April 27, 2015

Rent in the San Francisco Bay Area is worse than Manhattan! YES!!!

San Francisco Tops Forbes’ 2015 List Of Worst Cities For Renters


I don’t know about you, but this is music to my ears.

It absolutely makes sense that the cost of living in San Francisco, Oakland, and San Jose should be more painful (which isn’t always the same as $ amount) than our arch nemesis, Manhattan.

After all, we have easy access avocados. Have you ever eaten guac in Manhattan? No. Because it doesn’t exist.

And, of course, we have tech – which is disrupting paradigms in ways New York could only imagine.

Unfortunately, Manhattan is still way ahead in some areas – for example, the recent $100M condo that sold.

How can San Francisco compete with that? (I think we’re only at $28M or $49M.)

The difficult reality to accept is that it is still too affordable to live here in the SF Bay Area. This is not acceptable. We might have the best guac, but we won’t be world class until we do something about this.

People – what are you doing to help rectify this situation?

Comments (33) -- Posted by: burbed @ 5:12 am

33 Responses to “Rent in the San Francisco Bay Area is worse than Manhattan! YES!!!”

  1. CBVA_AA Says:

    One question: “average monthly mortgage payment”, is that a real statistic founded on actual data, or just an estimate?

  2. Alex Says:

    I went out and bought a house. Not sure if that is helping to rectify anything though.

  3. Kenny_Blankenship Says:

    Rent prices usually don’t match mortgage prices because you will rarely find apartments that are more than 2 bed rooms in the Bay Area.

    On another note, has anyone noticed the ridiculous increase in HOA fees? They have almost doubled since the peak of the bubble back in 06. I just don’t understand this. How can you justify $400/month for minimal maintenance. Are they anticipating “the big one?”

  4. deertick Says:

    It so smells like 1999-2000 its not even funny. The amount of money people are spending on rent is pretty obscene. As in rent for a studio apartment that costs 2 times as much as my 2012-originated mortgage for a 3 BR house. Yet people seem “ok” paying the prices.

    Sometimes I wonder: is it remotely possible that the BA can ever exist with rational, semi-sane economics? If its not one bubble its another.

  5. CBVA_AA Says:


    I’m actually NOT ok paying that price…that’s why I started renting in one fancy place 5 years ago and now I’m moving more and more outside the BA.
    On the other hand, I honestly tried to buy a house. However, the paradigm “buy any kind of shack you can afford” does not make sense to me, in particular given I do not have 1M$ in cash and I have to get into 30year mortgage no matter what…

    What pisses me off is having to deal with people they do not even work/live here but they are buying everything included pets’ cabins like they are mansions. I understand they are just investing in house. Fine. Unfortunately, this is the game with its rules and even if I didn’t want to play, I have to accept it.

    So, I read Burbed and I cheer myself up while I wait the time to say “You see? I was RIGHT!” 🙂

  6. nomadic Says:

    Today I saw a listing that said it was in the “coveted” part of Campbell (smh). Then a very average looking house in Santa Clara for $1.4M. It’s insane. I thought I had acclimated to the prices here…

  7. deertick Says:

    How long have you lived here? I ask because this stuff happens in cycles. I’ve been here 15+ years and the last housing bubble hit tight at about the same time I was starting to finally make a decent income. The more money I made, the more prices went up. It was just as crazy back then, with people paying 500-600k for knock-down houses in the worst neighborhoods. Buyers were stretching themselves to the max.

    I was on this site back then. There were hordes of trolls proclaiming the boom would never-ever end and that we’d better buy now… Those people wound up being very, very wrong at around 2006-2007 when the bubble began to pop. It did pop. While this site seems to focus a lot on the very core center of Silicon Valley where prices fell a little or remained flat, the rest of the Bay fell a lot.

    We bought a house for 40% less than it had been priced at before in 2006. For about 2 years there was a window to buy when it made sense. Now I’m not so sure it makes sense.

