Bubble Trouble: Silicon Valley & San Francisco Housing Markets Head South

The underlying dynamics changed in August and have worsened since. And this is still the tech boom.

It’s high time to unload houses and condos in Silicon Valley and San Francisco, one of the most expensive housing markets in the US. Sellers are now flooding the market with properties. Inventory listed for sale in those three counties that make up the area – San Francisco, San Mateo, and Santa Clara – surged by 102% in November compared to November last year, to 3,931 listings.

In each of the past three months, the number of active listings (new listings plus old listings that have not sold yet but haven’t been pulled from the market) was the highest since August 2014. The chart below shows the year-over-year percentage change in active listings. The red bars in the chart mark the beginning of bubble trouble in this housing market (all data via the National Association of Realtors at realtor.com):

When inventories are piling up because sales are slowing, sellers have to figure out where the market is, and the market is where the buyers are, but buyers have become listless and refuse to participate in bidding wars. They see the prices and they do the math with higher mortgage rates, and they walk. So, motivated sellers have to do something to move the properties. And they started cutting prices.

In November, the number of properties on the market with price cuts, at 1,038, skyrocketed by over 400% year over year.

The chart of the year-over-year percentage changes in price cuts in Silicon Valley and San Francisco shows that the change of direction in the market occurred around August. By September, price cuts hit the highest level since Housing Bust 1:

The median asking price for the three counties had peaked in May at $1,369,200 and has since fallen by $132,100 or by nearly 10% from the peak, to 1,237,100. Median asking price means half are listed for more and half are listed for less. It differs from the median selling price at which homes are actually sold. Compared to November last year, the median asking price dropped by $71,200 or 5.4%:

The chart below shows the percentage change of median asking prices, which clarifies further the underlying dynamics in the market:

After years of blaming the surging home prices in the area on a shortage of inventory for sale, the industry is suddenly faced with all kinds of inventory coming out of the woodwork, just as sales are slowing and as mortgage rates are rising, while the affordability crisis bites the market.

Buyers have lost their blind enthusiasm. They’re still buying, but at lower prices, and they’re taking their time.

Yet the hiring slowdowns – or worse, layoffs – at area tech companies and the broad wind-down of countless and hopelessly cash-burning start-ups – both a prominent feature of every tech downturn here – haven’t even started yet. The area is still booming and companies are still hiring, and this housing downturn is starting during the tech boom, and not as a consequence of a tech meltdown. Though share prices of local companies such as Google, Apple, Facebook, and many others have taken a big hit since the summer, we’re still far from a classic tech meltdown. That is yet to come.

The Case-Shiller home price index lags by about three months, but it too is now picking up the changes in the market: Seattle home prices dropped at fastest pace since Housing Bust 1, while the first price declines cropped in San Francisco, Denver, Portland, and other markets. Read…  The Most Splendid Housing Bubbles in America Deflate

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  92 comments for “Bubble Trouble: Silicon Valley & San Francisco Housing Markets Head South

  1. Art says:

    Just celebrated a birthday in November, this is the gift I was hoping for.

  2. CRD says:

    According to reports, some former Facebook employees are seeing an uptick in colleagues who are asking them to assist them in quitting.


    It’s funny what a significant drop in the value of your equity and the realization that you’re working for satan will do.

    As more and more rats start to opt out of the rat race, the party could get pretty interesting.

    • Shawn says:

      Like I’ve always been saying, Facebook and Google, glorified ad companies.

      • polecat says:

        No …. they’re SPY agency adjuncts .. masquerading as ad companies …

        • d says:

          Making comments like that without expanding on who they spy for and why, is simply black noise. AKA BASELESS Slander.

    • You might assume that SV companies can lower salaries if housing prices abate, what they pay new hires and wage increases.

    • John Taylor says:

      Working for Satan is pretty harsh. I wouldn’t isolate the tech companies as particularly bad, I think they’re every bit as friendly as Wells Fargo, Volkswagen, GE, or most other major corporations.

  3. Howard Fritz says:

    Clearly, this is a sign that the market’s appetite for assets fueled by cheap debt is beginning to die down, I think?

  4. Lisa Murphy says:

    My mid peninsula house had been seeing breath taking rises of 3% monthly during most of 2018 — this according to Zillow. Suddenly, two weeks ago it slowed to a near stop — only went up .6%. I expect two weeks from now it will be at 0 or -minus something.

    I live in a tiny 100 year old shack and if I told you’all what it’s valued at you would not believe me. The Fed talks about coming price inflation — What? Coming? Houses in my neighborhood have been priced about triple what they should be (relative to incomes) for the past year or so. Why does something as important as the price of a home not count in the Fed’s inflation equation?

