With home prices increasing in San Francisco, some forecasters are worried that another 2001-style collapse is on the horizon.
Others, like Jeff Mezger, CEO of KB Homes, don’t think so.
“I don’t think you are anywhere near the bubble price, certainly not at the price points we are playing at,” he told Business Insider.
He added that although it’s admittedly sad, home prices reaching as high as $1.5 million is considered affordable in the Bay Area.
The variables are many, but one of them is the technology boom that San Francisco has seen in recent years. Similar to the impact that the dot-com explosion had on the housing market, economists are forecasting somewhat of a similar outcome, although perhaps not as brazen.
Ken Rosen, chairman of the Fisher Center for Real Estate at UC Berkeley, described the tech-boom as “unsustainable” in an interview with the SF Chronicle.
He described how these new technology companies will, undoubtedly, have to cut jobs in the future. He could not predict as to whether the result will be as bad as it was in previous years.
The FitchRatings report released a press release that said home prices in the Bay Area have risen to a level unsupportable by area income. “The last time the Bay Area experienced this kind of home price growth was during the dot-com era from 1997-2000,” said Grant Bailey, managing director of FitchRatings, Inc.
“Our Sustainable Home Price Model indicates that the growth in San Francisco home prices has outpaced the level warranted by the underlying drivers of home prices. While we do believe that homes are overvalued in the area in general, we believe the overvaluation can resolve in any number of ways, including a scenario in which the underlying drivers of prices may catch up with prices,” FitchRatings said in an email.
Both Florida and Texas also have markets that are growing at unsustainable levels.
And it was noted in the report that the last time there was this wide a gap between real home prices and sustainable home prices in San Francisco was between 2003 and 2006.