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The conversation that is going around the real estate industry water cooler is, “Are we in the bubble in the Bay Area and when is it going to burst?” Are Newark residents now playing poker with their mortgages? Instead of giving my opinion, I have gathered some of the top minds in the real estate world and asked them “is the Bay Area real estate bubble real?”

“This is not a bubble,” says Chris Thornberg, an economist in Los Angeles. “The money flooding the Bay Area isn’t built on speculation like the last boom. These are people with real money, with real incomes. They have enough money to live in whatever cities and neighborhoods they want, so if there’s not enough high-end housing, they’ll just gentrify lower-income neighborhoods.”

Fitch Ratings’ Managing Director Grant Bailey has no doubt that homes here are overvalued and pointed to a fairly recent run-up to describe the current market.

“The last time the Bay Area experienced this kind of home price growth was during the dot-com era from 1997-2000,” Bailey said. Prices continue to go up in many markets throughout the country, but home prices in the Bay Area have “risen to a level unsupportable by area income,” according to Fitch Ratings which also found that San Francisco home prices “hit an all-time high in third-quarter 2015 and are now 62 percent above their post-recession low in early 2012.”

Ken Rosen, chairman of the Fisher Center for Real Estate and Urban Economics at UC Berkeley, said, “The high-tech boom we have is unsustainable. Job growth is unsustainable. There will be, in the next three years, a correction. These unicorns (private companies valued at more than $1 billion) will have to cut jobs. That will have by far the most important impact” on the housing market. The only question, he said, “is whether it’s a minor decline or something more substantial.”

“I can safely say that the pace of growth we are having is not sustainable,” said Cynthia Kroll, chief economist with the Association of Bay Area Governments. “I don’t know if we are poised for the kind of bust we had in 2000 or 2001, but at some point this has to at least slow down.”

Big investors and hedge funds have largely left the building when it comes to investing in residential real estate. They started in 2014 and largely made a full exit in 2015. Today, you have a bunch of aspirational house humpers trying to make their money on the edge of a frothy housing market. Flippers are flipping and families are overextending. While the tech sector hits a snag, you have the median-priced house in San Francisco selling for $1.2 million. Many millennials, the next large group of potential house buyers, are unable to buy because they are simply broke. They are living with parents as grown adults or have become one of the 10 million new renter households over the last decade. At this point, with sky-high home prices, house lusting families are willing to do anything to buy even if this means they are setting themselves up for the next wave of foreclosures. Quicken Loan is pushing the rocket mortgage which you can “Push Button, Get Stuff” — sounds about right for a marketing slogan for a Twitter addicted audience that probably has totally forgotten the sins caused by the first Great Recession. Now you can get a mortgage while sitting on the can or going zero down up to $2 million. What can possibly go wrong? So feel free to buy that $1.2 million shack in San Francisco with a 30-year $1 million mortgage. I’m sure that startup will be around in 30 years.

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Adam Modzeleski is a real estate professional with Rainbow Funding and Realty, located in Newark for more than 30 years at 6658 Thornton Ave.

Article source: http://www.insidebayarea.com/my-town/ci_29695617/real-estate-is-bubble-going-burst

Apple at 40:

Michelle Quinn writes: How has Apple led the tech pack for so long? Its survival may be chalked up to a combination of lucky genes and good timing as much as perfect execution, constant innovation and key risk-taking.

Troy Wolverton writes: Apple’s hits have revolutionized markets, while its misses have sometimes paved the way for future products, even when they’ve been the butt of jokes. Also: Apple is still innovating and the jury is out on some recent products.

Apple’s expansion: The company’s plans for a new “spaceship” campus in Cupertino are certain to create an attention-getting headquarters icon and another Silicon Valley landmark, but the company’s push into neighboring cities such as San Jose and Sunnyvale is likely to also transform those communities with dramatic new office complexes and high-paying jobs.

Plus a timeline and a look at Apple’s key players.

The rest:

Troy Wolverton writes: If you’re looking to cut your pay TV bill, but aren’t yet ready to ditch all of your favorite channels or programs, the Internet is starting to offer some alternatives. The latest is Sony’s PlayStation Vue service.

Overall sales of the iPad are falling, but growing numbers of restaurants and retailers are ditching their old cash registers to use Apple’s tablet instead.

Larry Magid writes about his experience when he accepted Vivint’s offer to lend him a professionally installed home-automation system that includes an Internet-controllable thermostat, front door lock and doorbell camera along with modules that let him control lights and appliances.

As the way we digitally communicate with one another continues to undergo a sea change, new evidence seems to suggest a large-scale pivot by youth toward messaging apps such as WhatsApp and Viber to do their chit-chatting. And there’s a noticeable age divide that increasingly makes traditional email seem like a tool for the middle aged and beyond.

Bay Area real estate: Marin, Santa Cruz and San Francisco counties are among the five least affordable markets in the nation, according to a first-quarter analysis of 456 U.S. counties by RealtyTrac, the real estate information company.

