During the 2001-2002 bust, bay area rents fell 50% in marginal neighborhoods. In desirable neighborhoods, rents fell maybe 10%. Prices to buy came down, but not nearly as much. In marginal areas 20%, in desirable neighborhoods, maybe 1%. Small houses and fixer-uppers in the 10/10/10 school districts (ie, Palo Alto) kept going up. One reason is that construction prices fell 30%, so there was allot of tears downs and renovation happening.

"During the 2001-2002 bust, bay area rents fell 50% in marginal neighborhoods. In desirable neighborhoods, rents fell maybe 10%. Prices to buy came down, but not nearly as much. In marginal areas 20%, in desirable neighborhoods, maybe 1%. Small houses and fixer-uppers in the 10/10/10 school districts (ie, Palo Alto) kept going up. One reason is that construction prices fell 30%, so there was allot of tears downs and renovation happening. "

It was a bit more complicated than that ...

You are correct that rents/prices fell much more in marginal areas, but "marginal" can mean a lot of things. Very expensive, 3-4 million dollar homes are also marginal (or at least, they were at the time) and those fell a lot. There just wasn't a healthy demand for 4 million dollar homes in SF and Marin during that period, and those prices dropped a lot.

So, yes - mid-range (mid-range for SF) houses in desirable areas did not fall a lot ... but just like houses in undesirable areas dropped a lot, so did a lot of other marginal properties - namely, very expensive ones.

Very true. In 2001, landlords of rent-controlled apartments wouldn't even pause the rent increases in the best neighborhoods.

what happened to the Small houses and fixer-uppers in the 9/8/8 school districts?

What's the meaning of 10/10/10 or 9/8/8?

schools

ele/mid/hs

http://www.greatschools.org

> SF can't expand easily since it's water 3/4 all around. Demand still high and supply very low.

That might easily change.

If average salaries go down, people won't be able to afford pay rent they once used to. There will be less people living on their own and more people sharing with others. This will create oversupply of rental properties which means rent prices will go down.

If rent prices go down, property prices will go down too as property investors won't be able to justify holding a relatively expensive property yielding low rental returns. So they might as well put the property on the market creating more supply of properties for sale. Thus bursting the bubble.

SF is heavily relying on the high-tech, high salary population to sustain its high market value. So SF is always at risk of having market breakdown. But because giants like Google and Facebook have offices in SF, or near SF, as long as that population remain, SF market will survive, no matter what. If SF only relies on startup, SF will doom. Startup population, however, is dragging the price higher, so high that even the workers from the giant tech feel wallet drain, and that's really bad, because Google wouldn't pay everyone $200,000 annually, and even if Google does, only a handful of companies can, thus the market will bloat with a huge economic gap.

I'll get hammered for this, but I just wonder if we will be talking about Google, and Facebook ten years from right now?

I know both have diversified, and Google has become best friends with the Obama administration.

I just wonder if they will be relevant? These tech companies main reason for living is advertising, and their algorithms.

I look back, and Apple had a physical product. Other than Apple, exactly what companies will be here in a decade?

Actually, I don't think I would buy another new Apple product for myself. I still buy them as presents. It's a nice gift. For myself, I will still buy used while their is a surplus of parts.

I went into my Corte Madera Apple Store on 2-1-16. There's no cash registers. A few printers are attached under the counters for receipts. It's ambience was that of a operating room. I walked out, with a $39.00 iPad mini case. I said to myself, "Is this my last visit?" The case was not the quality I expected from Apple either.

Please don't beat me up. I won't even be back. Just thinking out loud. My prediction of future events have a poor track record.

Google and Facebook are completely different animals. They both make money through advertising[1], but the use cases are different. Even their algorithms have different implications. In Google's case for example, their search is like an ever improving AI, increasingly hard to overtake. And assuming search is going to continue to be a need, it may become increasingly hard for a competitor to overcome them. I do understand nothing lasts forever, but only thing is I don't see it coming yet.

Sibling comment, compares Goog with MS 10 years back. My humble submission is several people saw it coming even then. I remember reading a book called 'The Search', and also having some discussions with friends, where we felt that Google will overtake MS. But there is no such thing in the horizon, which challenges Google. And people tried - Blekko was noteworthy. DDG is also liked by hackers, but it remains to be seen in the long term.

