With the expected post-Labor Day listing bonanza underway, the number of single-family homes and condos listed for sale in San Francisco has jumped 30 percent over the past week and is running 26 percent higher versus the same time last year, not including the vast majority of new construction condos available for sale across the city (the number of which has been hovering around 1,100 and 50 percent higher, year-over-year).

At a more granular level, the number of single-family homes currently listed for sale in the city (309) is now running 23 percent higher versus the same time last year while the number of listed condominiums on the market (457) is running 28 percent higher. And in terms of pricing and expectations, 19 percent of active listings have undergone at least one price reduction versus 9 percent at the beginning of September last year.

Expect inventory levels to continue to tick up through October and then to start dropping through the end of the year while the number of listings for which the asking price has been reduced continues to rise.

Comments from Plugged-In Readers

  1. Posted by SFrentier

    It’s the end of the world as we know it……
    ……and I feel fine

  2. Posted by curmudgeon

    Went to a condo open house yesterday in Potrero (3/2 for 1.1). Crickets except for a few neighbors and we were there for about 20 minutes chatting with the agent. Purely anecdotal evidence of any slowdown. But it will interesting to see how this fall plays out.

  3. Posted by Zebra224

    My anecdotal Zillow search for a condo under 900k shows no significant inventory change over 7 days. Where is this mythical inventory spike?

    • Posted by SocketSite

      We can’t speak to your methodology, but we will note that your source isn’t the most accurate with respect to accounting for nor analyzing listing activity.

      And the number of listings for properties priced at under a million dollars in San Francisco actually jumped 31 percent over the past week (which was actually one point higher than for the market as a whole).

      • Posted by Sunsetter

        What would be your recommended source for accounting for listing activity?

        • Posted by soccermom

          Proprietorially-scrubbed, closely-guarded, methodology-undisclosed, self-sourced from the MLS. Takes a lot of work, though. Provides opportunities for sensational headlines, however.

    • Posted by Ohlone Californio

      Yes, I also feel like once there is an appreciable amount of sub 900K 2 br units then we’ll know there has been a significant price shift.

  4. Posted by Mr. Miyagi

    Zebra224, when you are trying to make a point about data reliability, you should resist the urge to show your lack of sophistication about the real estate market by quoting Zillow.

    This overvalued market will be undergoing a massive correction soon. It is not even debatable at this point.

    • Posted by confused renter

      “This overvalued market will be undergoing a massive correction soon. It is not even debatable at this point.”

      This is exactly what we are debating right now.

    • Posted by JR "Bob" Dobbs

      A prediction about the future is not even debatable? I assume you are investing big on this knowledge? Your 100% non-debatable crystal ball should soon make you a billionaire as it is very easy to make scads of money when you know what the future will bring.

      • Posted by incog

        An amusing anecdote. What’s called by some measures the largest trading loss in history occurred when someone correctly predicted that sub prime mortgages were a pile of garbage and so shorted them and funded his short by essentially going long on “AAA” mortgages. But the “AAA”‘s were also garbage and Voila! $9B down the drain.

        • Posted by wow

          After losing $9 Billion of Morgan Stanley’s dollars, Howie Hubler was allowed to resign and paid $10 Million. So much reward for such incompetence/negligence. I’m in the wrong business!

        • Posted by JR "Bob" Dobbs

          There was a good reference to this in the film version of the Big Short where Steve Carrell (playing a composite character), who had bet big and correctly against mortgage securities, learned that the other side of his positions was his own employer, Morgan Stanley.

      • Posted by Sabbie

        This stock market pull back and Trump catching up to Hillary in the polls should put a wet blanket on the real estate party this fall.

        • Posted by Ohlone Californio

          I don’t think either of those things are much at this point. Trump is still losing handily and the market is cycling through a reaction to the petroleum industry.

          • Posted by Sabbie

            Wrong, it’s not oil. Why are stocks and bonds both selling off together right now?

