Is it another tech bubble?

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Apparently economists hired by the city are wondering if San Francisco is headed for another tech bubble. In the meantime, they’ve also documented how dramatically the cost of housing has increased – even though wages in almost every sector except tech have failed to keep pace with the higher rents and housing prices.

According to a set of slides presented at a recent meeting of the city’s Workforce Investment San Francisco board, “there are reasons for concern in the local economy.” From the city's own analysis:

But so far, there have not been any signs of a technology bubble reflected in stock market data, the presentation noted.

The Office of Economic Analysis and the Controller’s Office prepared the slides, which were presented during an Oct. 2 meeting as part of an update on the city’s economy. The presentation also noted that San Francisco is the fastest-growing county in the United States in terms of private-sector employment.

It also linked the growth in tech with a rise in housing prices. Here’s a slide on how San Francisco’s housing market ranks in comparison with 15 other U.S. cities. It has the highest median home value and the prices went up more than 20 percent in 2011-12.

The slides also show that while the employment rate has bounced back from the dip experienced during the recession, that recovery has largely been fueled by jobs created in tech, which accounted for more than one out of four new jobs in 2011-12.

San Francisco's economy, in a nutshell. "The recovery has been largely driven by employment in the Technology Sector. Demand for housing has driven up housing and rental prices. Wages in most sectors have not kept up with housing costs. No sign of a technology bubble yet ... However, there are reasons for concern in the local Tech Sector," the matter-of-fact presentation concludes. It also notes that rent control has helped soften the blow, by preventing property owners from raising rents sky-high just because they can.

The city's own experts consider rising housing costs to be a defining aspect of our local economy -- so why isn't finding a solution to the affordability crisis a top priority for Mayor Ed Lee and other local elected officials?

Comments

Seriosuly, if P/E ratio's were indicative of future stock market performance, you can bet that a million fund managers would have been all over that a long time ago.

Interesting that you cite that metric in a week where Eugenee Fama was (jointly) awarded the Nobel Prize for economics, for his work on asset prices in which his main discovery was that stocks moved in a "random walk" and that no single metric can indicate future returns except by luck or inside information.

But hey, ace investor Rebecca knows best. And the SFBG never met a successful economy that wasn't a "bubble".

Other cities would kill for San Francisco's "problem".

Posted by Guest on Oct. 15, 2013 @ 4:36 pm

Yes, but you failed to mention that Fama shared the Nobel Prize this year with Robert Shiller, who is a strong believer in economic bubbles that can be predicted with analysis of P/E ratios and other economic data. And, yes, it's fair to say that we at the Guardian aren't big fans of Fama and the conservative University of Chicago School of Economics and its belief in the magical infallibility of markets. Shiller's arguments against Fama's rational actor beliefs seem far more realistic to us. 

Posted by steven on Oct. 15, 2013 @ 5:05 pm

After the housing bust in 2008-2009, he claimed that RE would not come back. In fact, RE has come roaring back, to the delight of SF voters who now see their home values exceeding the previous 2007 high.

Fama's observation that markets are efficient does not preclude bubbles and busts. Indeed, it holds that they are inevitable. But the mistake you make is assuming that every time our economy is doing well, it's a bubble and therefore must collapse.

Our 250 year or so history as an independant nation is one of growth and prosperity. Sure there is the odd setback. But the long-term return from stocks (again, thanks to Fama) is about 10% a year. That includes all those collapses.

So yes, there are market setbacks. But the markets always demonstrate higher lows and higher highs. The arc of history favors those who risk capital to build prosperity. All you do is try and confiscate and shuffle wealth.

Posted by Guest on Oct. 15, 2013 @ 5:38 pm

Who could have predicted four years of treasury bond and MBS purchases by the Fed? After that ends housing prices fall down and go boom.

Posted by marcos on Oct. 15, 2013 @ 6:09 pm
Posted by Guest on Oct. 16, 2013 @ 9:47 am

get em while they're hot (and fucking up everything)

Posted by abcdef on Oct. 18, 2013 @ 9:52 am

It's way above it's 2007 high, so you might want to take a look at it.

Posted by anon on Oct. 18, 2013 @ 10:03 am

how many licks does it take....?

Posted by abcdefghijklmnopqr on Oct. 18, 2013 @ 10:16 am

can't live with it

can't live with.... well....

can't live with it

Posted by abcde on Oct. 18, 2013 @ 9:51 am

My 401K is now 20% higher than the 2007 high.

So Ben gets a big hug from me.

How about you?

Posted by anon on Oct. 18, 2013 @ 9:57 am

can we go for

fore!

Posted by abcdefghijklm on Oct. 18, 2013 @ 10:08 am
Posted by abcd on Oct. 18, 2013 @ 9:49 am

of chicago school "logic"

Posted by abc on Oct. 18, 2013 @ 9:48 am

totally failed to predict the RE recovery. So he's scoring 50%.