    Bought my house 24 years ago for one sixth what it’s appraised at now. My neighborhood has been the beneficiary of a lot of that Fed stimulus money, having gone from a middle class area to upper middle, coinciding with the tech bubble. Several houses around me were torn down and swishy mini mansions were built in their place. I did almost nothing to my house, instead just paid it off 16 years ago. All my neighbors are in debt, having either come in at bubble prices or paid for a renovation. Prestige conscious sheep! I am very much hoping to see RE prices collapse here, and see my neighbors crying about it!

    • interesting says:

      I’d sell your house and wait 3 years then by it back at 1/3 the price…….and don’t be surprised if the new suckers……i mean homeowners….do a bunch of upgrades.

    • Nicko2 says:

      Uh….if your 100 year old shack is worth six times more than you paid for it, sell now…then rent…and buy back another house for cash after the correction. That’s how one makes money in RE. Otherwise…you’ll be lamenting it after the fact.

      • Lisa Murphy says:

        “if your…shack is worth six times more than you paid for it, sell now…”

        If I didn’t like my house or the location I might consider that idea but it’s not the case. This is a house I’ve lived in for 25 years and the location is unbeatable for my needs. But that said, selling ones primary property to go live a rental then wait for a bottom in RE prices & try to guess when we’re there, isn’t a wise plan.

        Another important thing to note: here in CA there is a cap on property taxes, holding increases to 2% per year from the original purchase price. So, if I sold my house and RE prices declined by 60%, I’d still see a significant increase in my property taxes. If after the purchase RE declined further, there is no possibility for downward tax reassessment – that’s nearly impossible to get here in CA.

        Additionally, there are a lot of expenses in moving, such as realtor and moving fees. The rent I’d be paying for any comparable house around here would be a lot of money out the window, and lastly, moving sucks!!

        I think most economist and investment advisors do not recommended using ones residence as a money making vehicle. With good reason. However, if I were unhappy with my house, I’d probably consider it.

        • sierra7 says:

          Kudos to you! Having been born/raised in SF and spent most of my life on the peninsula/San Jose area (remembering how beautiful Santa Clara used to be!) I completely agree with you.
          “Illegitimi Non Corundum”! (and) good luck!

        • Dos Tacos Mas says:

          “Additionally, there are a lot of expenses in moving, such as realtor and moving fees.” — And don’t forget the potential capital gains implications – no $500K exclusion on CA State Income Tax obligation, IIRC. Another poster – Seen It All Before, Bob – did a breakdown and you’d have a major tax event to address – to the tune of $100K+ depending on purchase/sale prices.

        • Guido says:

          Not to mention that buying a house under new tax laws puts you at a disadvantage when it comes to claiming the interest paid on house as a deduction.

  5. Gorbachev says:

    There is only so much one can afford. Whether it is 3,4 or

    5 per month if interest rates rise and your wages

    are not moving up up then you must

    pay less for the property

    • Ididsa32 says:

      Wages are definitely not moving up. “Houston we have a problem.”

      • sierra7 says:

        Look at it this way: There are more than 2 billion individuals out there just chomping at the bit for your “job”……then figure the odds of wages going up significantly or even enough to keep (our) your head(s) above water!

  6. Rosebud says:


    a Victoria, British Columbia housing blog that has picked up your latest, Wolf… my, you get around!

  7. Ididsa32 says:

    We live here. I’m glad to see this happen. Bubbles are a waste of capital and bring out the greed in the best of us.

    Now this equity bubble is also very disconcerting…….

  8. Guido says:

    @Wolf, is it possible that the slowdown is correlated with the pessimism that is now rampant among H1Bs? Homeland dept. is also taking away work visa of a 100k (?) spouses in Bay Area.

    Traditionally, a lot of H1Bs coupled with their spouse income would buy a newly built townhome in San Ramon instead of renting. I now hear stories about how they are not sure of a renewal or even their own prospects and holding off the buying. Throw in the loss of second income with the going away if H1B spouse work permit.

    Essentially, the question boils down to who’s contributing to this slowdown now. Could it be Chinese like cash buyers? They don’t take mortgages and besides they have slowed purchasing for a year and a half. So they’re probably not the ones driving this stagnation. So I wonder if this slowdown is driven by the salaried employee and his mortgage calculations.

    And H1Bs and their spouses are a huge part of the salaried tech worker in Bay Area.

    • Adam Smith Engineer says:

      It is probably a combination of multiple factors. Remember, housing started turning in May with visible went south since August. That was before the October massacre in stock market. When stocks were still shooting for the moon. But remember, back in January, we saw a major correction. Which I am sure made a lot of people nervous. Imagine, you are a Facebook employee. Even American citizen, so no visa issues. Half of your income is from stocks. Suddenly, the stock takes a 30% hit with a clear downward spiral, no betterment in sight. It means, your income is 15% less than last year. You saw Yahoo go bust withon a few years. You heard from older guys that there was a huge company called AOL. You are not sure if your company will be around in 3 years. Apply the same to AAPL, GOOG, AMZN qnd others with slightly varying percentages.

