Cash-Only Real Estate Transactions and Property Prices in San Francisco, California

Abdala Rioja, Yamile E (2016): Cash-Only Real Estate Transactions and Property Prices in San Francisco, California.

Abstract

In recent years, there has been the common shared belief that international investors and other buyers of real estate in cash-only transactions have exercised an upward pressure in property prices in the city of San Francisco in California, the consequence being the crowding-out on buyers requiring access to credit. This paper examines real estate prices and cash sales for the period beginning after the last recession to the year 2015, as well as other significant drivers since the year 1998. The results suggest a contradiction to the cash-only claim, at the same time that they reveal a strong relationship between the technology sector and the real estate prices in the city.

• Item Type: MPRA Paper
• Language: English
• Keywords: Real Estate, Mortgage, San Francisco Tech Pulse, Business Cycles, Interest Rates
• Subjects: E - Macroeconomics and Monetary Economics > E3 - Prices, Business Fluctuations, and Cycles > E32 - Business Fluctuations ; Cycles; E - Macroeconomics and Monetary Economics > E4 - Money and Interest Rates; R - Urban, Rural, Regional, Real Estate, and Transportation Economics > R3 - Real Estate Markets, Spatial Production Analysis, and Firm Location > R31 - Housing Supply and Markets

References

[1] Allen, P., Shilling, J. and Sirmans, C. F. (1987). Contracting, Contingencies and Single-Family House Prices. Economic Inquiry, 25-1: 159-164.

[2] Antoniades, A., Hobijn, B. and Stirob, K. (2003). Taking the Pulse of the Tech Sector: A Coincident Index of High-Tech Activity. Current Issues in Economic and Finance, Federal Reserve Bank of New York: 9-10, October.

[3] Business Insider (2014). Robert Shiller: The San Francisco Housing Market is Getting a Bit Bubbly. December 30. Available: http://www.businessinsider.com/sp-case-shiller-home-price-index-december-30-2014-12 Last accessed: June 2016.

[4] CNET (2015). For Cash-Flush Tech Workers, San Francisco Housing Still a Challenge. March 8. Available: http://www.cnet.com/news/the-results-are-in-buying-a-home-in-san-francisco-is-still-impossible/ Last accessed: June 2016.

[5] CNNMoney (2013). Chinese Buyers Flood U.S. Housing Market. July 8. Available: http://money.cnn.com/2013/07/08/real_estate/chinese-homebuyers/ Last accessed: June 2016.

[6] Favilukis J, Ludvigson S, Van Nieuwerburgh S. 2010. The Macroeconomic Effects of Housing Wealth, Housing Finance, and Limited Risk-Sharing in General Equilibrium. NBER Work. Pap. 15988.

[7] Freddie Mac. Primary Mortgage Market Survey®

[8] Hobjin, B. (2008). TechPulse Index – Sources and Methodology. Federal Reserve of San Francisco. Available: http://www.frbsf.org/economic-research/files/Tech-PulseIndex-SourcesandMethodology.pdf Last accessed: June 2016.

[9] Iceland, J. and Steinmetz, E. (2003). The Effects of Using Census Block Groups Instead of Census Tracts When Examining Residential Housing Patterns. Census Bureau, July.

[10] Mayer, C. (2011). Housing Bubbles: A Survey. Annual Review of Economics 3(1), August.

[11] McDermid, R. (2016). Surprise! Don’t Blame Tech Buyers – Bay Area is Low on The List for All-Cash Buys. San Francisco Business Times, January 15. Available: http://www.bizjournals.com/sanfrancisco/blog/real-estate/2016/01/dont-blame-tech-buyers-cash-not-king-in-bay-area.html Last accessed: June 2016.

[12] NBER (2010). US Business Cycle Expansions and Contractions. Business Cycle Dating Committee, September 20.

[13] Paragon Real Estate Group (2013). San Francisco – All Cash Home Sales, August. Available: http://www.paragon-re.com/All_Cash_Home_Buying_in_San_Francisco Last accessed: June 2016.

[14] Quan, D. and Quigley, J. (1991). Price Formation and the Appraisal Function in Real Estate Markets. Journal of Real Estate Finance and Economics, 4:127-146.

[15] SFGate (2014). How and Why Buyers from China are Snatching Up Bay Area Homes, November 29. Available http://www.sfgate.com/business/networth/article/How-and-why-buyers-from-China-are-snatching-up-5924991.php : Last accessed: June 2016.

[16] Shiller, R. (2007). Low Interest Rates and High Asset Prices: an Interpretation in Terms of Changing Popular Economic Models. Brookings Papers on Economic Activity 2:111–32.

[17] Smith, A. J. (2015). How the Twitter IPO Will Soon Affect San Francisco Real Estate, November 18. Available: https://smartasset.com/insights/how-the-twitter-ipo-will-affect-san-francisco-real-estate Last accessed: June 2016.

[18] Thaler, R. (1997). Irving Fisher: Modern Behavioral Economist. The American Economic Review, 87-2: 439-441.