This page has been archived and commenting is disabled.

Doctor Fed, You Are Wanted In The San Francisco Housing Ward, Stat

Tyler Durden's picture




 

We have previously explained why the San Francisco market is such an important bellwether of overall liquidity and prevailing economic euphoria, directly supported by not only the Fed's "wealth effect" printing and the second tech bubble, but also Chinese capital flows out of the mainland and into US real-estate. Which is why the latest update on San Fran housing dynamics should make those looking for the housing inflection point somewhat nervous as said inflection point now appears to be almost a year old.

Specifically, after posting a 25.7% Y/Y increase in home prices last September, as of June the pace of home price increases is precisely half that, or 12.9%, and also a signfiicant drop from the 15.6% reported in May.

Why is this notable? Because the only three previous times when there was such a sharp contraction in the pace of San Fran home price appreciation, either the dot com bubble, the housing bubble, or the European sovereign debt bubble had just burst. For now, we leave what is going on in San Francisco as merely a question mark, because clearly the Fed's grand "reflation at all costs" experiment is nowhere near over...

 

- advertisements -

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Tue, 08/26/2014 - 10:26 | 5144709 BandGap
BandGap's picture

Like a drowning man struggling to reach the surface.

Tue, 08/26/2014 - 10:32 | 5144750 clade7
clade7's picture

Good description of your average working stiff...Watched my old man do that for 40 yrs...He should have tried out for the SEALS the way he could tread water..

Tue, 08/26/2014 - 10:46 | 5144816 Vampyroteuthis ...
Vampyroteuthis infernalis's picture

Yes, one day those bankster will own all of the Bay Area real estate and have no tenents because the rent is TOO HIGH!!

Tue, 08/26/2014 - 10:53 | 5144838 PartysOver
PartysOver's picture

I tried to have sympathy for anything Californian, water, broken wine bottles, imiigration, public schools.....  No, seriously, I really tried.

I FAILED!

 

Tue, 08/26/2014 - 11:59 | 5145117 The Big Ching-aso
The Big Ching-aso's picture

Lotta queer rumblings coming outta San Fran lately.

Tue, 08/26/2014 - 12:12 | 5145222 knukles
knukles's picture

Maybe it's the bursting of the "Everything is just fucking hunkie-dorrey propaganda bulllshit bubble"
Long overdue

Tue, 08/26/2014 - 14:46 | 5146003 Pool Shark
Pool Shark's picture

 

 

Here come the new tenants:

http://www.breitbart.com/Big-Government/2014/08/26/Jerry-Brown-to-Mexican-Illegals-You-re-All-Welcome-in-CA

And, they can stay in the home rent-free; after all, they're not 'burglars,' they're merely "undocumented house guests."

 

Tue, 08/26/2014 - 12:29 | 5145344 Statetheist
Statetheist's picture

"My tax farm is better than your tax farm"

Tue, 08/26/2014 - 17:20 | 5146660 WOAR
WOAR's picture

You didn't fail that.

Tue, 08/26/2014 - 13:57 | 5145788 lasvegaspersona
lasvegaspersona's picture

Vam...

here is the political afiliation for you...

http://en.wikipedia.org/wiki/Rent_Is_Too_Damn_High_Party

Tue, 08/26/2014 - 10:54 | 5144846 Dr Strangemember
Dr Strangemember's picture

But there's a drought in Cali... nobody is drowning these days.  

Tue, 08/26/2014 - 11:15 | 5144918 tarsubil
tarsubil's picture

Like an addict struggling to keep getting high.

Tue, 08/26/2014 - 10:26 | 5144710 q99x2
q99x2's picture

It won't matter once the Ebola pandemic hits the US.

Tue, 08/26/2014 - 10:34 | 5144756 astoriajoe
astoriajoe's picture

or once Californians can no longer flush a toilet, wash their hair, or drink a glass of water.

Tue, 08/26/2014 - 12:30 | 5145350 Statetheist
Statetheist's picture

Or the rest of the western US.

Tue, 08/26/2014 - 13:15 | 5145595 seek
seek's picture

Actually most of the western US except california isn't too bad off. Better water management policies plus they're not getting bitchslaped by the mythical hand of god on a daily basis the way Cali is.