      Would you buy or wait to see how things roll out?

      • CRD says:

        Don’t forget that a growing number of mortgage lenders have been willing in recent years to count some equity compensation as income for mortgage qualification purposes.

        So it’s not just that stock options/RSUs are sources of down payments; for some buyers, they have also been a source of income.

    • Jon says:

      Someone who was on h1b few years back I have first handedly seen the abuse of h1b visas to replace American workers with cheap labor
      H1b is meant for speciality occupation but most of the h1bs are just to replace the American workers

      Hats off to Trump who is thinking about the Americans
      Personally I dislike trump but his policies are in general very good and difficult times for h1bs is just one example

    • Shawn says:

      Contrary to what the law says. H1B, as implemented today, is cheap tech labor. H1B spouse, cheaper tech labor.

    • Dave Chapman says:

      @Guido, H1-B is an evil plan to bring back slavery. I am quite grumpy that Trump did not kill it 30 seconds after taking office.

      Regarding your question, I think that the Fed raising interest rates is the most important factor. Something like 25% of buyers last June were just barely qualifying for the mortgage they wanted, and now they can’t buy anything.

      To get a little bit technical, what is the elasticity of demand for owner-occupied houses in the Bay Area? If the elasticity is 1, then a 25% reduction in buyers should translate into a 25% reduction in prices. We’re not there yet. . .

      I do not think that Chinese flight capital, H1-Bs, or a flaccid stock market are the main event: This is a plain old-fashioned Interest Rate Recession.


  9. Bobber says:

    Anybody that bought a house or condo in San Francisco the past few years took a huge financial risk. Many people that take this kind of risk are financially illiterate and like spending on $80,000 cars, private schools, etc., and getting divorces over money anxieties.

    This is what drives a bubble up, but then drives it down when the time comes. We may be testing the resale value on those shine Tesla automobiles fairly soon.

    Why can’t people live within their means and appreciate what they have? Reminds me of my kids that pick up a toy, putz with it, then drop it on the ground in give seconds.

    • JZ says:

      Because it is human nature to try to FEEL better than other fellow humans and OWN what other humans want. This is being exploited by other humans. Yes, look or appear to be good CAN make you FEEL better than others but nobody is trying to “BE good”. “BE” good or rich takes time but LOOK good takes no time but DEBT. People say they “OWN” the house while actually they have to be slaves OWNED by the banks. For that dose of FEEL good emotion, people fall into the traps of the emotion exploiters. Same as why people take drugs to get high to corrupt themselves and make drug dealer rich.

      • RagnarD says:

        Right. I love it when the form / questioner asks:
        “Do you own your own or rent?”
        I usually reply, “Well, I have an obligation…”

    • John Taylor says:

      If you look at https://fred.stlouisfed.org/series/HOWNRATEACS006075
      You will see that the home ownership rate in San Francisco county dropped a lot from 2009-2015 and has barely increased since.
      The housing market turned back around 2014 when the Obama administration brought hedge funds into the own-and-rent business as suggested by Been Bernanke.

      My point is that ordinary people aren’t driving these prices – it’s a typical investment boom that you see in all investment assets. Buying at the top of a bubble is always called a mistake in retrospect, but ordinary people tend to buy based on personal circumstances rather than market sentiment. So don’t blame high prices on stupid neighbors, they are not the ones orchestrating this thing.

      • Bobber says:

        Nobody is forced to buy anything. I agree certain life circumstances may make home ownership attractive, but why does that have to be on the coasts after prices have exploded.

        • char says:

          I love underpasses. Housing may not be forced on you in theory but it is in practice.

  10. kitten lopez says:

    my eyes rolled back in my head

    • Bobber says:

      Is a little financial discipline too much to ask? Consider that honest hard working taxpayers usually wind up cleaning up these housing messes.

      Is renting all that bad? Is living outside San Francisco completely intolerable? Why are huge financial risks necessary? Do we need the latest counter tops that badly?

