Wednesday, May 18, 2016

Zero Hedge doesn't know what it's talking about.

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.


  1. It would be interesting to know how much was just chinese money being dumped like what happened to Vancouver.

  2. I bet a lot. The burbs used to be fairly lilly white. Now all the strip malls are fairly AsainCentric.