This will be a huge crisis when the California division of the FSA decides to invade other states. The irony is cloward-piven could actually kill the welfare state when a group of locusts that concentrated descends on a much smaller and less blue state.

Tue, 08/26/2014 - 10:59 | 5144863 Dr Strangemember
Dr Strangemember's picture

Perhaps letting even MORE illegals in will help boost the housing numbers for SF.  8 families to a unit, as long at the landlord/bank gets paid, who cares.  (but where you gonna park all those Dodge Diplomats and Olds Delta 88s???)

Tue, 08/26/2014 - 11:01 | 5144868 Dr Strangemember
Dr Strangemember's picture

Ahhhhh, EEEEEEEEE-BOOLAAAHHH!  I can't wait until that happens.  Looking forward to driving go-carts anywhere I want and not worrying about the fuzz!

Tue, 08/26/2014 - 11:22 | 5144941 Freddie
Freddie's picture

I want to be Ken Block in a 650 bhp Ford Fiesta rally (cross) car driving through an empty San Fran.

https://www.youtube.com/watch?v=B_HT4z7-tOA

Tue, 08/26/2014 - 10:27 | 5144719 Carpenter1
Carpenter1's picture

Diminishing marginal returns.

Tue, 08/26/2014 - 10:27 | 5144720 Cocomaan
Cocomaan's picture

How about a 'water bubble'?

Tue, 08/26/2014 - 10:28 | 5144727 Cangaroo.TNT
Cangaroo.TNT's picture

Speaking of SF, I heard the only people to escape the earthquake unscathed were the gays because they had their shit packed the night before.

Tue, 08/26/2014 - 10:34 | 5144762 Dr. Engali
Dr. Engali's picture

That was damn funny.

Tue, 08/26/2014 - 10:37 | 5144778 quasimodo
quasimodo's picture

That joke would be well received over at huffpo!!

oh wait...........

Tue, 08/26/2014 - 10:36 | 5144734 clade7
clade7's picture

The FED is needed in San Fran?  Why?  Isnt there enough ass drilling going on there enough as it is?

Shooting fish in a barrel!

Tue, 08/26/2014 - 12:30 | 5145354 Statetheist
Statetheist's picture

lol, a gay joke!!!!!!!

Tue, 08/26/2014 - 10:31 | 5144744 Comte d'herblay
Comte d'herblay's picture

You never learn.  It's different this time.

Tue, 08/26/2014 - 10:33 | 5144752 Dr. Engali
Dr. Engali's picture

No worries, the iPhone 6 is almost here to save us.

Tue, 08/26/2014 - 10:36 | 5144777 Cangaroo.TNT
Cangaroo.TNT's picture

I'm holding out for the iPhone Googolphonic with the moon rock screen.

Tue, 08/26/2014 - 10:33 | 5144757 JimboJammer
JimboJammer's picture

 Calif.  has  three   huge  concerns  >>>>  Radiation  in  the  Air  and  the  Ocean  ( Fukushima )

                                               >>>>  Drought . .  

                  >>>>          >>>       Nancy  Poloci  is  there....

Tue, 08/26/2014 - 11:11 | 5144775 Emergency Ward
Emergency Ward's picture

Beep.  Beep.  Beep.  Beep.  Beeeeeeeeeeeee

Tue, 08/26/2014 - 10:52 | 5144839 CHX
CHX's picture

And it's sitting on a major fault line that could literally rock the state pretty much at any time.

Tue, 08/26/2014 - 11:25 | 5144951 Freddie
Freddie's picture

Don't forget Boxer, Feinstein, Honda and endless more DemoCreep fascists. 

Tue, 08/26/2014 - 10:38 | 5144789 youngman
youngman's picture

Must be all the old gays dying of Aids....

Tue, 08/26/2014 - 10:51 | 5144791 luckystars
luckystars's picture

San Fran is where the rich Chinese park their money. They own buildings that are totally empty now, they don't rent out and local realtors say they buy them sight unseen. That coupled with Airbnb has caused rentals to skyrocket.

