Front page of San Francisco's Daily Alta California, June 20, 1855.  California Digital Newspaper Collection
Front page of San Francisco's Daily Alta California, June 20, 1855.  (California Digital Newspaper Collection)

Boomtown Real Estate Angst, 1855-Style

Boomtown Real Estate Angst, 1855-Style

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If you showed up in the Bay Area in the last three years or so, you know that you've moved into a world where rents and home prices appear to know no limits. The current "up" market has seen the median price of single-family homes sold in San Francisco hit $1 million. Million-dollar home sales have become commonplace in non-chic locales like Burlingame.

Rents have blown through the roof, too, with the Bay Area average for all apartments topping $2,200 last summer (and $3,400 in San Francisco, the region's most expensive market).

So we all know what rapidly inflating real estate prices look like. You have to have been here a little longer, though -- at least four or five years -- to have seen the other side of this market, when prices fall. The most recent example, naturally, was during the Great Recession. Some parts of the Bay Area saw median home prices crash more than 50 percent from peak levels in 2006 before bottoming out in early 2012.

Housing prices also ran up during the dot-com boom, then slumped when that bubble burst in 2001. Prices spiked in the late '80s, then fell in the early '90s when California entered a deep recession. (By way of San Francisco's Paragon Real Estate Group, here's a pretty good review of data on the last 30 years of the rising and falling tides in the housing market.)

Of course, not all booms and busts in the real estate market here have been created equal. The last down cycle, triggered as it was by subprime mortgage madness, was particularly brutal. It ended in mass foreclosures and to many homeowners owing far more for their homes than they were worth after the mortgage meltdown.


Likewise, the current run-up in real estate prices has led to an increase in evictions in San Francisco. Driven largely by the Bay Area tech boom, the soaring cost of housing and rising tide of displacement in the region's core cities have prompted widespread concern both about the welfare of those pushed out and what seems like the irreversible change in the character of communities.

Of course, this isn't the first time high property prices have triggered displacement alarm in San Francisco. Check out "Boom: The Sound of Eviction," a 2001 documentary that focuses on displacement during the dot-com bubble. And you can go a whole lot farther back than that.

Historian Roger Lotchin, in the sexily titled but nonetheless informative "San Francisco, 1846-1856: From Hamlet to City," traces the ups and downs of the city's early real estate market:

San Francisco's realty boom, like its commercial prosperity, began before the Gold Rush. In 1846, William Heath Davis wrote to H.D. Fitch that "land speculations have been brisk at this place. Most of the lots ... have been taken up." The next year, Governor Stephen W. Kearny released the government's claim to beach and water real estate and the market surged again, with beach and water property reaching six and seven hundred dollars an acre. Some "lots in San Francisco of 50 varas granted by the Alcalde in '44 for $15 were "worth $1000." Yet even this increase was insignificant by comparison with advances stimulated by the Gold Rush. In December 1849, Thomas O. Larkin sold eight water lots and one other for $300,000. However, late 1849 marked the termination of the first "flush times" in real estate as speculation grew rife and a deflationary reaction set in.

Lotchin says a second run-up in property prices reached its peak in December 1853: "Lawyer John McCrackan wrote, 'Our city just at this time is dull except [for] Real Estate Speculations, upon which our people seem crazy. I drew papers of a piece of property today for my friend "Hood" which in 1846 cost him five dollars. It sold today for sixty thousand.'"

But by 1855, a prolonged depression set in that knocked the bottom out of property prices. That collapse was the subject of an unsigned column in the June 20, 1855, edition of Daily Alta California. The piece is compelling for how contemporary some of the language sounds -- property speculation has been "merely a bubble, liable to burst at any time" -- and for its condemnation of out-of-control speculation as ruinous to the public good: "In a word, it has vitiated the morals of the whole community," it says.

Even if the moral focus of that statement is coming from a Victorian concern about the deleterious effects of speculation -- gambling, in effect -- it resonates in a present where social justice activists are fighting gentrification taking place amid crazy-seeming spikes in property prices.


Here, by way of the California Digital Newspaper Collection, is the Alta piece in full:

Daily Alta California
June 20, 1855

One of the greatest evils which has ever overtaken the city of San Francisco — the greatest because the parent of many other evils -- has been the overvaluation of property. It has not been properly confined to the city, but has manifested itself all over the State, and its results are to be noted throughout the length and breadth of the land. Now that Real Estate is "down," it may not be improper to say a few words concerning a subject which is of unusual interest to every permanent resident of California.

