The End Of San Francisco's High-Rise Housing Boom

A prominent developer predicts that all hi-rise housing will cease in the San Francisco due to the credit crisis. The result, says an urban think tank director, will be more sprawl development in the Bay Area as it presents the least financial risk.

"Michael Covarrubias, chief executive officer of San Francisco development firm TMG Partners, said that he doubted he would witness another residential skyscraper built in San Francisco.

Covarrubias made his comments during a real estate discussion sponsored by the San Francisco Housing Action Coalition. In an interview, he explained that most of the residential towers erected in the city during the boom were financed by multimillion dollar loans in which banks took on 80 percent of the risk.

With those institutions foreclosing in rising numbers and swallowing steep losses, few will accept such lopsided ratios again, he said.

It's not just skyscrapers that are at risk, but mid-sized condominium projects as well, said Gabriel Metcalf, executive director of the San Francisco Planning and Urban Research Association. Once developers begin construction on condos, they and their financers are on the hook for the entire structure, he said. In contrast, builders can tilt up single-family homes one at a time, drawing down their loan in increments as the market dictates."

"My greatest fear is that the fallout from the financial collapse will be that sprawl development becomes even more attractive," Metcalf said.

Full Story: High-rise plans teeter with economy in S.F.



Where Are The Foreclosures?

Most are in remote sprawl suburbs, such as Stockton. Very few are in San Francisco. In fact, real estate values in most of the Bay Area have declined dramatically, but in some neighborhoods in San Francisco they have actually increased since the crash.

It could be that high-rise condos will stop because of the risky financing involved, as this article says. But sprawl will not become more attractive. Sprawl was overbuilt during the real estate bubble.

Charles Siegel

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