San Francisco home prices enjoyed an annual gain of 23.1 percent, second only to Las Vegas’ 24.9 percent rise, according to S&P/Case-Shiller home-price indexes released Tuesday. The composite 20-city home-price index was up 13.2 percent in January from a year earlier, with all 20 cities posting year-over-year gains after factoring in seasonal adjustments.
But aren’t we supposed to be a bubble, says the left? Why does it refuse to pop?
The left is obsessed with bubbles, yet their track record for predicting them is really poor, with predictions of a second housing bubble continuing in this tradition of being wrong all the time. But this time it’s really different. Unlike in the early 2000’s, we have permanently low interest rates and massive influx of private equity and foreign buyers. We’re in global liquidity boom and money is flowing everywhere – expensive real estate, jewelry, art, cars, stocks, and even treasuries. 20-30 year olds rich off the web 2.0 boom are buying homes like ordinary people buy groceries.
Foreign Investment in U.S. Hits New Record:
Talking with a friend/realtor in the Bay Area. He says the Bay Area is out of control. The example he gave is bidding over a home’s asking price. He referenced LinkedIn employees, flush with cash, bidding over by large amounts just because they want the house and have cash in their hands – as if it was play money. Against his advice of the home not being worth it, they pay it because they have it, and they want it.
The economy and real estate market is not isotropic. It’s varied with parts that will do well and parts that won’t. When the left says prices are too high or that the economy is weak, that all depends on location. Where I live things are going great; for others it isn’t. But that doesn’t mean the whole economy is weak or that the whole real estate market is a bubble. But generally speaking, regions that do well keep doing well.
Many on the left and right wants to restrict technology worker immigration, which will hurt home prices in the most innovative regions of the economy, such as the Bay Area and New York. The left, in their war on success, want rent control, higher interest rates, higher taxes, regulation, and to see home prices fall. Gentrification, like drones, Google buses, Facebook, high frequency trading, and the NSA is the newest boogeyman of the left. The creative class is rewarded with higher home prices for the economic value these individuals bring to society. It is an inevitable consequence of social evolution that those who create more value should and will displace those who don’t.