No American cities made UBS’s annual “bubble risk” index this year, though several of cities like San Francisco, LA, and, of course, New York are in the midst of local housing crises. Here’s how the Swiss bank’s index assessed them:
The case for San Francisco
Even though the city saw real prices go up by 65 percent since 2011 — 15 percent more than the average city UBS qualified as a bubble risk — the Swiss bank isn’t concerned about the tech town. It’s overvalued, but its booming tech companies, and the strong local economy that accompanies them, means San Fran’s soaring prices are unlikely to crash suddenly.
Ditto for LA
Though prices have climbed by 45 percent since 2012, Los Angeles’ star-studded local economy shows no signs of faltering, so UBS isn’t worried — despite LA being well above the national average increase for U.S. home prices, which currently is hovering at 23 percent.
New York’s mixed bag
Here’s the good news for buyers: New York is “fairly valued,” according to the Swiss bankers’ assessment of the city, which, even they admit, is “one of the most expensive and unaffordable markets in the world.” For four quarters in a row, New York prices rose less than 3 percent and have only risen 10 percent since 2013.
The bad news: if you’re actually working in New York, salaries are not increasing enough to make a difference. The average income went up by only 7 percent since 2013; so, if you couldn’t afford prices then, you still can’t now. The report also notes rising costs associated with financing and a decline in population as factors hampering demand.
Then there’s the issue of high-end units not selling. Since 2015, deals in the luxury market have “declined considerably,” according to the report, and average selling time has doubled in comparison to 2013.
The combination of an oversupply of luxury units, too-low local salaries and the still yet-to-come units in development, lead UBS to conclude their report by observing that “buyers will likely require additional discounts from developers.”
[UBS] — E.K. Hudson