          • Posted by Ohlone Californio

            Bonds because it’s becoming clear that the fed won’t raise rates any time soon. Stocks because of what I said.

          • Posted by Sabbie

            It’s still too early to short big. I will mostly wait until SPY breaks below the 200 day moving average. Could be a week, could be a month. Either way, this volatility does not instill confidence. If the Fed won’t raise rates anytime soon, then how can you say the economy is doing well?

          • Posted by Ohlone Californio

            Why did you feel the need to insert, “how can you say the economy is doing well” into this dialog? I certainly did not type that. The US economy is doing relatively well, from a global perspective. Historically speaking it is doing OK at best probably. But do feel free to not insert false arguments into dialogs, thanks.

          • Posted by Sabbie

            It’s not a false argument and neither are my other ones. Show me a single election poll where Trump has not made headway in the past month. He’s now leading Ohio, which has picked the winner every time since 1976. As for stocks, look at the latest BAML global fund manager survey, when asked “What is likely to be the biggest driver of equity prices in the next six months?” the number one answer and biggest MoM gain was treasury bond yields, and the lowest answer with the biggest MoM drop was oil prices. They also said the #2 biggest risk to markets right now was Trump winning the White House.

          • Posted by Ohlone Californio

            I said Hillary still leads Trump handily, which she still does, not that Trump has not made headway.

          • Posted by incog

            I must admit that I though Sabbie had gone off the deep end on this and then this pops up on my feed this morning: “Poll Shows Tight Race for Donald Trump and Hillary Clinton

            Dead tied if the two minor candidates are included and 46 to 44 head to head among likely voters.
            Have to give the crystal ball award to Sabbie on this one.

            My prediction though, is that polls will be unusually inaccurate this cycle. Pollsters use models to extrapolate from small samples and predict who will vote. And this cycle is so strange in so many ways, that I think these models will be severely tested.

          • Posted by Ohlone Californio

            Trump cannot get more than a paltry percentage of the Latino vote, and none of the black vote. Which polls reflect these demographics?

          • Posted by incog

            As I said, I predict that this unusual election will test many people’s polling models. But I highly doubt that any reputable model would completely ignore entire large demographics. And I doubt the NYT would base a front page article off a disreputable model.

          • Posted by Sabbie

            Yes the polling models are probably broken. I think a good lesson is the Brexit, the pollsters totally blew it there. I think the polls are somehow not capturing the populist anger. Maybe a lot of people are thinking about doing something crazy like voting for Trump just to give the finger to the elitist establishment and the MSM. And maybe Hillary supporters are being too complacent right now.

          • Posted by JR "Bob" Dobbs

            Note that the Brexit pollsters did not really blow it. The late polls indicated the vote would be extremely close, which it was. Some late polls indicated “leave” would win narrowly while some went the other way.

            Regardless, here is my U.S. election prediction: Hillary will win with at least 300 electoral votes, possibly as high as 347. You can all laugh at me if I’m wrong (I will be on my way to Canada or France anyway – still making up my mind on that one).

          • Posted by Sabbie

            If the pollsters and odds makers had Brexit correct, then it would not have caught the smart money so off guard. The fact that the markets freaked out like they did shows that the predictions were off.

          • Posted by JR "Bob" Dobbs

            You mention pollsters “and oddsmakers.” My comment was just about the polls. The late Brexit polls indicated the vote would be extremely close (50.6% remain to 49.4% leave was the final composite poll tally). That was quite accurate – higher than expected turnout (with lower turnout amount the “remain-leaning” young) was the difference. The so-called experts, predictions markets, and oddsmakers, on the other hand, were indeed off. The “smart money” failure was to rely on those sources rather than the polls.

            Dems start out with a large electoral vote advantage in non-competitive states (roughly 240-190). It is not inconceivable we could have a surprise — if young, black and Latino voters in swing states stay home and poor whites have a huge turnout — but I’m betting I won’t need my Plan B.

