With the stock market on fire the last few months, I suspect we will see Bay Area house price resuming its uptrend this year. I myself am thinking of unloading some stocks to buy a house. Anyone else in the same boat?
Some of the bellwether names:
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NO
Use the recent gain of your stock to buy a beautiful primary residence is a no brainer for the best interest of your family.
Happy wife => happy life
Remember, money you earned is not yours yet, only money you spent is really yours.
Disclaimer: Your wife did not ask me to type that 
I unloaded some stocks in 2019 and kicked the tires at open houses (all the way from hayward till south san jose). With the demand I am seeing, I’d like to not get into a bidding war with first time buyers. So I am just waiting it out a bit and building a better cash position for off market properties.
I am not in real estate buyer market, but my recent appraisal (Dec 2019 refinance) was higher than last year (Dec 2018) around 7%-8% higher than previous ones.
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Hmm 
You may not like the hard truth 
Is there a correlation between stock market and real estate? Prices are determined by demand and supply. If more homes are demanded and people are willing to pay higher price for it, prices of homes will rise even if stock market does not rise. In real estate, rent is true indicator of how far can home prices rise. So, real question is whether the rents are rising. Someone suggested snob-appeal (desire to buy a product even if its value has little relation to the price) may cause home prices to rise. but, that has to be seen.
Rent is not everything. Many like to lock in their housing cost by taking advantage of the 30-year fixed mortgage.
On a personal level, I need to sell some stocks in order to buy a house to my liking. So yes, it’s related to the stock market at that level. On the macro level, both housing price and stock market are buoyed by Fed liquidity. There’s correlation there as well.
It will be highly speculative and unsustainable if home prices rise and but the rents do not rise in same ratio. For example, SFR in SV/SC area go around 4k. So, if home prices have to rise, the rents have to rise. Now they may not rise (or fall ) in perfect lock step, but they must equalize over a period of time. This is law of economics and accounting. The only time a value of a product can be detached from its price when the value of a product is not derived from the use of the product but for something else (like in an antique piece).
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That’s a very simplified view. Look at the stock market in the last 24 months. Pricing is dependent on supply and demand. There is an element of financials, but it isn’t the whole story.
Use a margin loan for down payment
Maybe a little bit but can’t be the whole piece.
How stock market is related to house price should be clear with a thought experiment. Let’s say Facebook and google stock price double in the next 12 months. So if a Facebookie (is that what they call FB employees?) were sitting on 500k worth of FB is now worth 1M. Anybody seriously saying housing price around Menlo Park won’t go up as a result?
Now in real life the stock price movement won’t be that extreme (or will it?) but the relationship should be clear.
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This is a classic example of speculation ( = Reasoning based on inconclusive evidence; conjecture or supposition. ). For the price of the home to be sustainable, it has to be supported by something of value (=rent). In a speculative market that the bay area has become, the cost of ownership of a home in the early days must be rewarded by higher rent in the latter days of the ownership. The way the ownership model works in the Bay area is that the buyer pays higher costs upfront in a hope that in the latter years, the cost will be recouped by payments that are lower than the rents. For this model to work out, the rising home price must always be supported by rising rents. I am just tyring to think about how the market would feel like if Prices were to rise every year but rents stay fixed. If that scenario does end up happening, I would rent for eternity because my rents would get me more with each passing year.
I am not suggesting that home prices will not rise, but my argument is that home prices and the rents must both rise in same proportion for this to continue. You cannot have one rising but other not rising.
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leverage on leverage?
This is a classic example of speculation ( = Reasoning based on inconclusive evidence; conjecture or supposition. ). For the price of the home to be sustainable, it has to be supported by something of value (=rent).
Rent parity is current value of the home = In stock, this is current value of the company.
In a speculative market that the bay area has become, the cost of ownership of a home in the early days must be rewarded by higher rent in the latter days of the ownership.
In stock, equivalent is equity risk premium, people are ready to pay additional premium for future returns.
The way the ownership model works in the Bay area is that the buyer pays higher costs upfront in a hope that in the latter years, the cost will be recouped by payments that are lower than the rents.
In stocks, this is exactly like DCF (Discount cash flow). sum of all future returns (20 years)+(final sale value) are equal to current value of the stock.
For this model to work out, the rising home price must always be supported by rising rents.
This is achieved by inflation. As long as inflation is there, every year rent (as well as stock price/returns) increases.
Now, coming back to bay area real estate, rent always increased year over year except recession years. Rent increase is minimum 3% an year at par with inflation.
Population increase and local people equity wealth increase leads to real estate premium during bidding process.
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It’s all about the environment ( call it bubble , call it matrix ) .
Everyone lives in a different set of reality .
Over here the commonly accepted set of realty is to keep moving up in better zip codes . I have seen People who have made enough money in Mt. view move to Los Altos . They prefer North Los Altos . I routinely see lots of 3.3 and 3.3 getting demolished and under construction to be sold later . I goto architectures commissions meeting and on the last meeting I see someone getting approved to demolish the house for apprpxoxinateky 4.7M. ( indian family ) and I saw another Asian google family trying to demo and rebuild a 3.5M lot in the same meeting . So clearly this is an alternative reality . And as manch Poijtee out Stocks are the biggest factors here . Not rent . No rent can ever jjustfy a single buy in Los Altos
My thoughts .
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Inflation = rise in general price level. Inflation affects both the price of a home and the rent it can get.
Population increase: I think the bay area population is already at its max. The only way to increase the population in the bay are would be to increase density. Force people to live in smaller homes and walk-in narrower streets.
Real estate markets are just as segmented as the market of other useful things like say car. You can buy a car to go from point A to point B for $20k. Or, you can buy a 100k car. But the majority of real estate, barring a few exceptions as you listed, is tied to the rent it can generate. Bay area has about 6 million residents, how many of them would buy a 4 Million home? A single swallow does not make summer.
10 min later: The homes priced way outside the median price of homes can be found in any market. I am sure such outlier homes (4 M types) can be found in all major markets and are unrelated to price of the median home in the same market.
Which family making median income is buying in Los Altos? There are maybe 10 homes for sale at any given time. Just one more person deciding to buy is enough to materially move the market.
We who live in the real world don’t worry much about median rent and median income.
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