  11. Marcus says:

    Sisyphus is feeling nervous

  12. Joe Banks says:

    Interesting times for sure. I’m not sure what is going on right now. The NASDAQ is only down 8% from all-time highs yet we have a bubble popping in home prices? Something is off. Also the ten year yield hit 3.22% and looked poised to go to 3.3% and beyond. Yet it’s been monkey hammered down below 3%. WTF? I work for the 15 largest privately owned company in the US. I recruit for sales reps. We pretty much have to find all our applicants now, people don’t apply; college kids in sales programs at universities are being recruited like football players. I don’t know, which way we heading? They have f’ing devalued our money like crazy to bail out everyone but mostly corporations. My gut says we can’t continue to borrow to fund the government but then the 10 year gets slammed lower. I guess time will tell. Sorry for rambling

    • JZ says:

      Hanks for this rambling. This is the EXACT information I am looking for. The fact that fresh graduates get hired like football stars means the FED will NOT stop until it takes out the zombie business that is competing labor with the legit businesses. The competition between good and capital for limited labor is killing the capitalist. This happens when there is too many Telsla, Snapchat etc still hiring. It is time to flush out bad businesses, and let unemployment rate inch higher. If there is anything that can make the FED fear, this is it.

  13. Mike says:

    Google has been in the process of re-locating many jobs to much cheaper Areas of the country, such as Illinois, and even Michigan. They have dramatically slowed hiring in Sillycon valley. once they start letting a lot of people go in sillycon, as will Apple, and many other firms, who have been disguising this move out of there, that market will drop like a rock, and real estate prices will plummet unlike anyone has ever seen. first it all seems gradual, but then it will happen suddenly, and without warning. If I was CEO of a smaller business in or anywhere near San Francisco, San Jose, etc, I would immediately relocate the business to the midwest, and sell my home, and take the profits, and instruct employees to do the same. Once this sort of exodus develops some real momentum, people won’t be able to exit CA fast enough, and many of the high paying jobs will literally evaporate over night, as all of these firms who have established ‘new bases’ elsewhere, could rapidly re-hire who they need from other states, for 1/3rd the salary, and the people they hire won’t need to be H1b’s. This will ripple down to smaller businesses very quickly, as those employees working there who have housing, will need to exit the state very fast, as they will become upside down on their massive mortgages. just wait and see. If you thought the 08 downturn was bad, you ain’t seen nothing yet. We are talking decades of disaster where many super high paid tech geeks working in a very expensive geography, will be turned into paupers, and wont know what hit them. Real estate and cost of living here in the midwest will seem dirt cheap by comparison. Amazon’s HQ move’s notwithstanding, the upsurge in multi-HQ’s in much lower cost geographies, should not go un-noticed, and even be suspicious of what you think are just ‘branches’ that could immediately become massive new HQ locations, to save on CRE costs as well.

    • polecat says:

      So then what ?? The new ‘low-cost’ flyover becoming an overcrowded, over-extended, high-priced inflation Hell, losing all it’s regional character and charm .. starting the whole mindlessly wretched cycle all over again, sans Golden Gate ?!?

      Well, that’s gonna work out swell, won’t it …

    • Ridgetop says:

      Silicon Valley has seen this several times over the last 30 years, and has bounced back.
      But so if what you say comes true, yeah! One third less traffic around here.

      • Gershon says:

        Silicon Valley has seen this several times over the last 30 years, and has bounced back.

        These “bounce-backs” are due to one thing only: the Wall Street-Federal Reserve Looting Syndicate’s engineered boom-bust cycles every 8-10 years that are the most efficacious means of transferring the wealth and assets of retail “investors” to the Fed’s grifter accomplices on Wall Street. Looks like yet another Great Muppet Reaping is well underway.

        • Michael Fiorillo says:

          Not entirely: the region has long been the beneficiary of the academic-military-industrial complex, demonstrated by proximity to Stanford, Livermore Laboratories and California’s long connection to military research and production.

          There are objective historical reasons why Silicon Valley developed where and as it did, completely separate from monetary policy.

      • Rcohn says:

        The San Francisco Area was recently rated the the worst commute in the country based upon the % of people with a commute of 90 minutes or more.Just get on 24E starting at 3pm and the traffic is stop and go for almost 5 hours.

      • CRD says:

        What makes you think that Silicon Valley’s ability to bounce back has more to do with Silicon Valley than the Fed’s bubble blowing?

    • TrojanMan says:

      Dude you really don’t seem to have any idea what it’s like out here. People here have so much money and love living here so much what you describe will never happen. Too many people want to live here and have enough cash to floor the market. The Midwest is in decline and I wish all the Midwesterners would go home. All of the tech companies have built or are building brand new campuses here. Of course tech will expand elsewhere but it will ALWAYS best centered here. Have you not seen the giant dildo Benioff just build in the middle of SF or Tim Cook’s flying saucer? The people who run tech have massive egos and being here is a status symbol. Bay Area is God’s country and the Midwest sucks, sorry.

      • Wolf Richter says:


        Benioff (Salesforce.com) didn’t build the giant dildo. A developer did and named it the Transbay Tower. Salesforce is leasing over 700,000 square feet in it (about half of the total space) and acquired the naming rights, after which the tower was renamed to Salesforce Tower. Boston Properties owns nearly all of the tower.

