Bay area Housing 2020- Crash or no crash

Real Estate News & Current Events
6yFollow

Bay area Housing 2020- Crash or no crash

Brian Singh
Rental Property Investor · San Jose · Member since 2020 · 45 posts · 35 votes

Just wanted to get a sense of what people are seeing in Bay area and what they think will happen after a few month. Also wanted to see if I am being too negative on bay area and forecasting a 10-15% price drop.


The reason I see a 10 to 15% drop by April 2021 is

1. The virus and unemployment

2. Start-up layoffs

3. H1B ban for next 2 years effectively

4. Tech work from home or anywhere going main stream.

The area I am using as bench marks are

1. San Fran

2. Mountain view

3. Fremont

4. Walnut creek.

Very different demographics in all four and they together represent the Bay area as a whole quite good with the issues highlighted above.

I will write in more details when people write about  their opinion on the points I raised.

I hold no solid stance one way or the other, just want people who are actually investing there give their side of the analysis, so I see if I am thinking correct.

Rents have dropped over 10% for two months now, are property prices next ?

7Reply
413 views

Most Popular Reply

Tracey Robinson
Member since 2020 · 16 posts · 26 votes
6y

“ Bay Area “ is very different in terms of properties, quality of life, amenities, etc depending on exactly where you are talking about. So what will happen to prices in San Francisco may differ from what happens in Mill Valley, Walnut, Creek, Menlo Park etc. 
I predict a substantial price drop in San Francisco, especially in the condo market for multiple reasons. Tech heavy presence in SF will go down as people switch to working remotely and leave . Quality of life in SF continues to decrease with high burden of homelessness, filth, crime ( car breaks in for example ) which will also prompt people to leave. Covid has caused numerous restaurants and businesses to go bankrupt and shut down, the things that drew people to city life are no longer available, that will also cause an exodus, especially with no real end to the SF lockdown in sight. 
The surrounding suburbs probably will see an increase in price, in part due to some people’s desire to flee the city for more personal space, and freedom from some of the negatives that have become all too common in SF in the last few years. 

13Reply
See this reply in the discussion

95 Replies

Jump to latestLatest
  • Justin Thorpe
    Member since 2020 · 437 posts · 675 votes
    6y

    @Brian Singh

    History will mostly tell you that in the Bay Area FOMO group as you put it has done way better than than the MOFE group.

    By MOFE I mean “Missing our Forever”. Essentially spectators / naysayers.

    For every successful investment story there are 1000 naysayers who felt that the investment was crazy. That’s just in the Bay Area.

    I can’t even begin to quantify that population located outside of the Bay Area who think this market will crash badly and that’s when the sun will rise they will convert from spectators to investors.

    Of course history is just that and may not repeat but it offers some guidance.

    I wish you all the very best for your investment projects.

    3Reply
  • Brian Singh
    OP
    Rental Property Investor · San Jose · Member since 2020 · 45 posts · 35 votes
    6y

    I am looking at putting money in 2020 or by mid 2021 and , I usually take out after 2 years or 5 years. 
    So with that time horizon is how I look at bay area. 
    Yes if my grandfather had bought in palo alto in 1950 when it was an orange yard at $ 1 a sq foot and held it today . Yes you are right. That can be said for anything. If I had got gold in 1950 it would be over 2000%. 

    Thank you all for the input , it really helped me understand the bay area investors . So I will not be surprised when the sellers go into FOMO mode in September or October and start selling in bulk. It goes both ways.

    In real estate you make money going in and adding value. @Amit M. seems to have figured out the adding value part so he makes $$

    I am part time in RE so I focus on making money going in buying at the right price and 10% rehab budget.

    to answer my logic of selecting the 4 suburbs

    1. Walnut creek - mostly non tech professionals (sales , Finance etc) and salary to loan value very high, so they will face financial crisis . Thus deals will come. However HOA here is very high so resale value will be capped, thus may drop it.

    2. San jose, Sunnyvalle and Fremont: This is where majority of H1B ppl live, so with no new H1B coming in demand will drop for both rental and house , thus deals may come and prices may fall to 2016 or 2015 level in a year.

