What forrestthewoods, api, and zanny are saying is that too few units have been getting built for many years. What you are saying is 'wait, they are coming'.
The first is most certainly true. The second may be true, but we'll have to wait and see how it impacts pricing. For now, you can't live in a building permit.
There were plenty of foreclosures and short sales in 2010-11, indicating overbuilding (be it because of over-buying / over-lending, regardlesss) in the previous few years (2006-2008).
The article is from 2012. There are 140 projects under construction RIGHT NOW.
There weren't many foreclosures. San Francisco represented less than 1% of foreclosures in California despite being 20% of the population, and outcomes for foreclosures didn't end up in the homes being sold as much as it did in the rest of the country.
For example (not in 2010-2011 range) in 4th quarter 2011 Sacramento lost 2200 homes to foreclosure vs. 160 for SF.
Foreclosures don't indicate overbuilding, they indicate that people can't afford to pay for their homes.
These don't indicate overbuilding. It just means you are off the cliff as soon as your cash flow turns negative.
Buying a house in this area is like condemning yourself to walk around with a huge sword hanging above your head.
Declining prices are much more due to changes in the economy (in this case, a recession), not the housing supply. Aggregate incomes and wealth dropped a lot during that time.
If you were looking for something that indicated overbuilding, I would look for declines in the ratio of rents/sale prices to median metro income. If housing is getting cheaper compared to incomes, that means supply is catching up to or outstripping demand. This could happen regardless of boom, bust, or stagnation.
The first is most certainly true. The second may be true, but we'll have to wait and see how it impacts pricing. For now, you can't live in a building permit.
BTW, here's a graph of permitting and completions in SF for the last 60 years: http://www.spur.org/files/u41/f1.png