Bay Area Expected Worst Performing Market in 2020

35 Replies

San Francisco is expected to be the worst performing real estate market in the national in 2020. The best is expected to be Austin Texas. This info is coming from Zillow so take it with a grain of salt... and consult other sources of info before determining your target investment market(s).  

The San Francisco Chronicle article is linked below. 

Thoughts? Agree? Disagree?

What markets are you focused on? Why?

Disclosure: I do not work for the Chronicle nor do I benefit in any way if you read it.. I do hold investments in San Francisco, Austin and Charlotte (markets mentioned in the article). https://www.pressreader.com/us...

If you own in the Bay, you might want to consider selling now and renting for a few years... buying again in 2022  which should be about the bottom of the recession phase, although no one will know a bottom until market prices start rising again...

Worst performing as in appreciation?..........No surprise there.,,,,,,,,,,,,worst performing as far as cash flow?.....I think the entire world knows that.     If/When people start panic selling........So now instead of owning they become renters then there will be those that will happily buy at discounted prices.

ABB - always be buying (to rent to people)

“There are two kinds of forecasters: those who don’t know, and those who don’t know they don’t know.”

The article links to some app so I was not able to read it easily. I can’t really comment on what it says.

Then Depending on how long you’ve had your home, you can easily go over the 250k thingy. My parents home value has tripled. They’d be paying taxes on $1m (even with 500k tax free thingy). As of right now, I assume people are still paying over asking. If prices drop, more people might be interested and it still might be hard to get a property.

And with the recent ipos, I’m sure many people are able to realize their gains now. Lots of jobs here. Lots of opportunities.

I’m not saying it’s going to be the best market, but I don’t think it’ll be a bad market. Sometimes I don’t think people realize how much wealth is in the Peninsula. I’ve painted a few houses in the hills and I don’t think any of them will feel the squeeze from a recession.

I just came back from visiting the city and street parking was 7.50/hr on Valencia st. People be putting 2 hours on their meter :0 I just got my smoothie and left.

I guess another thing is I stopped believing headlines.

Originally posted by @Steven Ko :

“There are two kinds of forecasters: those who don’t know, and those who don’t know they don’t know.”

The article links to some app so I was not able to read it easily. I can’t really comment on what it says.

Then Depending on how long you’ve had your home, you can easily go over the 250k thingy. My parents home value has tripled. They’d be paying taxes on $1m (even with 500k tax free thingy). As of right now, I assume people are still paying over asking. If prices drop, more people might be interested and it still might be hard to get a property.

And with the recent ipos, I’m sure many people are able to realize their gains now. Lots of jobs here. Lots of opportunities.

I’m not saying it’s going to be the best market, but I don’t think it’ll be a bad market. Sometimes I don’t think people realize how much wealth is in the Peninsula. I’ve painted a few houses in the hills and I don’t think any of them will feel the squeeze from a recession.

I just came back from visiting the city and street parking was 7.50/hr on Valencia st. People be putting 2 hours on their meter :0 I just got my smoothie and left.

I guess another thing is I stopped believing headlines.


yes, but the point is to compare it to other markets... ex. Austin.  When you can invest anywhere nationally, your view begins to change.  No one knows they future for sure, but the Bay past a peak a while back, and for various reasons, won’t likely be growing much in 2020.

 

Originally posted by @Saj S. :

good thing it has been the best performing for the last 20 years.

Up 300% down 20% no big deal 

———
3 words like my buddy @Amit M.

ABB - always be buying 

Yes. ABB... but not solely in one market.  That’s added risk.

Whether it’s up or down depends on when you bought.  I know when you bought and so you’ll likely be fine.

If folks bought lately and didn’t add significant value, they’ll likely be in for a rough ride the next 3 years.

Originally posted by @Steven Ko :

“There are two kinds of forecasters: those who don’t know, and those who don’t know they don’t know.”

The article links to some app so I was not able to read it easily. I can’t really comment on what it says.

Then Depending on how long you’ve had your home, you can easily go over the 250k thingy. My parents home value has tripled. They’d be paying taxes on $1m (even with 500k tax free thingy). As of right now, I assume people are still paying over asking. If prices drop, more people might be interested and it still might be hard to get a property.

And with the recent ipos, I’m sure many people are able to realize their gains now. Lots of jobs here. Lots of opportunities.

I’m not saying it’s going to be the best market, but I don’t think it’ll be a bad market. Sometimes I don’t think people realize how much wealth is in the Peninsula. I’ve painted a few houses in the hills and I don’t think any of them will feel the squeeze from a recession.

I just came back from visiting the city and street parking was 7.50/hr on Valencia st. People be putting 2 hours on their meter :0 I just got my smoothie and left.

I guess another thing is I stopped believing headlines.

I actually think there’s one kind of forecaster... one who doesn’t know.  No one “knows”, all forecasts are educated guesses, some more educated than others.  But that serves a purpose.  We know we will never predict the future correctly, but if we’re close, it’s often enough to make plenty of money. 

