On Tuesday afternoon, I was joined by approximately 200 other Realtors at the First Republic Holiday Luncheon at The St. Francis Yacht Club adjacent to Crissy Field and the incredibly picturesque SF Yacht Harbor.
Putting aside the free lunch (which was surprisingly tasty), First Republic annually invites one of their top wealth advisers, Alan Zafran, to share his views on where the markets currently sit and more importantly, what lies ahead, and it's always a worthwhile way to spend the afternoon . . . (Thank you, Alan.)
Keep in mind that while we dined on perfectly-cooked salmon and polenta over lunch, the Dow Jones Industrial Average fell nearly 800 points and bond yields plummeted [In fact, short and long-term yields inverted for the first time in history] as investors’ doubts over the U.S.-China trade truce renewed anxieties about the pace of economic growth. (The Wall Street Journal; brackets inserted.)
"Everything you need to know about the economy right now can be summed up in two things, Alan said, "interest rates and trade tariffs with China."
He also suggested that "given the complexities involved, trade tensions with China may persist longer than one might imagine" as President Trump's time in office has term limits, while Xi Jinping could conceivably hold power for the next 20 years - or more. Thus, China can afford to kick this can down the road almost indefinitely (and likely will), while waiting for the next, less combative president to take office. (One can only hope.)
How do Alan's predictions bode for real estate and our Bay Area housing prices, specifically? Typically, significant corrections in the stock market translate to a corresponding correction in the Real Estate market within 13 months, so it follows that we may be looking at softening sales in the near term.
We've already experienced downward price adjustments this fall and more days on market (DOM) than we've all become accustomed to, leading to a slurry of "off-market" opportunities that are hoping to capture last spring's peak prices before having to test these cusp-properties ON market. (Unfortunately, that ship may have already sailed.)
As to whether this softening pattern will continue into 2019, is still anybody's guess. More than 600,000 people have moved to the Bay Area in the last five years and nowhere near that many housing units have been created to accommodate them.
In short, we live in a highly-desirable and unique marketplace with a fair amount of well-educated, well-compensated employees/entrepreneurs, enviable year-round weather, and a good number of IPOs set to emerge in the near future, AND let's not forget - the Bay Area marketplace still has far LESS SUPPLY than DEMAND, which is the single most important factor in driving housing prices UP!
So that's all positive, right? (Not necessarily.)
Lack of inventory doesn't automatically make us lucky Bay Area residents immune to higher interest rates, escalating property taxes, less favorable tax write-offs, consumer fatigue, heavy stock-market losses, high-tech upsets, OR tremendous wealth disparity, all adding to the fact that starter homes (in the Bay Area, at least) have become unaffordable for many, and often eliminate move-up sales altogether. (People are staying in their homes much longer.)
The inability, or lack of desire to move, culminates in a shortage of "churn" that more normalized markets tend to experience. In short, affordable housing creates the foundation on which move-up Buyers MOVE! (Buyers need to get established in the marketplace FIRST before they can leverage their gains.) So even if you're long past the point of "starter" home status (as am I ) a healthy economy has a stake in entry-level Buyers and in retaining a strong middle class. (To be clear, that's my own point of view; I wouldn't presume to speak for Mr. Zafran.)
As the economy pertains to your home and your future plans, IF a move is definitely on the horizon - but a few years off - you may want to consider accelerating that decision as 2020 is likely to see a very different marketplace than 2019 may deliver, and one that's potentially VERY different than the last "BULL" decade DID deliver. (Did you follow that?)
What I'm saying is let's hoist those sails now while the wind is still favorable.
(Not just a Realtor, but a consultant in all things house and home, I'm here to educate, explore, examine and refer . . . In short, you may count on me to take care of your home as if it were my own and anyone who knows me, knows I take pretty darn good care of my home.)
How can I help you?
Julie Gardner, has been writing The Perspective for 18 years and has published more than 670 essays on life and real estate.