Big Signs of Bubble in San Francisco

[Juan Diaz]

Robert Campbell, who’s a well-regarded real estate trend-spotter based out of Southern California, has finally spoken on the bubble that’s formed in San Francisco. In his semi-monthly newsletter, he’s identified a few areas of the country as bubbly, but there is one that has become ridiculously over-priced: San Francisco.

I won’t spoil the details in his “Campbell Real Estate Timing Letter”, but I’ll pull out one public statistic from the Case-Shiller Index, and expand deeper on it. At this point in time, the Bay Area metro (five counties) has grown 82.3% over the last 4 years, while the city of San Francisco has gone up almost 100%. Over that same period of time, the country as a whole has increased approximately 29%.

That’s crazy! And completely unsustainable. Right now the Bay Area has an unemployment rate of 3.4%. That’s about as low as a major metro can get. Mortgage rates are .1% away from historic lows (thanks Brexit?). In other words, things are as good as they can possibly get economically. There's nowhere to go but down.

Dig into the employment data found here, and there are some other worrying signs. Tech employment in San Francisco (look under Computer Systems Design & Related Services) hasn’t risen over the past three months. There were big year-over-year gains, but hiring seems to have dropped off as venture capital has cooled. San Jose and Oakland show similar slow growth in recent months.

So what’s the moral of the story? Take care of your money ladies & gentlemen, and invest with caution.