Real Estate

Real Estate – John M. Lee

It’s not ‘ethnic cleansing’

by John M. Lee

We in San Francisco have been in a housing crisis for a few years now. Recently, housing activists starting using the term “ethnic cleansing” to describe what is going on in the San Francisco real estate market! Ethnic cleansing is defined as the mass expulsion or killing of members of an unwanted ethnic or religious group in a society. Thoughts of Adolph Hitler andthe Nazis come to mind.

The idea dramatizes that as real estate and rental prices go up, people who cannot afford to pay for housing are driven out of San Francisco. I am somewhat offended at the use of the term “ethnic cleansing” being used to describe our housing crisis.

Our high real estate prices can be attributed to economic factors and legislation developed over the years.

There has been strong population growth in San Francisco. With more people, more housing is needed. Because most of the land has been built out, we cannot construct enough to satisfy the demand. What has been built are mostly high-end condos in the South of Market Area, at very high price points.

With inadequate supply and increasing demand, simple economic theory tells us prices must increase.

Another reason is that employment is plentiful. We are hovering in the 2.6 percent unemployment range, which by many economists’ standards is full employment. Because people have jobs, employers must compete by increasing wages, leading to higher income to pay for housing and other expenses.

The turnover rates of homes in the City are low, and tenants are not moving out of their rent-controlled units, limiting the housing supply and acting to push real estate and rental prices even higher.

What will bring this housing crisis to an end? A number of things need to happen and some are happening already … real estate goes through cycles of ups and downs like other business cycles.

Most importantly, we must increase the supply of housing in San Francisco to absorb all of the people who want to live and stay here. We have wonderful moderate weather, a wealth of culture, employment opportunities, restaurants that rank tops in the world, music and arts, sites to explore, many recreational areas within driving distances and a very accepting and welcoming environment.

This is a world class city and it is not surprising that people want to live here.

Our city leaders have embraced the idea of building more homes. Our top four mayoral candidates have all vowed to add more housing to San Francisco. However, I have not heard any solid and viable plans from them to do so. But it is encouraging that they get it.

Some natural migration out of the City is also happening. Unfortunately, many families with children move out of the City to go to a good school district and to live in a single-family home with a backyard; their vision of the American Dream.

This has led to our City being one with the lowest number of children, per capita, in the United States. The mortgage rate has been hovering at all-time lows for the last few years but have been increasing as of late. When that happens, buying power decreases and real estate prices will come down.

The stock market has been declining somewhat lately, which affects buyers’ ability to come up with large down payments.

The question is: When will the housing crisis moderate? Looking back 30 years at this real estate market, I can’t remember a time when I thought real estate prices were cheap.Prices are always high. My parents complained that prices were high when they purchased their home. When I speak to homeowners who purchased their properties 30-40 years ago at under $100,000, they thought the prices were high then too.

You see, over time San Francisco prices will always go up. There is even one study which shows that if you purchased property in San Francisco, even if it was at the peak of the market, and you held it for eight years or more, you cannot lose money!

Real estate is dynamic with properties changing hands and sometimes people do get displaced. But is this “ethnic cleansing”? I think not. It is more a natural function of the market at work.

Our spring selling season has begun and with it comes some record sales because of the lack of inventory. However, real estate fluctuations do occur in cycles and we are close to an inflection point at this time. So, if you are considering buying or selling, please consult a real estate professional for the latest information.

John Lee graduated from UCLA with an MBA and specializes in the Richmond and Sunset districts. For questions about real estate, contact (415) 447-6231 or

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