Article source: http://www.mercurynews.com/ci_29694056/forty-years-apple-bay-area-real-estate-more

San Francisco’s commercial real estate market may be foretelling a slowdown in the city’s heated technology-driven economy.

Office subleasing, an early indicator of past downturns, is at the highest level since 2010. The amount of available space from subleases in the city jumped to 1.9 million square feet (176,500 square meters) last month, a 46 percent increase from the end of the third quarter, according to a report from Cushman Wakefield Inc. Twitter Inc., Intuit Inc., and Zenefits are among tech companies putting excess space on the market.

“It’s the beginning of the change,” said Kenneth Rosen, chairman of the Fisher Center for Real Estate and Urban Economics at the Haas School of Business at the University of California, Berkeley. “We’re very early in the correction process. It’s going to take several years to play out, and we don’t know how deep it will be.”

A five-year frenzy for San Francisco office space may be cooling as venture-capital investments decline and tech firms slow their hiring from a breakneck pace. The extra space is a warning sign that the growth rate for some companies was unsustainable, Rosen said. Some startups took more space than they needed in the hopes of expanding later, while others are moving to less-expensive areas or shifting staff to other buildings in the city.

A pullback would be a marked shift for one of the hottest U.S. real estate markets. San Francisco had the lowest metropolitan office-vacancy rate at the end of last year, at 5.9 percent, according to CBRE Group Inc. The San Francisco Bay area was No. 2 in the country for office investment in 2015, behind New York, the brokerage’s data show.

“A lot of the startups aren’t doing as well as the money behind them would like them to do, so they’re cutting off the flow of funds for a number of these companies,” said Robert Sammons, regional director of research at Cushman Wakefield in San Francisco. “These companies are having to make corrections in their business plans.”

Tech Companies

The largest share of space on the market is from companies that are contracting or consolidating, according to Cushman Wakefield. As of the end of last year, about 55 percent was from the technology industry.

An increase in subleasing preceded office-market downturns following the 2008 financial crisis and the dot-com bust in the late 1990s, said Colin Yasukochi, director of research and analysis at CBRE in San Francisco.

The trend isn’t entirely negative. Some companies that leased space in the early stages of the boom can rent it out at a profit. Others may be expanding and moving into bigger offices, an indicator of growth.

Subleasing also opens up more affordable space at a time rents are near record highs. The space on the market for sublease have asking rents about 17 percent below those of regular leases, according to Cushman Wakefield.

“If you’re looking to move to San Francisco, the increase in subleasing availability is a sign that there’s still space available,” said Drew Murrell, citywide revenue manager in the division of budget and analysis at the San Francisco Controller’s Office.

Twitter, Zenefits

Twitter is subleasing 50,000 square feet at its 1355 Market St. headquarters, according to Matt Hart, executive managing director at Savills Studley Inc., a tenant brokerage.

Natalie Miyake, a spokeswoman for Twitter, declined to comment. The social-media company, which said in October that it would cut as much as 8 percent of its staff, has lost 67 percent of its market value in the past year.

Companies such as Intuit are banking space that they’re renting with plans for expansion but don’t yet need. The software firm is subleasing two floors at 22 Fourth St. “that we have in our portfolio for future growth,” said spokeswoman Diane Carlini.

Zenefits, which is occupying four floors at 303 Second St., is subleasing space to move workers to adjacent floors, said Jessica Hoffman, a spokeswoman. The human-resources software startup, facing investigations over compliance with state rules, said last month that it would cut about 250 jobs.

A big chunk of the subleasing space on the market comes from Charles Schwab Corp., which is subletting about 300,000 square feet as it combines its two San Francisco offices into one, while boosting staff in other states, including Colorado and Texas, said Sarah Bulgatz, a spokeswoman for the financial-services firm.

Jobs Slowdown

More than 1 million square feet in additional sublease space will likely be available this year, said Hart of Savills Studley. He said he’s more concerned about a shift in tenant demand.

“Many startups that were hiring 10 to 20 employees per month have adjusted to a net zero to three employees per month,” Hart said.

Jobs in San Francisco’s tech industry, which includes Internet, software-publishing and data-hosting companies, increased by an annual rate of 5.1 percent in January, half the 10.5 percent growth in the same period the year before, according to Amar Mann, a regional economist at the Bureau of Labor Statistics.

Anemic initial public offerings and falling valuations for some tech companies are leading to a decline in the early-stage investments that help fuel office demand. Venture-capital investments fell 32 percent in the fourth quarter from the previous three months to $11.3 billion, according to a January report from PricewaterhouseCoopers LLP. Bay Area companies releasing IPOs dropped to 26 in 2015 from 35 the year before, Savills Studley data show.

“We’re going to have a correction in the job market in San Francisco over the next several years,” said Berkeley’s Rosen. “We had an economy that was growing based on the availability of capital rather than the fundamental performance of some of the companies.”

Article source: http://www.bloomberg.com/news/articles/2016-03-24/tech-slowdown-seen-in-san-francisco-s-commercial-property-market