The beatnicks moved in during the 50s because rent was cheap and businesses empty, people were moving to suburbs.

SF housing was the cheapest after the freeway system was built in the mid sixties and and opened access to the newly built suburbs. Also in 1967 the city was flooded with hippies. White flight and only the poor remained. That is also when the Chinese bought RE in SF, the old group.

In 1984 I worked in the first California Cuisine restaurant in SF, I heard the word "Yuppie" for the first time. All of a sudden whites wanted to return to the cities.

 

Tue, 08/26/2014 - 11:30 | 5144985 Bastiat
Bastiat's picture

There's also significant money coming from dotcom 2.0. 

Tue, 08/26/2014 - 12:28 | 5145329 combatsnoopy
combatsnoopy's picture

THe EB-5 Visa incentive to invest in US is limited to real estate and construction, the Chinese Americans are really trying to open it further into American oil research and exploration.  They SHOULD be trying to get the EB-5 to buy marketable common and preferred shares in U.S. companies since we have too much of Chinese government money in the U.S. Treasuries giving the U.S. government way too much control over the people.   We could really use corporate tax breaks.  The US has the weakest private sector investments/GDP for developed nations.  http://world.bymap.org/Investments.html

And of course Venture Capital isn't the best option with all the red tape set up by techies protecting themselves from badly needed competition. 

The "investors" "buy" complexes and rent out ONE unit at a superhigh price, then use that money to finance the maintennace of that entire complex.

The Chinese are not the only ones doing it, Indians and of course American Hedge Funds got into that game.  I've seen the books. And of course those who can blow $3000+/month on a rental are the most unhappy tenants.  
If you find out who the landlords are, Yelp is chock full of fun reviews.   

Tue, 08/26/2014 - 10:42 | 5144800 CheapBastard
CheapBastard's picture

The new leader in China is cracking down on "corruption" serious Big Time which means much less loot sneaked out of the country. Singapore RE is already plunging and even their luxury market is tanking due to the crackdown the Singapore news reports. If he continues his crack down, it may very well result in lower Cali McMansion sales/prices as demand shrivels up from the cahs buyers in the PRC.

Tue, 08/26/2014 - 10:44 | 5144812 yogibear
yogibear's picture

Baby-boomers are retiring and downsizing as well as eliminating expenses. In the meantime the Federal Reserve is printing like there is no tomorrow trying to keep the reflation up. Seems like poorhouse economics.

Tue, 08/26/2014 - 10:46 | 5144819 SillySalesmanQu...
SillySalesmanQuestion's picture

I suppose they can blame this on the earthquake... or the weather...or the drought...or the corrosive salt air...or...

Tue, 08/26/2014 - 10:52 | 5144837 Dr Strangemember
Dr Strangemember's picture

What, no more fools left to boost it higher??  Oh, we're talking about SF... I doubt that!!!

Tue, 08/26/2014 - 10:58 | 5144866 khakuda
khakuda's picture

I keep getting the mental image of Yellen shouting to the guys running the printing presses and ZIRP machines, "Faster, just a bit more for a bit longer...don't stop just yet...needs...more....bubble...Must. Reach. Escape. Velocity..."

Tue, 08/26/2014 - 11:06 | 5144889 Downtoolong
Downtoolong's picture

It’s one of the oldest self-promoting ploys in the publicity playbook. Act the hero by claiming you will do something good for others which is dependent on something else which you know can’t possibly happen.

“I’m going to invest $100 billion in the Palestine economy, just as soon as their war with Israel ends.”

 

 

Tue, 08/26/2014 - 11:07 | 5144891 Al Huxley
Al Huxley's picture

Based on the chart, the implication seems to be that there's a good 6 months to 1 year of rising stock prices before the equity markets catch up with SF housing.

Tue, 08/26/2014 - 11:23 | 5144933 Hongcha
Hongcha's picture

A crackerbox in the windswept, desolate outer Sunset (aka Outer Mongolia) with a cemented backyard presently runs around a million.  The skyline SOMA is as they say "dotted with cranes" much like Bangkok was in the late 1990's.  There are hundreds of building permit applications on the desk at City Hall and hundreds of new condos in the works in SF, Oakland, Emeryville.  They always overbuild.  Absolutely the top as I have been pounding the desk about for some time.