          • Posted by incog

            Wikipedia has helpfully tabulated polling results for the historical record. Most polls were showing “Remain” the week before, some by a large margin. A different story two weeks before.

            My main conclusion is that polls have low accuracy during unusual circumstances.

        • Posted by SFRealist

          Sabbie, so with this stock market pull back, which stocks are you shorting?

          (I ask because it’s easy to say there’s a pull back, but it’s not as easy to back it up. But if you honestly believe the stock market will fall, then the rational decision is to start shorting.)

          • Posted by incog

            Something to take away from Mr. Hubler’s story above is that successfully predicting a downturn and successfully shorting are two different things. And thus it’s not necessarily rational to short every time you suspect a pull back.

      • Posted by cleverpunhere

        The Phillies will win the world series. That is not even debatable at this point.

        What is debatable is when that will happen. And if you don’t know that part, you don’t have much of a point.

        • Posted by JR "Bob" Dobbs

          Well, Mr. Miyagi claims this massive correction is coming “soon.” Sounds like his non-debatable prediction has a short time element to it.

      • Posted by Mr. Miyagi

        I don’t need to become a billionaire, I’m a millionaire many many times over and that has afforded a nice enough lifestyle. Oh yes, and my net worth and income are 100% derived from real estate investments, so yes, Bobby, I am investing along these lines.

        There is truly not anything to debate… Rents as well as SFR valuations are a total froth-festival. If you cannot see that then…

        • Posted by Fishchum

          I love it when anonymous commenters on the internet make claims about themselves that can’t be verified.

    • Posted by SFRealist

      Okay there, Miyagi.

      Lets put some numbers on your prediction. How soon? End of 2016?

      And how much is “massive”? 10%? 25%? 50%?

      • Posted by Mr. Miyagi

        As for when this sloppy party will end, it is tough to say with total certainty because of monetary policy meddling. With government intervention at this level it is does muddy the waters. However even the Fed cannot stop this unraveling. It is greater than the Fed. I think within 6 months barring some wacky interventionist policy that cripples our currency, this real estate market will be a blood bath. And by blood bath I mean active REO dominated market and rapidly softening rents. I have many apartment buildings, so you would assume that I want upward pressure on rents ad infinitum. I do not. Rents are insane right now everywhere. From Kansas City, Sacramento to Vancouver, you name it. This market will crater. How much clearer can I be? Truly, I could not care less if you see this or attack me on these points. It makes zero difference to me nor does it affect my income streams in any way. Many of you are searching for answers here, which is great, and sometimes you get answers, if you shelf your ego for one second and admit to yourself privately that perhaps you are not as all-knowing as you think you are. Tough to do I know, especially considering most of you in that camp don’t even own a home much less made fortunes in real estate. I am giving you a direct answer here. Whether you believe I’m massively rich or not from successfully navigating decades of real estate cycles is a total non-factor to me. Take the advice or leave it, again, it changes nothing for me. This real estate market is not organic and it is totally unsustainable. It will crash. End of story, no crystal ball needed.

    • Posted by Dave

      Real estate is local and many markets. I assume that is why you say “this overvalued market”.

      SF’s affordability level is the poorest in the nation and with techie jobs scattered in more and more sub-hubs, there will be a shift out of the Bay Area. So a price correction is not hard to predict. But massive? I don’t see it. Assuming by massive you mean 40% or more.

      It’ll be a correction and a readjustment to bring SF more into line with other booming areas. Not cheaper than those areas – just not as hugely more expensive as it is now. The adjustment is apparent in Seattle, Portland and Denver which are seeing recently significant more appreciation than SF.

      Its a time of opportunity for investors with a non-parochial approach to RE investment.

      If I had to guess, I’d say a 10% correction. More in the condo market.

      • Posted by incog

        Given that the next post is about an 11% drop for new condos…

        • Posted by Dave

          That 11% drop is for a small slice of the condo market. I don’t believe existing condos have dropped as much as the new ones coming online. Maybe the editor has access to the number for existing condo sales prices vs a year ago.

