A national housing crisis is brewing

https://m.sfgate.com/news/article/A-national-housing-crisis-is-brewing-What-13505365.php

by spking • 8 years ago

34 77 8 years ago

m.sfgate.com

slenk2• 8 years ago

I feel like they are projecting SF's problem on the rest of the US.

In my city, affordable housing isn't available downtown, but it's not more than a 10 minute bus ride away.

xvedejas• 8 years ago

If it's a problem that will follow anywhere experiencing strong economic growth, that's a problem that can affect everyone indirectly. It probably hurts young opportunity-seekers most though.

moorhosj2• 8 years ago

Aren’t you possibly doing the reverse with your anecdote?

The points raised: higher interests rates, higher construction costs, flat home building stats, slower price growth, and historically low homeownership rates are countrywide facts, not specific to San Fran.

mywittyname3• 8 years ago

But none of those indicate a lack of affordability, except home ownership rates. In most states (31 of 50), the median household income can more than afford a median mortgage.

http://time.com/money/5355518/home-price-salary-every-state/

So I agree with the OP, the author of this article is unjustifiably projecting the SF housing crisis onto the rest of the country.

jdlyga• 8 years ago

Which city? New York has the same problem.

thousandautumns• 8 years ago

I would argue most cities outside of a handful of the largest metropolises. I would argue that outside of the LA, San Francisco, New York, Seattle, DC, Boston, and maybe one or two more cities, affordable housing is well within the 10 minute radius posed by the above commenter is pretty common.

Obviously that list of cities makes up a large group of Americans, but it still isn't really representative of the country as a whole.

That said, at least in my field, the vast majority of jobs are in those cities, and so it becomes problematic when from an employment perspective, it is difficult to avoid those areas, while from a livability perspective, it is financially difficult to get by (at least, without the torturous commutes).

skh• 8 years ago

In my metropolitan area being 10 minutes from downtown via bus is much different than being in downtown. Our public transit system is such that going from downtown to any other location serviced by the transit system is easy. But if don’t start from downtown then you first, usually, have to go downtown and then catch the bus to the location you want. This makes using the public transit system a burden for anyone who doesn’t live downtown.

magduf4• 8 years ago

In my city (DC), housing is expensive everywhere unless you're willing to drive 2 hours each way to work.

JohnJamesRambo• 8 years ago

Move to slenk's city!

in_cahoots• 8 years ago

The author is the Chief Economist for Moody’s Analytics, I believe he’s located in New York. Your point still stands but I’m hoping someone with such an influential position is skilled at taking a broader perspective.

jeletonskelly• 8 years ago

A lot of young people are saddled with student loans that eat into their budgets for things like housing. Obviously a lot of factors at play.

magduf4• 8 years ago

I think it'd really be better if young people stopped getting student loans, and just didn't go to college, so they wouldn't have this problem. Eventually, the problem of overpriced housing will correct itself.

ilikehurdles• 8 years ago

By the same logic, if they keep at it, eventually wages will rise to accommodate increased housing costs, and the problem corrects itself.

The problem is “eventually” has an unclear definition in both cases, and few are willing to sacrifice their potential of attaining certain careers or income in exchange for working low wage jobs waiting for a hypothetical future correction of this inequality.

It’s hard to level existing residences in many historic cities and so housing costs rise, yet people are still wanting the opportunities afforded by those cities enough to sacrifice having better housing conditions elsewhere.

adrianN• 8 years ago

As soon as there are a sufficient number of well paying jobs that don't require a degree, people will stop going to college.

xg152• 8 years ago

On the other hand, better education is (particularly on this board) usually recommended as the most important defense against unployment due to automation or outsourcing. How does this fit together?

murph-almighty• 8 years ago

Anecdata, so please take with a grain of salt- in the past 5 years of my life I've spent significant time in Pittsburgh, DC, central NJ, and NYC. In each of these areas I've seen large luxury apartment projects, but not one project for affordable housing.

If you create high priced housing that no one (including students paying off massive ampunts of debt, where the min payment + rent = a mortgage payment) can afford, your high-priced housing will stay empty. Developers beware.

leetcrew• 8 years ago

If you create high priced housing that no one (including students paying off massive ampunts of debt, where the min payment + rent = a mortgage payment) can afford, your high-priced housing will stay empty.

if too many developers do this, that high-priced housing will have to become low-priced housing if they actually want to clear the market.

lovich4• 8 years ago

No one is ever going to make affordable housing on a scarce resources like land in a city. Developers will always build luxury housing.

When building was allowed, you got richer people moving into new luxury housing and as buildings aged, instead of fixing the luxury features, landlords would lower the rent and target a different market.

Now that many cities do not allow enough building you get richer people staying on those aging buildings or even moving into the city and competing for fairly run down housing.

If we don't allow building then two options are allocating housing by price or by lottery(like rent control), but either way people lose out because you can't put 110 families in 100 apartments. Unless more housing is allowed to be built there will be this frustration

lxmorj• 8 years ago

One of the best ways to profitably build affordable housing is to build luxury housing 25 years ago.

nunez• 8 years ago

definitely this. i can already afford a house, but getting the down payment saved up without crippling my social life (which is more important to me) is difficult (not impossible, though) b/c of student loans.

apearson• 8 years ago

Non-mobile link: https://www.sfgate.com/news/article/A-national-housing-crisi...

olivermarks• 8 years ago

https://fred.stlouisfed.org/series/CSUSHPINSA Overpriced and due for a correction

epistasis• 8 years ago

There's a couple reasons it could be over priced. If it's a bubble, then we could be due for a correction. If it's a shortage, and it certainly looks more like a shortage from my vantage point in California, there wont be a huge fall in prices unless there's a large economic decline.

helen___keller5• 8 years ago

Probably both a bubble and a shortage.

I can't speak for California, but in Boston rents are high and mortgages to sustain the same units are much much higher. Regardless of the existence of a housing shortage, this is bubble economics.

In a zero-speculation environment, the total cost of homeownership should be comparable to the cost of renting. Without speculation, market prices in places like Boston mean investment properties are absolutely horrid investments because they have little or no return (when you factor in the total cost of managing the property and the opportunity cost of the capital used to purchase the property). The fact that despite this most properties are rented means that landowners are banking on rents rising to meet current prices (or they aren't confident they can sell at current "market price" in a short amount of time - real estate can't be easily liquidated with a click like stocks can, plus there's tons of overhead costs involved in trying to liquidate real estate)

Or to put it in other words, the high rents in boston reflect the current housing shortage and the higher home prices in boston reflect the expected continuation of the housing shortage (backed by the reality that population here is increasing faster than housing is being built)

pjmorris2• 8 years ago

I wish. The trick, I think, is that the monetary base has been adjusted to keep housing prices high. See, e.g., https://fred.stlouisfed.org/series/BASE

Overlay the graphs to see the relationship. IMO, one of Quantitative Easing's chief purposes was to keep the artificial housing debt taken on in the run-up to 2008 in place by having the Fed pay what the original borrowers could not. That QE money is now floating around the system, keeping all kinds of asset prices high.

And what can be done once can be done twice.

bradleyjg• 8 years ago

Zandi is the chief economist at Moody's Analytics.

Does Moody’s stand to benefit more or less directly from the policy changes being advocated here?

outside1234• 8 years ago

The real housing crisis is the inability of cities like SF to approve redevelopment projects to tear down single story structures and build multistory structures as fast as is needed by the growth of the economy.

We might not like to admit this but part of this problem is us: people vote against putting up an apartment complex across the street from them while claiming that "affordable housing" should simultaneously exist. This leads to all sorts of bad decisions like restricting this building, but when we do build it, setting aside two apartments for "low income" occupants that is intellectually dishonest at best.

helen___keller5• 8 years ago

To add to this, it's not just that restricting the housing supply results in a shortage. Also, because there's systematic restrictions on construction, speculating on a continued housing shortage (and hence consistently high housing prices) is a surefire bet if the housing supply never increases.

If people somewhere nearby were building a lot of housing, an individual would feel a lot less certain about committing 7 figures of debt to own a dinky 3 bedroom house built last century, because the value is derived entirely from scarcity.

On the other hand, going housepoor on a six figure salary seems like a reasonable choice when you see articles like this https://www.mercurynews.com/2018/06/28/map-shows-it-may-take... and think that you might not have another chance in your lifetime to afford a house in the area.

mywittyname3• 8 years ago

If people somewhere nearby were building a lot of housing, an individual would feel a lot less certain about committing 7 figures of debt to own a dinky 3 bedroom house built last century, because the value is derived entirely from scarcity.

This is absolutely the way people think, but it might actually not be true.

The person in question may be able to sell their land for a large multiple of their purchase price, if a developer were able to tear down the structure to build a multi-tenant dwelling. As it currently stands, the maximum economic value that can be derived is based on that of a single family home for the top x% of earners who can afford to buy one. But if you could house ten families on the same land, the economic value probably skyrockets.

conanbatt2• 8 years ago

speculating on a continued housing shortage (and hence consistently high housing prices) is a surefire bet if the housing supply never increases.

Two important concepts about this. The first is that in places like SF, those making the speculation are also the ones that dominate the elections. Figure that SF has a high amount of renters, of the which many are foreigners that can't vote. That shows a skewed and corrupt political system.

Second, that such a ploy of decreasing housing shortage is economically inefficient, and thus makes the whole poorer. In an efficient system, the more housing, the more people, the more services and tax income and everybody wins. So how can the home-owners be benefitted more if the pie shrinks than if it grows? Its the tax system that double punishes renters and prizes landlords. SF spends 2,600U$S a month per household. If the city levied its taxes on land instead, it would literally eat up all the rental prices of land, and housing would be worth next to nothing: but because instaed it punishes workers coming into the city with sales taxes, and companies with corporate taxes, landlords actually get a double pay: they get paid by the renters twice.

ascales• 8 years ago

That isn't the problem everywhere. There are places where the lack of planning or zoning results in less than equitable and ethical development. Building lowest-bidder style "luxury" apartments that just start falling apart after move in day with the developer moving to the next construction project the next week. There's a line between freezing a city as is, and overly aggressive development where the buildings you build are blights in less than a decade.

Gibbon16• 8 years ago

I always see this parroted. But there is two facts that come into play that are ignored biy this bit of propaganda.

1. It's not just housing but transportation infrastructure. Of which SF has developed nothing other than the 3rd St light rail and the Central Subway. After that there is _nothing_ in the pipeline. Which means nothing will be built for the next 15-20 years.

2. They are building new multifamily. Cost is about $700-1000 a square foot. Unlike you I had a talk with my insurance agent. Guess what, _rebuilding_ costs between $600-1000 a square foot.

Really the solution is not more housing in SF but to move tech bro jobs elsewhere more affordable. Like Detroit.

criley22• 8 years ago

"Really the solution is not more housing in SF but to move tech bro jobs elsewhere more affordable. Like Detroit."

Funny that you call a realistic, economically sound criticism of NIMBY-ism "propaganda" but then go on to attack the entire problem as "techbros".

Wow, talk about intellectual dishonesty.

I'm so glad we all learned today that the only problem with SF is "techbros!" That's certainly not "propaganda"! All we have to do fix SF is kick all the techbros out! How convenient for your preferred ideology!

helen___keller5• 8 years ago

By your own admission wouldn't the answer be more transportation infrastructure to support more dense housing?

Nonetheless, I personally "agree" with your solution (in that I work in tech and don't live in SF), but hoping for the free market to do something that it is not doing has never been the solution to a question of public policy. Even if you took the most anti-tech public policy options possible in the city of SF, it wouldn't solve the fact that tech is firmly embedded in the entire metropolitan region which is outside of SF's municipal control.