    I’m saying this because if there is a bubble now, a bubble pop will come later. In the meantime consider doing what I did: rent for as cheap as possible, get housemates, scrimp and save, and when the pop comes and prices reach levels of (less) insane, then you might have your chance. Granted its always going to be expensive here. Just keep your head, don’t listen to the real estate trolls and do what makes financial sense.

  8. CBVA_AA Says:


    Thanks Deertick!
    The problem is I’m getting old in the meantime and I’d like to enjoy the american dream (house+backyard+swimming pool+barbeque+dog+cat+garage full of stuff I used once and I will never use again) before the andropause.
    In the meantime people are inflating the bubble with money I do not know where they are getting from, yesterday it took me 1hour and 13 minutes to drive 10 fxxxxxxg miles on HW101.
    BA’s arch-enemy Manhattan is not cheap but at least I can seat in the metro while someone else is driving for me.
    Sunlight 9/10 of the year is not enough, at least for me. I am stupid, I guess…

  9. deertick Says:

    If it helps, I’m not a spring chicken either. Let me say that I was VERY frustrated all during the bubble. It made no sense ( still doesn’t ) and there seemed to be no end in sight. While everyone has their own way of dealing with things, my way of dealing with the last bubble was to spend some time studying finance, historical real estate performance, and to then trust my judgement. Historical performance very much pointed to a bust.

    The same thing is happening today. I’ve met a fair number of people who are out there as we speak just throwing money at houses- any house. To them its become less about buying a house they want in an area they want to live in and more about trying to “win” against other bidders. When enough people do that it creates a frenzy and frenzies are seldom driven by sensible financial decision. Instead it simply accelerates the bubble to pop.

    Another very real possibility is to look at other metros and in particular, ones that aren’t the top-tier cities like NYC, SF, LA, DC and so on. Some cities like Austin have really blossomed in the last few years as go-to, cool places. Its also a lot cheaper than here. The same goes for a lot of cities. If it weren’t for fact that my industry is grossly concentrated here I might have made that same choice.

    My observation of all this is that humans like to have absolute answers. When a bubble will bust or inflate is difficult to judge. There are signs but even if there is a pop the outcome is seldom as expected. Many folks on the housing forums back in the day were sure prices would fall 200%. Instead the outcome was far less dramatic, with loads of FED and government intervention to slow the pop to a slow hiss instead. The prices fell for sure. But it took 2-3 years. What happens this time and when it will happen is anyone’s guess.

    Have patience. It will all work out in the end.

  10. Bill Lumberg Says:

    In the last few days Twitter is down 25%, Yelp is down 21%, LinkedIn is down 25%. Help is on the way…

  11. 2million$shack Says:

    Not sure if “this year” is accurate but I do think a lot of this article rings true.

  12. burbed Says:

    It’s important to remember that this time it’s different.

  13. 2million$shack Says:

    @burbed Of course. A paradigm shift where revenue and profits don’t matter so long as there are a crap ton of users. 🙂

  14. deertick Says:

    One has to be a little careful wishing for doom and gloom. Trust me- I was one of those ” oh good! the economy will crash and we’ll have cheap houses!” Well… the economy DID crash. Only problem? I and millions of others lost their jobs as either a direct or indirect result due to the chain reaction that recessions create. I was out of work for almost 5 months, the longest I’ve ever been unemployed.

    If tech crashes and that in turn crashes the real estate market then in turn everything in between also suffers. Workers ranging from IT execs all the way down to the Big Box home supply night shift guy are affected.

    The big pie in the sky, unlikely economic ideal situation is a steady, perhaps modest rate of growth and income. I recall reading an article discussing nation-wide home prices a few years back. One would think that surely there is a HUGE difference between appreciation rates in the Bay Area and somewhere else like Indiana. Actually there isn’t. Over the long term, as in decades of performance the national average rate of home appreciation is about 3-4% annually. The difference between here and many other metros is that while some of the lesser “sexy” metros have slow but steady gains in the single digits the Bay Area has very rapid and large percentage gains and equally rapid losses in times of an economic downturn. When you look at the averages the Bay Area also has about a 3-4% annual long-term gain. The whipsaw pattern of booms and busts here is far worse than a “boring”, albeit reliable slower growth rate.

