May 15, 2007
San Francisco Makes Forbes's 'Most Overpriced Real Estate Markets' List
Are you as shocked as we are?
No, really, we think everyone knows things are pricey out here, and Forbe's is utilizing some interesting methodology to glean "overpricey' from the "pricey," and turn it into everyone's favorite, a Top 10 list.
Well, we weren't the worst; that honor went to San Diego.
From the get-go, this was less interesting than it could have been, because they only examined the top 40 largest metro areas -- so this is basically a top 25% list. Then again, we guess you have to compare apples with apples.
The article posits that the markets in "bubble territory" are those with a high price-to-earnings ratio (in other words, a measure of value representing return on investment per dollar spent), low affordability, low income growth, and a high cost of living. The article states that:
San Francisco, ranked fourth, fits that bill. Despite home prices growing at a 2% clip over last year, according to the Natioanbl Assoc. of Realtors (NAR), the city by the bay ranks third to last in expected income growth, reports Moody's. Not good news in a market where only 7.5% of housing is affordable for the median-income earner. Combine that with a housing P/E ratio over 50, and it isn't difficult to imagine some softening on the horizon."
The list, in order, went: San Diego, Miami, Sacramento, San Francisco, D.C., Honolulu, New York, Los Angeles, Boston, and San Jose.
Hey -- there's a lot of "-ists" on that list.
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'SFunny how the most sustainable cities are the least affordable!
See:
sustainlane.com/us-city-rankings
howgreenisyourcity.com
So it goes.
these lists are pretty standard fare in journalism, sometimes funny, sometimes odd and sometimes dumb. in a quick scan of the story, i didn't see anything about the local housing inventory, where San Francisco is clearly in a different category than, say, Sacramento.
as long as there are various kinds of jobs to be had here and a tight supply of properties to buy or rent, prices stay high.
People pay real American dollars to live in Sacramento? Eww.
San Francisco has and will alway's have limited inventory so there never will be a bubble to worry about. The Market there has survived earthquakes, stock crashes, unemployment, etc.
It sure would help affordability if the city allowed more condo conversions. Right now, buyers only have the option of buying $800K -plus single family houses (there's nothing really cheaper than that), or condos or TICs. Since TIC's are so costly to finance, etc. they're not really a good option. So the way it is set up now, TIC owner's end dumping all their money into additonal interest payments instead of into all the good restaurants in the city.
Well, just wait until a good earthquake wipes all of you out.