Is the Bay Area in a Bubble and Will it Burst?

Will building more be enough to alleviate housing pressures? (Mark Andrew Boyer/KQED)

Will building more be enough to alleviate housing pressures? (Mark Andrew Boyer/KQED)

As part of our series, Boomtown, we’re answering questions from KQED listeners and readers. Our third one comes from N’Jeri Eaton, a documentary filmmaker based in Oakland, who asks:

N'Jeri Eaton (Courtesy of Kaleb Welch)
N’Jeri Eaton (Courtesy of Kaleb Welch)

Are we in a bubble? Is it going to burst? And if not, what do I do?

N’Jeri Eaton lives in Oakland’s Eastlake neighborhood. “Funktown,” she told us. “It’s amazing.”

It’s part of what she loves most about Oakland, where she has lived for 10 years. She remembers her first visit to the Grand Lake Farmers Market near Lake Merritt — she couldn’t believe how diverse it was.

“Seeing white Rastafarians and Ethiopians and Vietnamese musicians playing for the crowd … it was just everyone. Oakland felt like a real-life version of United Colors of Benetton,” she said. “This is the first place that has felt like home ever in my entire life.”

Eaton loves her cozy apartment and would like to stay here forever, but she’s worried that she won’t be able to. She’s in her 30s, with a full-time job in documentary film. Her life can stay the way it is only if absolutely nothing changes — not her job, not her rent, not the number of people living in her apartment. And, of course, that’s not realistic.

“I just feel vulnerable,” says Eaton, who grew up outside Chicago and has lived many places in the Midwest and on the East Coast. “And I want control of my own space. I want to have kids someday soon, and I can’t have a kid in this apartment and have a healthy semblance of a life.”

So Is It a Bubble?

“This is not a bubble,” says Chris Thornberg, an economist in Los Angeles.

Though he’s just one guy, we called him because he has the dubious distinction of having predicted the 2008 market crash. His colleagues used to call him “Dr. Doom.”

He says that the money flooding the Bay Area isn’t built on speculation like the last boom.

“These are people with real money, with real incomes,” he says. “They have enough money to live in whatever cities and neighborhoods they want, so if there’s not enough high-end housing, they’ll just gentrify lower-income neighborhoods.”

And while the growth may slow, it won’t stop, Thornberg predicts. He believes the solution is a matter of adding to the housing supply. As more units come on the market, prices become more reasonable for everybody, he says.

But others argue that without policies making sure some of the housing is affordable, it’s not going to make any difference for middle-class and poor people.

“That’s completely wrong,” Thornberg says. “The evidence tends to suggest that for the most part, when you start layering rule after rule after rule on real estate developers, ultimately you end up simply hurting the supply worse.”

So what should Eaton do?

Thornberg’s answer? Buy now. Anything you can get.

The Bigger Problem

“Did you tell him what I do for a living?” Eaton said, laughing, when we told her Thornberg’s advice. “I can’t just plop down $200K for a condo in deep East Oakland. That’s great advice for someone who has a lot of equity and doesn’t work in nonprofits.”

Eaton reached a troubling conclusion: “It’s time for me to leave.”

But is that really her only hope?

Paul Saffo is a technology forecaster who thinks about the future of the Bay Area for a living. He said he’d understand if someone like Eaton chose to leave, but he thinks we should try really, really hard to keep her here.

“I’m less concerned about your caller’s problem than the region’s problem,” he says.

More and denser housing alone isn’t going to keep people like Eaton here, says Saffo. We also have to build better transit, bend outdated rules and think creatively about how the region works.

Some work on this front is already underway. People have proposed new rules for in-law apartments, and some are banding together to buy buildings cooperatively through structures like co-ops and land trusts.

Saffo says we all need to start thinking cooperatively — to see the Bay Area as a city-state. Even if this isn’t a bubble, the reality is that single-industry booms don’t last forever, he says.

“I think the danger today is becoming a monoculture,” said Saffo. “So we need to keep thinking about diversity in the ecological sense of lots of different kinds of people, lots of different kinds of industries, lots of different kinds of housing. That’s what protects us when booms go bust.”

Submit a question you’d like us to answer as part of our Boomtown series.