  5. Posted by Spencer

    Has increase in condos fit a certain profile? 1bd, 2, studio, 3 etc?

  6. The last purchase contract I signed was in late 2014 and I haven’t bought any houses since. Not only did I call this market top perfectly, but unlike most people here, I put my money where my mouth is.

    • Posted by Anon

      So are you unloading your inventory now so you can buy it back for 40% less in a couple of years???

      • I’m keeping a few houses in prime neighborhoods as high yield rentals (portfolio yield is currently 9% cash on cash net of costs – not great but survivable), while amassing another war chest of cash to buy in when this downturn bottoms out. Of course I am always buying at the margins so the macro trend isn’t necessarily as important as the specifics of each deal. But the stage is set …

        • Posted by jackthetripper

          9% yield is chump change if you truly believe this is the top. Sell and put your money where your mouth is unless you arent really sure.

          • Well… taxes.

          • Let me rephrase that 9% statement slightly. It’s a 9% cash on cash return, however, the return is substantially greater on a balance sheet basis if you factor in amortization of the underlying note and appreciation in the underlying asset. Which ever way you run the numbers, there are worse deals out there than owning prime real estate in SF/Peninsula, assuming your numbers pencil out as well or better than mine do.

            The glory days of double-digit returns will come again and when they do, I’m ready to jump back in.

  7. Posted by tender

    rack ’em

  8. Posted by Mr. Miyagi

    What you uber-bulls don’t get is it that I could not care less (and other successful real estate investors like me) if you don’t see there is not a massive glistening real estate bubble.

    Truly your understanding of this fact is totally inconsequential to me. I make money because people like you fail to see such obvious asset distortions. So, no, I won’t spend 30 minutes on here trying to counter…how the market is not in bubble territory both in terms of rents and valuations.

    • Posted by SFrentier

      Mr. miyagi you sound quite delusional. 1- So how exactly will you remain a “multi millionaire” if the RE market crashes big (I assume -40% or greater) if you own so many rental properties? 2- you predict rents crashing too, so where exactly is everyone going to live? How much new construction rental housing is being built? Exactly, not much. So unless everyone is going to double up or shack up with extended family, I’d love to know how rents are going to crash too.

      • Posted by incog

        “so where exactly is everyone going to live?”
        Somewhere in the (3.8M – 49) square miles of the US that provides cheaper living than SF?

        • Posted by SFrentier

          Errrr….mr miyagi was referring to a rent decline throughout the whole country. So peeps might as well stay here, cause they’ll be able to get a 2BR in the mish or Noe for $1200.

      • Posted by mr. miyagi

        1. Where did you learn that multi-millionaires cease to exist when rents and values soften? Some of us have what is commonly called “equity” in buildings which still remains when values soften and rents soften. Also some of us have many buildings which even if halved still allows the operator to be a “multi-millionaire.”

        2. Your logic of rental crashes not occurring because “people will not have anywhere to live” is so hairbrained I’m not sure where to start. I hope you are aware that rental softening has occurred many times in history all while population is still increasing yada yada yada. Yes, we have been in many markets where people doubled up or lived with family and it negatively affected rental rates.

        You must be a recent college grad, you certainly aren’t over 30 years old.

        • Posted by SFrentier

          You’re real cute mr.miyagi! Now you’re talking about rents and values “softening”. And before you exact words were “blood bath” “values cratering.” Do you see a difference between these, or are they the same thing to you?

          Hardly anyone here thinks rents and prop values are going to continue going up over the next 2-3 years. But your doomsday and bombastic language implies a hard -40% crash. And that’s what you’re getting pushback on. To be clear “softening” would be in the 5-15% range. So, which one is it?

          And as for your wealth, unless you own your buildings outright, even if you’re at 50-70% equity to loan, if your assets drop by 40%, your net worth is decimated. And if rents drop that much, unlikely you will have much cashflow either.

