hoover.org

San Francisco Homeowners Lose $260 Billion In Value

June 7, 2023 interview with H.R. McMaster

6–7 minutes

US residential home values have declined modestly since their 2022 peak, reflecting higher mortgage interest rates. But residential values have plunged in San Francisco, falling by about 16.7%, compared to a decline of just 3.3% in the rest of the country, a difference of about 13.4 percentage points. San Francisco’s housing stock was valued at nearly $2 trillion by real estate valuation firm Zillow before the price plunge. This additional 13.4 percentage-point drop means that San Franciscans have lost an extra $260 billion more in residential real estate value than it would have had it kept pace with the rest of the country.

San Francisco’s housing price decline reflects the fact that the city has lost more than 65,000 residents, roughly 7.5% of its population. San Francisco’s population loss has been the largest among all major cities in recent years.

Departing San Franciscans have on average represented households of very high income. Between 2019 and 2021, San Francisco lost nearly $15 billion of household income, even after accounting for those who moved into the city. Taxpayers who filed 2019 tax returns from San Francisco and 2021 returns from a new location reported an average annual adjusted gross income (AGI) to the IRS of nearly $196,000 per household.

Teton County, Wyoming—home to Jackson Hole and other well-known ski resorts—attracted the wealthiest ex-San Franciscans, with an average annual income of nearly $600,000. Washoe County, Nevada, site of Lake Tahoe, another ski resort, brought in 333 San Franciscans, with an average AGI of well over $300,000. Just behind these ski resorts in terms of high-income SF expats is Palm Beach, Florida (where there is no state income tax), which attracted San Franciscans with an average income of about $300,000.

Home values in some of the most expensive San Francisco neighborhoods have been significantly affected. The median home price in the Pacific Heights neighborhood, home to former Speaker of the House Nancy Pelosi and actress Julia Roberts, declined more than 20%, from a peak of $2.05 million to $1.6 million, a loss of over $400,000. The median value in the Nob Hill neighborhood, home of film director John Waters, declined nearly 33%, from a peak of $1,662,500 to $1,170,000, a loss of nearly $500,000.

Quality of life and crime have worsened in San Francisco, even in these expensive neighborhoods. Nearly 90 percent of Nob Hill sidewalks and streets were recently found to be soiled with feces. Unacceptable street and sidewalk sanitation, including human feces and used hypodermic needles, have been an issue for San Francisco for years. In 2018, the city created a pooper scooper team, each member of which received annual compensation of about $211,000 that year. Given the inflation that has occurred since that time, scooper compensation may be close to $250,000 per year today. San Francisco spends nearly five times as much on street sanitation than comparable cities, but despite this high level of spending, city streets remain dirty.

Compared with the national average, the overall crime rate is 37% higher in Pacific Heights and 43% higher in Nob Hill. Compare these statistics to those of other expensive California locations, such as Montecito, which is adjacent to Santa Barbara (60% lower than the national average), and the Bel Air district of Los Angeles (52% lower). But the Pacific Heights and Nob Hill neighborhoods are safe compared to the rest of San Francisco. The city’s crime rate, including these two relatively safe neighborhoods, is 111% higher than the national average.

San Francisco’s crime and sanitation issues reflect the city’s tacit acceptance of illegal drug use. San Franciscans are paying an extremely high price for this, and so are drug users. Drug overdose deaths in the city jumped to 200 in the first three months of this year, representing a rate about 3.8 times higher than the national proportion of deaths to population.

San Francisco mayor London Breed, who lost her younger sister to a drug overdose death, is advocating an alternative strategy to the city’s long-standing policy of accepting and facilitating open drug use: “Compassion is killing people. And we have to push forth some tough love to change what’s happening on the streets of San Francisco.”

Some of the city’s supervisors, however, are unwilling to consider Breed’s ideas, including Supervisor Dean Preston, who stated that Breed “is preparing to start arresting people for public drug use. Arresting people for drug addiction is not ‘moderate’ nor ‘commonsense.’ It’s reactionary, cruel, and counterproductive.”

Breed’s relationship with the Board of Supervisors has deteriorated since she appointed tougher-on-crime prosecutor Brooke Jenkins as city district attorney following the 2022 voter recall of progressive DA Chesa Boudin. If Preston and like-minded supervisors won’t listen to Breed, they should listen to Jacqui Berlinn, who has been trying to save her son from drug addiction for years: “My son is stuck with politicians who just hand addicts free drug paraphernalia and double down on the same failed policies. We finally have a new DA who wants to bring real change but she can’t do it until the rest of the city’s political leaders start working toward a real solution instead of making the crisis worse.”

There are tens of thousands of mothers, fathers, brothers, sisters, sons, and daughters of San Francisco drug addicts who likely feel the same way as Berlinn. They should be heard, and new policies should be implemented to get drug use off the streets, provide support for those struggling with addiction, and return functionality to a city that lost its bearings so many years ago.

Several recent home listings in San Francisco sold for more than $500k over the asking price. Today, I overheard a couple of hipsters in San Jose who noted that they would like to buy a place in SF despite the issues. A young acquaintance who makes around $160k a year is saving to buy a condo there, and her friends are doing the same.

Is there a point to this story?

SF is still worth $1.67 trillion. Housing prices and rents are still outrageous and unaffordable. Remember that this valuation is based on a city of less than a million residents (homeowners and renters alike).

As an investor, I think that RE investments in SF are still outstanding!!!

I think of HOW HIGH valuations still are and the pleasures of living in the City by the Bay.

I think of how much money all of us in CA have made, including over the last few years, and are still expecting to make.