        • TrojanMan says:

          Wolf, fair enough although Salesforce committed over $500 million over 15 years of the lease. Apple owns its campus and Google is building another campus. My point still stands. While I don’t disagree a tech bust is in the cards, I also know private equity and venture have raised record capital and they will likely be back in the game looking for bargains to reflate values. The biggest tech companies are also flush with cash, so we could see them doing a good deal of distressed M&A following a bust.

        • Wolf Richter says:


          I didn’t mean to argue with your point. I just want to set the record straight as to who built and owns this thing.

        • Dan Romig says:

          I had to check out Salesforce Tower on Google Earth. Is it me, or does the building look like it’s tipping towards the northwest?

          If so, maybe that explains Trojan Man’s description. And it does appear to be a bit similarly shaped.

          By the way, in a few months there will be another spring thaw. Bald eagles will be migrating north along the Mississippi, and I will be riding my bicycle beneath them. Of course, for the time being, I’ll be riding my rollers inside or skating on Lake Nokomis.

          No, don’t worry, this Midwesterner will stay home.

      • Mark says:

        There’s a reason these companies don’t relocate to the Midwest or the South: talent recruitment.

        The labor market for educated, skilled tech workers is very tight, and these companies have to compete with one another for talent. No single, 20-something with an education and skills wants to move to Kansas. A company will never be able to recruit the workforce they need in Kansas, no matter how much they’ll pay to offset the fact that they’re in Kansas. Especially with this generation, quality of life is more important than money.

        The same factors come into play for medical doctors. The cities are saturated with doctors while there is a tremendous shortage of doctors in the midwest, the south, and basically any rural area. Reason? Once someone has an education and an in-demand skill set, they want to live in a city with decent weather and good quality of life.

        • Guido says:

          Talent recruitment? Haven’t Zuck, Gates, and everybody in tech been telling us that there’s not enough talent left in the USA? Isn’t that why we need foreign talent?

          They hire either fresh graduates or H1Bs, both of whom relocate to Bay Area. The h1b relocates 10000 miles. If the quality of life were indeed the driving factor, there’ll be no tech in Kansas. Yet, the congressman Kevin Yoder — he lost in November— first tried to lure the erstwhile h1b voter as his savior and is now tabling a bill to increase the quota to 300k per year on his way out. I know people who work in tech and they tell me that the numbers in Kansas are now substantial. Tech is also more amenable to remote working. And a fresher will soon be glad to have a job — we wait for the recession on this one.

          As for Bay Area, even though the place is chock full of outdoor activities, most are so tired from their daily commute (which also prevents daily shopping) to just do shopping and visit friends during weekends. As a result, the traffic is bad even during weekends.

          As for skilled tech workers, Bay Area claims to have a lot of them. I am in tech and I can tell you that is not true at all. People who were unhireable 15 years ago and sat at home for a decade, unemployed, now have tech jobs writing software. They’re still bad but the demand is now there for a warm body. As Seinfeld would put it, they’re are now letting in everybody.

      • JZ says:

        Trojan man, the devil is the prettiest before the fall and the penis is the hardest before the pop. Those giant dildos and cancers are what catches people’s eyes. The represents excess and make people forget about the hollowing W2 wage earners. Yes, they have a lot of money but they have lots of debt as well. The key thing is the ratio of equity and debt and price/income. On these ratios, silicon valley folks could be more stretched than other areas. Yes, you see dildos everyday and you feel something to make you forget about the debt burdens and the fear of layoff for now, for a while.

    • Dan Romig says:

      How’s this for a comparison between the Bay and the mid-west?

      According to Zillow:
      The median home value in Palo Alto is $3,225,600 & median listing price is $1,513 per square foot (which IMO is the best metric).

      Where I live in Minneapolis (55406), the median value is $258,200 & median listing price is $236 per.

      OK, it is winter in Minnesota. But there’s plenty of Fortune 500 companies in the Twin Cities and our economy is healthy.

      • Ethan in Northern VA says:

        $236 a square foot in flyover still seems expensive.

        • Dan Romig says:

          If you go further out from the cities that price comes down quite a bit. But $236 to live in a metropolitan city with a light-rail minutes away by foot, greats parks and cycling trails all over, outstanding arts, theater, restaurants, and sporting entertainment makes it a bargain.

          Yeah, I’m a bit biased I suppose …

    • Dave Chapman says:

      Boeing moved their HQ to Chicago suburbs in 2001.
      It has not worked out very well for them.

      It turns out that when you outsource all kinds of airplane parts, you get suppliers who are cheap but flaky. Last week, I saw 60 or 70 brand new 737s parked in Renton and Boeing Field. The word on the street is that they are waiting for some parts to arrive from a sub-contractor in Faik-Tan or Goatroapistan or something.