    SF as most people say is useless and just going down. Palo alto is rich ppl so economic conditions dont dictate that market. ( so no interest in that market)

    Please feel free to tear apart my logic, I would rather be wrong here than with my money :-)

    0Reply
  • Juan Pardo
    Member since 2020 · 201 posts · 118 votes
    6y
    Originally posted by @Darius Ogloza:

    The same debate has been raging for the 26 years I have been living/investing in the Bay Area.  When I paid $1,700 rent per month for a 3/2 view house in Sausalito in 1994 and then when I bought a Mill Valley rambler in 1997 for $450,000, all of my friends/family/associates who lived outside the Bay thought I was nuts to pay such a huge sum for such modest accommodations.  The dot.com bust in 99 was going to end it all.  Then 9/11.   Then the financial crisis in '08.  As the mutual fund guys like to say, the past is no guarantee of future success but the resilience of this area has been remarkable.  Have there been dips?  Sure.  Any reason to think that the Bay is going to drop further on a percentage basis relative to other areas, I don't see it.  

     In 1997, according to graphics, prices had been falling a few years.

    Let's view the topic from a different perspective: what are the drivers for appreciation at the Bay Area, and will they continue working?

    And another angle on this discussion: why would not a well-paid professional working in SF wish to relocate abroad, lower the amount of working hours, taking a long vacation, enjoying life at a lower pace, with less stress, and investing his or her savings somewhere else? By relocating everything is cheaper, it's possible to live in a very nice place and cheaper (Brazil? Caribbean? Italy? Bali?). By diversifying investing in different countries, in theory we have a safer and more stable portfolio.

    Last remark, just playing devil's advocate: it cannot be that obvious like buying a property in the Bay Area and sitting on it for 15 years. It may have worked in the past but, will the trend continue?

    0Reply
  • Account Closed
    Lender · Milpitas, CA · Member since 2016 · 376 posts · 248 votes
    6y

    @Brian Singh San Jose, Sunnyvale, and Fremont have a lot of H1B people, and it's possible that prices might go down if H1B are no longer coming in. But don't forget that those area are generally for first-time homebuyers and have been consistently in demand. 

    People want the American dream of homeownership and there are still a lot of citizens who are willing to pick up homes in these areas. I doubt the housing market in the suburbs will be affected too much in the near future.

    1Reply
  • Darius Ogloza
    Investor · Marin County California · Member since 2018 · 1k+ posts · 2k+ votes
    6y

    Brian Singh: if your grandfather had bought in Cleveland Ohio in the 1950's that $17,000 house would be worth $22,000 plus the cost of a VHS VCR.

    Seriously, we have made real estate investments 6 states over the years because we believe in holding a geographically diversified portfolio.  Nothing has compared to the Bay Area.  

    Dips do happen.  We bought our primary in March 2009 (lucky, not smart) and have enjoyed seven figure appreciation since then.  

    Where else in the U.S. (other than NYC) are you going to see that?     

    3Reply
  • Darius Ogloza
    Investor · Marin County California · Member since 2018 · 1k+ posts · 2k+ votes
    6y

    Juan Pardo:  

    Time zones matter.  I once handled a matter involving clients in London and Taipei.  Whole workday every day shot waiting for phone calls from early morning through late evening.  Working from Bali is nice on paper until you have to meet a deadline or deal with the home office during business hours.  

    No one has a crystal ball.  The Bay Area has the best weather in the U.S.  It has also reinvented itself pretty much every decade or two to remain in the vanguard of the U.S. economy.  Stand at the top of Russian Hill (say Union and Leavenworth) and look around.   You will get it.

    2Reply
  • Justin Thorpe
    Member since 2020 · 437 posts · 675 votes
    6y

    @Juan Pardo

    Seems like you are happy to bet on a pandemic driven trend of remote work and thus implicitly to bet the pandemic lingers forever. History will tell you they don’t but you be the judge on that.

    As for the remote locations you mention, why would I as an American in the prime of my working years go live away from a hotspot economic area and that too in a different country.

    I am sure there are people who might do that but it will be in the very slim minority. Also the practicalities of working remotely that too from a foreign country are very complex.

    True that offshoring has happened in several tech areas over the years but it’s limited to people below a certain level of skill set and has not worked well beyond a certain point because of cultural and time zone issues.

    1Reply
  • Brian Singh
    OP
    Rental Property Investor · San Jose · Member since 2020 · 45 posts · 35 votes
    6y

    First sales fall, then realtors tell sellers wait and pull the listing off- market, market will improve will improve , price fall a little. Then Sellers (bay area FOMO) . Inventory comes online all at once. Prices fall hard.

