How a tech slowdown could affect Bay Area housing
Jared Sperli stashed this in sf
When dot-com stocks crashed in 2000, some predicted that Silicon Valley home prices — coming off four years of double-digit gains — would also tumble. And while there was a decline, it didn’t go far or last long.
“There was a period when prices were depressed; that’s when I bought my house,” said Russell Hancock, CEO of Joint Venture Silicon Valley. “I thought I never would be able to get in, then the market opened up.”
The home in Palo Alto was listed at “north of $1 million,” Hancock recalled. Six weeks went by, and when the home didn’t sell Hancock contacted the owners — who lived outside the Bay Area — and explained the dot-com crash. He got the house for $920,000.
Today it’s worth $3.4 million and Hancock said he feels guilty that he can afford such a house when “friends who are doctors, lawyers, highly trained people can’t get into this market.”
Ken Rosen, chairman of the Fisher Center for Real Estate at UC Berkeley, said tech is due for another correction, and that could open a window of opportunity for home buyers.
“The high-tech boom we have is unsustainable. Job growth is unsustainable. There will be, in the next three years, a correction. These unicorns (private companies valued at more than $1 billion) will have to cut jobs. That will have by far the most important impact” on the housing market. The only question, he said, “is whether it’s a minor decline or something more substantial.”
The 2001 decline turned out to be minor. From the fourth quarter of 2000 to the first quarter of 2002, the median Santa Clara County home price fell about 7 percent on a seasonally adjusted basis, said Christopher Thornberg, founder of Beacon Economics. But that was after it had doubled over the previous four years. “When you look at a graph, (the decline) looks like noise, it’s so small,” he said.
The first sign of a slowdown was an increase in inventory, said Realtor Rick Smith, owner of Windemere Silicon Valley.
“Homes started not selling,” he said. Then, people who had lost their jobs needed to sell. “You could have five houses for sale in the same neighborhood. One guy has to sell more than the rest, he lowers the price. That becomes the newest comparable,” putting downward pressure on prices overall.