SF RE is now at or above its 2007 high. In the end the bust will be seen to have bee a non-event, like the 1987 and 2000 stock market falls.

Patience rewards the prudent investor.

Posted by anon on Oct. 18, 2013 @ 9:56 am
Posted by abcdefghijklmn on Oct. 18, 2013 @ 10:10 am

the vast majority of the United States.

SF is one of the exceptions because of the tech gold rush. When Twitter fails, watch out.

Posted by Guest on Oct. 18, 2013 @ 10:16 am

this is simply a barricade against trolls

it is a signpost to indicate to the reader that other anonymous posters on this thread are beginning to purposely diminish the conversation into repetitive reactionary hyperbole, and/or petty, mean spirited personal attacks and irrelevant bickering

the barrier is put in place to signal that there is probably little point in reading more replies in the thread past this point

proceed at your own risk

Posted by bdi on Oct. 18, 2013 @ 10:28 am
Posted by lillipublicans on Oct. 18, 2013 @ 10:47 am
Posted by racer x on Oct. 18, 2013 @ 10:55 am
Posted by wxyz on Oct. 18, 2013 @ 9:43 am

I've learned a lot from him.

Posted by anon on Oct. 18, 2013 @ 9:53 am

the trolls on sfbg are so easy to manipulate

Posted by abcdefghijk on Oct. 18, 2013 @ 10:04 am

I have lived in SFO since 87. If anyone does not think we are in a tech bubble they are blind. This is just like 1999. 800 startups and no one over 35 working at them. Take away Google, Apple ,Linkedin and Facebook and the tech economy is grim.

Sun, Microsoft, Cisco and Oracle drove the tech build up in the 90s. Not much else. These start ups will be gone soon when they run out of money as virtually none of them are profitable.

Posted by Guest JW on Oct. 26, 2013 @ 8:04 am

economic growth and prosperity as a "bubble".

Of course, they'd much prefer it if everyone was a failure like they are.

Posted by Guest on Oct. 26, 2013 @ 8:28 am

because he understand that the one third of San Franciscans who own their own homes (like Tim Redmond, Sue Hestor, Calvin Welch, Randy Shaw, and our very own "marc") all make out like bandits when RE appreciates.

In fact, most SF homeowners are paper millionaires now, thanks to RE appreciation - the average SF home now being worth ten times what it was 20 years ago.

And voters love few things more than feeling rich. A better economy means better paying jobs AND that your home is worth more - a tax-free gain for many.

Woo hoo - bring it on!

Posted by Guest on Oct. 15, 2013 @ 4:52 pm
Posted by ab on Oct. 18, 2013 @ 9:45 am

Or the poor in Africa or Asia?

I'd guess so.

Posted by anon on Oct. 18, 2013 @ 9:54 am
Posted by abcdefghijkl on Oct. 18, 2013 @ 10:07 am

We knew that we were in a bubble when they passed the twitter tax break that re-exempted stock options from the payroll tax, an exemption that was only closed by Newsom, Leal, Ma and McGoldrick after the City's ass was still smarting when the last bubble popped.

Posted by marcos on Oct. 15, 2013 @ 6:11 pm

they are risk capital and not regular pay. The Twitter tax break simply fixed an unfair anomaly.

Posted by Guest on Oct. 16, 2013 @ 9:48 am

this is simply a barricade against trolls

it is a signpost to indicate to the reader that other anonymous posters on this thread are beginning to purposely diminish the conversation into repetitive reactionary hyperbole, and/or petty, mean spirited personal attacks and irrelevant bickering

the barrier is put in place to signal that there is probably little point in reading more replies in the thread past this point

proceed at your own risk

Posted by mamba on Oct. 16, 2013 @ 10:56 am

the mamba

should be let loose in wall street investment firms

Posted by abcdefghi on Oct. 18, 2013 @ 9:58 am

street urchins' nose hairs

not my jet ski purchases

Posted by abcdefgh on Oct. 18, 2013 @ 9:56 am

Just so they appreciate government services more.

Posted by anon on Oct. 18, 2013 @ 10:05 am

beep beeeee beeedidi

anomonop

beep beedeep bee

Posted by abcdefghijklmnopqr on Oct. 18, 2013 @ 10:18 am

revert to shakespeare

Posted by abcdefg on Oct. 18, 2013 @ 9:54 am

Regarding the rising housing prices...

One should not forget about the banksters buying up the toxic foreclosed housing that is also fueling the bubble. Then I read that Asian (specifically Chinese) investors have bought up large amounts of these pretentious "luxury designer home" condos but recently stopped doing so. So that would also explain the tech bubble, dahling. As for new jobs, they are far and few between: low-waged and part-time. And we're in a depression, not a recession. This stuff about coming out of the recession, is propaganda bull shit. The country has a $17 TRILLION DOLLAR DEFICIT which one can see on debtclock dot org. There is no "recovery." That's just Obama-speak, dahling.