I guess I find the article title soooooooo cliche. Just like how people think the market will crash since 2015 or earlier. It’s nothing new that prices in the Bay Area are high. It’s nothing new that Austin is growing. You can probably flip a coin as an investing strategy when picking the prime markets: SF, Seattle, NY, Austin, Denver, etc

I live in Austin and love Austin, I just know the "deals" aren't cheap here either especially if your goal is cash flow. Like any market, a good investment can be had with effort and a very clearly defined strategy. Austin alone doesn't make it a great investment. Happy to connect if anyone wants to learn more about our market.

@Jon S. , Even with a poor performing 2020, I don't think this one year will be a good enough datapoint to show how investing in the Bay Area has done comparatively this cycle, or even if it's a good idea to re-invest OOS at this time. My impression has been that if the Bay Area falls significantly, then most of those other hot markets drop quickly behind it.

So, if you were someone with absolute perfect timing, maybe the optimal play would have been to get out of the Bay Area a couple years ago, to continue riding the perfect wave upwards in markets that are now outperforming us (and subsequently getting out before the next correction). But, barring that perfect scenario, making the same move in 2020 could equally end up a disaster by transferring your wealth and local knowledge out of a "safe" market at a bad time.

Also, I wouldn't be surprised to see certain local Multi-family markets diverge more drastically from SFR performance, which definitely wouldn't be reflected in national headlines.

@Steven Ko , And yeah the peninsula does have massive wealth! How the heck do we get BP to create a local "Peninsula Real Estate Forum"? I'm tired of clicking on either San Jose or San Francisco or Oakland.

Originally posted by @Robert C. :

@Jon S. , Even with a poor performing 2020, I don't think this one year will be a good enough datapoint to show how investing in the Bay Area has done comparatively this cycle, or even if it's a good idea to re-invest OOS at this time. My impression has been that if the Bay Area falls significantly, then most of those other hot markets drop quickly behind it.

So, if you were someone with absolute perfect timing, maybe the optimal play would have been to get out of the Bay Area a couple years ago, to continue riding the perfect wave upwards in markets that are now outperforming us (and subsequently getting out before the next correction). But, barring that perfect scenario, making the same move in 2020 could equally end up a disaster by transferring your wealth and local knowledge out of a "safe" market at a bad time.

Also, I wouldn't be surprised to see certain local Multi-family markets diverge more drastically from SFR performance, which definitely wouldn't be reflected in national headlines.

@Steven Ko , And yeah the peninsula does have massive wealth! How the heck do we get BP to create a local "Peninsula Real Estate Forum"? I'm tired of clicking on either San Jose or San Francisco or Oakland.

Transaction cost usually defeat the purpose with coming in and out of markets unless your buying court house steps type stuff

 

Yeah... real estate is fundamentally different than more liquid assets (like stocks).  No one who knows what they're doing would ever recommend trying to sell the peak, rent the downturn, and buy the lows. Even if you time it perfectly (and you won't) Transaction costs will eat up 13% of your capital. So yes - if the market dips 25% and you time it absolutely perfectly you might be able to eak out a 12% gain over the 4 year cycle, which would be 3% per year. Cash on cash return would be higher of course as you're leveraged, but so will your losses if you don't time it right (and you won't). 

Originally posted by @Michael Haas:

Yeah... real estate is fundamentally different than more liquid assets (like stocks).  No one who knows what they're doing would ever recommend trying to sell the peak, rent the downturn, and buy the lows. Even if you time it perfectly (and you won't) Transaction costs will eat up 13% of your capital. So yes - if the market dips 25% and you time it absolutely perfectly you might be able to eak out a 12% gain over the 4 year cycle, which would be 3% per year. Cash on cash return would be higher of course as you're leveraged, but so will your losses if you don't time it right (and you won't). 


 

Thanks Michael.
I believe you're wrong about that. It happens all the time in expensive markets and savvy investors can and do get it right and profit from doing this. While you're right, it is impossible to call a peak or bottom exactly, it is not that difficult to get close... and doing that can help you generate wealth. Ex. buying after a bottom, selling after a peak, and renting... then buying again after a bottom. This is done by savvy investors all the time... in Seattle, San Francisco, New York City, and other expensive markets, ... but in all markets.

Originally posted by @Jay Hinrichs:
Originally posted by @Robert C.:

@Jon S., Even with a poor performing 2020, I don't think this one year will be a good enough datapoint to show how investing in the Bay Area has done comparatively this cycle, or even if it's a good idea to re-invest OOS at this time. My impression has been that if the Bay Area falls significantly, then most of those other hot markets drop quickly behind it.


So, if you were someone with absolute perfect timing, maybe the optimal play would have been to get out of the Bay Area a couple years ago, to continue riding the perfect wave upwards in markets that are now outperforming us (and subsequently getting out before the next correction). But, barring that perfect scenario, making the same move in 2020 could equally end up a disaster by transferring your wealth and local knowledge out of a "safe" market at a bad time.


