What Would Make SF Real Estate Prices Fall

“My investment outlook is simple, expect the 4 standard deviation event”

-me

Now I agree, this is a hard thing to do. SF is one of the most resilient real estate markets in the USA. But many of my friends in SF are currently priced out of the market. And they wait hoping that prices will break so they can get in.

So what I will do is simply present a scenario which may cause the low end of the market (here that means 1BR condos currently prices from 500-700k) to come down. For the past two weeks, since I have been here, I have run a hypothetical scenario by a number of people out here – that hypothetical consists of the following:

1. we go further into recession causing a decline in business
2. tech firms lay off workers to keep costs low
3. venture capital firms get stingy with funding for tech start ups
4. IPO’s come to a standstill (no public money for companies)
5. we assume that most of the people in the low end condo market in SF are regular tech/finance/other workers making around $100-150,000/year

Economist Article on Silicon Valley

Note: I had wanted to publish this article while I was in San Francisco and I didn’t do it for some reason – but today a friend forwarded me this article:

NY Times

Which basically outlines step 2 above (I think most would agree step 1 has started already).  Let’ s see if 3,4, etc play out…

Chris Grande
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