    0Reply
  • Justin Thorpe
    Member since 2020 · 437 posts · 675 votes
    6y

    @Brian Singh

    Will be interesting to see if inventory is up or down year on year.

    Also key is Days on Market. If inventory is up and sales are down, we know it’s a bad sign. More supply and less demand.

    If DOMs are going up, that’s bad too. The 2.5% drop in pricing is not worrying especially in a downturn. Actually if you go back 12 months, the prices are likely down 10% or more.

    Also home showings have been on a pause for most part and in a virtual only sales environment, that data does not look bad.

    1Reply
  • Brian Singh
    OP
    Rental Property Investor · San Jose · Member since 2020 · 45 posts · 35 votes
    6y

    More demand going away 

    0Reply
  • Brian Singh
    OP
    Rental Property Investor · San Jose · Member since 2020 · 45 posts · 35 votes
    6y

    Bay area start-up layoffs since march 2020 - 25k now. to put this in perspective. Facebook has around 30k employees 

    1Reply
  • Juan Pardo
    Member since 2020 · 201 posts · 118 votes
    6y
    Originally posted by @Justin Thorpe:

    @Juan Pardo

    Seems like you are happy to bet on a pandemic driven trend of remote work and thus implicitly to bet the pandemic lingers forever. History will tell you they don’t but you be the judge on that.

    As for the remote locations you mention, why would I as an American in the prime of my working years go live away from a hotspot economic area and that too in a different country.

    I am sure there are people who might do that but it will be in the very slim minority. Also the practicalities of working remotely that too from a foreign country are very complex.

    True that offshoring has happened in several tech areas over the years but it’s limited to people below a certain level of skill set and has not worked well beyond a certain point because of cultural and time zone issues.

    I wasn't referring to the pandemic. I am not worried about that. However, it can trigger a change of mindset, it can get people thinking.

    Also I didn't mean to work remotely, let's say from the Caribbean, and having to come back every week or every two weeks for a few days to an specific place. 

    I meant to quit working full time and go live somewhere cheaper, maintain a similar or better lifestyle, work less, earn less, but maintaining the same quality of life, because the new place is just affordable. Why moving? To enjoy life! To see the world, to have perspective on things, to discover other countries, to live in a large house on a wonderful beach at a fraction of the US price, and working less hours, to have free time.

    Does it make sense to work non-stop during the best years of one's life just to buy overpriced property? And this is a general reflection.. 

    1Reply
  • Account Closed
    Santa Clara, CA · Member since 2018 · 100 posts · 71 votes
    6y

    @Brian Singh I am sure there were several similar statistics after dot com bust and '08 recession. Several posters have talked about the resiliency of the Bay Area. 

    In your first post you mentioned you hold no solid stance one way or another. Yet post after post you are clearly convinced that the Bay Area is gong to crash. My best friend, a flipper is making $100K+ profit per house in this market. You don't have to wait for a crash to get in, or perhaps you are likely going to wait forever. 

    4Reply
  • Prakash Saraf
    Rental Property Investor · San Jose, CA · Member since 2018 · 6 posts · 1 vote
    6y

    @Pooja C.

    What’s the typical value of homes your friend flips ...

    1Reply
  • Account Closed
    Santa Clara, CA · Member since 2018 · 100 posts · 71 votes
    6y

    @Prakash Saraf $850K - $1M. She focuses on starter homes and primarily in SJ Market. 

    What I am trying to say is that you can make money in any market and infact hotter the market the better so you get a premium price. 

    0Reply
  • Justin Thorpe
    Member since 2020 · 437 posts · 675 votes
    6y

    @Juan Pardo

    My 2 cents on the question you raised is that the average Bay Area techie is an ambitious career driven individual with big dreams and hopes. They are not interested in abandoning flourishing careers and moving to remote islands in the prime of their lives when they could stay and work at companies that are changing the world and someday even start their own companies and play the big game.

    As for overpriced properties, there is a reason why the market is so hot and homes get sold quickly and that’s because locals can afford those homes and that’s because they are well compensated. There are many dual income households etc.

    The other things about the bay is there are neighborhood options. If you want to live in Palo Alto/Los Altos there is a price point for you but if you have lower price points then there are several areas that are favorably priced and it only gets better as you move East towards San Ramon and beyond. Same if one chose to live in south San Jose or Morgan Hill etc.

