While these seem like peanuts for Coaster's, its having a pretty huge effect on long time residents. We're undergoing a building boom that feels insane.
As someone on the inside, I'm sorry to say it's going to get worse before it gets better.
But there is a real chance, that in a few years, we'll see some moderation, as Millennials fail to replace the last crop of new homebuyers and current values fall. That's what I'm hoping for, at least.
And I second your thoughts. Transplants from the coast still think it's an affordability paradise, but for someone who's grown up here all his life, the picture looks bleaker.
You'd think so, but the last 3 years have not brought relief...I'm not complaining about housing prices - I've owned for a while, but I feel for my renting friends.
Traffic on the other hand...that's something to complain about
Be wary of any trend extrapolation. Better to figure out the dynamics underlying changes.
In this case, the rate will change way before rents have the chance to double. Rental markets are cyclical. In simple terms: They go up; they become unattractive to renters; they go back down.
There's no doubt that in many areas, including the San Francisco Bay Area, the current trend is not sustainable. But I think you're underestimating some fundamental shifts that have taken place that will put a floor under rents.
First, in the wake of the Great Recession, many folks are simply not able to buy homes. They can't meet more stringent lending standards and while there are efforts to make mortgages more accessible, a repeat of what you saw in the last housing bubble isn't likely any time soon. Making matters worse for folks still getting their financial footing is that home prices have appreciated considerably over the past several years.
Second, you need to consider demographics. Most young people can't afford to buy homes (more and more of them are living with their parents into their late 20s and 30s), and surveys indicate that home ownership is generally less important to younger people.
Finally, in some areas, including some of the most desirable parts of the Bay Area, there is realistically not going to be a significant increase in supply any time soon, so demand is likely to exceed supply for the foreseeable future.
Obviously, another recession would put a damper on things and double digit decreases in average rents are even possible in the hottest markets under such a scenario, but people waiting for $1,500 studio apartments in San Francisco shouldn't hold their breath.
The rent prices in SF (and around) have baffled me ever since I moved here in 2011. Can anyone explain who is supposed to be able to afford $3k+ for a studio?
Me and my gf both work in tech (making well north over 100k each) and between the two of us we barely can afford a 2bedroom apartment for about 3k/mo. I can't imagine living by myself and paying such insane amounts on rent alone. After adding in things like student loan payment, car payment and groceries/living expenses there isn't much left to save or do anything extra? (Don't even get me started on trying to "buy" a place and coming up with a downpayment, which is very different dynamic on by itself)
So, I can only assume that everyone who is able to drop 3-5k on rent alone must be making 200k at least? There can only be that many "Directors of engineering", "Heads of dev"? Clearly I am doing something very wrong here.
I live in SF and I work in tech. I make north of 100k and my rent is 2k. Your situation seems bizarre to me.
If you and your girlfriend make north of 100k, then you're pulling in cumulatively 13k-15k/mo after taxes. At $3k/mo your rent is below the commonly cited <33% of take-home income for housing. With at least $10k left over between you, why is it so difficult to save? I could very easily save 20% of my take-home or I could "upgrade" to a $3k/mo apartment. The only major payment I don't have in common with you is a car payment (and auto insurance). I'm also not particularly frugal, but I don't go eat at Saison every night either.
You really are doing something wrong. I don't know if you're griping in vain, but you and your girlfriend should review your lifestyle and make some changes.
We are definitely not living in financial hardship and I didn't mean to come off as someone who did. I definitely consider myself as one of the privileged ones and it helps that I have someone else contributing to the household. It's hard for me to imagine however, how I would be able to survive on my own or try and raise a family in current conditions, let alone being one of the less privileged, meaning not working in tech and having to live off (way) less than 100k in and around SF.
Now that I think of it, no-one I work with (with families) live in SF, even my boss and her boss (undoubtedly making north of 200k) all live outside the city (and even outside the peninsula) in places like Castro Valley, Fremont, etc. and most of those places have caught up pretty well with SF prices so I have no idea where to go next. (We bought a house in Tracy, CA that we are renting out, which was the closest place we could afford to buy).
