to vet if debtors can pay off loan over 30 years.

However, working with remote offices have always given me a pause when starting new projects. Different parts in US (let alone European countries) lack the SV mentality - that is to build a quick MVP and iterate like crazy. Yes, there should be long term bets where research & development is split like 20:80, but nothing will come to life if you design year long goals and work 9 to 5. That doesn’t even work in grad schools.

Despite all the crazy meritocracy being under scrutiny, I’m afraid we’ve hit the optimum for productivity when it comes to work culture, and if your startup consists of 40 somethings having to participate in kids school play, no sane VCs would throw money at you. And for that reason only, we need to look at where fresh grads want to live in. Case in point - even Y Combinator moved to SF. These guys must’ve been enjoying good life in Menlo Park.

[Roy321]

@pandeyathotmail

How much of it (price drop) could be due to cap on SALT (state and local taxes) deduction on federal tax return since 2018?

In this forum there is almost a consensus that SALT has nothing to do with it. Few members also “walked the talk” on this issue.

[hanera]

@manch If VC money keeps coming to SFBA and stock market is at ATH, how come house prices keep declining? New monies (VCs/Startups) and old monies (Existing BA companies) couple with low inventory are not sufficient to prop up RE prices? According to Zillow, my Cupertino SFH have dropped 20+% from 2018’s peak more than from 2017’s peak to financial crisis’s low, and there is no recession or stock market crash! Remember we are concerned with RE prices, not so much about jobs and enough housing

[manch]

If Apple has such a great future how come it went down 20% from time to time?

Because nothing in life goes on a straight line. Humans, being human, are prone to panics and manics.

[marcus335]

These are the Best and Worst Cities for Tech Jobs in 2019

The 10 best cities for getting a job in tech beyond Silicon Valley

If SV is top in VC money but not top in tech job growth…

[manch]

Maybe we should turn @hanera’s question to you because Seattle RE market is second to last in the nation. Using his logic, if Seattle job market is so hot how come its housing market is so soft?

[marcus335]

So your response to actual data is hand waving.

[manch]

@marcus335

So your response to actual data is hand waving.

You didn’t know Seattle RE appreciation is the 2nd weakest, after SF?

[hanera]

@manch Relevancy. Stock and RE are not in the same asset category and have fairly different characteristics. Stocks are more volatile than RE prices. Each share is identical but each house is unique.

[manch]

@hanera

Stocks are more volatile than RE prices.

Stock market moves faster. Both RE and stock are markets which make them subject to human emotion. Did you know we had an RE bubble in the early 2000s? Who knew RE market can have bubbles too right?

[Jil]

@hanera

If VC money keeps coming to SFBA and stock market is at ATH, how come house prices keep declining? New monies (VCs/Startups) and old monies (Existing BA companies) couple with low inventory are not sufficient to prop up RE prices?

VCs money will be reflected when IPOs are positive. How many IPOs are positive in 2019? Most of them underwater what the last 3-5 years investors paid.

Everything aftermath of Dec 2018 dip appx 19.5%.

This economy is stock economy, and RE also rebounding but it is very slowly coming up. RE has lag 6 months, but year 2018 was peak year in RE and it will take beyond 2020 to get further peak as long as stocks are doing great which I do by the impact of tariff. What FED has done so far is just counter balance the impact of tariff. At this time, we do not know how much it helps.

My recent home sale (please do not ask me zip code or address or anything about that home identification) , we expected 20% dip but closed $850k with 20 offers which we did not expect at all. Top 3 offers around the same price, finalized to a first time tech buyer who had 500k cash+stocks. We would have lost around 50k dip from the peak.

[manch]

@notabene

Different parts in US (let alone European countries) lack the SV mentality - that is to build a quick MVP and iterate like crazy.

There is also a self-selection effect going on. SV has this hardcore reputation that attracts the ambitious hard-driving people, and repels the work-life balancers. Start-up founders have to be crazy ambitious daredevils and SV is their natural habitat. That’s why SV’s network effect is so hard to reproduce elsewhere.