    1Reply
  • Brian Garlington
    Realtor · Oakland, CA and a Real Estate Investor with Multi-Family Units and a Self Storage Facility · Member since 2016 · 2k+ posts · 2k+ votes
    6y

    I agree with @David Song   regarding his outlook    and @Austin Largusa   You can't lump San Francisco in with the rest of the Bay Area. In fact San Francisco by itself has a LOT of variables. 

    0Reply
  • Brian Singh
    OP
    Rental Property Investor · San Jose · Member since 2020 · 45 posts · 35 votes
    6y

    @Account Closed I was neutral but I am starting to lean towards market crash now ( 20% correction by Dec 2021). I dont see any real arguments except FOMO to sustain the bay area market. There seems to be so much demand destruction

    1. Start-up Job losses

    2. H1B folks gone

    3. Work from home

    4. Tech IPO failing ( Slack, AirBnB, UBEr, Lyft etc etc ) Even softbank took a $ 12B hit and had to sell T mobile stocks.

    As for your flipping business , I said before in RE you make $ either by adding value or buying at the right price. I dont have time to do a major rehab, I do this in my free time. So I focus on buying at the right price.

    That is what I am doing here is price discovery and I think the price of Bay area is 2015 prices. Bad rescission 2012 prices . Max prices will go up in next 5 years 2018 level.

    If you dont mind can you can DM me the zillow link to your friend's rehab. Would love to see the price point she entered and what she got ARV. hopefully its not 2018 as we have seen that was the top of the market recent last 3 months would give credence to your argument.

    Real estate moves slowly and I think the world has changed too fast and buyers are looking for tomm prices and sellers are still stuck in 2018

    Thanks

    0Reply
  • Johnny Wolff
    Rental Property Investor · Kansas City, KS · Member since 2015 · 45 posts · 29 votes
    6y

    Think we'll see a drop, but not a crash (10%)

    0Reply
  • Darius Ogloza
    Investor · Marin County California · Member since 2018 · 1k+ posts · 2k+ votes
    6y

    To all the doom-sayers, which markets will profit from the Bay's loss?  

    0Reply
  • Brian Singh
    OP
    Rental Property Investor · San Jose · Member since 2020 · 45 posts · 35 votes
    6y
    Originally posted by @Darius Ogloza:

    To all the doom-sayers, which markets will profit from the Bay's loss?  

     Great question: to answer it we need to understand or make an intelligent guess who are the investors:

    If I were to say equity yield chasers  - Florida and Texas. 

    0Reply
  • Justin Thorpe
    Member since 2020 · 437 posts · 675 votes
    6y

    A Castro Valley fixer upper was recently sold for 250k over asking.

    https://abc7news.com/bay-area-housing-prices-sf-home-2020-in-california/6307626/

    Naysayer/spectator community I am sure is saying this is a “FOMO” deal and the buyer could have purchased a mansion for that money in Texas and Florida.

    1Reply
  • Account Closed
    Santa Clara, CA · Member since 2018 · 100 posts · 71 votes
    6y

    @Brian Singh This is the info she gave me. Bought for $860K, she spent $65K rehabbing. Its on the market right now and most likely sell for $1.1M. Home was bought end March while we were in lockdown- rehabbed in 3 months. This home was bought from MLS. She has bought several homes before off market as well. And she is already shopping for the next house.

    0Reply
  • Allan C.
    Rental Property Investor · Member since 2018 · 826 posts · 810 votes
    6y

    To add perspective, I encourage you all to investigate international high cost markets. I used to think the bay was expensive, until I started living abroad. There are many markets more expensive than the bay, and those markets continue to appreciate. Everything is relative, so broadening perspective will help you assess value or risk of the bay.

    The fundamentals of restricted land, good weather and diverse economy is a common trait amongst global top tier cities. When global population increases flatten I’ll be concerned, but that signpost does not appear on the horizon anytime soon.

    2Reply
  • Ramsin Jacob
    Realtor · San Jose, CA · Member since 2018 · 184 posts · 71 votes
    6y

    @Armel Bayot 100% agreed. Majority of the Bay Area cities (actual Bay Area - San Jose, SunnyVale, Palo Alto, Mountain View, Fremont, Hayward, Oakland, Redwood City, San Carlos, etc) has actually increased since last summer. 2019 summer to 2020 summer, San Jose homes have a 10% increase in most neighborhoods. The Bay Are market is unlike any other market.

    2Reply
Join the conversationCreate a free account to reply, vote on answers and follow this thread.
Log InJoin for Free