More notes on the Bay area housing market
Saturday, 5 March 2005
Carlos sent me an interesting summary page about the Bay area housing bubble. I wish there were more links substantiating the assertions there (a few ring false), but it is thought-provoking.
I happen to have a bit more specific data; namely, the sales figures for houses in the Bay area over the past few years. I’m interested in the affordability of a 3-bedroom house (or condo, or apartment) in San Mateo county, and this is what a little Python scripting and Excel jockeying tells me;
Even more interesting, if hard to read, is the scatter plot of 3-bedroom sales in San Mateo county during this period.
Quite apropos, The Economist has yet another article on the global housing market that ends with this observation;
The figures look even more striking in the San Francisco Bay Area, where it is possible to rent an $800,000 house for $2,000 a month. Making the same assumptions about rents and house prices, but also deducting tax relief on a fixed-rate mortgage and adding property taxes, a buyer would pay $120,000 more over seven years than if he had rented. House prices in San Francisco would need to rise by at least 4% a year (2% in real terms) for it to prove cheaper to buy a house. Since 1950 American house prices in real terms have risen by an annual average of just over 1%. To expect them to rise faster from their current dizzy heights smacks of irrational exuberance, to say the least.
UPDATE: see what it looks like in early 2008.