Bay Area Expected Worst Performing Market in 2020

Investor · Berkeley, CA · Member since 2015 · 1k+ posts · 713 votes

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...

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Jay HinrichsBusiness Member

Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes

Originally posted by @Robert C.:

@Jon Q., 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

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Sam Josh
Sunnyvale , CA · Member since 2017 · 373 posts · 362 votes
6y
@Jon S.
Sorry but what a dumb article!
1 Reply
Michael HaasBusiness Member
Real Estate Agent · Redmond, 🌧️ Seattle Investor-Agent | 🤑 Helped 400+ Clients Invest in Real Estate | 🏘️ Owns 23 WA Rentals & Airbnbs | 🏗️ Built 5 DADU's | 📈 You Can Do It Too · Member since 2016 · 724 posts · 3k+ votes
6y
Originally posted by @Jon Q.:
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.

Its possible investors are doing this in San Francisco, New York, etc. but I doubt many would try it in Seattle. We have Real Estate Excise Taxes here in Seattle of 1.78% of the purchase price (not profit, but purchase price) so churning properties is pretty severely tax-disadvantaged. I actually have no idea about which other area's have excise taxes and how much, but they definitely discourage unnecessary buying and selling.
I agree with you about "Trading Up", but that's a strictly consumer purchase that you may be able to get a good deal on, not an investment strategy with legs.

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Gary Roberts
Member since 2019 · 9 posts · 8 votes
6y
You can’t time the market? In this case not really true if you follow the money.

It’s drying up. IPO disasters are causing VC money to get tighter. Need only research SoftBank and WeWork debacle to see where it will trend. (Wife in big tech finance)

with all of that easy money stock options and big salary signing bonuses were offensive before ... trending other way (severance packages is the topic at the moment)

every day a company is announcing a “re-org” involving layoffs. Today it was Lyft.

Back to WeWork... was 47 billion a year ago... now 8 billion evaluation. This will impact the RE market eventually.

More layoffs are coming. Weekly we are finding out friends are getting notice.

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Sam Josh
Sunnyvale , CA · Member since 2017 · 373 posts · 362 votes
6y
@Gary Roberts
Hard fact is the Bay Area is not the domain of the average BP investor. Its a premium market with premium returns and majority of those returns come in the form of asset appreciation vs cash flow. It’s the playground of the wealthy including a massive chunk of very wealthy overseas investors. So the market dynamics are quite broad and not to mention startup and IPO wealth. If Lyfts layoffs matter, then I am not sure what you have to say about Tesla, Google, Apple hitting their best financials ever.
Don’t think you can or should try timing this market. To me this is like a Berkshire Hathaway stock that you buy and hold. If you can’t hold, it’s not the right investment.
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Eva Miller
New to Real Estate · Los Angeles, CA · Member since 2020 · 7 posts · 0 votes
6y
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.
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Eva Miller
New to Real Estate · Los Angeles, CA · Member since 2020 · 7 posts · 0 votes
6y
@Connie Chan Do you know of any specific companies that are worth giving a look?
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Sherwin Gonzales
Rental Property Investor · San Francisco, CA · Member since 2015 · 236 posts · 156 votes
6y
@Jon Q. thanks for sharing! @Account Closed, great points! I agree in that you should always be looking for a deal. People been saying the market was going crash a year ago, two years ago, etc. So those people waited and didn't buy. But then one year passed and then another and then they passed up on some great deals and regretted not buying.
A savvy investor makes their own deals. Whether in a down market or in an up market. There's always money to be made. Just strategies change and you have to learn to adapt accordingly.
4 Reply
Jon Q.
OP
Investor · Berkeley, CA · Member since 2015 · 1k+ posts · 713 votes
6y
Originally posted by @Connie Chan:
@Jon S. I have thought about selling, feel like I missed a window last year and prices are already down at least 5-10%. Realtors are telling me it’s stabilizing but who knows with elections coming up. What are you planning to do with your Bay Area properties?

i never sell unless (1) my original investment thesis turns out to be wrong or (2) the neighborhood turns south (ex increasing crime, homeless shelter built next door etc)

If you are considered in selling, instead consider a cash out refinance that way you can pull your money out tax-free.

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Jon Q.
OP
Investor · Berkeley, CA · Member since 2015 · 1k+ posts · 713 votes
6y
Originally posted by @Sam Josh:
@Jon S.
Sorry but what a dumb article!

Thanks Sam! But the article is not a valuable part of this forum discussion.
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