Also, I wouldn't be surprised to see certain local Multi-family markets diverge more drastically from SFR performance, which definitely wouldn't be reflected in national headlines.


@Steven Ko, And yeah the peninsula does have massive wealth! How the heck do we get BP to create a local "Peninsula Real Estate Forum"? I'm tired of clicking on either San Jose or San Francisco or Oakland.


Transaction cost usually defeat the purpose with coming in and out of markets unless your buying court house steps type stuff



 


 

Taxes are less prohibitory.... if you're living in home 2 out of 5 years and claim tax deduction of $250k or $500k with your wife. It's regularly done in the Bay Area to help people trade up. This is commonly done in the San Francisco Bay.

Originally posted by @Robert C.:

@Jon S., Even with a poor performing 2020, I don't think this one year will be a good enough datapoint to show how investing in the Bay Area has done comparatively this cycle, or even if it's a good idea to re-invest OOS at this time. My impression has been that if the Bay Area falls significantly, then most of those other hot markets drop quickly behind it.


So, if you were someone with absolute perfect timing, maybe the optimal play would have been to get out of the Bay Area a couple years ago, to continue riding the perfect wave upwards in markets that are now outperforming us (and subsequently getting out before the next correction). But, barring that perfect scenario, making the same move in 2020 could equally end up a disaster by transferring your wealth and local knowledge out of a "safe" market at a bad time.


Also, I wouldn't be surprised to see certain local Multi-family markets diverge more drastically from SFR performance, which definitely wouldn't be reflected in national headlines.


@Steven Ko, And yeah the peninsula does have massive wealth! How the heck do we get BP to create a local "Peninsula Real Estate Forum"? I'm tired of clicking on either San Jose or San Francisco or Oakland.



 

No one said that this is an indication that the Bay Area wouldn't be a good place to invest long-term.
But right now it's likely not the best time to be investing here... at least for the next 12-24.

Yes, I agree. I also own property in the Peninsula AND it should have it's own Forum page.

They should have pages for San Francisco, East Bay, Peninsula, and South Bay.

Cheers!
jon.

Originally posted by @Brian Garlington:

Worst performing as in appreciation?..........No surprise there.,,,,,,,,,,,,worst performing as far as cash flow?.....I think the entire world knows that.     If/When people start panic selling........So now instead of owning they become renters then there will be those that will happily buy at discounted prices.

ABB - always be buying (to rent to people)


 

Both right now... :-) But yes, unless you get super creative or find ways to add units, cash flow is usually non-existent for 5+ years, but most savvy Bay Area investors know this. My deals here lost money for 5 years before they began cash flowing...

This market, and many markets nationwide are going through the "Recession" phases of the real estate market cycle, therefore likely not a good place to buy over the next 12-24 months unless you find an obvious deal that you can get cash flowing out of the gate (very unlikely).

This post has been removed.

@Jon S. just curious are you taking your own advice and selling your Bay Area properties now and planning to buy back in 2022? I am looking to buy right now, let me know what you have maybe I can help you get out.

Thanks,

I've been looking into investing in fractionalized investing in the Bay Area based on property values which seem extremely high when compared to other markets around the country. Even if property values decline in 2020, I doubt they'll stay that way for long. Look at Bay Area property values in during the housing crisis. 

Originally posted by @Jon S. :

Originally posted by @Robert C.:

@Jon S., Even with a poor performing 2020, I don't think this one year will be a good enough datapoint to show how investing in the Bay Area has done comparatively this cycle, or even if it's a good idea to re-invest OOS at this time. My impression has been that if the Bay Area falls significantly, then most of those other hot markets drop quickly behind it.


So, if you were someone with absolute perfect timing, maybe the optimal play would have been to get out of the Bay Area a couple years ago, to continue riding the perfect wave upwards in markets that are now outperforming us (and subsequently getting out before the next correction). But, barring that perfect scenario, making the same move in 2020 could equally end up a disaster by transferring your wealth and local knowledge out of a "safe" market at a bad time.


Also, I wouldn't be surprised to see certain local Multi-family markets diverge more drastically from SFR performance, which definitely wouldn't be reflected in national headlines.


@Steven Ko , And yeah the peninsula does have massive wealth! How the heck do we get BP to create a local "Peninsula Real Estate Forum"? I'm tired of clicking on either San Jose or San Francisco or Oakland.



 

No one said that this is an indication that the Bay Area wouldn't be a good place to invest long-term.
But right now it's likely not the best time to be investing here... at least for the next 12-24.

Yes, I agree. I also own property in the Peninsula AND it should have it's own Forum page.

They should have pages for San Francisco, East Bay, Peninsula, and South Bay.

Cheers!
jon.

And North Bay/ Wine Country

 

@Eva Miller same!! There are companies that are making this happen now. They allow California Landlords to take out home equity loans and match them with investors buy fractionalized stakes in those loans. Nice steady returns backed by great bay area homes without the actual landlording. I just started investing this way and plan on doing this for awhile until prices in the Bay Area go down.

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