Now talking about FB's algos (or AI). Its purely anecdotal, but till I was using FB, I found it highly irritating. Imagine if your email was trying to guess which email you like to read, rather than simple time sorted one (and brief categorization, which gmail does).

[1] This analogy of comparing Google to advertising company has become a bit tiring now as well. I think, thats their current way of making money, we should judge them by what their intrinsic value is - Search/self-driving cars/Youtube/etc. As the means may change (micro-payments via Bitcoin/etc who knows?)

The Google <-> Microsoft analogy is especially relevant with Google becoming the owner of the operating system of the world's most dominant computing platform. The resemblance of Microsoft of the nineties is uncanny; commoditized hardware made by a plethora of companies at razor-thin margins and Google sitting on top of all of them collecting the profits. Funny enough, both of those operating systems were arguably ripped off from Apple. History does rhyme.

Only Google is a lot more diversified than MS was back then, since Android isn't even their main business.

Ownership means something different when you charge for it, however.

I think you might be right. I remember about 10 years ago having a discussion with a coworker. He was bemoaning the fact that Microsoft was so far entrenched that nobody would ever be able to challenge them. Back then Microsoft looked like Google does today. Nobody stays on top forever.

I agree with @monkeywork, i think Microsoft is now in better than what it was in 2003/4, At the time when i worked there we knew Linux was a challenge, MSSQL, AD, Exhcange all had still competition(sun one Ldap, domino mail/workflow) and was fighting hard in fact i would say Domino with it's workflow was in better position. With Azure, SQL Always on, .net and solid Windows server i expect Microsoft to be around for long atleast another 1o to 12 years in dominant position in enterprise segment.

but Microsoft is still in top in terms of market share on desktop, and they have started to put a dent into the prosumer tablet market, and they compete well in the gaming market. I'd say they are still "on top"

Microsoft is long past "nobody would ever be able to challenge them." Maybe on desktop, provided you exclude the server market.

You didn't used to have to exclude the server market. They owned that too. Then Linux challenged them and won.

In fact, they used to own all PCs. Then Apple challenged them for laptops and won.

Microsoft isn't doing badly, but it's not an unchallengeable juggernaut any more.

And Google won't be forever either.

Advertisement is relevant. http://finance.yahoo.com/q?s=KO produces nothing of intrinsic value, yet it is valued at $185B. Why? Because they've built and maintained a very valuable brand, via advertisement. The day CocaCola is headed for bankruptcy is the day I start worrying about Google and Facebook.

Market cap is not the same thing as book value, and the book value of the Coca Cola brand is less than $80 billion.

Google is up with Apple and Coca Cola as most valuable brands, but Facebook is not even top 10.

San Francisco had 35% decline from peak in the years following the 2007 bust, across all market segments. Less 'prime' fell first and hardest. But decline was comprehensive.

http://us.spindices.com/indices/real-estate/sp-case-shiller-...

SF and Texas is where the fugitive capital from the mortgage meltdown was running to. It's not about demand; it's about how many high rollers go bust.

Exactly. Property values might not continue to grow at such a high rate but they aren't going to decrease by 30%. That's ludicrous.

It just happened! Not more than 7-8 years ago!

It happened in many, many markets across the US and the world.

We just saw it happen!

That was part of a massive, global housing bubble popping. A better point of reference is the dot.com crash (the worst of which was a local event) and the worst you saw, at least in decent areas, were valuations that stopped climbing.

How quickly people forget :)

There are areas that do not follow Bay Area realestate economics.

I have watched Bay Area realestate for too many years. I do agree the decline will be at least 30%. I think it will be more like 40%, but who knows.

That said certain areas (Rich areas--Pacific heights, etc.) of San Francisco do not follow the trends. Marin county, with the exception of Novato, do not follow the trends.

Rich areas are "tightly held," they usually don't have mortgages and the owners are wealthy enough to not need to sell at a loss in downturns. These are the safest areas but don't get the huge appreciation in the upswings