Tue, 08/26/2014 - 11:44 | 5145044 Freddie
Freddie's picture

I wonder if SF will be affected when more and more companies and people outside the USA stop buying USA technology filled with En Es Aye spy shit?  More and more hosting is moving away from US companies to Switzerland, Iceland, Russia and other places.

Tue, 08/26/2014 - 12:09 | 5145206 rosiescenario
rosiescenario's picture

Yeah..the "Sunset"....more like the Fogset. Some realtor in the '40's must have come up with that name Sunset to lure in the unwary.

Tue, 08/26/2014 - 13:50 | 5145760 Hongcha
Hongcha's picture

You are correct Rosie but it was shortly after World War One that the subdivision began in earnest.  It was just sand dunes then and to sand dunes it shall return.

Tue, 08/26/2014 - 11:27 | 5144952 novictim
novictim's picture

I keep reading that young people are being forced into rental servitude for life.  Making the landlord business model harder through taxation would help correct this.  The higher taxes on rentals could be funneled into more tax breaks for owners. 

Oh, if you libertarians don't like "more taxes" we can agree to call it a "home ownership fee", you know, just like on those privately run bridges and toll road "fees/tolls".  You like those, right?

So the solution to the nations housing problem is to "fee" the crap out of homes or apartments not occupied by the owner.  Empty or rented out units or homes would place a real crimp on Chinese bandits trying to park their money in US housing. And we could make a national U-Turn on our current policies that mistreat people who work and the younger generation forced to rent.

Tue, 08/26/2014 - 11:32 | 5144991 joego1
joego1's picture

What about people who are in real estate to avoid the stock market bubble? Fee the crap out of yourself tard.

Tue, 08/26/2014 - 12:14 | 5145218 novictim
novictim's picture

How many units do you own? 

The reason why a command economy is needed is because every one of our individual decisions driven by the greed and fear of our self interests and that of oligarchs and mini-slumlords got us to this point.

Imagine a business that decided to run itself like you would have us run the USA economy and government.  It would be owned and operated by the Chinese long ago.  Perhaps it is today.

Tue, 08/26/2014 - 20:12 | 5147235 Suisse
Suisse's picture

Rental prices are out of whack due to supply constraints. Old buildings need to be torn down and larger ones built in their place. 

Tue, 08/26/2014 - 11:50 | 5145076 Econolingus
Econolingus's picture

I believe it is something called supply and demand. If kids can't afford to rent, they should leave town. If they are stay, they are making either an irrational economic choice or a greed-gamble that they can cash in on the next social media/software/green tech phenomenon. In each case, they embrace the results of a sentient decision. No one is forced into rent servitude, any more then student loan debt. Such a predicament derives from a failure to perform risk-based economic analysis, and simple calculations based on earning potential.
As for horse-shit socialist economic redistribution schemes like rental fees, you might consider researching the impact of rent-control on the quality and upkeep of housing stock or visiting a public housing complex. Then ask yourself if you would invest in real estate under strict government control: if not, why not?
Selah, bitchez

Tue, 08/26/2014 - 12:03 | 5145170 novictim
novictim's picture

Funny, the Chinese have lots of demand but somehow they can park "their" money in US housing?  Think about what you are saying.  Our kids have to compete against the stolen wages of millions of Chinese so how could they possibly compete?

Leave town?  That is your free trade/free market mindset.  Hey.  You would give up your kids national inheritance just to pander to your own broken ideas?  How stupid.  A chinese oligarch is waiting to take advantage of your foolishness. 

The Chinese play the long game, Econ.  They know the land is valuable and YOU think you are clever to let it slip.  That is why the USA is plunging into economic ruin.  Your philosophy has no success to turn to.

Regarding rent control, only YOU mentioned that.  When my opponent turns to straw-men I then know just how weak they feel about their own positions.  Thanks.

CHINA, Bitchez!  How did that economy beat the crap out of ours, BITCHEZ?