I can't even begin to think where the next generation of workers will be living and in what conditions. Seems to me that if the 'middle class' is already being priced out of the city (and most of the bay area in general), in another 20 years or so, the city will either consists of VCs/dotcom/execs or prices will have to fall significantly.
My pet theory (with some anecdotal evidence) is that a lot of external investors are buying up most of the inventory. And a lot of young people making > 100k will spend large amounts of their income to live in the bay area even if they have to have roommates, etc. Cities like SF and NYC do have the advantage that you don't strictly NEED a car at least in some areas (and of course the gas, maintenance and insurance that goes with it) so that frees up a decent chunk of cash too.
What generally happens is once people start getting married and having kids they move to other states. I have seen this with several friends.
I had an opportunity to take a job in SF directly out of college. I opted to take a job in DC instead, considering the cost of living I'd be making considerably more in DC.
I did have friends that moved to SF and SV to take jobs in tech. A few that worked for twitter lived together in a house in the valley where they each paid around $1.5k each. They then car-pooled into SF (which would take hours on some days).
Others I know are completely broke. They make ~$90k a year and live with several others in very dilapidated apartments.
I will never, ever, understand the draw to living in SF. I've been their and yes it's a lovely city but the cost just makes absolute zero sense. On top of that the pay is really not that much better. I've done extensive research (I've been planning to write up a post about it but just haven't had the time) about wages in the Valley vs. SF vs. other large cities and you're looking at maybe a 10-15% bump, which will in no way cover the difference in the cost of living.
To live in the city, you really need a household income of $300K+. Anyone below that is either going across the Bay Bridge or south into the peninsula.
Based on your pricing, you're best off heading to the East Bay and commuting in via BART. The peninsula may be a better option but you won't get much relief from the rents and everything is car-based and a bit sleepier for young people.
You are so right, we live in San Mateo now and the closest place we could afford to buy a house without maxing out our budget was Tracy, CA (Pleasanton/Livermore are is also still quite affordable). Needless to say the commute is terrible from there so we have rented the place out and hopefully we can return there once our jobs are more settled and we have more flexibility to work remotely.
In the limited research that I've done about Bay Area real estate, you're best off selling the Tracy home while prices are high, because the schools in Tracy aren't great.
There is likely a minor market correction coming but you could see a lot of the homes lose 20-40% of their value in places like Tracy. The homes that will retain most of their value will be the ones with really stellar schools (9+ on greatschools.org or higher) because there's always demand for them. They won't correct much beyond 10-15% at the most.
If you're dead set on buying, I would go with Pleasanton if you can afford it. Solid schools, and a somewhat reasonable BART commute into the city. Otherwise just save your cash until you can drop $1 mil into a house.
You can pay $3000 for rent on $100k salary, it's not ideal but it won't automatically put you in extreme hardship either, you just have to be frugal somewhere else. Granted $100k is still a high salary, but there are a lot of people making that in SF. Still not enough to fill up the town probably, but then you have rent controlled apartments diminishing the supply, and also poorer people packing 2,3,4,5 salaries into 1,2,3 bedrooms. With lack of new construction and a lot of good jobs it's easy to see how the situation has gotten to the current point.
That's not to say people are living well there—you take a significant lifestyle hit to live in SF compared to the mid-tier American cities even with a 50% pay raise, but it's seen as a desirable place to be so prices just keep getting jacked up.
Tech is always implicated in stories about Bay Area housing and rents, and it does play a role, but too many people forget that the Bay Area has a diverse population and economy. There's a sizable foreign population, and professionals working in industries like finance, law and medicine often make far more than their code-writing peers. For instance, an associate attorney or investment banker with a few years of experience can easily pull in more than $200,000/year.
This said, there are also a lot of young people in tech who earn good money but spend most of it (on rent, eating out, traveling, etc.) believing that the current environment will last forever. If they knew that this wasn't the case, they'd probably be less willing to spend a huge chunk of their take home pay on rent.