          It’s your tone that’s the issue here. So why don’t you put some numbers/ranges down along with your rhetoric?

        • Posted by Some Guy

          The larger question about the Mysterious Multi-Millionaire Mister Miyagi is why such a putatively successful fellow feels the need to get his panties bunched posting authoritatively-posed and condescending remarks on (with due respect and your indulgence, SS) Some Internet Forum. Is 5M’s therapist on vacay? Did the SSRI’s run out? Wax on… wax off…

    • Posted by Confused renter

      You sound like Donald Trump.

  9. Posted by Markets_arent_a_panacea

    I get it Mr. Miyagi, but as someone who is not a wealthy real estate investor and not a millionaire, in fact as someone who just wants to get my family and me out of this 2 bedroom apt and buy a house i wonder why you are so confident. To be sure, i really hope you are right, and certainly think things are over valued. But i would like to know why you think there will be a buuble bursting as opposed to a small correction not because i disagree with you but bc i hope you are right and want to feel good about that belief and hope that there is some hope for a family that makes less than 200k to afford a house

    • Posted by SFrentier

      Mr. miyagi….now look what you’ve done! Delusion breeds delusion. This is hysterical

      • Posted by jackthetripper

        And that’s the problem. People like Mr miyagi cause potential buyers to wait for the crash and when it never comes they end up priced out and move to the east bay. Seen it a million times before. Will see it a million times again.

        • Posted by incog

          Well, never except for the last time, and all the times before that.
          You have far far more people going around thinking that RE never goes down than you have people being irrationally pessimistic.
          But, it is important to recognize that there can both be a bubble *and* a long term shift in income and wages for some job types.
          In a bust when the mood turns pessimistic, with loans and jobs are harder to get who’s to say that you can remain optimistic with a job and access to capital?
          And during a tech bust, what happens to jobs and wages in the support economy?

        • Posted by Some Guy

          “Moving to the east bay” sounds like “diagnosed with stage 3 carcinoma.”
          The –horror. The –horror.

    • Posted by Sabbie

      Reasons for a bigger vs smaller correction:

      1. The Fed has painted themselves in a corner, is out of ammo. NIRP and banning cash will backfire, so will buying equities. I doubt helicopter money will have much success either.

      2. People underestimate the role of high rents in this current run up; rents are much more liquid than home prices, it’s quite easy for tenants to move or renegotiate the lease, putting the landlord underwater on the payment.

      3. The structural problems in the economy are worse than going into the previous recessions.

      While SF proper has seen a crazy number of cash buyers, it only takes one or two motivated sellers per neighborhood to drive down values.

      • Posted by jackthetripper

        And the opposite holds true as well. One property in glen park just sold for 1600 per sq ft. Pure insanity.

        • Posted by Sabbie

          That’s what I’ve been trying to tell people. Ten local couples with good jobs bidding on a house in Glen Park have much less effect on home values than the one IPO or foreign cash buyer who steps in and drops the bomb at 30% over asking price.

      • Posted by JR "Bob" Dobbs

        I don’t discount the possibility of a significant (20-25%) SF housing price correction at all, as I’ve been saying here. However, is that a fait accompli “beyond debate?” The counter-evidence is pretty strong: very high worker income gains reported yesterday, hitting all income levels; low and falling unemployment; near record stock market highs; steady GDP gains; prime working age population is growing; local tech and VC environment continue to be strong; recent Case Shiller YOY data and “apples” indicate SF housing prices are still rising, albeit much more slowly; Clinton victory looks very likely.

        I certainly would not claim it is not debatable that housing, and the economy generally, will continue to do great over the next couple of years. But I would not (and have not) bet against it given the prevailing trends. I would wager that would-be buyers waiting for a big fall in prices will be disappointed for the next couple of years at least. That said, I repeat that anyone buying in this market should be positioned to withstand a significant decline as that is certainly not a far-fetched scenario, particularly if Trump somehow pulls off a surprise.

