San Francisco long-term appreciation (Image Source:

It’s not the “bubble-proof” moniker that caught our attention, but the measure of San Francisco’s long-term (1949-2006) average annual home price appreciation (4.2%).

Business 2.0: Bubble-proof markets [CNNMoney]

11 thoughts on “Expectation Setting: San Francisco Appreciation”
  1. As a bubblesitter, I’m definitely hoping for some mean reversion, regardless of if it’s this 4.2% or the 8.0% put out by the CAR.
    That aside, I had heard that the resistance to developing Treasure Island had been overcome, and a huge new project was about to break ground there. Has anyone else heard the same?

  2. The stats are misleading. What happens if you take out the 40-100% appreciation in the past 4 years. The afford bility index is an important statistic and that number is down a few percentage points. What happens when the affordability index goes to zero? OK, so that’s not going to happen, but as it declines it prices more people out of the market and that must come into balance, either by increased wages, or declines in RE prices.

  3. either hyperinflation of wages or major correction is in order over the next couple of years in my opinion
    I vote for the prior in that the evil federal reserve likes to steal money from the savers of America (through inflation)

  4. Is that real or nominal growth? I am guessing that is must be real, since inflation averaged abot 3.6% over that period. So nominal growth would be about 7.8%. That is a bit higher than my personal calculation based on median home prices since 1940 — which is 7% — but it is in the same ballpark.
    Over the long term, San Francisco real estate has returned about 7%, which is pretty darn good for a leveraged investment. The question as to how much longer we can get more expensive than the rest of the country is an interesting one though.

  5. Nothing? Usually these kinds of threads generate a lot of enthusiasm. I guess all the bears have finally left the building.
    This is making me nervous. I am generally contrarian by nature, but I am starting to feel like San Francisco real estate in general and in my neck of the woods in particular is overpriced. I have never really felt that way before, though I thought we were in a nationwide bubble starting in about 2004.
    Don’t get me wrong, I really like my neighborhood. I just don’t see how it can possibly be joining the most expensive neighborhoods in The City in price. Maybe it is just sour grapes about being priced out of a bigger place. Sometimes it is a good to make a virtue out of a necessity.

  6. NVJIm: I thought the prevailing explanation for Noe is that Palo Alto and Menlo Park are comparatively boring for the young enthusiastic people who wind up being successful in Silicon Valley. “Dude, I spent 2 years in Palo Alto for my MBA… Why would I go live there?” Besides, those Peninsula towns are pricier than Noe.
    Look at Manhattan. Prices just keep going up. Absentee owners buy and visit infrequently. You have that dynamic in Pac Heights. This pushes working professionals to Park Slope, Prospect Heights,(Noe Valley!)
    No we are not Manhattan, but the bay area is a magnet for globally important high paying jobs for very smart people.

  7. As a property owner and avid real estate observer, I’ve totally lost interest in the market here. Nothing seems real any longer: the listing prices, the selling prices. I was fortunate to have bought here years ago but I can’t afford to move. I guess I’ve made some money on paper but I’d have to leave the area to see any of the gain. I would be much happier if prices increased moderately over the years rather than the dramatic speculative increases we’ve seen. I’m really not sure who this crazy market benefits other than the speculators and a handful of real estate agents.

  8. “I guess all the bears have finally left the building.”
    Actually, I’d guess that most of the former bears bought after prices corrected and just aren’t that obsessed with the market anymore. But I agree that prices are getting a bit crazy again in some parts of town. I’m starting to hear mumblings from neighbors along the lines of “I wouldn’t pay that to live here” when places sell.

  9. This former bear that had turned bull in 2010 hasn’t fully converted back to bearishness. But I am definitely calling this collective hysteria.
    But “this time it’s different”, lol.
    What a bull could say is that this market is driven by actual cash/wealth. People had refrained from taking any chances during the GR and are now awakening from their torpor. This awakening is powerful. And it is augmented locally wherever the economical miracle is happening.
    What a bear could say is that the massive QEs to rescue the economy only benefited one class of people, who then have to park that cash somewhere. And they do that by foolishly betting on the “sure thing” that they think they know. The rest didn’t see any relevant income increases (hence the low inflation which reflects a reality for the average consumer).
    I am almost ready to resurrect the old catchphrases “deflation Gods” and “Money Heaven”. If growth and inflation do not materialize to justify the current run-up in prices, then the pendulum will come back in full swing. Maybe in as little as 2 to 3 years.

  10. Noe and Menlo are very comparable these days:
    Look at median price and price/sq ft. They are almost the same. Menlo has more spread, from the flats west of 101 to the hills, but just anecdotally, I spend some time around the train station looking at places and prices seems similar to Noe, but with bigger lots. Palo Alto is still a bit more, but only in the really pricey neighborhoods.
    Maybe what you say about a generational shift is taking place.
    As an aside, I doubt that the bear really bought during the downturn, though I hope they did. I suspect they just kept waiting for the “real” collapse they kept predicting and missed it.

  11. What is funny about the generational shift that COULD account for an attraction by some to Noe instead of Menlo Park is that affluent younger buyers ARE turning Noe Valley into Menlo Park imho.
    1.)Adding Garages
    2.)Communting long distances to work
    3.)Wanting single family homes with yards
    4.)A huge increase in SUVS (See Whole Foods lot)
    5.)strollers everywhere
    etc. etc.
    Younger buyers may think that purchasing a Noe Valley home makes them “urban”, but I feel Noe Valley has become the suburb that they claim they would never want to live in, just with better architecture and coffee.
    A friend of mine who moved to S.F. from Chicago wouldn’t be caught dead in Noe Valley and instead purchased on Russian Hill which reminded her of the Lincoln Park district she lived in. I asked her if she looked at Noe Valley, Cole Valley, etc and she responded – “why would I want to live in a suburban neighborhood atmosphere?”.

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