Blogging Bayport Alameda

August 22, 2014

Bubbly

Filed under: Alameda, Development — Lauren Do @ 6:02 am

With all the talk about potential price points for the new Alameda Landing housing development and the overall affordability issues in Alameda and beyond naturally given the high rates for both for sale and rental units leave some people wondering if this is just another sign of an impending housing bubble which left the housing market decimated.

SPUR recently held lunchtime forum about whether what we are currently seeing in the Bay Area is a sign of an impending housing bubble or if this speaks to the overall affordability crisis that has made it difficult to find affordable housing for a vast number of people.  The conclusion presented by the speakers was that the Bay Area is not in a bubble, it’s just not affordable.

One of the main reasons that distinguish an affordability crisis from a housing bubble is whether the high prices can be explained by supply and demand from the SPUR piece:

Unlike a housing bubble, San Francisco’s sky-high real estate prices can be attributed to supply and demand issues: the hallmarks of an affordability crisis. This is good news because it means prices won’t come crashing down — but distressing because it’s indicative of a longer-term economic issue.

Currently San Francisco is the least affordable metro area in the country. Only 14 percent of homes for sale are affordable to the middle class. The rates in San Jose (34 percent) and Oakland (40 percent) are better but still unaffordable for the significant majority of their residents.

According to some of the graphs presented it may not get better.  There was one graph in particular which presented the age range of the households that make up new net growth.  The data revealed that it wasn’t the young techies snapping up the majority of these units, but rather the Boomer generation (ages 55 – 74).  The reason it will get worse is because of the tech boom the new residents are in the millennial age range and they haven’t even made a dent in becoming part of the housing problem.

graph1

 

 

Here are the slides showing rental and for sale supply vs demand, Alameda is part of the Urban East Bay:

rental

 

sale

 

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35 Comments

  1. The criterion for a housing bubble for me is when prices get away from their long-term ratio to rents (on which one cannot speculate). This time, rents seem to be keeping pace (though I’ve not looked at the data in a while). The SPUR stuff seems to suggest this is true.

    However, the Bay Area is very exposed to one industry for its growth and I worry that tech is getting back to 2000 levels of stupidity. I was at the airport yesterday and there was a story on CNN about an online service from which you could rent luggage. This was billed as a top ten travel hack.

    When (I do think it’s when) Bubble 2.0 bursts (perhaps when money becomes more expensive), rents could cool off pretty fast.

    But maybe it’s different this time….

    Comment by BC — August 22, 2014 @ 8:56 am

  2. The PowerPoint had a slide about San Francisco specific owner vs. renter spread. At the bubble (2005ish) the spread was 131%, presently it is at 40%.

    Comment by Lauren Do — August 22, 2014 @ 9:23 am

  3. Hmmm…. Definitely frothy out there right now. I was in Sac 2004-2007 and this doesn’t feel like that felt. I made the right call then and kept renting for $1400 instead of buying at $450k. I might have made the wrong call in 2011 in not stretching my budget and buying then. But our rental was just too good to see the wisdom at the time.

    Unfortunately, the owner is going to try and capitalize on the price gains and it’s going on the market next week at 1.1M!! Even though our rent has climbed to $2700, that doesn’t come close to covering a million dollar mortgage. A comparable rental looks like it would cost $3500-4500 now, if we aren’t lucky. Oh well, time to downsize.

    If there is consistent demand at that level, rents aren’t that out of whack from sale prices. Cultural shifts and constrained supply in the urban cores have driven much of the increases we have seen. It does seem like we have reached an inflection point, however. Inventories of for sale and rentals in Alameda seem to be increasing a bit as more people try and cash in. This will arrest the price increases quickly, I think. Combined with more apartment listings that are taking longer to fill, there is starting to be some competition in that market. I don’t think we are in for a big drop in prices anytime soon, unless there is a strong downturn in the tech companies. My guess is we have seen the real price gains for the decade (2010s) and we will level off for the next 3-5 years with inflation slightly eating into values. Just an educated guess though, ymmv.

    Comment by BMac — August 22, 2014 @ 10:07 am

  4. BC, they said the Tech is different this time because it is grounded more in established companies whereas in 2,000 it was start-ups with hopes and dreams, but with no foundation. Start-ups are great but when 90% are start-ups there is a problem.