        • Posted by incog

          I agree with you that calling it “beyond debate” is hyperbolic.
          But I don’t think the counter evidence is that strong. In absolute terms, the median US income is $56k. The median family isn’t buying anything in SF. And over a longer scale the median income is still below what it was 17 years ago!

          LA based, but indicative of a sharply reduced willingness of investors to keep dumping money into a pit, another Uber for donuts style startup just went belly up.

          Many of these “tech” startups don’t really have any technology to speak of and were just testing out an (overcrowded) market niche. I doubt Google is going to be itching to snap up the coders of yet another laundry delivery app for their tech chops. These people will probably just go home.

          The last housing bubble flattened out for a few years before deflating, so I don’t think the lack of an immediate decline is very surprising. It’s the change from up to flat that is significant.

          • Posted by SFRealist

            All the tech startups in San Francisco combined are smaller than Apple. And Google. Those are the drivers of our real estate prices.

          • Posted by incog

            Apple’s presence and Google’s rise did nothing to stop the 2000 Rentpocalypse, nor did the 2007 introduction of the massively successful iPhone stop the post 2007 housing bubble collapse.

          • Posted by SFRealist

            In 2000, Apple’s market value was about $6B, in 2009 about $100B. Today it’s about $600B.

            In 2000 Google’s market value was $0, in 2009 it was about $170B. Today it’s about $520B.

            I should add Facebook. It was $0 in 2000 and 2009. Today it’s about $360B.

          • Posted by incog

            These companies went though strong growth phases which undoubtedly allowed their workers to acquire housing and yet did not forestall either a rent nor a housing bust.

            And their growth was profitable. Where are the companies this cycle making those kinds of profits? There have been large established companies in the valley during previous boom bust cycles. A bust doesn’t require every single company to drop dead.

          • Posted by SFRealist

            My point is that it’s still Apple, Google, and Facebook that are driving our housing prices. They make tons of money, employ lots of people at high salaries, etc. I seem to remember that they are each larger than every unicorn in SF. (Not to mention Salesforce, Oracle, etc.)

            They are the reason prices have remained high around here. If one of them had problems, then our housing prices will drop.

          • Posted by Some Guy

            SFrealist’s point here underscores what I’ve said at least once or twice on SS, a year or two back — that part of why “this time around may be different” is due to the sheer scale of these global companies. Billions of devices, billions of users, billions of ads served. It’s like a giant global funnel plopped into place in a few short years, sucking high billions to low trillions of $$ into the BA tech sector.

            The hive swarmed and decided to land in SF. Things can always change but for the time being the BA is like Detroit in its heyday. Apple/Google/Facebook are The Big Three, not to mention scads of other major players like Uber, Salesforce, Oracle, and probably 50 others.

          • Posted by Jake

            OK, here we go again, or not. This time, is it differently the same or similarly different?

            Post-WWII, generations of flocks of techno golden egg layers (Fairchild, Intel,…, Apple, Oracle, Cisco,…, Netscape, Yahoo,…, Google, Facebook,…) and their mother hens and consigliere (Stanford & PageMillRoadies) have enriched bay areans, including the majority of us that actually moved to the bay area in these many many gold rushes of the past ~50 years.

            As for the present times of getting fat while the stock strike prices are right again, well, in this generation many of the biggest and most profitable SV hens depend on consumer spending, either directly (Apple sales of iPhonery and iOZery) or indirectly (Google and Facebook ad revenue from consumer product companies). Both those get hurt in a recession or (shudder) deflation. As long as the stock market and GDP are up-up-up, what me worry?

            As for the weird tendency to equate the bay area with ALL tech that exists, when it is but the largest of many technopols and rather concentrated in ONE segment of tech, well, where did Uber go to steal away a team to build their engineer-firmly-gripping-the-wheel-self-driving-buggies? Carnegie-Mellon, PA.

