Financial Samurai: How New Tech IPOs Could Cause SF Bay Area Real Estate Prices To Fall Further


#1

What I don’t see him address is the folks that make 300-500k in windfall after taxes who has the downpayment to go purchase the houses.

@manch agree with your guy’s analysis?


#2

Long time no see, @RealEstatebull.


#3

Samurai is going increasingly crazy. He’s basically talking his book. He is famously bearish on Bay Area RE and bullish on flyover country because? Trump.

You don’t need a large number of buyers to move market. Just 100 more and you will feel it right away. I still think the market will heat up later this year but not as crazy as many predicted. Why? Because of SALT limit and prices are already pretty high already.


#4

Sam is turning into Patrick.net, who has gone truly crazy.


#5

:+1:

Patrick.net, Sam, zero hedge = permanent bears


#6

Trump Tax stuff have made Bay Area RE much more expensive though as compared to cheaper places which can now take advantage of higher std Deductions(even these higher std deductions go nowhere in Bay Area for most people, hence the disadvantage).


#7

People don’t live in the BA because it cheap. Comparing cheaper places is futile. Old folks will leave for more affordable housing but not far. Sacramento MSA attracts the most. The more the BA appreciates the more bullish I am on Sacramento.
But new arrivals will keep coming for jobs.


#8

Typical Patrick.net rant…

http://patrick.net/post/1322990/2019-03-10-why-california-is-the-worst-state-to-live-in


#9

Some places are cheap for a reason. Conversely Bay Area is expensive for good reasons.


#10

Can buy a house in Pittsburg PA fir $20k. Maybe Patrick and Sam will move there. Plenty of jobs, paying $20/hr.


#11

Sam is annoying. All he likes to talk about is how he crafted and negotiated his severance.


#12

Sam is assuming that 5% of homeowners want to cash out and leave the bay area. This is a gross assumption based on his own estimate. This number seems very high. I agree that there are a lot of folks wanting to leave the bay area, but these are mostly renters and low income workers. Homeowners on the other hand are less inclined to leave.

The only FOMO homeowners I see who wants to cash out and leave the bay area are:

  1. Recent homeowners who is fed up with the bay area and wants to relocate
  • these are probably first time homeowners who bought 3 - 5 years with some equity and can sell with some slight profit
  • for longer term or seasoned homeowners, these are folk who are locked in with low interest rates and lower property taxes, they probably also have a family or recently started a family and it would be more difficult for them to leave
  1. Retirees who wants to cash out and live like a king
  • these folks typically don’t time the market, they will just sell when they are ready to retire since they already have so much equity in their house

Also, within these 2 groups, we are only counting the ones that are trying to time the market and have FOMO. All non FOMO folks are just regular seasonal sellers as you will always have folks who are fed up with the bay area or folks that retire.


#13

I’m saying, the NET cost of living has gone up(in Bay area) DUE to Trump tax stuff. So from a business plan(Revenue-cost) for their businesses, the companies have to now decide whether they pay the living cost increase in terms of pay raise or will the employees suck up to it.

My view is that remains to be seen, but anecdotally, I personally know people who can work remotely are moving(in Tech) to states such as Nevada, Colorado & these are $200k jobs.


#14

Counts the way?
Easy to startup :slight_smile:
Earn high salary :slight_smile:
Build NW fast :slight_smile:
Mix with the best :slight_smile:
Great weather :slight_smile:
Net salary/ total expenses is the highest in USA? I presume is true :slight_smile:

About right. Have been renting since I landed. Now can’t afford the rent and have to move to Austin.

Exactly. We have to monitor closely. Not good for RE if too many businesses start to thin out operation in BA.


#15

Right. That’s why I think the market won’t rocket up crazily like many people predicted. However the net effect of the upcoming mega IPO cycle will still push house prices up.


#16

SV’s unemployment rate is even lower than the last dot com cycle. Are people sure companies are moving out?


#17

Austin’s unemployment is a little higher than SV, at 2.6% vs our 2.4%. Both places’ economies are on fire.


#18

Just glanced through the article,

The average employee’s option strike price is higher than zero since the vast majority of employees didn’t join at the beginning.

Startups still issue EOs? MegaCaps have changed to RSUs only.


#19

It should(hopefully). Prices are already down I think @10% average over the past 10 months so hopefully back up the next year.

Having said that tax deductions related to RE in Bay Area are now permanently capped (unless someone reverses the tax changes), so we’ll have to wait and figure out it’s long term effects on Bay Area(both on RE prices and job growth)


#20

:+1: