Study finds Bay Area housing prices in line with economic growth
Kelly Zito has a very non-media-like, non-doom-n-gloom article (although you can bet this one will sell papers!) in the Chronicle this morning on why San Francisco’s housing prices are in line with economic growth and why we won’t see any dramatic price drops.
“The bubble fears are over people paying money for housing today because they’re expecting unreasonable (price increases),” said Todd Sinai, associate professor of real estate at the Wharton School. “Our calculation says that if people are expecting something reasonable, house prices today are justified — and they are in San Francisco.”
The Wharton School, huh? That’s not the California Association of Realtors or even DataQuick (where Zito got the data for her last article), but an esteemed institution of higher education. Everyone who knows me knows that I am very comfortable with the San Francisco market and with nearly all of the prices being paid for houses these days (there are always exceptions). So it’s nice to hear when someone agrees with me and that they can actually back it up.
My sense of well-being comes from being on the streets and seeing how many buyers are still willing to pay $1M for a small house in Noe Valley. The Wharton study’s comfort level comes from hard data. “In fact, Sinai and his co-authors found that the annual cost of owning a home relative to renting in San Francisco and other expensive cities — including Boston, Los Angeles and New York — is lower than it was in the late 1980s, just before the last major downturn in housing prices. The ratio of housing costs to income is also more favorable than at other times during the past 24 years in these cities, the survey said.”
All of the buyers that are in the market right now should heed this advice. There is a veritable saturation in the market this week of way too many homes. This will last for a couple of weeks, then that will be it, more or less, for the rest of the year. Don’t be fooled into thinking that this stockpile of inventory is a trend. It is a one-time occurrence. And you can quote me on that.
