Where there is a vibrant job market there is a robust real estate market. The Bay Area is in the midst of an employment boom, and it is not based on smoke and mirrors as the dot.com era was. These are real companies with sales and profits, and lots of upside to all of them – Twitter, Google, LinkedIn, Apple, Genetec, Price Waterhouse and many many more.
The tech industry is the driver, but with this employment boom some of the largest Bay Area employers are city governments, health care, universities, etc. In fact, of the largest 25 employers in the Bay Area, 20 of them are infrastructure and service type entities. They must meet the demand for services of the population growth. And, the challenge of the 4% population growth in the last four years is that new home developers have not kept up with the housing demand. They have added less than 2% of new homes built during this same period, with the population growth out stripping new home sales by two to one.
The Bay Area unemployment is at 5% or less with the State still at 7.6%. The employment boom in the Bay Area has created an economic island within California. The Bay Area jobs are extremely desirable and high paying, which is attracting a very talented work force from around the country and the world. And, even though job growth will level off over the next several years we will continue to add to the demand for housing – great for sellers and a challenge for buyers.
The Peninsula and downtown San Francisco continue to be the “hot” locations for luxury home prices and the same for rents. With the world class talent flocking to the Bay Area supply and demand are working in the favor of sellers and landlords. And it is changing the demographics of the Bay Area.
So even though the predictions for continued growth in the Bay Area is easy to make, one of the topics that may slow things down is the shortage of housing. This shortage is what is fueling the high prices for housing and it may slow growth as a talented work force is scared of relocating to a region where housing is so difficult to find and to afford. The focus is still on new construction to deliver housing and it is not likely they will be able to keep up with the demand during the next several years.
Here are my conclusions. The Bay Area jobs market is fueling the population growth and keeping real estate prices high and still climbing. The economic engines driving the Bay Area economy are based on solid businesses that will continue to grow and expand. The shortage of housing may be the factor that slows this growth over the long run. (BTW, I never saw the Zillow / Trulia merger coming.)
Those of us who live in the Bay Area are so fortunate to take advantage of the economic health of our communities. The quality of life is extreme. And, we know that the price we pay for this experience is high. I personally would not have it any other way. Contact me anytime with your questions about real estate. Until next time… Jim Walberg