Tue, 08/26/2014 - 11:54 | 5145111 novictim
novictim's picture

------------OR------------

Yes, or we can pretend that the "Market Knows best" and that the outcomes we like for OUR OWN country will magically come to pass all without conscious policy choices.  People, the Chinese are playing a VERY manipulated and conscious manipulation of their markets and they are winning this game!

All this libertarian philosophy the US half-employs is buying us slavery and servitude. Can you not see this?  And no, going Full Retard Libertarian will not make things better.

The massive expansion of the Chinese economy, a COMMAND ECONOMY MIND YOU, should have taught you the naivete of thinking"free market" are "best".  Chinese markets are far more RIGGED than ours and they are winning this game of cheaters, undervaluing their currency and generating a trade deficit with which they then use to buy out US housing. Our younger generation is suffering as a result.

Your children's land lords will likely be Chinese if you don't wake up.  We used to be more wise.  We used to have trade tariffs as a matter of standard practice, we used to have the ability and will to protect US Tax Payer funded ideas/tech so that production would be in the USA! Free trade nonsense and libertarian hands off policies have ruined us.

All that you libertarians and free marketeers have done is to substitute our once great production economy with a financial gambling house. 

Tue, 08/26/2014 - 17:37 | 5146751 armageddon addahere
armageddon addahere's picture

Having been in the rental business since the 70s, I can tell you your ideas would be disasterous for tenants.

One reason rentals are so scarce, and rents so high now, is all the anti landlord laws on the books.

The good landlords get driven out, the crooks and sharpies figure an angle.

And, the costs always get passed on to the consumer. If not right away, as soon as the last honest landlord goes bankrupt.

Tue, 08/26/2014 - 21:49 | 5147499 novictim
novictim's picture

armag, my point was lost on you.  I want us to make renting the rare or temporary status, not the default as it has now become.

I want to discourage the very act of "investing" in rental properties and I want my fellows to have those homes and apartments as their own.

If there is no viable business in renting then those homes must transfer to people who pay for them! 

It is supply and demand, too!  Think!  Tomorrow it now costs you more to rent out a home than you can get back from selling that home...then you sell!  That is a market incentive.  Eliminating profit in rentals is totally doable.

I put our one idea of how to get there.  Now that you know you had me wrong, what idea do you have?

Tue, 08/26/2014 - 11:36 | 5145015 Econolingus
Econolingus's picture

As you know, all real estate is local. Here in Marin County, things are frothy perhaps but certainly not manic. Rather, it feels like ordered chaos as tech millionaires retire from silicon valley at age 32 to raise their kids and mountain bike. And there is no shortage of such millionaires, courtesy of the fed and minted with your ( and your grandkids) future dollars.
So, when the rate of appreciation drops below sustainable rates (5-7%), i might take notice. As it is, middle-tier houses ($1.5mm-3.5mm) are selling at $900-1,200/ft on 1/8 acre lots in towns like Mill Valley, while homes with city or bay views in Tiburon get a $250-500k premium.
Bubbly? Perhaps. But no real signs of relent while the housing supply is less than 30 days when 3-4 months is considered "healthy".
Selah, bitchez.

Tue, 08/26/2014 - 12:35 | 5145382 novictim
novictim's picture

I think it is great that a place so wealthy like Marin County can become such a social wasteland while having all the hills and trees and beauty!

Or do most of the kids of that "community" inherit enough wealth that they can park their little asses down in those million dollar homes? 

Or do you even give a rats ass about your neighbors kids...that they most likely will never land a job that could ever possilby afford their ability to stay where they grew up?

Of course not!  Econ, that is where the Chinese have your kids and your neighbors kids for lunch.  They do care.

Tue, 08/26/2014 - 16:21 | 5146356 Econolingus
Econolingus's picture

Have you considered that I might be Chinese?  Even if I am not, I appreciate your concern for my kids.  Maybe they won't be able to stay here, but I'm guessing the real estate investments that I've made in the Bay Area will allow them to--either because those prove profitable, or if they do not, because real estate prices moderate or--gasp!--fall!  And if the preparations I have made (including requiring them to study Mandarin) are not sufficient for them to be productive earners, then I can accept that they've been priced out: just because they got to take a shit here in their youth does not (and should not) ENTITLE them to a seat at this particular table.  Nobody gets a guarantee to live where they grew up, though you seem enamoured of that particular entitlement--probably among many others.  

