Well, that's my family. Grew up in the East Bay and my family has been there for 4 generations. My dad bought the house in '81 for ~60 and now the house next door is in negotiations for about 600. That's a 1000% increase. Compare this to wages, and it's still bad. These are 1 bath, 3 bedroom single story 1.5 acre plots. Basically, Levittown houses. Granted, the elementary is 3 blocks away.
But still, it's insane in the Bay property market again. Anyone from the Bay knows a bubble when we see one by now. When all the hipsters and their credit-cards run out, the market will crash and the locals MIGHT be able to buy something again. There is also the elephant in the room called Prop 13 that is not mentioned here. That, among all other bubble ingredients is the main reason why property in the Bay is the way it is.
It's just as likely to go sideways for a decade or two with devaluation only due to inflation. Japan is the best example but Australia never had a major crash and seems to have rebounded again.
Maybe if there was another DotCom crash it might take the real estate market down with it.
Again, prop 13 distorts things a lot here. Mobility is very restricted for people, as the taxes go sky high for older owners when they sell.
Still, until you can reasonably pay a mortgage on 2 incomes, pay for kids, medical, and insurances, then these bubbles will continue. Rent? Sure, but rent also has to make sense. You can float on credit for a long time, but eventually people have to have a future for your market to exist. Otherwise, they'll just move to Tuscon or Denver. Similar people and climate (not lots of snow for months on end).
The Australian bubble has been largely blamed on two things:
- Restrictive policies on land release for development which is the simple classic supply/demand explanation
- Low credit costs and negative gearing tax concessions which encourage speculation fueled by debt (Keen, Minsky, et al)
The First Home Owners Grant and other schemes also stimulated demand but any value was quickly absorbed by the rising prices. On top of this spruikers pushing get rich quick on property also inflated the market.
Now, everyone's stuck where they are.
A true correction here will require either a normalisation of interest rates or repeal of negative gearing provisions. Neither of which the current Government are likely to allow.
Most likely it will be a long slide and a lost generation who's best bet will be waiting for an inheritance. That is if their baby boomer parents don't reverse mortgage the house to fund their retirement.
In a bubbly, Ponzi scheme way. Last one in is left holding the empty can.
I used to read this blog back when I was watching for the crash that never was. (Doesn't appear to have happened in Canada either) He had an interesting tax story from a few days ago too about inheriting property.
"But still, it's insane in the Bay property market again. Anyone from the Bay knows a bubble when we see one by now. When all the hipsters and their credit-cards run out, the market will crash and the locals MIGHT be able to buy something again"
Just curious, but what happened to property prices in Oakland/SF during the last crash (2008)?
But still, it's insane in the Bay property market again. Anyone from the Bay knows a bubble when we see one by now. When all the hipsters and their credit-cards run out, the market will crash and the locals MIGHT be able to buy something again. There is also the elephant in the room called Prop 13 that is not mentioned here. That, among all other bubble ingredients is the main reason why property in the Bay is the way it is.