      Meanwhile, it would appear that the State of Illinois is even more fiscally irresponsible than Seattle. . .

      Cheap advice: If you are going to move to the Midwest, be sure to avoid states which are run by crooks. ;-)

  14. SoCalJim says:

    The beach cities in LA and OC seem to be still doing fairly well. Any decent enough deal is being snapped up quickly. The only slowdown I can see is in the stuff north of 3M, especially north of 5M. But, below the low 2M number seems to be a decent story.

  15. J.M.Keynes says:

    – When the gap between (real) wages and real estate price keep growing then it’s inevitable that some day gravity will start to pull house prices down. Like now is happening in Australia, New Zealand and now here in the US (e.g. Silicon Valley, Seattle)

  16. MC01 says:

    A quick question: we know San Francisco proper has a lot of supply coming on line now, and will have a lot more over the next few years. Most of it is high end, at least judging by the ads I am seeing here ($1.8 million to live packed like a sardine inside a tin; my brother would love it :-D ), meaning it’s affecting prices in the highest brackets, with more pressure coming as projects cannot be stopped nor easily repurposed.
    But how is Silicon Valley proper doing? Cupertino? Sunnyvale? Santa Clara? How is supply there? Are the cranes and bulldozers hard at work or have local homeowners successfully resisted developers? Remember: the less houses are built, the more valuable existing ones, especially when so many people want to live there: Hong Kong conglomerates (hongs) such as Swire learned that a long time ago and that’s why they keep such an iron grip on Hong Kong real estate.

    • Dymo says:

      Data is data.
      There are not much choice for buyers in San Francisco or bay area. The price is softer a little bit and the actual inventory is not enough for the people. I don’t think there will be much collapse in near future.

      Similiar in Hong Kong. The supply is not enough and there are huge number of invaders from the north. The price of estate won’t drop too much. The people just hold the money and wait for the right time to buy, buy & buy.

      • Wolf Richter says:

        There is a ton of inventory that is not even reflected in these numbers. Developers have their own sales offices, and condos in a new tower are being marketed by that sales office. These condos are not even listed in the MLS data, which this data is based on, and there are only vague estimates as to how many new condos are actually on the market. There is absolutely no shortage of housing in SF for people who have enough money to buy, and who want to spend a huge amount on a small condo.

        • Probably why Toll Brothers’ California orders plunged 39 percent in the latest quarter. Silicon Valley millionaires are apparently getting skittish. The backup bid of laundered money coming out of Macua casinos must be drying up as well. :)

        • earl d says:

          In a technical sense there’s no such thing as “too much”, “too little”, “plenty” or ‘insufficient’ with respect to the supply, in absolute terms. At every level of supply there is exactly enough demand for the price arrived at by the market. The question, then, is how responsive is demand to changes in price, i.e. elasticity. It turns out that the SF city economist has estimated both elasticity of demand and supply for residential units. His estimates are that SF housing supply is highly inelastic and demand is relatively quite elastic so even a small change in median price stimulates a relatively large change in demand, the upshot is that the levels of supply we’re talking about have very little effect on median prices. It would takes an order of magnitude more construction to knock prices down to an affordable level: ~100,000 additional units c. 2013.


    • Adam Smith Engineer says:

      In Silicon Valley proper, there is a lot of construction goin on. All along El Camino Real, from Santa Clara to Palo Alto and beyond, countless projects are going on right now. Almost all high rise buildings, some town house complexes thrown in. There is no land for single family units, so virtually all new single family houses are tear downs of old units. There are probably 10K+ units built in the last couple of years or under construction that I am aware of. Now that the market turned, those units, mostly rentals, will put lots of pressure on the rental market. Rents in the valley has not risen for the last 2+ years. With thousands of new units coming online and a slow down in economy, rents will have to go down. If you check Zillow for rentals, you will see that many of the single family houses sit in the market for weeks, if not months. And we don’t know what they rent out for in the end. Very likely lower than asking.

      If you are an engineer and thinking about buying and realized that your landlord did not ask for an increase. You will start looking around and you will quickly find out you might already be paying a couple of hundred dollars too much. You negotiqte the rent down or move to a similar place with lower rent. The house you vacated sits empty for 45 days and finally rents for the market price, couple of hundred less than what you were paying for. This is repeated enough number of times and the rents will go down.

      Then your plans for purchase are put on hold. You do the math and find out you are paying $3500 for a single family house in Santa Clara and if you buy it today, you have to pay $7500 a month at least. And both the prices and rents are going down. Not a very difficult decision.

      I think we are starting to see this scenario play out now.

  17. walking in the city says:

    Is it possible to see house prices for the Bay Area without condos & new construction? I have relatives who would love to buy a SFH in the East Bay, but they are not yet seeing increased supply & lower prices. they’re hoping . . .

