|IN SAN FRANCISCO THESE RENTS ARE TRIPLED|
I saw something last week that has been rarer than a republican in California, a model home sales center. And not just one, but eight of these nearly extinct complexes and all in the same master planned development. And to top it off, the project, Mountain House, was once the poster child of poor planning, speculative buying, and rapacious development. East of Oakland, California and next to Tracy and in the same county as Stockton, Mountain House is the first master planned community a home hunter finds when they climb the Altamont summit on I-580 and enter the Central Valley. Four years ago it was a community of foreclosures, dead lawns, and single-family rentals – now it’s building hundreds of new homes, and adding schools and parks.
Such is the story of the past decade – bust, boom, bust, and now rebirth. The Bay Area has suffered through these cycles, but with less affect than the communities in the Central Valley. The growth of industries in Silicon Valley, the usual transient migrations in and out of San Francisco, and the slow growth attitude of most Bay Area cities actually contributed to reducing these impacts of the last five years. Yes, there were foreclosures and a total shut done of the homebuilding industry, but values held better than most other regions (New York and Washington D.C. excepted).
But values for new and old homes have now gone through the proverbial roof.
Case in point:
We owned a home in San Francisco for more than ten years. It was a delightful 900 square foot cottage on the city’s southwest side. Built in 1926, it had wonderful floors, lath and plaster, solid foundation, just great for a first home. And it was unlike most of the homes in San Francisco, it was on a detached lot. We paid about $80,000 in 1979 – by national standards three times the price in Chicago or Iowa. After all it’s California. Ten years later we sold it for four times the price. I chanced googling the house a few months back – it was on the market for $1,050,000. True, and to make it even more hysterical, nothing had changed in the house, the kitchen was exactly the same as when we sold it in 1990. And so was the small single bathroom, the small bedrooms (2), the one car garage, and the one extra room I added in the basement. It had not even been painted. That’s how bad things have now gotten in San Francisco. A thousand units are built each year (hopefully), when 5,000 are needed. The housing stock is aging with little to no replacement and at the insane price for a 900 sf house, no one will buy, tear down, and replace.
So the pressure on the existing housing stock continues to build and prices rise beyond reason. Now Bay Area rents have gotten to a point where the monthly would allow you to buy a new home – in Mountain House. I have seen this movie before and it did not end well.
Stay tuned . . . . . . . . . .