 

But getting back on point, I've heard this same hysteria of "long-term" real estate acquisition by foreign investors before.  You know, in the 80s, when the Japanese were buying up all those precious American icon properties, like Pebble Beach?  Only problem is, you can't export land.  So when you get in trouble at home, you end up having to liquidate those holdings, and usually not for profit (Exhibit A, Pebble Beach, sold at a $340mm loss.  See here).  Most likely, some Chinese will win, some will lose, and many Americans, Indians, Hispanics and Europeans will continue to find ways to own commercial property here.  They way they already do.

Ultimately, the problem isn't that the Chinese are allowed to park money in US assets; the problem is that we engage in trade with a nation and companies that do not have basic workplace and environmental protections in place, enriching explopitationist oligarchs in the process.  Basically, we outsource our pollution and by-gone sweat-shop practices, and as a result, a great deal of our capital.  If we insisted as a nation on tariffs and trade protections that ensured a level playing field for environmental protection, workplace safety and wages, that would produce more desireable results than imposing more regulation on otherwise free real estate markets.  

The Bay Area is a naturally constrained housing market: it has two peninsulas and a massive frame of unbuildable ridge lines.  Furthermore, there are practical limits to how high you can build your buildings up, least big earthquakes bring them down.  So again, the question is not one of rapacious chinese unfairly tilting the market with their ill-gotten gains, but the reality that great weather and other factors make this a quite desireable place to live.  Limited supply + very high demand = high prices.

As for me, the markets have just closed, so my workday is done.  time for a pleasant afternoon stroll across the social wasteland.  Why don't you join me? Or are you due back at the politburo for a meeting of the high collective?

Selah, bitchez.

 

 

Tue, 08/26/2014 - 22:06 | 5147543 novictim
novictim's picture

My hat is off to you for that reply, econ! 

We are on the same page on every point on that post except that I think the lack of continuity in community such as is the case for Marin and many other areas is destructive of the "social fabric".

The coarsening of the society due to ever newer generation getting cheated more than the last, of the rampant need to move for jobs so that "Home Towns" fail to hold meaning, much less national identity is a warning to us that something is going wrong.

How can a country that fails to meet the basic evolutionary drive for community expect loyalty form its youth?  This connects to your great pooint about crappy trade deals that undermine labor and environmental concerns  from the get-go. 

Yes, have a great break from work,econ, drink a microbrew for me!  It is time for my lecture "Lenin and the Joys of Pogroms".  March on Comrade!  Got to go!

Tue, 08/26/2014 - 11:43 | 5145033 moneybots
moneybots's picture

"... the Fed's grand "reflation at all costs" experiment is nowhere near over..."

 

Wouldn't that be the FED's re-deflation experiment, as the three bubbles burst and deflated San francisco housing each time?

Tue, 08/26/2014 - 12:15 | 5145236 rosiescenario
rosiescenario's picture

In the case of SF real estate prices, just look a bit further south for the cause....Silicon Valley. GOOG running its own bus service from SF for its highly paid drones.

 

The same is true over here in Santa Cruz.....Silicon Valley money drives the home prices here....many are second homes. On West Cliff you wouldnot believe the prices paid.....$$$$ coming out of recent IPO's, options, and the like.

Tue, 08/26/2014 - 12:45 | 5145445 pebblewriter
pebblewriter's picture

It would look more convincingly bearish if the latest move had broken the trend line connecting the last two bottoms...

Tue, 08/26/2014 - 13:58 | 5145799 talisman
talisman's picture

 

Strange how San Francisco
is always crying poor....
with real estate tax
revenues now topping $2 Billion??

San Francisco used to be a
really great  place well into
the "80's....now it is total hellhole
the City doesn't even bothe
to pull out it's hand while
it picks your pocket nonstop.

Tue, 08/26/2014 - 14:23 | 5145909 Professorlocknload
Professorlocknload's picture

OMG, down to only 12.9% increases Y on Y? The humanity!

Do NOT follow this link or you will be banned from the site!