If you really wanted to get "tech bros" out of your city you would need a solution on the level of the California state government, ideally something that intentionally disincentivizes business and venture capital. Good luck on that, in the mean time you're just going to have more "tech bros" moving in and voting for anyone who speaks out in favor of upzoning.

conanbatt2• 8 years ago

Really the solution is not more housing in SF but to move tech bro jobs elsewhere more affordable. Like Detroit.

When the tech bro jobs leave, SF will be in dismay, it wont get better. SF city spends 2,600U$S a month per household. If it were to lose its corporate/sales tax revenues, it would have to cut spending aggressively, and it will not make rent cheaper: it will make it unaffordable, exacerbating unemployment which could lead to rising homeless ness.

SF is in a terribly delicate position right now, its just masked by a lot of money.

projectramo2• 8 years ago

Confused about what I am supposed to take away from point 2. Rebuilding costs about the same as building. Okay. So?

And how do you conclude from 1 and 2 that "Really the solution is not more housing"?

I was with you on point 1 (housing and transport go hand in hand. That makes sense).

Detroit, along with every other city in the world has been trying to create their own Silicon Valley and ignite a revolution but its just not that easy to do. Just google innovation and government and read a few books worth of text on the various theories of what the problem is. (Not enough VC, not enough tech talent, not enough money, not enough infrastructure etc etc).

hedora• 8 years ago

I’m building a house in the middle of nowhere near SF. Costs for the house itself are trending well under $400/sqft (would be closer to $300 pre- tarrifs; maybe it’ll drop a bit).

Once you add in questionable California regulations, the price jumps up to about $$750-800 per square foot. (None of this extra money is in the house itself; it is in the surrounding site.)

I think existing homeowners have been voting through “wouldn’t it be nice if everybody else paid for X, even though I would never do that myself” NIMBY regulations which further exasperates the housing shortage.

Two concrete examples:

In my neighborhood, accessory dwelling units (ADU’s) are capped at 1200 sq ft, but primary homes are capped at 6000 sq ft. There are no colleges nearby, and per TFA, only 50,000 houses under 1400 sq ft were built next year. The ADU is too small to be rented to a family. It is only for au pairs, inlaws and airbnb. The stated purpose of the ADU rule is to increase housing supply. Heh. If this was for adding housing stock, the rule would be “two houses, not to exceed 7200 sq ft”.

We are being forced to upgrade our driveway to the point where runoff and landslides may be an issue (the existing driveway is adequate for heavy construction equipment). We will probably need to add retaining walls, and maybe an underground cistern to mitigate the environmental impact of the driveway.

dabockster• 8 years ago

There’s also a lot of corruption in low income housing. Just about a month ago, a housing program in Bellevue, WA came under fire because over 90% of the subsidized renters made $100k or more (some of which worked for the WA state social services).

CHsurfer• 8 years ago

Things aren't likely to get better soon, particularly for lower- and middle-income households struggling to make the rent and become homeowners.

This sounds backwards. If housing prices stop going up, won’t it be easier to make the jump from renter to buyer?

cherrygarcia• 8 years ago

I don't know about SF (I have no first hand experience there) but I can say that the market in the Boston area seems similarly overpriced and not very sustainable. Maybe for some different reasons, maybe some are the same. It's to the point where mediocre 3br suburban homes even far from the city are 500k+. It makes me very hesitant to purchase a home right now because I don't see how the value could do much anything besides decrease from here. That's my gut feeling. Would love to understand better how prices could continue to increase still.

leongrado• 8 years ago

Agreed. I recently moved from the Midwest to Boston and the housing and rent prices are giving me major sticker shock. My rent has tripled and looking at the housing prices, looks like they have too. Who's buying these 1 million dollar homes?

shados2• 8 years ago

That's easy. Depending on the interest rate, condo fees, taxes, etc, a 1 million home is about $4500 (less when the interest rates were lower, I think).

If you have a couple of DINKs, it's 2250 per person per month, or about $27000/year. 150k/year per person, about 90-100k/year after tax, and that's well under 30% of your take home pay.

