Silicon Valley Housing Burst in 2018?

[Sam Shueh]

                                                                        Sam Shueh

                                                                   Realty One Group

                                                                        Campbell, CA

Below is a summary of all jobs including San Francisco, Peninsula and Santa Clara County including most of SiliconValley:

In 2017 it was Verizon merged with Yahoo that resulted in plant closing and employees get booted out including Yahoo’s CEO who would like to stay but was told otherwise. You have growth and let go often at same time to justify a realignment in business. Technology companies always favors new things and the first company get there have an edge. Those who got behind get booted out often including most brilliant scientists. If job growth outpace shrinkage the technology will survive. While it is the business model it can shrink when inflation, cost will wreck the housing industry. In my opinion 2018 continues having strong demand for housing and homes will appreciate perhaps slightly less than past years because there are still plenty of highly paid jobs. There are already some ingredients suggest it will not stay that way very long.

Below is a summary of all jobs including San Francisco, Peninsula and Santa Clara County including most of SiliconValley:

In 2017 it was Verizon merged with Yahoo that resulted in plant closing and employees get booted out including Yahoo’s CEO who would like to stay but was told otherwise. You have growth and let go often at same time to justify a realignment in business. Technology companies always favors new things and the first company get there have an edge. Those who got behind get booted out including most brilliant scientists. If job growth outpace decline the technology industry thrive. While it is the business model it can shrink when inflation, high cost of doing business will wreck the housing industry. It is my opinion 2018 continues having a strong demand for housing and homes will appreciate because there are plenty of high paid jobs. There are already some ingredients suggest it will not stay that way very long.

San Francisco Bay Area Employment 

Employment growth through Oct 2017(Bureau of Labor)

YEAR	SF to SCC employment
2007	2,235,100
2008	2,304,500
2009	2,188,700
2010	2,184,800
2011	2,349,700
2012	2,570,700
2013	2,736,000
2014	2,926,900
2015	3,114,900
2016	3,267,300
2017	2,708,200

Affordability of housing is a key issue.  I doubt the well educated seasoned home owners will stop purchase because of $10,000 property tax limit (avg is over that today).  One percent of mortgage interest increase is affecting mortgage borrowing limit by 10%. That may take 4 increases through may be 2019 to reach 1%. Today, $2,000,000 home mortgage is common. Most can afford to put a higher down. However, if the interest rate moved to say 6% from 4% one will see possibly less competition from 8 offers to 4 ? offers. But it is still a competitive market.  The real question is how the economy will affect high technology employment two years out?  I know Uber, Lyft they are all local startups wanting to go ipo. Venture Capitalists will still able to bring in seeded money at least for months.

          ----to be continued in the next blog

Sam Shueh