    As a more recent homeowner theoretically I should be pleased my home has supposedly gone up 30-40%. But I’m not because I’ve been here long enough to know that while the boom now is great, a bust is probably inevitable. Downturns are bad for everybody.

  15. CBVA_AA Says:


    Agree. I think nobody here is willing to wish a bloodshed like the last bubble.
    However, I feel like those drivers who diligently drive just a bit over the limit, and they get fingers from those instead driving at 180mph with super cars that you have the suspect they didn’t even pay, it was a nice present from their daddies who have enough money to have lost the meaning of it.
    And because I am human, let’s say I’m subdued to think that…yes…maybe 180mph is enough to crash. Nobody to get hurt, just the car to be dumped. And because the game has its own rules (i.e., none…), I know that police has nothing to do with those driving over the limit because there is no limit at all.

    You said it: the average increase is there, but the actual huge fluctuations around it is what will leave few smarter (???), craftier (?!), luckier (!!!!) alive surrounded by a pile of poorer than before around them. Someone who pulls the break at 180mph just at the right time..

    That’s the essence, and the purpose, of the entire game, isn’t it?

  16. 2million$shack Says:

    Totally agree that downturns are painful but they are an unfortunate reality. I saw my parents file for bankruptcy during the early 90’s recession and it was awful. What it did teach me is to be prepared for downturns in the economy. Have an emergency fund and don’t overextend yourself financially (easy to do when you buy during the boom and have a sketchy mortgage broker- they are still out there).

    Personally, I’d rather wait to purchase a bay area home during a recession or very beginning of an upswing. If you do still have a decent income during a downturn, you benefit from increased housing inventory and (likely) better pricing. If you don’t have a decent income during a downturn and are renting, at least you aren’t tied to a huge amount of mortgage debt and can move anywhere you find a job or downsize to a more affordable rental.

  17. Sreeni Says:

    My popular observation interacting with people is that almost everyone is waiting for this bubble to bust. Everybody now thinks that boom/bust cycle is normal and a bust is overdue. Mass psychology counting on bust is a big sea change for me to notice. I am pretty sure that even if a bust ensues, it will be far different from what people do expect.

  18. Bill Lumberg Says:

    How many of those waiting it out have the 20% cash to put down when things do crash? Sometimes “waiting it out” is the easiest way of saying “I can’t afford it.”

  19. Bill Lumberg Says:

    And the bust will look the same as the last one: Outer Bay Area real estate tanks, RBA real estate stagnates (sorry, you’re not getting a 3/2 in PA for under a million), empty office space everywhere and used car lots overstocked with entry model BMWs.

  20. 2million$shack Says:

    This article about “ghost homes” in Palo Alto was interesting: http://bit.ly/1GP9Z2M

    My husband’s coworker lives in Crescent Park and has mentioned that some of the neighborhood feel has been lost as a number of homes are sitting empty.

    I wonder how this will ultimately impact the market. Will investors drive up prices by holding onto the “ghost homes” they have and continue to purchase additional “ghost homes” in the RBA or will they sell them off at some point to free the money in favor of different investments?

  21. nomadic Says:

    Weird the “ghost owners” wouldn’t hire a property management company to rent it out for them.

  22. Real Estater Says:

    What’s wrong with ghost homes? It’s better to have a ghost home than renters next door.

  23. CBVA_AA Says:

    @ Bill Lumberg

    ..it’s indeed what we are discussing about: affordability.
    The question is not “I’d really want to pay 900K a 4bd/3br in Palo Alto, damn!!!” but “I would like to be able not to spend 1.2M a 2bd/2br in 2000sqf lot with HW101 just on the other side of the fence given that I work 24/7/365 and my paycheck is supposed to be in the high upper side of the chart”

    But, as said, it is most probably just my fault. that’s it…

  24. deertick Says:

    “I am pretty sure that even if a bust ensues, it will be far different from what people do expect.”