          • Posted by Some Guy

            I should probably better-qualify my notion of “this time it’s different” by explaining that “this time around isn’t DotCom2.0,” the growth / expansion / RE price movements have made new highs but also new plateaus (indicating stability) since the mid-late 2000’s bubble-crash. So, I think we could enjoy another several years to maybe even a decade before undergoing any really damaging pullback.

            To put some hard numbers on it, I’d not be surprised to see +20% to +30% total increase in average RE sale prices between now & 2022 to 2024-ish. What lies in store in the meantime is notoriously harder to predict. If history is much of a guide there could be some thrilling whoopsies on the way there.

            That said — IF I was looking to buy at this moment, as a smalltime Joe Landlord w/ one or two rental SFR’s, I would not buy. Relatively luckily for me I bought in Jul 2014. (At the time, having the exact same sentiment & reservations, i.e. I thought Jul 2014 could be near a market peak, but for various reasons I needed to buy at that time.)

          • Posted by Jake

            the dotcom was a once in a generation flood of hype, hubris, and actual epic practical and piratical advancements. The current run is less spectacular and speculative. FWIW, the bay area tech juggernaut has had a recession every decade or so. The late 1980s SV had a nasty hickup when PC sales slowed, caused a residential RE decline in the ~20% range. Wonder what would happen if smartphone sales stalled and/or the taxers take a scoop outta the Apple/Google/etc irish punchbowl.

        • Posted by jackthetripper

          But in the next couple years even in this flat market we can see a 15% increase which would make your 20-25% only a 5-10% loss. May be worth it for investors to wait for that small profit but for families trying to lay down roots the wise advice has always been to buy the second you can afford it.

          • Posted by incog

            Many bought as soon as they could during the last housing bubble and for many it did not work out so well. People could “afford” high price to income ratio’s then due to loose lending and now can “afford” high ratio’s due to low interest rates.
            Stretching works out great when prices go up. Even a 10% net drop plus 5% transaction costs and yearly property tax can leave you with your down payment gone after years of stretching to make payments.

          • Posted by Jimmy The House Flipper

            Nah, this is just simply wrong-headed thinking. In San Francisco and the Peninsula, debt is simply future wealth. The more you have, the richer you’ll eventually be.

        • Posted by JR "Bob" Dobbs

          On the VC front, this from today’s NY Times:

          “For the last year, investors have worried that the venture industry had become overheated and that there would be a freeze in fund-raising. But like Sapphire Ventures, several firms have raised more than $1 billion this year, giving them firepower to write big checks for start-ups, whose valuations peaked around the end of 2015.

          Last month, Technology Crossover Ventures announced a $2.5 billion fund. Earlier this year, Kleiner Perkins Caufield & Byers raised $1.4 billion across two funds and Andreessen Horowitz raised $1.5 billion. Founders Fund also raised $1.3 billion, Accel Partners garnered $2 billion and Norwest Venture Partners raised $1.2 billion.

          In the United States alone, the venture industry raised nearly as much money in the first half of 2016 as it did in all of 2015, according to data from Thomson Reuters and the National Venture Capital Association.”

          The Bay Area boom will end one day and reverse, of course, but I don’t see any compelling evidence that day is coming soon. Believe me, I am on the lookout for evidence of the slowdown, such as lots of companies shutting down and shedding employees with no new ones to replace them. Not there, despite some whispers and hints and maybes at best (such as valuations peaking at the end of 2015, although the NASDAQ is now within 1% of its all-time high). Since the “Big Short” everyone wants to be the next to make the call “Collapse – First!” So far, all I’ve seen is “Wolf!”

          • Posted by Sabbie

            VC funding peaked at exactly the same time as Nasdaq in 2000. Definitely not useful as an early warning sign.

          • Posted by JR "Bob" Dobbs

            I agree – that is exactly my point. There is no early warning sign yet. Nor any evidence (yet) that VC funding has peaked, for that matter; it appears to still be rising.