The available area of the pueblo of Yerba Buena for business purposes was very small. It extended only from about Pacific to California and from Montgomery to Dupont streets. We indicate the boundaries by streets which were laid out after the pueblo became the city of San Francisco. This space, although ample to accommodate the limited trade of 1846-7, proved wholly insufficient to meet the requirements of the wholesale immigration incited by the gold discovery.

By a natural law, the working of which never deceive, the prices of lots within the available area of the town, after those discoveries, rose enormously. Thousands of people were rushing into the State, the most of whom landed in this city. Thousands of tons of merchandise were poured in upon us, which had to find storage in town, and had to be disposed of here. Rents naturally rose to the most extravagant rate, and the price of land advanced with equal rapidity, although not in a proportionate degree. There was no telling where the thing would stop, particularly as money was most abundant, and there appeared to be no end to the immigration. So far the speculation was a legitimate one. Afterwards it assumed another character.

It was evident from the first that this state of things could not last forever. The capital which had been introduced into the country in the shape of merchandise was quickly turned to enlarging the limits of the city proper. Wharves were extended, and the water invaded on the one side, while hills were cut down and streets graded on the other. All this time rents still kept up, if not to their original point, at least to one which proved highly remunerative, and the immigration still continued larger. It still appeared that there was more room wanted, until at last San Francisco attained her present size. But the tide had turned, and rates at last, after a long period — unexampled, indeed, for duration in California — began to decline. They have been declining ever since.

The city of San Francisco is to-day out of all proportion to the State. Where we originally did not have enough room, we have now a superabundance, not merely for today or this year, but for years to come. The Real Estate speculation, which was originally a legitimate one, has for the last two or three years been merely a bubble, liable to burst at any time, and kept in a state of inflation merely by the activity of those interested in it. There is no reason why, with the present population and prospective increase of our State, fifty-vara lots two miles from the Plaza should command thousands of dollars, particularly when they are so situated as not to be available for purposes of agriculture. They should have a value, of course, and a vary considerable one. They may and do furnish legitimate objects of permanent investment for those who look forward to a return for their capital years hence ; but their intrinsic value it not to be rated by thousands.

We have been going too fast. We have followed out the speculative illusion to its full extent, and now we must stop. It is an indisputable fact that nearly all the prominent operators of 1852-3 are now bankrupt, and the mass of smaller men are utterly ruined. A year or two ago they thought themselves rich — they lived extravagantly, kept their horses and carriages, furnished their houses magnificently, and now — they have nothing. Seme few still hold out, and, with retrenched expenses, are wailing impatiently for a "rise." They will probably be sick of heart before it is realised.

But this system of overvaluation has not merely ruined those engaged in Real Estate operations : it has to a certain degree debauched the whole community. Parties who saw futures in land have neglected their legitimate callings to squat on fifty-vara lots, and drag out unprofitable years waiting for a settlement of titles. A recklessness of human life has been engendered, which has told very badly on the interests of the State at large, preventing many who would have made excellent citizens from coming to these shores. It has kept rates of interest extravagantly high, thereby eating out the vitals of the republic. A disposition to speculate desperately — in other words, to gamble— not merely in land, but in everything else, hat been fostered by it, and manifests itself in the frantic effort to "get whole," which have led men of high social standing to the commission of the most debasing crimes. In a word, it has vitiated the morals of the whole community.

The Real Estate market is at present in a curious position. The asking and offering prices for land show no approximation whatever to each other. Outside lots are unsaleable except at a ruinous discount from cost prices, while in some parts of the original plat of the city rates still keep up. The lot at the corner of Washington and Montgomery streets on which Burgoyne's building stands sold, a few days since, at auction, for $39,000, or about $1000 a front foot. At the same time, fifty-vara lots on the hill, which .were valued eighteen months ago at $12,000 to $18,000, to-day only command about $2500.

It is a singular fact, that a person owning a lot in the business part of the city, on which a brick building has been erected, can to-day borrow more money on it than it would sell for!

It is time that we began to awaken to the real value of property here. San Francisco is not New York, a city of half a million of inhabitants, with an immense population behind it; it is a small place— an important one, it is true, and destined one day to be the central point of the Pacific, but nevertheless a small one — the entrepot for a population of less than four hundred thousand people.

There is no reason why property in it should not rule at New York rates, and any attempt to force them up to such prices can only be a purely speculative movement which must, like all gambling— be it with dice, or cards, or Peter Smith titles — redound to the injury of the community at large.