Bubble Proof Markets

According to the experts over at Business 2.0, there are five bubble-proof markets. They’ve listed those markets, their historical appreciation rates (from 1949 to 2006, national average is 2.3%), and the reasoning why they’re “bubble-proof.”

1. San Francisco - 4.2% appreciation rate - The reason they give for this area being bubble-proof is because of the abundant green space and the fact that builders can’t build on the green areas like Treasure Island, Presidio, and the Marin Headlands.

2. Los Angeles - 3.7% appreciation rate - The reason for LA being bubble proof is that there’s no more room, 75% of development is in areas filling out Los Angeles.

3. Seattle - 3.2% appreciation rate - Another bubble-proof city protected by the fact that you can’t make any more land, recently the city council approved new zoning laws that removed restrictions on building heights downtown.

4. Boston - 3.0% appreciation rate - The first non-West coast city listed and the first city protected by something other than the fact that there is no more land, Boston’s bubble-proofness is the result of strong wage growth.

5. New York City - 3.0% appreciation rate - It’s New York City.

So lets take the numbers above for us Bay Area folks and do a little math.

Let's say you buy a home for 500K (yeah I know "where?") and stayed in it for 10yrs.

Here's what the numbers would like with regards to appreciation...

500K

Year/New Value
1 - 521K
2 - 543K
3 - 565K
4 - 589K
5 - 614K
6 - 640K
7 - 667K
8 - 695K
9 - 725K
10- 755K

Wow! The numbers add up quick! And that's being conservative and compounding with an appreciation rate of only 4.2%/yr. Throw in a few 7 to 10% years and the numbers could start looking real good. But for arguments sake, we'll just stick with the historic average. There's no arguing with that figure.

I'm going out on a limb here and say these numbers aren't so much for San Francisco, San Francisco, but rather the Bay Area as a whole.

You just can't beat living in the Bay Area - awesome weather, thriving economy, tech headquarters of the world, restaurants galore and cultural diversity.


Have a great Sunday!

Go Niners!

Al