BUBBLE, BUBBLE …
Now’s the time to buy that condo you have always wanted — in Chicago. Housing in that large city is undervalued, according to the UBS Global Real Estate Bubble Index. You might not have been planning to invest halfway across the country, but you might consider it after learning that UBS rates San Francisco as a city with overvalued real estate.
In San Francisco, “real prices have increased by more than 50 percent since 2011, and the market seems — despite the fast growth of the local economy — on a path towards bubble risk,” according to the UBS report. Nationally, prices have increased only 15 percent during that same time span. UBS notes that the local price increases have even “surpassed the previous peak in 2006 by 5 percent. Even though income growth rates have been above the national rate, the imbalances in the city’s real estate market have increased.”
San Francisco civic and business leaders have talked up increasing the amount of new housing in the city since 2000, but it has fallen short. That’s the view in a new report from real estate site Zillow’s research team, “Is Your City Building Enough Housing? Weighing Today’s Housing Promises Versus Past Housing Delivery.”
“Both Seattle and San Francisco pushed hard to deliver new housing in the 2000s and currently have aggressive plans. But compared with Seattle, it seems as though San Francisco is currently dreaming bigger — but with a weaker track record of execution,” according to Zillow. “It’s hard enough to build in the land-scarce, notoriously regulation-rich city of San Francisco, but it remains a very desirable place to live and its population growth is rapid and expected to continue.”
By comparison, Zillow notes that Dallas “is currently setting the most aggressive promise, but also has the best record of delivery.”
That’s not to say San Francisco isn’t building new units. No city resident or visitor needs to look hard to find newly opened and under-construction housing. Zillow took into account previous residential construction, but added that “unless San Francisco and Dallas really ramp up construction in the next few years, it may be difficult for them to follow through with their plans.”
FARRELL WANTS GUARANTEED INTERNET ACCESS
Tenants of multiunit residential buildings in San Francisco would be guaranteed the right to select their own Internet service provider (ISP) under a new proposal by District 2 Supervisor Mark Farrell. If passed by the Board of Supervisors, the bill would prevent owners and managers of multifamily buildings from interfering with or limiting the choice of Internet service provided.
“We all have a vested interest in local laws which increase competition and ultimately deliver the highest quality Internet service at the lowest cost,” said Farrell. “Limiting consumer choice is plain and simply bad for San Francisco.”
Though federal law prohibits owners and managers from entering into exclusive agreements with ISPs, limitations are placed on an estimated 50,000 units “that effectively deny them the opportunity to provide Internet access,” according to Farrell’s office.
In San Francisco, 60.6 percent of homes sold for more than their listing price in September, according to real estate website Redfin. That compares with nearby Oakland and San Jose, where 56.4 percent and 55 percent of the homes sold above listing, respectively.
Inventory (the number of available homes for sale) has continued to increase in the city. Redfin reports that San Francisco had the third-largest increase in its nationwide survey in the number of homes for sale, up 22.3 percent. (St. Louis and Provo, Utah, were ahead, with 29.9 percent and 29.7 percent, respectively.)
A CAUTION FOR OFFICE LANDLORDS?
Venture capital firms have grown more cautious about investments in tech companies, and that is expected to have a knock-on effect on the office real estate market in San Francisco, putting a break on leasing. Real estate researchers at Jones Lang LaSalle expect that “competition in certain segments will result in retrenchment for cash-limited companies, further increasing sublease supply.”
Nonetheless, the firm says that San Francisco continues to be a leading market for technology business, helped by “access to talent, funding, and valued amenities” that fuel growth.
“A lot of people have wanted to move but get frustrated because they can’t find anything, so it makes more sense to remodel. … People feel good about things. They feel their jobs are stable, incomes are rising. They’re not concerned about being able to pay back [the loan] or getting in too deep.”
California Credit Union League chief economist, discussing recent record high home equity lines of credit taken out by Bay Area borrowers; San Francisco Business Times