Economic Context
With more than half of 2019 already in the books, it’s been quite a long way from the 2008 recession. Compared to other leading developed countries, the U.S. has outperformed other leading economies since the financial crisis. Recently, the U.S. even hit more than 120 months of economic expansion for the U.S. economy. This expansion has created its share of problems and opportunities. According to the Financial Times, the unemployment rate is at a half-century low of 3.6% with job openings outpacing the number of registered unemployed by a record number. At the same time, inequality is on the rise. While the top 20% of households have seen an increase in median household income increase of 13%, the poorest fifth saw a rise of only 0.2%.
Taking in all the nuances of this economy, it remains that real estate, housing, and property are still essential topics in the minds of Americans. With the Bay Area as a focal point due to its population density and hustle, let us take a moment to look at some highlights of the 2019 housing market so far.
Rising Prices
It’s no surprise to anyone that the real estate market in the Bay Area has been historically lucrative. Even just in the last decade, in a CNBC report, “The overall median home value in San Francisco rose a whopping 90% between April 2009 and April 2019, from $715,900 to $1.36 million, according to property rental and sales company Trulia.” The rising prices are not limited to only San Francisco. Rather, median value homes in the surrounding areas like Oakland, are up “77% over the past decade, Trulia says, from $534,800 to $946,700.”
Startling Start-ups
Even with sky-high prices, the demand is not dissipating. True to the entrepreneurial spirit the Bay Area has come to embody, startups of all types are hungry for real estate. According to Bisnow, “In 2018, life science in the San Francisco area attracted $5B in venture capital, topping Boston’s market for the first time ever.” With so much money in the pot, it makes sense that hopeful infant companies need a space to incubate and grow. It’s also not slowing down anytime soon, Kilroy Realty’s Tracy Murphy says that with the size and scope of venture deals, every single deal is like “three times what it used to be.”
Tech Giant Solutions
Perhaps this clamoring for space is why tech giant Google decided to get involved in the Bay Area housing shortage. In July, Google pledged $1 Billion dollars to help ease the escalating burden. Google plans to repurpose $750 million dollars of owned properties to allow local governments to lease and develop homes. The remaining $250 million in investment will be incentives for developers to create more affordable housing in the East Bay Area. This move by Google represents a larger trend among tech giants in the Bay Area and Seattle who have tried to remedy a problem they have helped create. With greater numbers of tech workers flocking to work for these large corporations and their associated companies, the housing market has not been able to keep pace. It will be interesting in the next few years whether we can expect more private companies to take responsibility for public issues they create in dense, productive places like the Bay Area. For more on this issue, consider this article by the New York Times.
In closing, many moving pieces have been busy in the real estate market in the Bay Area. As we come to the latter half of 2019, let’s remain vigilant even through the characteristically mild Bay Area summer.
To stay up-to-date on the latest developments and news in the real estate market, see here. For more resources and information about real estate, see here.