    Comment by Joseph — August 22, 2014 @ 10:21 am

  5. “Yo!” as the app would put it. Joseph, I used to agree. But recently it’s been becoming more worrying. My evidence is only anecdotal but there do seem to be a lot of awfully bad ideas getting VC money, and the VCs are getting more money than there are good ideas.

    Comment by BC — August 22, 2014 @ 10:31 am

  6. http://valleywag.gawker.com/there-are-officially-too-many-apps-and-nobody-is-makin-1611128750

    There really aren’t that many “big” tech companies – even they have a saturation point employeewise – the mother ship (Microsoft) laid off 10,000 people last month and if the “average” salary at Google is 124,000 and Yahoo is 107,000- with turnover rates that are really bad- where is this going?
    Those salaries sound like a lot (and they are from where I am standing) but the math simply does not work for me. Who can afford $2500.00 – 3000 per month for rent and then tries to save for a house or a life or a college fund on top of that?
    Has the population in the bay area increased that much in the last 3 years and they are all making big money?

    Comment by librarycat — August 22, 2014 @ 11:09 am

  7. 70% of Total Tax Returns in Alameda in 94501 and 94502 make less than 50,000 in wages and Salary in a city that averages
    2.2 residents per household.

    Over one million families in Ca had their house foreclosed on since 2008…..So huge rental Demand

    44% of New Home Buyers are From China where CA Properties are Being Marketed

    70% of Single and Joint tax returns in 94501 and 94502 made less than 50,000

    IRS Data of Salaries and Wages in 94501 by those filing jointly and single…..28,822 Total Returns

    4104 made between 0-10,000 With the average making 3,952 in Salary and Wages
    5158 made between 10,000 -25,000 with the average making 12,483 in Salary and Wages
    7229 made between 25,000-50,000 with average making 30,040 in Salary and Wages
    4830 made between 50,000 -75,000 with average making 48,730 in Salary and Wages
    2688 made between 75,000-100,000 with the average making 67,253 in Salary and Wages
    3757 made between 100,000-200,000 with average making 103,913 in Salary and Wages
    1056 made more than 200,000 with the Average making 198,888 in Salary and Wages
    IRS Data of Salaries and Wages in 94502 by those filing jointly and single…..6623 Total Returns
    999 made between 0-10,000 With the average making 3658 in Salary and Wages
    653 made between 10,000 -25,000 with the average making 9,775 in Salary and Wages
    922 made between 25,000-50,000 with average making 23,977 in Salary and Wages
    927 made between 50,000 -75,000 with average making 41,356 in Salary and Wages
    742 made between 75,000-100,000 with the average making 58,996 in Salary and Wages
    1642 made between 100,000-200,000 with average making 106,493 in Salary and Wages
    716 made more than 200,000 with the Average making 232,395 in Salary and Wages
    Total Tax Returns in 94501 and 94502
    24,822 make less than 50,000 out of the 35,445 in Salary and Wages or 70%
    http://www.incometaxlist.com/alameda-income-alameda-ca-94502.htm
    http://www.incometaxlist.com/alameda-income-alameda-ca-94501.htm
    http://www.incometaxlist.com/alameda-tax-alameda-ca-94501.htm

    Comment by What does the Tax Data say — August 22, 2014 @ 11:50 am

  8. librarycat: Except Kim Kardiashian’s app which pulled in $200 million which is both sad and funny at the same time.

    Comment by Lauren Do — August 22, 2014 @ 11:52 am

  9. You also have Oracle, Saleforce, Twitter, Cisco and a few other big ones which I would include in that category. Goggle increase their off space in Hills Plaza and just bought a building along Embarcadero, Microsoft is in One Market, Twitter in Mid-Market, Zynga in San Francisco, Wind River although much smaller in Alameda, and as Lauren posted awhile back some Texas company is relocating to Alameda.

    Comment by Joseph — August 22, 2014 @ 12:07 pm

  10. I wonder how much this has changed in two years for affordable housing in Bay Area.

    Oakland opens up Section 8 housing waiting list

    OAKLAND, Calif. (AP) Oakland officials expect 100,000 applications for Section 8 subsidized housing.

    But there are only 10,000 spots on the waiting list.

    Oakland’s housing authority opened up its Section 8 waiting list on Tuesday and some 6,000 applications were submitted in the first three hours. Some 100,000 are expected during the five-day application period.

    The San Francisco Chronicle says the only way to sign up was over a computer, so applicants jammed Oakland libraries to fill out the forms.