  18. Gershon says:

    The full magnitude of the fraudulent “recovery” resting on the central bankers’ deranged money-printing and a tripling of public and private debt since 2009 is becoming clear for all to see.


  19. Gershon says:

    Pop goes the Ponzi.

  20. nofreelunch says:

    When the plans of so many people are so dependent on razor thin finances for buying that $1M home, its easy to see how it doesn’t take much to turn in around. Finances such as: deposit needs to be bigger, so invest in FANG stocks, deposit money will also come from startup A-shares, or break even tech employer options with large upsize. 3% or less 30 year mortgage. It’s really sad, because so many of these startup workers putting in sweat equity, counting on upside, and not saving for retirement will end up with no savings, just like Enron employees did.

  21. Rcohn says:

    The simple fact is that Housing
    Prices/ median household income
    are by far the highest in the US.
    The are only 6 ways to afford a median priced house in the BAY area
    A. Currently own a house and sell it. This creates a much higher real estate tax
    B. Be a foreign buyer with all cash
    C. Have a much higher than average income.Note that the median family income of around 118,000 qualifies for housing subsidies in SF and pails in comparison to the median house price
    D.Receive a large bonus
    E. Make a large gain in the stock market
    F.MOMMY and DADDY bank

    The main cash buyers are from China
    The tech stock market bull market has ended and has a lot more to go on the downside
    The unicorn market will virtually disappear. This has already started with crashes in the price in the price of some IPOs and will pick up steam in the current months. SF housing prices resemble the prices of Japanese’s stocks on the 1980s .

    • Shawn says:

      I liked your outline. Can you elaborate on higher real estate taxes when one sells their house? Also, to point C, a lot of yuppies have double income, but at these prices even a double income can not afford a house in much of SF, Penn, Valley. It’s also risky, if both spouses are working in tech, one looses their job, then what?

      • Rcohn says:

        PROP 13
        Property taxes are limited to a 2% annual increase. The assessed value of a house ( for property taxes) is changed only when the property is sold.Thus anyone who has been in their house for protracted period will see a large property tax increase if they sell their house and buy a new one

        • Rcohn says:

          To make this worse , if a property is transferred between parents and children or grandparents and grandchildren, the original property tax assessment is retained.

        • Rowen says:


          Wait, so everyone else has to subsidize generational wealth transfers?

        • Harrold says:

          Better than that Rowan, the truly rich have their houses owned by LLC and instead of selling the house, they sell the LLC and the tax basis never resets.

        • Rcohn says:

          Yes – another CAL law, that you have to read to believe
          Some other complications with home ownership in the SF area
          Water rates , garbage rates and electricity are astoundingly high.
          I rent an 1100 sq foot apartment in the East Bay. For the month of Nov, I paid
          $110 for water, $55 for garbage collection and $ 90 for electricity.
          Now do not get me wrong; the SF Bay Area is a wonderful place to live as long as you do NOT have to commute and as long as you have boatloads of money.

        • Dos Tacos Mas says:

          Keep your eyes peeled for efforts to “improve” Proposition 13 with the LA Times leading the charge! Apparently, they believe that family wealth is there for the state government’s benefit and the state should get “their fair share.” Several articles lately along this line of reasoning. All your wealth are belong to us…


  22. earl d says:


    – There is currently a bill in the CA state legislature (SB 50) to enact mandatory municipal upzoning of residential construction around urban transit stops. The has the potential to remediate the biggest barrier to residential unit construction: height limits and multi-unit occupancy constraints in practically all CA municipalities, esp. large and already dense ones (e.g. the majority of SF has been effectively downzoned to single family units.), and to radically increase supply and of course put downward pressure on house prices.

    – A statistic that recently surprised me about the SF Bay Area is that the percentage of all cash offers was rather low compared to the many other less pricey cities e.g., ~21% vs ~38% in Philadelphia. I had thought that restrictions on loans at around the $1M+ had put a damper on non-cash sales. The question I ask is: is it really the case that most homes in the Bay area are financed to the tune of $1M in bank loans? If so the implications would be severe if the Bay Area were to lose say 1/3rd of its multi-trillion dollar residential asset valuation. Something which must happen if the Bay Area is to address its severe housing crisis, something the state politicians are increasingly determined to do.

  23. Shawn says:

    Head up! Dow drops 700 points, Nasdaq down 230 point. Yields on 2- and 10-year Treasurys have nearly inverted.

    • nick kelly says:

      “High-priced growth stocks where expectations are too high, they’re going to be punished severely,” Wilson says.

      From Morgan Stanley.

      So…can we think of any high- priced stocks that already have weak earnings (and sky high PE ratios) that qualify?

    • Jukia says:

      Countdown to trumps inevitable 3 am rant about how Powell is single handedly destroying America?

