Echo
bubble chasers are going to be in a world of hurt. Mark my words.
It's
super risky to talk about a market you know nothing about. Which is exactly was
Zero Hedge did today.
First
he clumps together Palo Alto, Los Altos, and Atherton houses selling more
slowly. I'm not sure why he didn't include Los Gatos. Maybe he doesn't know
about Los Gatos. But anyway, these are the most expensive markets in the
Valley.
Having
said that - these markets make up an extremely small portion of Silicon Valley
Real Estate. And Zero Hedge was trying to prop up his theory the bubble has bust
because houses are sitting on the market in these cities 5 days more.
Causing these houses to sit on the market for 16 days! I would dance on a
chair if I knew my million dollar house (that I don't own) would only sit on the
market for 16 days. Shit, any house sitting on the market for only 16 days is a thrill!
16
days people! Oh for shits sakes I rolled my eyes when I read this. I guess it's
always a bit of a pet peeve of mine that everyone thinks Palo Alto is all of
Silicon Valley. There must be 20 cities that make up silicon Valley. The markets
he talks about make up like 4.
"In
Palo Alto, home to many Google and Facebook executives, homes costing more than
$5 million were on the market for a median of 16 days in April, up from 11 days
in the same month in 2015, and up from 10 days in April 2014. While that figure
is low relative to the 67 day median time across the U.S., it's a significant
increase from recent years."
He goes onto hyperventilate about the recent layoffs of companies like Yahoo. Frankly I didn't go through all the companies he listed - but a lot of those companies have been dying stars for quite a while now. They are almost meaningless at this point.
Then,
the most laughable portion of his article:
"With
the continued global slowdown, and the likes of Yahoo having to continue to take
measures to increase shareholder value, the situation in Silicon Valley will only
continue to deteriorate, and it is only a matter of time before we start to
learn of developer bankruptcies, similar
to those starting to occur in Manhattan and elsewhere."
I honestly can't figure out which "developer" bankruptcies he's talking about. Because Silicon Valley for the most part isn't building luxury properties right now. Silicon Valley isn't New York.
Developers
are lucky if they can find a spare dead car lot to
build on. And the amount of units being built is astonishingly small. You can
imagine how may condos go on an old car lot. Right? Even if it's a triple
decker. This is precisely why there is going to be such a problem soon.
I'm
not worried about the million dollar market. If I start seeing the low end
market crack, then maybe I will change my mind. And I see absolutely no evidence
of that happening. The "luxury" market is minuscule in comparison to the rest
of the market.
Also
when real estate starts to get super expensive in the Valley, urban sprawl
starts to really ramp up. Everyone here expects to spend about an hour in
traffic commuting to work. So cities an hour out are showing a lot of
growth.
Are
the next few months going to be shitty? Probably. No one is going IPO, and tech
valuations are being crushed. But this housing thing is really starting to bear
down on us now. In my grandparent's generation this Valley was nothing but
orchards. In one generation we have what we have now. People are not going to
stop having babies.
It would be interesting to know how much was just chinese money being dumped like what happened to Vancouver.
ReplyDeleteI bet a lot. The burbs used to be fairly lilly white. Now all the strip malls are fairly AsainCentric.
ReplyDelete