    The housing authority uses a lottery to determine who gets on the waiting list.

    Housing authority executive director Eric Johnson says there are currently only 650 vouchers available and about 50 vouchers get freed up every month.

    Comment by interesting times — August 22, 2014 @ 12:15 pm

  11. Unfortunately, averages aren’t as relevant in the short run. And since housing is not a liquid asset, short run can be many years.

    What counts are the marginal purchases. What are the demographics of the newest buyers? Rental prices can fluctuate more quickly, due to lack of rent control and thanks to smaller transaction costs of moving vs buying&selling, but they are still not small.

    Comment by BMac — August 22, 2014 @ 12:22 pm

  12. Question: I see that Alameda Landing will BMR rentals but will there be units there for purchase also

    Comment by frank M — August 22, 2014 @ 12:25 pm

  13. ” a few other big ones” being the key words here- even they can only grow so much and it isn’t like no one is living in SF-. Cisco is laying people off yet again and they are very far from new tech and Oracle isn’t burning up the wires with job opportunities these days either and they are definatley not new tech. I work near WindRiver- that parking lot is a wasteland.They never got close to what they said that they would do.
    Oh- yes – the Kardasian app which will go nicely with her new selfie coffee table book (coming to a bookstore near you.
    Who says that publishing is dead!
    Still can’t make the $2500 per month rent + having a future life thing work – numberswise. More like fighting to survive while watching the American dream slip away and still making a decent salary. The tax numbers just re-enforce the whole numbers things- add to that Alameda is 52% renters and rent is not deductible but then..it is still happening so .. I am leaning to big painful bubble.

    Comment by librarycat — August 22, 2014 @ 12:30 pm

  14. Just an example: a 2 bedroom- 1 bath house on Nason going for $3000/ month and the landlord wants to do nothing/pay nothing – not even the gardener.

    Tenant pays gas, electric, water, garbage and recycling. Tenant to maintain yard and landscaping.

    Comment by librarycat — August 22, 2014 @ 1:08 pm

  15. Tax filers: just remember that a single family or household can have any number of filers, even households with joint filers (ie children living at home might file or others living in the residence might file). So what you really want to look at is “household income” (which is the sum of all income [wage/salary income, investment income, business income, and other income] of all persons [related or not] living in a household) not just IRS tax filer data, though this is helpful.

    Comment by tony daysog — August 22, 2014 @ 3:02 pm

  16. #14 welcome to home ownership or renting a house. Tenants often don’t realize how much gas, electric, water, garbage and recycling, cable, internet costs and what it takes to maintain a yard and landscaping. They have a house in Bayport for rent for $7,500 per month although it is furnished.

    Comment by Joseph — August 22, 2014 @ 3:06 pm

  17. Total Tax Returns in 94501 and 94502 Both Single and Filing Jointly

    Out of the 35,445 Total Returns………….24,822 make less than 50,000 in Salary and Wages filing Jointly or Single.

    Which works out to about 2.2 filers per household in a city of 75,000

    Comment by What Tax Data say — August 22, 2014 @ 4:53 pm

  18. 40% make under 30,000 in Salary and Wages both single and filing jointly

    70% make under 50,000 in Salary and Wages both single and filing jointly

    Comment by What Tax Data say — August 22, 2014 @ 4:58 pm

  19. #16 The house for 7500 has 5 bedrooms, 3 bathrooms, fully updated everything and completely furnished- not exactly apples and apples + it has a lot of amenities- the one on Nason has 2 bedrooms, 1 bathroom and recently painted does not really count as updated. I have rented houses for decades in a lot0f places – fully aware of the process and what most landlords do/do not and expecting your tenants do maintain your landscaping is just cheap and gouging.

    Comment by librarycat — August 22, 2014 @ 5:03 pm

  20. 55 % made under 50,000 filing jointly and single including all Incomes….. Business, Investment, and other income..

    Comment by What Tax Data say — August 22, 2014 @ 5:10 pm

  21. Tax Data where did you get your data from and how old is it? It is hard to believe since everyone on Bay Farm, Gold Coast, Bayport, Grand Marina, Fernside area the development across from Lucky’s, and Southshore all the others areas who households which make probably earn over $100,000-200,000.