Disclaimer: N’Jeri Eaton is a friend of Casey Miner. She asked KQED her question before Miner received the assignment to answer it.

Is the Bay Area in a Bubble and Will it Burst? 13 April,2015Olivia Allen-Price

  • Chairman Meow

    It’s refreshing to see someone who understands the economics behind the issue of displacement being given the local media spot light for a change. I wrote at length on this issue over a year ago…

  • Ty Gerhardt

    My advice for Ms. Eaton…if you can, buy in Oakland instead of renting. You may not have 200k to plop down but a 30 year mortgage on a 200k condo is going to be not much more per month than you’re paying in rent as rents have gotten ridiculous and the interest rates on mortgages are low…But you need to act because values are going up because of the people leaving SF for more affordable places. I’ve lived here for 20 years and saw the writing on the wall in 2010 after I missed the last opportunity to buy just before the .com bubble burst in 2001. I stayed in my rent controlled apartment for as long as I could and when the home market dropped I made my move. If I hadn’t I would probably be living in Portland right now.

    • kskiska

      That’s assuming she’s been saving and has saved up enough for a down payment.

      • Ty Gerhardt

        True. I can only speak to how I did it. I moved here from Sacramento with a few hundred dollars in my pocket from the sale of a limited run of poetry books I self published and sold at my readings and cafes…I didn’t know anyone or have any place to land. After a few years of living here I decided I wanted to stay and I knew the only way that was going to happen was to hunker down in my tiny rent controlled apartment and save while the rent was cheap…I’m a musician and while I recently started making decent money in the last 5 years I spent a lot of time at low paying or part time jobs. It can be done, but timing is as important as income for making it happen…being able to live on beans, rice and ramen for extended periods of time…rocking a flip phone when all of your friends have smart phones…using the library to “rent” movies…surf the internet, etc. socking away what you can and keeping an eye open for opportunities…it worked for me…your mileage may vary.

      • Hey hey is a 100% financed loan and covers closing costs. fha requires 3.5% of the purchase price as a downpayment.

      • chasmader

        You can get an FHA First Time Buyer Mortgage with 3.5% down-and you can even borrow that if you have a smart Realtor who knows how to write a Purchase contract.
        I do get really tired of reading stories like these. Anecdotes about friends and co-workers [of the author] and then sloppy research which supports those anecdotes.

  • l bay

    The nature of Nothern California has always been Boom or Bust dating back to the gold rush. So the times we are in are nothing new. This is an area of extremes. I just wish Ms Eaton had been doing the inquiry about housing in 2010 or 2011 or even 2012 when the market was back in 1990s prices in some areas. I also wish there was more news coverage and exposure on the arrests, convictions and fraud charges of a relatively small group of people that are in part- responsible for some of the crazy extremes in pricing. They had the counties of Alamed and Contra Costa in their palms when it came to purchasing foreclosure at rock bottom prices during the dowturn. They may be facing some slaps on the wrist for their white collar crimes- where’s the outrage from us the people and what’s the restitution for their crimes? Anywho- where there is a will there is a way. Don’t buy anything out of fear, fear you are going to miss the boat, fear that your not keeping up with the Joneses-it never works. She could buy a place- it just would be more than likely a home further out or special housing programs with income limitations and resale restrictions or home in more marginal neighborhoods. Personally, I think one factor that also contributes to bubbles butsting/busts are man made and natural disasters.

  • Chett Garcia

    I am excited to see this conversation growing. I currently teach math at a private high school. Even though the school pays better than public, I can’t maintain a life here in the bay area and raise a family. I am leaving teaching instead of the bay area and headed to police work so that I can make enough money to live where I want and still help people. It is frustrating though, I love teaching and coaching and felt very good at it. I feel sad that after only 4 years of teaching I needed to change. I never imagined this before. I hope we can keep future teachers here, without putting ridiculous commutes on them, or making them house poor.

  • kevin-louis Barton

    This explains exactly the reason that I chose to leave. It’s not a good environment for fine artists and creatives who want to focus solely on their work without needing several jobs just to finance their creative endeavors. I moved out of the bay area in August, 2014. I’m now just 60 miles from NYC and Philly and I was able to buy a very large historic home for just 70k. I’m in a city that is culturally thriving–full of artists, musicians, performers, etc!