Posted by Guest on Oct. 15, 2013 @ 7:08 pm

The naysayers just hate it when things are going well here.

Posted by Guest on Oct. 15, 2013 @ 7:43 pm

Well you made my point for me. Partying (i.e. getting drunk), throwing up on the sidewalk and on your friends, and using alcohol to temporarily drown one's pain and many problem$ is a sure sign that things are going splendidly here. Alcohol is the cheapest drug in a dismal economy by comparison to other drugs.

Posted by Guest on Oct. 15, 2013 @ 8:06 pm

doom and gloom just because they are unable to participate in the prosperity that is being built and shared in the Bay Area, again.

Posted by Guest on Oct. 16, 2013 @ 9:47 am

this is simply a barricade against trolls

it is a signpost to indicate to the reader that other anonymous posters on this thread are beginning to purposely diminish the conversation into repetitive reactionary hyperbole, and/or petty, mean spirited personal attacks and irrelevant bickering

the barrier is put in place to signal that there is probably little point in reading more replies in the thread past this point

proceed at your own risk

Posted by mambo on Oct. 16, 2013 @ 10:58 am

by referring to

reality

SHUT THEM UP!

Posted by abcdefghijklmnopq on Oct. 18, 2013 @ 10:14 am

Regarding the local economy, earlier this year the Duboce Triangle Neighborhood Association wrote the following in their newsletter. And things have only gotten worse since. They wrote:

"Candid conversations with many Upper Market/Castro retailers suggest concerns extend beyond the presence of vacancies. While vacancies are a problem, they are only a symptom suggesting larger economic flux. In many stores, sales are down. Some argue the neighborhood has too many bars
or nail salons. There is also mounting concern around the loss of the community’s historic LGBT character."

The most common phrase I hear from people in the area no matter where I go is, "I can't afford that."

Posted by Guest on Oct. 16, 2013 @ 3:49 pm

When people complain that "X is unafforable" what they really mean is that they cannot afford X. But plenty of others can.

The Duboce/Castro area is doing well - I am seeing new condo's, stores, bars and restaurants.

How gay it is isn't a major concern.

Posted by Guest on Oct. 16, 2013 @ 4:13 pm

there is one helluva hangover comin'

Posted by abcdefghijklmnop on Oct. 18, 2013 @ 10:12 am

whatever shall we do to shut them up and hide the truth

Posted by abcdefghijk on Oct. 18, 2013 @ 10:03 am

upon the last

capitalism ends

musical chairs uber alles

Posted by abcdefghij on Oct. 18, 2013 @ 10:01 am

The bubble deflation is going to happen around one year from now. Today (just as in the last tech bubble) more and more "companies" are making nothing and hoping that they'll be part of the "next big thing". On the macro level, Twitter is doing well because of their IPO despite showing losses this quarter that are quadruple that of the previous year. The "actual" value of the company will depend on the willingness of consumers to engage with their new and intrusive advertising methods. But there's only so much money to be made in advertising, particularly when citizens around the world have less and less money to spend on impulse purchases.

The lure of mass connectivity and massive mutual attention is the basis of the current bubble. Some companies--Square being one--are actually serving a new developing level of the economy. But that level involves extremely small companies, tiny interlacings of commerce. Many start-ups (i.e. idealistic and rather greedy groups of younglings) will be useless and will go belly up.

San Francisco will do alright, although people will (as usual) panic when jobs and companies evaporate and houses will no longer sell for vastly inflated prices. A good number of those currently being sold will suddenly be worth much less and (as usual) their owners will leave and incur an awful loss. Just as people love the "feel" of paper wealth, they are terrified of the feel of incipient poverty. Since the tech culture, such as it is, hasn't supported real social development, the City will die yet another of its cyclical tiny deaths.

Three to five years after this bubble deflates, something new will come along and if we're lucky SF will be the cradle for it.

Of course, there'll likely be a nice earth-shaker at some point, everyone new to town will flee and RE will plummet.

In the meantime, save your money, keep your friends, be extra nice to artists and musicians, vote for smart people who at least pretend to resist corruption (good luck on that one...). And always always thank God for the tourists. If SF ever loses her looks, the wee town is truly doomed.

Posted by Guest on Oct. 15, 2013 @ 11:26 pm

Now await the feasting by the hyena trolls. Something that will include phrases like knowledge economy, fiscal power, Oakland, Daly City, black and brown inferiority, and other assorted hokum.

Twas always so.

Which comes first? The bubble bursting or the promised improvements to the comment section cesspool?

Posted by Guest on Oct. 15, 2013 @ 11:50 pm

why aren't you richer than Buffett and Soros?

Posted by Guest on Oct. 16, 2013 @ 9:50 am

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