[hanera]

@Jil

VCs money will be reflected when IPOs are positive. How many IPOs are positive in 2019? Most of them underwater what the last 3-5 years investors paid.

Essentially debunking @manch claim that increasing VC funding would lead to higher RE prices.

@Jil

This economy is stock economy, and RE also rebounding but it is very slowly coming up.

Which mean investors are not putting monies into RE. Some of them are like you, some of them are like me, some of them of course continue to put money in RE of SFBA. However, that represent a lesser amount than expected because of the two former investors’ behavior. Both of us have changed our behavior and have nothing to do with VCs/Startups or stock market. You change because of tenants’ issues and state-wide rent control, and I feel California is mismanaged and getting worse.
@manch Notice I was pushed away (bad CA) and then pull towards(growing Austin), and not the other way.

Investors’ behavior affect the demand and hence RE prices in SFBA quite a bit since they own 35-50+% of the housing stocks.

Cupertino California Housing data

[marcus335]

@manch

@marcus335

So your response to actual data is hand waving.

You didn’t know Seattle RE appreciation is the 2nd weakest, after SF?

Did I mention Seattle anywhere?

[pandeyathotmail]

@caiguycaiguy

Thanks for sharing. I’m sure it wasn’t easy to relive those dark days.

I don’t know where you are financially but I think you should just keep it simple.

1. Focus on your day job and maximize your income and/or security.

2. Have a big emergency fund in savings account. For someone as conservative as you, I think you need at least 6-12 months of expenses saved.

3. Then max your 401k until you hit your company match, then max your Roth IRA, then finish out the 401k.
   $19,000+$6000=25k already.

4. If you still have cash, then you invest in a taxable brokerage account.

As to what to invest, I’ll keep it simple as well. Use a target date fund that’s 10 years ahead of your planned retirement year to keep it conservative. If you want to do your own, use 50/50 stocks and bonds (might be too much bonds but you can 60/40). Keep things on autopilot. Markets move up and down, sometimes violently, but just let it ride. Stick with your allocations and keep investing.

Time is your friend, assuming you’re at least 20 years or so from retirement.

You might be better off at Bogleheads.org - Index page
to get you over the hump of investing in the stock market and deciding allocations.

Thanks for the to the point advice. There is a wealth of information at Bogleheads.org - Index page.

My question is what I should do differently if I am only 10+ years away from retirement?

[pandeyathotmail]

@manch

@notabene

Different parts in US (let alone European countries) lack the SV mentality - that is to build a quick MVP and iterate like crazy.

There is also a self-selection effect going on. SV has this hardcore reputation that attracts the ambitious hard-driving people, and repels the work-life balancers. Start-up founders have to be crazy ambitious daredevils and SV is their natural habitat. That’s why SV’s network effect is so hard to reproduce elsewhere.

You might be putting too much faith in network effect. The kind of people you have mentioned can slowly relocate to other places. Just look at the history of how empires rise and fall. For example, the modernization of Europe started in southern Europe but it was northern Europe that took it over after the industrial revolution, particularly after the discovery of the steam engine. New world was discovered by Spanish and Portuguese explorers, but Englishmen end up ruling many of the places discovered by others. What I am trying to say is that the time we are living in has a high rate of mobility. People and money can move relatively easily. It is not to say that the Bay area is going to crash tomorrow, but I am not leaving out the possibility of some other city or place rising up and giving a good challenge to Bay Area.
Bay area would still do what it is doing, it is just that someone else could do even better. Remember one thing of strategic planning. The two threats to any enterprise are obsoletion and substitution. I do not think the bay area will become obsolete, I am more concerned about having a substitute or an alternative.

added later: Without time lines, discussions are useless. I would say it takes generation or two or even more for some shifts to happen. And some may never happen.