      What a farce, it was up 600 points before it was down 700 in 24 hours despite no actual news or event occurring.

      Qe and zirp will arrive before 5 or 6% rates do (aka… Semi normal rates by historical data).

  24. ewmayer says:

    The chart of the recent-years rampage in asking prices in this piece neatly captures the mania for me – APs doubled in just 5 years starting 2013! Utter madness. So if prices were magically halved today, we’d only be back to 2013 levels, which were already quite well along the Bernanke-Yellen Fed’s Ponzi-reflation curve.

    Speaking of the Bernanke-Yellen Fed, if you want a good ‘wtf?’ today, have a gander at the WaPo’s unintentional comedic masterpiece, Trump thought Yellen was too short to be Fed chair. That’s not how any of this works, which opens with an HRC-esque most-qualified-evah howler, and then pretends that Yellen’s current noising about ‘curbing bubbles’ is in any way reflective of her stay-the-bubble-course as Fed chair:

    “Janet L. Yellen was the most qualified Federal Reserve chair we’ve ever had and maybe the most successful Federal Reserve chair we’ve ever had.

    … [boo hoo, Trump replaced her ’cause she’s short] …

    That’s not to criticize current Fed Chair Jerome H. Powell. He’s done a good job, and in fact probably hasn’t acted much, if any, differently than Yellen would have in his place.”

    Well, Yellen *was* in his place and *did* act very differently, you WaPo weenies.

  25. TrojanMan says:

    Prices are still quite high in SF. Yes, there have been price reductions from absolutely absurd levels, but sellers still do not seem to have accepted the reality on the ground. It still seems most sellers are expecting 100% returns over a five year investment. It’s going to take some time for true price discovery.

    As I mentioned above, there is a bunch of money waiting on the sidelines to buy up bargains, especially in PE and venture. These are funds that have already been raised and need to be deployed. We have already heard the incessant whining from pushing Fed funds to 2 – 2.25%, and seen the stock market sell off and housing move into stagnation. Any more pain and the Fed will freeze further hikes and if the declines continue they will reverse course. At that point it will be clear to everyone that the Fed is hopelessly trapped, refuses to accept any deflation and the dollar is doomed. We will be Japan at that point. At that point I think we see the money on the sidelines pile into the market and off we go.

  26. sierra7 says:

    Two areas that are growing like mad and are “bedroom” commuter destinations are Livermore and Los Banos CA. Livermore with it’s perfect position at the “East end of Bart” and Los Banos that is again in a building boom (single family homes). Livermore is not “unpricey”; Los Banos new construction single family homes “starting in the “$350,000″‘s…….If highway #152 is eventually finished for the last 15 miles or so that is still two lanes that area will just literally blow up with growth. Los Banos went “dormant” after the GFC but for the past two years the projects that were “mothballed” have already been finished and other new building has continued including schools. Both have “heat” problems but as long as you can afford the energy bills, not bad places to live…..the commutes sometimes can get horrendous especially in and out of Livermore. But that’s why Bart is there. And that’s why people continue to move there.

  27. Ron says:

    So I took this comment from a regurgitation of this article elsewhere: “The first chart is misleading. Yes, the number of homes for sale is higher than last year, but there was very little Bay Area housing inventory last year so the percentage change looks high, but the actual number and percentage of homes for sale are still small.

    The 3rd chart looks scary (price reduction in last few quarters), but look at the price *increases* each quarter to the left of the red bar. That’s a LOT of price appreciation since 2013. It’s like my AMZN stock. ”

    He’s not wrong. I noticed that in this chart. If I start at 1 and am now at 4, that’s 400%. That sort of overstates the panic somewhat. It’s true that inventory is softening…*BUT* that doesn’t mean there is a stampede out.

    • Wolf Richter says:

      In a couple of hours, I’ll post an article on the year-over-year declining median prices in San Francisco. This is where the market is going. In November, in SF, the median sold price was down year-over-year in each of the dwelling categories. And it’s starting to be real numbers: The median house price was down $250K from the peak in early 2018. You can call these charts “misleading” if you want, but they reflect the market.

  28. Kyle Myers says:

    Just wait until Blackstone and the Wall Street & Hedge fund landlords start dumping their SFR rentals (B-stone purchased 50K SFRs for $9.6 Billion). B-stone used cash (very liquid asset) to purchase SFRs (very illiquid asset). When housing over supply hits both the purchase and rental markets, the Wall Street cap rates will drop and the investors will start redeeming their investments. These type of SFR owners will be forced to rapidly drop their sales prices to meet redemption demands. The real rub is this time the government cannot step into stop the sales process like they did when Banks were trying to unload homes via forceclosure. By the time the HUD, the Fed and all the other government officials figure out what is happening, it will be too late.

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