These 2 Forces Will Crush the San Francisco Housing Bubble

[marmar]

These 2 Forces Will Crush the San Francisco Housing Bubble
by Wolf Richter • July 5, 2016


[font color="blue"]Jobs, labor force are declining; housing construction in epic boom.[/font]

The San Francisco housing bubble – locally called “Housing Crisis” – needs a few things to be sustained forever, and that has been the plan, according to industry soothsayers: an endless influx of money from around the world via the startup boom that recycles that money into the local economy; endless and rapid job growth of highly-paid jobs; and an endless influx of people to fill those jobs. That’s how the booms in the past have worked. And the subsequent busts have become legendary.

The current boom has worked that way too. And what a boom it was. Was – past tense because it’s over. And now jobs and the labor force itself are in decline.

Until recently, jobs and the labor force (the employed plus the unemployed who’re deemed by the quirks of statistics to be looking for a job) in San Francisco have been on a mind-bending surge. According to the California Employment Development Department (EDD):

• The labor force soared 15% in six years, from 482,000 in January 2010 to its peak of 553,700 in March 2016.
• Employment skyrocketed 23%, from 436,700 in January 2010 to its peak of 536,400 in December 2015. That’s nearly 100,000 additional jobs.

This increase in employment put a lot of demand on housing. Low mortgage rates enabled the scheme. Investors from around the world piled into the market. And vacation rentals have taken off. As money was sloshing knee-deep through the streets, and many of the new jobs paid high salaries, the housing market went, to put it mildly, insane. ..............(more)

http://wolfstreet.com/2016/07/05/san-francisco-jobs-labor-force-decline-crush-housing-bubble/

[LonePirate]

1. So it's a bubble bursting when supply starts to catch up with demand?

That's not the only problem I have with this article, though. The author tries to tie employment numbers in SFO to the housing market there. Normally that makes sense but there are so many people who live in the city but work elsewhere. These are the people driving up the housing prices. Comparisons to Manhattan are not similar because high earning Manhattan residents mostly work in Manhattan.

Also, the numbers and graphs in the article suggest a plateau or flatlining of prices. It's far early to say the market is in decline from some very minor trend lines. Yes, the article could be correct; but the evidence simply is not there in full to support that claim. Even so, the housing prices in SFO need to return to Earth from their current astronomical heights. Some sanity and reality is needed there.

[fasttense]

2. What constantly gets blown up with hot air

Must explode.