The San Francisco Real Estate Blog

Wharton prof sees nothing but blue skies ahead

It's always nice to get a point of view from outside the Bay Area echo chamber, and last week it was wisecracking Wharton real estate Professor Peter Linneman who delivered the goods at a NAI BT Commercial industry breakfast in San Francisco.

Sprinkling his presentation with well-timed barbs about the Best Place on Earth -- "Here, you call the Ten Commandments the Seven Interesting Suggestions and Three Wild-Ass Ideas" -- Linneman told the real estate suits why he believes there is no national housing bubble and why commercial property is still undervalued, despite the run-up in prices.

According to Linneman's analysis, the combined supply and demand effects of the housing market -- low interest rates, rising incomes, population growth and modest home construction -- is almost statistically equal to the rise in home prices, meaning that the market is not out of whack but in equilibrium.

This is an interesting viewpoint, and does bring up an issue I haven't addressed before: the effects of generational wealth transfer. I know that a lot of Bay Area real estate people have, on occasion, muttered, (if only to themselves) "Where is the money coming from?" and Linneman provides an answer that isn't often mentioned: It's coming from grampaw and grandma. Especially in the Asian community, which as a group is the source of the majority of the City's home buyers.