San Francisco Stories

Rents and Real Estate

Monday Morning, February 18, 1850, Daily Alta California,, San Francisco, California

When a stranger arrives in the harbor of San Francisco, although he may have been prepared by the marvellous stories he has heard, to see strange sights, he is generally overwhelmed with astonishment at the magnitude of the place. The city looks to him like a great ramp scattered over the hills without any apparent order or regularity. Mingled with the houses which he sees rising in all directions, he observes numberless tents, which give him the impression that all this is but temporary, and will soon vanish away when the speculative schemes of these adventurers have either been realized or defeated.

If he happens to land in the rainy season, he plunges into mud knee deep; and while he observes an extraordinary degree of business and activity, still the terrible condition of the streets, the slight character of most of the buildings, and the singular fact that the masses of population around him are composed almost exclusively of men he is still more convinced that very soon, a shifting of scenes in this curious drama of life will entirely blot out the city and leave every thing in the dull solitude which existed only a few years since. But when he has been on shore a few days, he is startled to hear these very men speaking with the deepest conviction of the rising value of real property; he hears of prices paid for a few feet of ground, greater than any realized at home, in cities which have been occupied for centuries; and where a well regulated community with all the growing wants and expanding trade of American enterprise, gives the surest guaranty of permanent value. He rubs his eyes to convince himself that he is awake; it seems so much like a strange dream of vague probabilities and absurd chimeras.

He inquires curiously about the rents; he wishes to know upon what foundation these ridiculous values are based. He learns that rents are ten times greater than at home, and if it appeared strange to him that the fee of property should be so enormously high, it seems like the wildest infatuation in all these people to pay a rent which in twelve or eighteen months will equal the whole value of the property. Here is an anomaly which no past experience can explain. It is an absurdity, a farce, where for the common amusement, each one speculates upon his neighbor, and all grow rich by mutual spoliation.

In some lucky moment, he finds a sensible person, in whose judgment he confides, because he appears to be less crazy than the rest; and he attacks him with good natured raillery upon the general infatuation. He asks him if he supposes property is worth a tenth of its market price; if rents can continue at the immense disproportion which they bear to this price; and if business can begin to realize a profit, at all equal to its expenses. He remembers the speculative war of 1836 at home, and finds in the condition of things here a greatly exaggerated caricature of that singular period.

But our Californian has looked at all this, from a different point of view. He is not guilty of the absurdity of measuring things here by the standards of a totally different order of affairs. He shows him, in the first place, that San Francisco, from its geographical position, will be the great commercial city of the Pacific. That it will command the trade of all the western coasts; that very soon it will establish the most intimate business relations with the East. That it will in time become the great mart of oriental commerce, the source of national wealth to all those countries which have secured it heretofore.

The Jews, under Solomon, the Romans, the Venetians, the Portuguese, the Hollanders, the English, have all, at successive periods, been enriched by this commerce, and placed by it, for the time, in the very highest rank of nations.

This is the "manifest destiny" of San Francisco. But there are nearer sources of wealth. The internal trade of the country will centre here. This will be the great point of supply to all the rapidly increasing population of the interior. Flourishing towns like Sacramento, San Jose, Stockton, Yubaville, Marysville, etc. will find at San Francisco alone the supplies for carrying on their trade. Having thus in brief reasoned on general principles, he will ask our incredulous stranger to walk about the city. He will show him its admirable .situation for the great destiny which awaits it. He will point out its growing magnitude and ask him to notice the buildings rising like magic in all directions; the streets opening with systematic regularity, and all the well appointed municipal regulations of a thriving community. He will show him the hills melting away, the valleys filling up and then be will ask him if this looks like a temporary settlement the camp of a moving army of adventurers.

The stranger id now prepared to reason out for himself the causes that have produced those anomalies which startled him at the first. Rents have amused him the most. Rents he finds were raised enormously high by scant accommodations. Houses could not be erected fast enough to supply the growing wants; and rents rose in exact proportion to the supply. But as the accommodations are multiplied, the rents adjust themselves to the new condition of things and gradually sink nearer to the level of the real value of property. The real value of property is measured by its adaptedness either for business purposes or for residence. Although land is the only fast property, yet it is necessarily somewhat fluctuating in its value from the fact that the currents of business alter from time to time, owing either to the greater convenience of particular localities, or to that caprice which is noticeable in all human affairs.

In New York the favorite localities of trade have changed nearly twenty times within the last thirty years, and the value of real property has altered, in some degree with every change. The rents of stores in Pearl street are not one half as high now as they were fifteen years ago. The rents of Courtland, Liberty and Nassau sts. are more than treble what they were at the same time. These changes have been produced entirely by the change in the current of trade. The same results are known in all the large commercial cities of the east. But one fact is still remarkable. The value of property in all these various localities does not alter in the same ratio with the rents, and it proves that in these cities the rents are gradually adjusting themselves more and more to a fixed and permanent value in real estate.

The rents are always highest in those countries where the profits of business are the greatest.

It will not seem strange then if while rents gradually sink in San Francisco the value of the property should gradually rise. In Europe rents scarcely ever exceed five per cent on the value of the freehold; in many instances, as in Switzerland for example, from one and a-half to three per cent is a satisfactory return from land.

In San Francisco labor is higher than in any other part of the world. The profits of business consequently are greater, the interest of of money is greater; and of necessity rents will continue to be higher here than any where else, until all these various interests are adjusted more nearly to the standard of the rest of the world.

It follows then that real property measured by whatever rule, our curious stranger may choose to apply has not been raised to an undue value, but that on the contrary if he lives long enough in the country he will observe a gradual appreciation of the highest rates in some localities while in others, the increase will be as marvelous as any that has yet occurred.

Daily Alta California, April 26, 1854