    • molly


      • kevin-louis Barton

        Easton, PA.

    • stephanromanov

      awesome, I want to buy a house for 70k!

  • ksalmond

    Um, nobody is getting a condo in the Bay Area for $200K. I’d love to see a regular series profiling people who have already left the Bay Area since the tech boom and info on how the creative/non-profit/low SES classes have been impacted. Or a series that could actually impact policy and change. My partner and I are both non-profit workers and will likely join the exodus soon.

    • sn0re

      What does $200K buy these days, a closet?

      • jporter313

        A parking space… maybe. But the upside is you could probably pitch a tent on it 🙂 It’s one step up from being homeless!

    • cr33per

      I thought she meant $200k as a downpayment 😛

    • trentblase

      Patently false… do you even Redfin? Just one example:

  • 7Seeker

    “Real money” lasts as long as the current Silicon Valley boom-and-bust cycle. The usual combination of “bribery, intimidation and seduction” which governs Silicon Valley “ethics” will crash as it usually does.

    But there’s also the challenge of foreign money pouring into the bay area to gobble up real estate – residential and commercial. That’s an entirely other issue which remains to be addressed.

  • elizabeth31

    Sooo. The solution is us poor people huddle closer together, while the disgustingly rich continue to squander space in the hills and buy huge condos in the cities??? Excellent. Sounds like the good old days in Europe, where people were serfs being left to squander in poverty while the supremely wealthy switched castles at whim. <3 . But it goes to show, massive wealth inequality has been around in certain societies for CENTURIES and clearly if we all keep acting like Europeans the majority of us are going to starve on the side of the Expressway out here. I vote that the world forgets this nonsense about "progress through destruction of the planet" and everyone switch immediately to a Native Aboriginal or Bushman lifestyle. And if ANYONE in the hills objects? We can show them the same "mercy" they've been showing us.

    • joojoo

      So my girlfriend and I having worked hard and saved for nearly three decades so that we could recently afford to put a down payment on a beautiful (to us) house on the hill makes us – what, exactly, Elizabeth? what are you implying? that we deserve pitchforks? what had she or I ever done to you?

  • Nick

    this is what we are worried about in the Bay Area. Some are welcome changes, downtown and around Lake Merritt is really thriving but it feels like Oakland is losing its funk and character. For instance, 4 years ago the farmers market was a great destination for good food at pretty (not always) good prices. Now though, it seems like a new coffee shop or restaurant is opening that serves 5 dollar cups of coffee. Lake Merrit has always been a hot spot but now rents are skyrocketing.

  • howieeeeee

    Particularly if you have kids, I think it’s a grind here even if you get in on the housing market. Case in point: we know a couple, both work in tech, who bought a townhouse on the peninsula during the down market, somewhere around 600K. Now after having kids they’ve outgrown the place and want to move to a single-family home. Probably have 300K in equity in their home but all the SFHs start at 1.5 mil. So they’re stuck unless they move further out. First-world problems, of course, but still, the idea you could have that much cash and still not afford a home that would be 250K in other cities is pretty absurd. As for our situation, we bought our first home two years ago in a decent neighborhood with not so great schools, and now the nagging question with two toddlers is “how are we gonna afford private school?” I’m still mostly glad we bought, but when people feverishly talk about doing whatever it takes to “get in” on Bay Area real estate as if all your problems will disappear once you do, it’s definitely not that simple.

  • bgal

    Exactly the calculations I made for myself and why I left a couple of years ago. I am now living much, much more cheaply in the Midwest. On the flip side, it is more of a struggle to find work and decent pay here, so my income has definitely gone down. In the end, the struggle to do meaningful work for reasonable pay (that is, in line with the cost of living) is a problem everywhere in the country right now. The Bay Area is an extreme case, but the issues don’t entirely disappear in other places.

  • Darin

    It’s not a bubble in the way the market in 2008 was in a bubble, but prices may not be realistic either. If foreign investors and families can continue to pay $500k (east bay) to $1000k+ (peninsula) for homes, then prices are stable. But if either of those groups reduce spending or just cut and run during the next recession, prices will likely drop, especially in the bay area.

Sponsored by

Become a KQED sponsor