    Comment by Joseph — August 22, 2014 @ 6:45 pm

  22. Here is IRS data from 2012 so it appears the income for Alameda has risen significantly.

    94501 – total returns 30,290 Number of filers under $50,000 15,720 or 52%
    94502 – total returns 6,740 Number of filers under $50,00 2,420 or 36%
    Alameda – 37,030 18,140 filers under $50,000 or 49%

    Comment by Mike McMahon (@MikeMcMahonAUSD) — August 22, 2014 @ 8:24 pm

  23. The IRS data is what business use to determine real income versus some stats put out by some agency trying to sell them to move their business there.. They also look at real Wages and Salary and Real employee costs to understand market.

    Target probably is receiving around 39,000 per employee as a tax incentive to open store at Alameda point…..That is average for Enterprise Fund to get business to create jobs..

    I wonder what total wages and Salary were in 2012 breakdown.

    Going from 55% to 49 % in Single and Jointly Filed Tax Returns making 50,000 and Under in Total Income still leaves those Families in quite a pinch…….

    With Real Inflation Running over 12% a Year and Tax revenues for sales tax flat means people are getting less and spending the same amount of money..

    Tax revenues from sales tax should be increasing 10-12% a Year…..

    Comment by In The Real World — August 22, 2014 @ 9:08 pm

  24. Thank you Lauren for the fancy graph they all establish my points :
    The one you all blasted me a while back for the need to gentrify the City os Alameda “like if Alameda was a third world Countries” and now your complain on cost , Gentrification is expensive …… you are confirming all ,my points:
    Silicone valley Employees are over paid , which mean we are paying way too much for that Iphone , and all the junk that come with it , the market might be different today , there are absolutely no reason to have another dot.com bubble , only difference , now they will all have to fight with peoples more qualified than they are to work in restaurants .
    Mr McMahon might disagree and say we need growth in order to survive , I have a better idea how about controlling our cost to a reasonable level , not something taught in school .
    I have not seen any new fire station nor plan for a larger police dept , yet the City will grow by more than 15% , where will we get the staff , Oakland ? they already have a joke at the Oakland Fire Dept , let’s go to Alameda they have a BBQ out of control .
    Written by an American , grammar and spelling brigade have fun.

    Comment by Joel Rambaud — August 22, 2014 @ 9:16 pm

  25. 40% of students in Alameda Qualify for Free or Partial lunches and live in Poverty.

    61% in San Francisco and 70 % in Oakland.

    55% for the State of California combined.

    Delivering Free Lunches for Students in Poverty is one of the fastest growing business in CA

    Comment by In The Real World — August 22, 2014 @ 9:17 pm

  26. #23. “The IRS data is what business use to determine real income versus some stats put out by some agency trying to sell them to move their business there.” Nah, US Census data on household income is sufficient for most interested in this. Again, the IRS data-set you refer to is helpful mostly with regard to trends for those persons or couples who file — but, to repeat, “tax-filers” (individual or joint) is not the same as “households” or “families”, because you can have any number of tax-filers living in a household.

    For simplicity’s sake, let’s say there are six tax filers in the IRS data set for all of Alameda and each report $50,000 in income on their income tax, and, of the six, three live in the same household, two live together in another household, and one lives alone (ie a single-person household). Observing the data as you do, you come out with an average of $50,000 **per tax-filer**. But, on a **per household** basis, the single-person household’s household-income is $50,000, the two-person household household-income is $100,000, and the three-person household’s household-income is $150,000, for an average **household income** of $100,000.

    So . . . do you observe the data using households or tax-filers? Since the topic is the relationship between income and cost of housing, easy-peasy, you use households, since household income reflect the sum of all persons in a household whose income contributes toward maintenance of the household, which includes cost of housing. This is pretty standard stuff.

    This is a pretty long-winded way of saying, frankly, that you should not take a look at IRS tax filing data alone to come to a particular conclusion about **income** trends and the relation of this trend to cost of housing (i.e. gentrification). IOW, you can’t say (as you do) Alameda’s housing crisis is a function of the fact that 70% of tax filers report making less than $50,000 because, again, “tax filers” is not the same as households and families. Your basic argument being that incomes are not keeping up with cost of housing is right, it’s just that the IRS data-set is not the smoking gun. The IRS tax filing data set is useful, sure; but probably a clearer relationship (ie the smoking gun evidence) between income and housing is easily obtained by going to US Census’ ACS, which has a wealth of relatively current data on household income and cost of housing.