Why move? Maybe you don't understand the scaling actor of CA vs wherever you are. Life in CA STILL beats anywhere that I've ever been, and WE STILL MAKE MONEY HERE, lots of it, despite valuations that are now lower than infinity, but still outrageously higher than most other places, and expected to go back to infinity.

My income is much more than I need, even after taxes.

Most of my fortune has come from the stock market, and all of that is Capital Gains.

I love CA and have made a fortune here. I wouldn't trade my life for anything. I don't need to be greedy.

Also, I started out working for (my) army as a military operations analyst. I fought in a war (1967). I don't like guns or people who use them.

The 1967 war was neither brilliant nor well executed.

The Israeli Chief-of-Staff commented, after the the war, that it helped that they were fighting Arabs. This racial put-down was reversed by the 1973 war, which Israel lost, and these Arabs (especially the Egyptians) executed a very well planned surprise and follow-through. This campaign has been favorably compared to the Normandy Invasion in terms of planning, surprise, tactics, weaponry, coordination, objectives and performance of troops (and success). The same Israelis who boasted about THEIR "brilliance and superior execution" in 1967 (including the same Chief-of-Staff) fell apart when it came to a fair fight. It also needs to be pointed out how the 1973 war was really equivalent in moral content to Normandy.

As to how that war is remembered, that all depends on whose version you're "remembering".

Are you serious?

Do you know anything about it? Or, are you fresh from reading the internet? I was there.

Are you aware of the extent to which Israel re-writes history to further their own ends? They're not the first people in the world to do that, but are you aware of the extent to which they do it?

Basically, who achieved their goals in that war? Egypt, Syria, Jordan or Israel? Well, it was hardly Israel.

Egypt and Syria wanted their land back which had been conquered in 1967. Israel wouldn't give it back. For 3 years, Anwar Saadat offered a complete Peace Agreement to Israel, including full diplomatic recognition, but Golda Meier would not even respond to it. The final result, as a consequence of the war and Henry Kissinger, was that Egypt got ALL of their land back (every square meter!) and Israel lost the entire Sinai (even including Taba), and Syria got half its land back including the city of Quneitra (only half because they wouldn't agree to sign a Peace treaty).

And what did Israel get? The exact same Peace treaty that they were offered for 3 years before the war (and the casualties), and NOTHING MORE!. [Actually, they got a little bit less: Before the war, Saadat had offered 25 years to accomplish the Israeli gradual withdrawal, and after the war he allowed only 7 years with immediate Israeli withdrawal after the 7 years. He demanded this otherwise innocuous provision only to publicly stick it to Golda for refusing to negotiate.]

What goes on in the Middle East is MUCH MORE!!! complex than you are able to comprehend by reading popular (and simple) ((and biased)) sources often on both sides. You need to know what you are talking about before talking through your hat.

If you really want to learn anything about that war (or 1967), I would answer your questions. But you need to be able to comprehend that the world is more than just what you see on TV.

When I applied for the grant from Rome, I had to sign that I would come back to Israel to work for the army for an equivalent time as I was supported. I also had to sign for my visa to US that I would not use the visa as an opportunity to immigrate to the US. So I returned to Israel in September, 1973 and was to begin working for the army after the Yom Kippur holy day. I had to start to work a day early.

The 1973 war was "instigated" by Israeli occupation of Egyptian and Syrian sovereign territory. What's more, Israel established settlements in these territories which was against Geneva Conventions. If that were to happen today (for example, West Bank & Jerusalem) then under the 2002 Rome Treaty establishing the International Criminal Court, it constitutes War Crimes. Invasion of occupied territory by it's legal owner is not "instigation of war" under international law, but is more consonant with insisting that those nasty ol' Americans invaded Germany on D-Day, thereby "instigating" a war.

I seem to recall that the issue was about "The Yom Kippur war (1973) was another fantastic victory for Israel", and if you really insist on maintaining that position, how do you explain the final outcome of the war? Von Clausewitz points out how the military acts only to support the political activity, and Israel certainly came out on the losing side of the political activity, due to its military incompetence and the unexpected military competence of the other side.

I could discuss the circumstances of other Israeli battles with you, but only if you are really interested.

Why don’t you show us something about what you understand from your experience in the Middle East (it used to be called the Near East, you know) and other Israeli wars. Don’t rely on the internet. It lacks real-life accuracy and too often reflects the refutable bias of its author. You could discuss the 1948 war and what its real political aims were (including why President Truman became so angry), there is the 1956 war and what its real political aims were (and why President Eisenhower became angry), the 1967 war and its real aims (and why President Johnson was happy), and in 1973, what Israel’s real aims were (and why President Nixon did what he did).

I would be happy to either discuss with you or to teach you about them, but only if you are seriously interested and can relate to actual circumstances. So far, I have seen only words like “move on with your life” without any details of experience or demonstration that you know anything at all about the Middle East. After all, its a complicated place.

By the way, I am Jewish and still a citizen of Israel, although I don’t consider myself to have any loyalty to Israel beyond my loyalty to logic and the truth. I believed in the Israeli mission until the 1973 war, when I (and a lot of other educated Israelis) got to see the truth. So for your claim about “my friends”, well, most of my Israeli friends know what I know and they don’t live in Israel any more.

Shame? For what?

For understanding this serious problem and telling the truth about it?

Are you against the truth?

I had a very good vantage point over the 1973 war. I worked for the Office of the IDF General Staff as a professional mathematician/statistician, analyzing many of the operations for the commanders. I had a very good access to the failures and the few successes plus the very successful Egyptian First and Second armies and how they planned and executed their morally successful rescue of Sinai.

But shame? What for? For telling the truth?

And how is my family to be ashamed of me? What do you suppose is their involvement, and what would be their point of view that would cause shame?

I really hope to hear from you about why?