I used round numbers and I'm probably off, but even if you have to tweak the math, it's pretty easy to see where people are coming from.

When I was looking to buy in the area, a bunch of people looking at the open houses were couples with both people sporting their Amazon/Microsoft/Google/whatever backpacks or jackets.

shados2• 8 years ago

Define "far from the city". A 3br for 500k is available (if on the low-ish end) for Whaltam, which Boston folks consider to be in the middle of nowhere, but if it wasn't for traffic/transportation problems, wouldn't be all that far (it's not very far at all if it wasn't for the traffic issues). A friend of mine just got a 1BR 50 minutes away for <150k (and it wasnt even a fixer upper, and is on the commuter rail).

50 minutes is "far", but it's far from insane...

IMO Boston has a lot of places that can be developed within 30-45 minutes before we really need to start tearing everything down. (There's 3 high density development in construction literally in my backyard, so I'm not saying that because I have anything to gain from it, either).

The biggest thing to fix about the Boston area right now is the entrance from the suburb into Cambridge...the Alewife area is ridiculous, but that's what happens when you built a ton of mid/high rise without proper planning of infrastructure.

helen___keller5• 8 years ago

As another Boston resident, I'm extremely hesitant to purchase because I'm fairly confident current prices aren't sustainable and I want to be there to purchase if prices do go down.

I've kept my eye on real estate prices for the past few years and we definitely hit a plateau around summer 2018. Nowadays I see a lot of properties sit on the market for months - quite the opposite of how this "red hot" market is supposed to behave.

I just don't see the fundamentals supporting current prices. A lot of properties are going for 20-50% more than they were previously sold for (in 2012-2014 usually).

On the other hand, rent has NOT increased by 20-50% in that amount of time, and (in my own experience) rent has been pretty flat for the past year or two, except for a few neighborhoods like Allston that have definitely gone up. If rent in a unit stays flat for a few years it's basically impossible for that home's price to keep going up, and since we didn't pick up amazon HQ2, and have tons of luxury development coming in to absorb any other top earners entering the state, I personally doubt there will be much room for rents to grow.

That said, we're no SF. If you work in tech there's probably properties out there you an afford. It just might not be in Somerville or Cambridge where everyone wants to live. Some suggestions: Decent single family in Wollaston neighborhood of Quincy goes around 600k, and further down towards Quincy Adams theres a whole bunch of options. There are occasionally good deals that pop up walking distance to the T in Malden. West Roxbury has good deals almost always. Roslindale isn't totally gentrified yet so you can always jump on that bandwagon and look for a property near Forest Hills. Condos are pumping out in East Boston too although I haven't checked prices lately they might already be too expensive.

api• 8 years ago

Brewing? We have had a national housing crisis since the bubble around 2005 made housing unthinkable to a generation and then the crash destroyed those who did manage to wedge into an overpriced house. Since then we've reinflated to sacrifice the young to the baby boomers, and now it looks like another crash is looming. The housing market hasn't been sane in 20 years.

Brewing? Seriously? People wonder what is fueling populist rage and a desire to basically fire everyone in any position of authority or expertise...

forgingahead• 8 years ago

Housing cannot be both an asset, and also affordable. Pick one.

robterrin• 8 years ago

Just going to leave this here: https://www.bloomberg.com/news/articles/2019-01-03/manhattan...

I buy the story about rates and mobility falling in general, although I think this a longer term trend.

Mostly, if wages stagnate, people don't buy homes. Not rocket science. Been going on for nearly 50 years now.

RickJWagner• 8 years ago

I think there will be problems in housing, but not the problems this article describes. (Yes, I am over 40. And no, a 5% mortgage is not remotely problematic.)

With increased automation and wage stratification, there will be fewer jobs and fewer good-paying ones to allow people to buy houses. The price of housing has always marched upward, but it will get to the point where only the wealthy can afford a house.

That's my guess, anyway. Time will tell.

A national housing crisis is brewing

Related Stories