    Comment by tony daysog — August 23, 2014 @ 1:47 am

  27. 94501 94502 Salary and Wages

    40% make under 30,000 in Salary and Wages both single and filing jointly
    70% make under 50,000 in Salary and Wages both single and filing jointly

    These were part of IRS study that looked at Wages and Salary ONLY for 94501 and 94502

    What It shows me is many people not making enough money working to make it…..Draw your own Conclusions

    Simple Stuff without the Noise.

    Comment by Draw your own Conclusions — August 23, 2014 @ 9:06 am

  28. Sorry I was not more explicit about the numbers I posted. I posting numbers from the IRS site that were cumulative. So the numbers from in number 7 has gone from 70% to 49%.

    Here is a breakdown for 2012:

    94501 – total returns 30,290 Number of filers under $25,000 8,890 Number of filers from $25,001 to $50,000 6,830 or 52%
    94502 – total returns 6,740 Number of filers under $25,000 1,500 Number of filers from $25,001 to $50,000 920 or 36%
    Alameda – 37,030 18,140 filers under $50,000 or 49%

    Comment by Mike McMahon (@MikeMcMahonAUSD) — August 23, 2014 @ 9:17 am

  29. Mike could you give me link to that Data.

    My Link breaks down Wages and Salary and also Total income..I think your info includes all total income received.

    Total income received for both Joint and Single was 55% under 50,000. Yours was 49%.

    So going from 55% from 49% .is not huge leap.

    So to actually look at Salary and Wages you need breakdown when evaluating for Wage and Salary Info to compare.

    ..

    Comment by interesting times — August 23, 2014 @ 9:39 am

  30. The other thing is there are a lot of LGBT households which the IRS doesn’t recognize or treat in the same matter or lives here and uses and different mailing address. A guy living with us 65% of the time filed with his wife who is in TX although he makes probably $150,000 per year. You have a lot of students which may use their parents home to file or are paying for college using loans. One also need to look at how many dependents one has. There are a lot of variables in the tax data, so basically you are getting a foggy picture.

    Comment by Joseph — August 23, 2014 @ 10:35 am

  31. 29. it would be less confusing and more transparent ( if less “creative”) if you posted under one moniker.

    Comment by MI — August 23, 2014 @ 12:00 pm

  32. I believe your website you used is a few years old given the 2012 data is showing 37,000 filers versus the 28,000+ filers in number 7. This IRS data from 2012 is Adjusted Gross Income.

    http://www.irs.gov/uac/SOI-Tax-Stats-Individual-Income-Tax-Statistics-2012-ZIP-Code-Data-(SOI)

    Comment by Mike McMahon (@MikeMcMahonAUSD) — August 23, 2014 @ 12:00 pm

  33. Mike

    From # 7

    If you read thru the whole post

    Plus these links give detailed breakdown …..Plus there were late filers so that might be the discrepancy.

    35,445 is not 28,000 you are referring to.

    Total Tax Returns in 94501 and 94502

    24,822 make less than 50,000 out of the 35,445 in Salary and Wages or 70%

    http://www.incometaxlist.com/alameda-income-alameda-ca-94502.htm
    http://www.incometaxlist.com/alameda-income-alameda-ca-94501.htm
    http://www.incometaxlist.com/alameda-tax-alameda-ca-94501.htm
    Comment by What does the Tax Data say — August 22, 2014 @ 11:50 am

    Comment by Just to clarify — August 23, 2014 @ 7:25 pm

  34. Data date: Those files are latest provided to us from IRS and we update them as soon as IRS finishes compiling.

    Many organizations, including fund raisers, asset managers, corporation sales and marketing firms, have found the data useful and provided them an edge in income and tax data intelligence analysis and demographic profiling. We are the only site that shows the data in data table format with some basic statistics.

    Comment by Just to clarify — August 23, 2014 @ 7:45 pm

  35. The links show the same Adjusted Gross income which is what the IRS files use. The IRS numbers from 2012 file are different from yours. So you may want to contact the IRS since their numbers appear to be more current than your website. For example, your link for 94501 for $25,001 to $50,000 of AGI shows 7,229 returns, yet 2012 IRS filers for the same range of AGI is just 6,830. Your website shows 35,445 filers yet the IRS 2012 show 37,330. The IRS 2012 have higher number of filers and lower numbers in the income ranges you cite so your 70% is old data.

    Comment by Mike McMahon (@MikeMcMahonAUSD) — August 23, 2014 @ 8:14 pm


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