Morgan Stanley Has A Bleak Message For The San Francisco Housing Market

San Francisco Rental Prices for Homes and Apartments

It’s going to take a lot more than  a slowdown to stabilize rent and home prices according to a note to clients sent out by Morgan Stanely analyst Vance Edelson.

In his note Edelson says, “it will take more than a mild slowdown in tech activity to break down favorable supply-demand fundamentals in the Bay Area.”

That’s a favorable situation for homeowners and landlords, not renters or new buyers.

He adds, “We think supply/demand would remain favorable even if current Bay Area job growth forecasts were cut in half.”

There is a massive housing shortage in the Bay Area caused by a tech-driven community that has rapidly increased jobs.

New apartment supply is expected to increase by only 15,000 units in 2016-2017, they said.

Right now, the forecasts point to 145,000 new jobs in the Bay Area. 145,000 new jobs versus 15,000 new units is a ratio of 9.4x.

When you have more people looking for places to live than there are available units, you end up with skyrocketing rental and home purchase prices. Even if that number were cut by 80%, there would still be a shortage in the area.

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The traditional ratio is four jobs for every apartment, or a 4x ratio.  In 2015, the job/supply ratio was 8.9x in the area according to the note.

As the note states, there needs to be “more than a slowdown” to stabilize home and rent prices.