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Buildings in San francisco in the morning with misty and cloudy shooting from two peaks. Photo via Shutterstock

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SF housing went on a rampage this past decade

Just as in the movies of old, science has created a monster in San Francisco: your mortgage

In the 1957 B-movie The Amazing Colossal Man, an explosion causes a once-ordinary guy to grow to ten times his normal size and wreak havoc on a city—an apt metaphor for the San Francisco housing market more than 50 years later.

As the decade draws to a close, the question of what exactly happened to housing in San Francisco is one part triage to two parts post-traumatic shock. Opulent new constructions, like the $46 million penthouse at 181 Fremont or the $40 million house on Billionaires’ Row, had eyes popping—but that’s come to be expected in recent years. The real whiplash came when onetime humble homes geared toward middle-class residents became Onion headlines: A Sunset District Spanish Mediterranean sold for $555,000 over asking, and uninhabitable teardowns sold for near the seven-figure mark.

Here’s how housing in San Francisco looked in the 2010s, by the numbers.

In 2010, the median sale price for a single-family house in SF came in at $751,000, a smidge under the census-estimated median home value of $768,000. Median monthly housing costs for a home with a mortgage in SF were $3,180.

But by October of 2019, the California Association of Realtors estimated that a median-priced SF house sold for $1.65 million, more than double the value of a home the same time ten years ago.

Of course, one must add inflation into the mix—$751,000 in 2010 was more like $891,000 today if we apply the Bureau of Labor Statistic’s inflation formula. But that still leaves SF up more than 85 percent in less than a decade.

Condo prices were comparably more mellow but still jaw-dropping in hindsight, up from $670K at the beginning of the decade to $1.24 million earlier this year, according to real estate group Compass. That’s a 55 percent appreciation after inflation.

Home values have sprung up to $1.19 million in eight years, and mortgage costs in San Francisco for the 2018 census estimates were at $3,751, more than twice the national median of $1,566.

In eight years the number of owner-occupied homes in SF crept up from 123,128 in 2010 to 136,242.

And the homeowner vacancy rate, which was already a vanishingly small 1.3 percent, shrank to 0.3—a figure so small that most people assume it’s a mistake the first time they hear it.

Although the dominating force in the last ten years of SF housing has been the much ballyhooed tech boom—and the chaos in its wake—the beginning of the decade was a different time, with the nation still weary and wary after the failure of the banking and housing sectors and San Francisco looking at a 10 percent unemployment rate.

“They used to talk about the rational investor, but people constantly do things that are irrational,” Compass analyst Patrick Carlisle told Curbed SF, reflecting on the anxiety of those recession years.

“When things are down, people they think it’s never going to get better; and when things go up and optimism turns into irrational enthusiasm, they think it’ll go up forever,” he adds.

That irrationality creeps into housing prices as a sort of heady brinksmanship that drives up prices through bidding wars that buyers might not even realize they’re getting into.

“What pushes prices up more than any other factor is buyers competing for the same home,” Carlisle says, noting that bidders “start thinking about paying much more money than they ever did before” once there’s someone to compete against.

Bidding wars became de rigueur in the city, with many homeowners pricing their abodes with seemingly affordable prices, only to see offers, coming in fast and furious, skyrocket. Cunning realtors developed a habit of pricing homes below market value, angling for bargain hunters who ironically ended up vaulting the price ever-higher.

Midway through the decade, and with the tech-inspired housing frenzy in full swing, some parties began feeling queasy about the size of the year-over-year metrics and began having grim flashbacks of the previous dot-com boom and its aftermath around the year 2000.

In early 2016, credit rating agency Fitch Ratings called San Francisco home prices “unsustainable,” with Fitch Managing Director Grant Bailey pointing out, “The last time the Bay Area experienced this kind of home price growth was during the dot-com era,” which presaged ruin.

Only two months earlier, real estate site Zillow reported that of 56 “housing experts” surveyed, 22 believed SF was in the midst of a housing bubble, 11 expected a bubble within a year, and 15 predicted one within three to five years—so, right about now.

“All the rapid growth really brought back bad memories,” Jordan Levine, deputy chief economist for the California Association of Realtors, tells Curbed SF, recalling fears about both the old tech bubble and the more recent mortgage bust.

But the bubble didn’t burst. “I hesitate to use the phrase, ‘This time it’s different,’” says Levine, adding, “it’s a terrible time to be a housing forecaster” thanks, in part, to the inherent weirdness of the SF market, where constrained supply makes strange things happen.

Even so, he says he doesn’t anticipate any big crash-out in the near future. He also points out the irony of many people’s response to this assessment: “We end up rooting against ourselves” because SF’s signs of success— e.g., high wages, low unemployment, ravenous housing demand—are also omens of doom for those feeling compacted by the pressures of trying to afford living here.

Earlier this year, Curbed’s Jeff Andrews pointed out that a recession, when it comes (there’s always one coming sooner or later) probably won’t make a big dent in housing prices.

“During two mild recessions in the early 1980s, for example, home prices actually increased,” Andrews writes, and in most cases housing either stays flat or dips only slightly when the rest of the economy turns south. The 2008 crash was a weird exception not likely to repeat in our lifetimes—maybe ever.

Possibly San Francisco, with the sheer scale of housing appreciation this decade, has a little more air to let out than the rest of the country does.

But unless the fundamentals of how housing works in the city radically change, an economic disaster still might not hit hard enough to make homebuying plausible for anyone but the wealthiest or those willing to take on the greatest possible housing burden in its aftermath.

“Even tech workers can’t afford to buy homes in San Francisco,” Recode observed in March. That can happen when you create a monster: It’s out of your control before you know it.

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