Bust Royale Scheduled for Insane San Francisco & Silicon Valley Housing Markets

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Bust Royale Scheduled for Insane San Francisco & Silicon Valley Housing Markets
by Wolf Richter • February 25, 2016


[font color="blue"]Two treacherous forces, with impeccable timing.[/font]

In the city of San Francisco, the median condo price is $1.11 million and the median house price is $1.25 million, up 72% and 88% respectively from the first quarter 2012. Median means, 50% of the units cost more, and 50% cost less.

Which creates an absurd situation: only 11% of the households in San Francisco can afford to buy a median home, according to Paragon Real Estate’s report on “affordability.” In other Bay Area counties, it’s similar. In the Silicon Valley counties of San Mateo and Santa Clara, 14% and 20% of the households can afford a median home; in Marin (just north of the Golden Gate), 17%; in Napa 21%, Alameda (East Bay) 22%, Sonoma 26%. In the US overall, 58% can.

But the calculations assume that buyers are able to make a 20% down-payment, which on a median home in SF amounts to $240,000. And it also assumes the persistence of super-low interest rates and points for a 30-year mortgage.

....(snip)....

Renting a median one-bedroom apartment will set you back $3,400 a month, parking not necessarily included. And a median two-bedroom will set you back $4,650 a month.

But kinks are already appearing. According to Zillow data, those rents are down 5.4% from the respective peaks in June and August last year. And just then, with impeccable timing, this housing market is now facing by two powerful forces. ...........................(more)

http://wolfstreet.com/2016/02/25/bust-royale-for-insane-san-francisco-silicon-valley-housing-markets/