    Spot-on. As someone from the “last generation” waiting for the last bubble to pop, be prepared for thing to not turn out as expected. I had mentioned before that many had expected the sky to fall immediately. Prices really only fell dramatically in places where they shouldn’t have been high to start with, such as far-flung areas way outside of the Bay Area and some of the high crime neighborhoods. The rest was a slow decline. What wasn’t expected was that not too soon after the initial pop investors began buying up foreclosures. As in they sopped up most of the lowest priced stuff and thus kept the baseline prices higher than they should have been.

    It could be that many of those investors got a bad taste of what its like to own a big wooden box and having to maintain it and so on so perhaps the next time a crash happens there won’t be such eager zeal on part of investors.

    “How many of those waiting it out have the 20% cash to put down when things do crash? ”

    Sad to say 20% down seems to be the bare minimum these days. In fact at least for us when we bought that seemed pretty much expected that you would do precisely that. We wound up putting 35% down.

    ” It’s better to have a ghost home than renters next door.”

    That makes no sense at all. Having a vacant house nobody lives in next door is certainly not desirable.Given that almost 50% of the Bay Area rents… EVERYONE has renters living next door. Somehow that seems to be just fine and dandy.

  25. nomadic Says:

    I’d rather have paying renters next door than squatters. I guess vacancy is fine too, as a neighbor. It’s just stupid for the owner.

  26. CBVA_AA Says:

    How many nanoseconds from a squatter entering a 4M$ house to the moment police throwing him out?

    If you do not mind the fact of having to pay taxes and not getting any income from it, I think that the risk of having squatters in your house is really low, at least for the towns and blocks we are considering in this discussion…

  27. deertick Says:

    “I’d rather have paying renters next door than squatters. I guess vacancy is fine too, as a neighbor. It’s just stupid for the owner.”

    Renters, homeowners… makes no difference. Around 40% of the houses around me are rented, the other owned and there are both renters and owners who either really take care of or trash the houses they live in. When I rented I mowed the lawn, swept the sidewalk and driveway, kept the house clean and so on. Now when I drive by the same house on occasion whoever lives there now seldom mows the lawn and the driveway is covered in leaves and crap.

  28. really? Says:

    It should be obvious to everyone that the world is in the midst of an historic bubble which includes just about anything that has a price tag attached. And that China has a lot to do with this.

    Of course none of this is sustainable or realistic (just look at what’s happening in Australia). So, of course, it will all come back to earth at some point in the future.

    Does anybody really think that Google or Facebook are worth even a fraction of their present value? Or that Apple is important? Welcome to the 21st Century of groupthink madness.

  29. Real Estater Says:

    Deertick says,

    >>Around 40% of the houses around me are rented, the other owned and there are both renters and owners who either really take care of or trash the houses they live in. When I rented I mowed the lawn, swept the sidewalk and driveway, kept the house clean and so on.

    In the “ghost home” near me, there are also people taking care of the yard and cleaning the house every week. The house looks impeccable. You can barely tell the owner lives in China.

  30. Bill Lumberg Says:

    I can’t believe that we are so open and ok with Chinese money laundering through US real estate. It’s unbelievable.

  31. CBVA_AA Says:

    @Bill Lumberg

    “Pecunia non olet” (Vespasiano, 70BC)

    it doesn’t, it never did, it never will.

  32. Real Estater Says:

    >>I can’t believe that we are so open and ok with Chinese money laundering through US real estate. It’s unbelievable.

    Actually, I think you’re mistaken. Chinese own your money. They are very generous to allow you to buy here.

  33. CBVA_AA Says:

    >>Actually, I think you’re mistaken. Chinese own your money. They are very generous to allow you to buy here<<


    Absolutely true!!!
    Also, the main reason to devaluate the dollar was to get the world to invest in US, i.e. to pay off the hole left by the crysis.

    And it's what is happening.

    Dollar is getting stronger now. I would consider buying something in Europe. A small island in Greece, for example…

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