San Francisco real estate is deep into a tech driven mania.  Home prices in the Bay Area are comically out of reach for most families and people are getting squeezed out like ketchup in a disposable packet.  What seemed like a new peak was once again surpassed.  The housing market is running on massive fumes and delusions run rampant.  The justifications for current prices run abound.  Yet the truth of it all is that we are deep into a manic phase of the market.  The current median price for a home in San Francisco is now $1.5 million.  This is for your standard crap shack flavored box.  People are still buying even though volume has trended lower but just look at the current price range.  A lot of this is being fueled by wildly high tech valuations and people believing that prices will never adjust.  In other words, a bubble.

Tech driven mania in San Francisco

Home prices are up nearly $300,000 in one year simply because San Francisco is going through a housing mania.  Tech valuations are off the charts and there seems to be this belief that prices will never come down.  The consensus seems to think that buying real estate at any given point is a smart move.  They simply cannot foresee a correction in the cards.  What is interesting is that some think that since people didn’t buy in the last dip why would they buy this time?  So therefore you should buy today.  The problem with that line of reasoning is that it doesn’t focus on the most important economic item for most people – the actual jobs they hold.

So take a look at current prices in San Francisco:


This is how a mania looks like in the form of home prices.  People seem to think just because we don’t have NINJA loans or no-doc products that somehow no bubble can ever occur again.  Have you been to Las Vegas?  People routinely put actual cash on the table and lose it.  This isn’t a shock.  Just because you use cash or have a sizable down payment doesn’t mean a correction can’t happen.

You already see sales volume trending slightly lower:


There is something going on and it doesn’t seem all that clear.  But what is clear is that sales volume is moving slightly lower.  Prices are in another dimension.  The stock market is also in record territory and you have big deals being made like Amazon buying Whole Paycheck Foods.  We all know that when corrections hit valuations do get adjusted.

So what can you buy for $1 million in San Francisco?

million dollar home

You don’t even get 1,000 square feet for $1 million.  Someone is already trying to cash in here:

price history

It sold for $750,000 in 2015 and here we are two years later and somehow the place is now worth $250,000 more.  Totally makes sense.

So you have to wonder how long this Bull Run can go.  We’ve been in a very strong bull market since 2009.  Eight years of moving up for stocks and real estate is a long time especially at the speed of how things are going.  When crap shacks are going for $1 million you have to wonder where do we go from here.

San Francisco is in another world when it comes to real estate and the justifications being given remind me of tech bubble 1.0.  Will tech go away?  Of course not.  But many companies will and with that tons of high paying jobs.  I wonder what happens after that?

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