1. Incredibly low interest rates: this comes thanks to Mr. Bernanke. Credit is not the same thing as leverage: today we have available credit, while bubbles feed on excessive leverage.
2. Market technicals (supply): low by historical standards – sellers already acknowledge that the ability to sell a home is at their discretion. Sellers are in the driver seat on most exchanges, while bubbles are driven by the demand side.
a. Limited land (real estate) in San Francisco, and constant influx of domestic and international people moving to this extraordinary city. We all know rental rates have hit all-time highs, which will naturally spillover into the ownership category. At what point does it make sense to call oneself a homeowner and stop contributing to another property owner’s (mortgage) investment?
3. Market technicals (demand): The technology and financial sector – these sectors continue to prop up real estate via demographic pull.
The above points outline why I do not believe we are currently experiencing a real estate bubble in San Francisco. More importantly, and the biggest differentiator from the bull market of 2003 – 2007 is that the lending criteria of banks is very tight and ‘money is not looking for people’, but instead people are working hard to qualify for money (a loan).