          • Posted by incog

            Low rates are driving investment into a number of risk asset classes including VC funds. And if you aren’t seeing startups cutting back and shutting down, I don’t think you’re looking closely.

          • Posted by JR "Bob" Dobbs

            Of course, startups are cutting back and shutting down. When we see that without other startups getting funding and ramping up and hiring (the second half of the picture I noted above), then we will be in a slowdown in the startup arena. Not there yet. And, of course, as the startups that take hold and become established companies (FB, Goog, CRM, etc., etc.) continue to hire, that keeps the job market strong. I’m not saying this is a permanent situation, but there has scant evidence at this point of any reversal. And not every boom leads to Detroit(!!) on the down side – SF weathered a colossal tech bust in 2001 pretty well.

          • Posted by markets_arent_a_panacea

            I think what’s interesting and sort of missing from all these fun discussions on this site is that, IMO, psychology and expectations are a lot of what really driving prices of these houses. It’s not tech workers per se. As noted, the prevalence and google, apple, etc in the more recent downturn in housing, but the expectation what the true ‘value’ of a home is. So I believe, if you removed all of the tech workers, I think, there would be maybe 15% fewer people that still had the money to buy homes in sf. (What percent has been the large influx of residents into sf in the past 8 years?)

            If you think about it, in sf there are plenty of Drs, Lawyers, Engineers, Finance professional, etc that don’t work in tech. And in the current interest rate environment, a household with 2 people working in those fields, can make 250K plus combined relatively easily. That can afford you a pretty expensive home. Do these people want to pay that much for a house in SF? Probably not, but CAN they? yes.

            When you include flippers, and over seas investors, there is plenty of money to buy at current prices, but as long as they assume those prices wont decline. And I think that is what we are not (and can’t) really quantify here.

            To be sure, I do think the influx of tech has driven this psychology and demand on two fronts though:

            1. I think the influx of tech is noticeable and drives rents up, which also drives the rent to own calculation. So, the dr, enginer, finance person, may not be the tech worker that’s buying the home however, they are still being driven to that purchase due to the increase in rent prices do to the tech worker.

            2. I also think the influx of tech drives the psychology of needing to get into a house sooner rather than later.

            The interesting thing to me is if or when prices start falling, how will people react. Will they assume the market value of a house is still really high, ie, the price be sticky, or will they wait and the price will fall. Seems to me, there is plenty of people making enough money at current prices, it’s a matter of the expectation of the value of the home falling in the future tip the scale to any type of correction?

          • Posted by incog

            “I think what’s interesting and sort of missing from all these fun discussions on this site is that, IMO, psychology and expectations are a lot of what really driving prices of these houses.”

            I find myself beating that drum here quite regularly.

            Looking back at the 2007 housing bubble you can clearly see that it’s not just tech workers or foreigners that can let price expectations drive their purchase decisions.

            And when prices actually do rise strongly for a while, those high expectations get reinforced by actual observations of friends and neighbors cashing out. And then no-one defaults in a rising market with high price expectations so defaults are low and then banks look at that data to justify lowering loan standards, which feeds into higher prices which further increases price expectations…

            I do think that there is some positive correlation between the bay area version of tech and bubbly behavior though. The type of person that fully buys into startup culture and ties their hopes on options which have a large chance of being worthless is IMO more likely to lever up on a home purchase.

            If you were to assume that people are rational actors you might think that people with high risk careers would pursue low risk RE strategies. But in reality some people take risks in both aspects and others take risks in neither.

  10. Posted by Dan Clark

    My plan is to die with as much debt as possible. So far, the plan is working spectacularly well.

  11. Posted by Travis Bickle

    I sold two houses in SF for less than one mill each in the last 60 days and am feeling pretty good. Not only that I got rid of tenants without getting extorted. Just raised rent to market which is perfectly legal and they moved on. First Lawyer said to expect to pay them $50k to leave. Second Lawyer got rid of them both for $2500.

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