The last time I visited SF, I saw an awful lot of new construction. Even though I'm aware that it's unquestionably a landlord's market over there these days, there has always been a sizable spread between what modern/new stuff rents for and what the older stock rents for. I'd really have to see a distribution of years since construction/last major remodel, to really believe any data like this. To lump it all together seems naive to me.
Are these numbers so low because of rent control? I lived in a 300 square foot studio last year that cost me $1400 a month. That exact same studio now costs $2800. I've seen similar increases from craigslist posts throughout the city, compared to what I was looking at last year. What I wouldn't give for it to only have increased 15%.
The benefit of living in London is that there is a super smooth gradient of rent decrease as you move further out in all directions, and there is reasonable commuter rail all the way. The downside of course is tiny rat-infested 150-year-old boxes remodeled 30 times since then, each time with a poorer job than the last. San Francisco has the upper hand here having burned to the ground more recently.
It continues to strike me as odd that there isn't more focus on building high-density highrise housing in SF. Is this related to earthquake danger, historical preservation, idiocy on the part of local politicians, or some combination of these?
Established and older residents, especially those without children, see no reason we should be "Manhattanized" so more people can live here. They "like SF just the way it is, thank you". If you don't have kids, and you have rent control, you never really need to upgrade your 1BR apartment once you got it.
Secondly, there is no upzoning, and subsequently no increase in density, without eviction, thanks to the rental market. Evictions aren't popular. The Tenderloin is completely insulated from any of this.
Historical preservation is bogus, but has a history. The reason that some people argue for largely have to do with the projects in the Western Addition, which bulldozed a bunch of victorians to make what most people consider an eyesore.
Local politicians don't really care too much. The reason being is any action they take pissed off established residents, who voted them in. That's changing a bit, as more people feel the pressure of the rental market and evictions. Still, there's more of an attempt to protect people who are established then there is an attempt to accommodate those who actually need housing, especially those in the middle class.
And, to add to what everyone else said: there are out-of-towners who are buying up this newly-built property; either as a place to stash some cash (people from China, Russia), or as a crashpad for when they come in to town (from other parts of Bay Area) for an event or something.
Not sure why parent is being downvoted. I personally know several rich (corrupt?) people from China who have bought or are actively shopping for homes here in the SF bay area. They still work & live in China, but from what they've told me, their goal is to
1) Buy a house for their kids studying in the US;
2) Launder their money;
3) Own a property outside of China as an investment;
4) Have a safe house in case they need to flee the country.
The bay area is a popular choice for such people due to the high concentration of Chinese immigrants / Chinese Americans already living here.
I'm not passing judgement, just presenting facts from personal experience.
Yeah, I don't know why I was downvoted too... I was speaking from personal experience also. I happened to be friends with a realtor, and he would tell me about the crazy bids he was getting from China. A property in Pacific Heights got 2 Chinese bidders in a bidding war, both buying it sight-unseen, all cash, from China. Crazy times.
And I have friends in the Peninsula who have such crashpads in the City (unfortunately, I didn't win the IPO lottery like they did).
So I'm not blaming "furriners" or "1%", just stating what my limited experience has been.
The local politicians and their votes are mostly s. The rent control laws have made affordable housing rare but luxury housing and office spaces reasonably priced.
The problem is further compounded by the zoning laws, parking space related laws and the local community which is consistently voting against any housing projects to make sure their property rates do not go down because of increased supply.
I would love to say this is shocking, but it has become routine to see double digit percentage increases in San Francisco rents. I am curious to see if the increases were as extreme outside on the city.
We have a 9% jump in the last 6 months.
http://www.rentjungle.com/average-rent-in-austin-rent-trends...
http://kxan.com/2014/08/01/austin-hottest-real-estate-market...
While these seem like peanuts for Coaster's, its having a pretty huge effect on long time residents. We're undergoing a building boom that feels insane.