> The median price paid for a single-family existing home in the Bay Area fell from $727,000 in 2006 to $430,000 in 2009
When people talk about the bay area housing market, it's often said that it remained strong during the GFC. This fact seems to contradict that talking point.
The bay area housing market took a big hit in 2008, even within SF.
There is no reason why it couldn't happen again. Of course, even with the hit, SF was still one of the most expensive places in the US (everywhere else dropped as much or more).
The Case-Shiller index dropped 45% in SF between the peak (Apr 2006) to the bottom (Apr 2009).[1]
I'm not sure how useful it is to talk about the Bay Area as one market. During 2006-2010 things were very different from one zip code to another. I was just looking at some historical Zillow data from those years and some zip codes like Cupertino barely moved at all, for all those months. Others, like parts of San Jose dropped by as much as 50% and just recovered to their 2006 numbers recently. So maybe for some general sense of the numbers you can average the Bay Area market but when it comes to pricing an actual house and trying to see how recession-proof/prone it is, thinking of the entire SF Bay doesn't seem to make sense.
> This fact seems to contradict that talking point.
It would seem to if it reflected prices on similar homes dropping by that much. If, OTOH, it reflected a change in who was selling homes to a lower segment of the economic ladder (especially if those people were selling up the economic ladder) it doesn't show that the housing market was weak, at all.
Don't get too excited, borrowers have been more thoroughly vetted since the subprime crisis and everyone is familiar enough with the cycle by now that they'll hang on to their houses at all costs, to enjoy the recovery. Barring foreclosures, don't expect there to be a sudden wave of deals to be had.
People still have to make mortgage payments though? Given, the flush of cars sitting in the dockyard and such high unemployment rate, wont this affect housing prices a tid bit?
It will affect housing prices in working class or service industry oriented areas.
If a majority of your home owners are knowledge workers who are remote or bought a home in cash they’ll sit on them.
If the knowledge workers get laid off then the aspiring home buyer is also likely to be laid off. People who bought in cash will still sit on them because they will have no reason to sell.
That is a pretty loaded assumption about the superior financial security of the knowledge worker. It seems clear from the numbers of developers being laid off and start ups that are financially failing that this assumption is imaginary.
The only financial security a knowledge worker has, in this current economic downturn, is the essential nature of their employer or their employer's cash liquidity.
If you compare this against 2007/08 crisis. The Case shiller index for SF hasnt dropped much at all, even though the stress index is pretty high. Not sure, what am I missing. Would love for HN folks to educate me on this.
First thing to keep in mind is that the Case Shiller data you linked to only has data up to February. The FSI data is more up to date, but the big upswing was only getting started in late Feb with it being more visible in March/April figures.
The other thing to consider is that housing prices are likely to lag behind financial stress. If people are in financial stress, they are likely to sell off a second car or other luxury possessions before selling their house. Also selling a house takes time, so even when people do start selling they won't be on the market or closing sales straight away.
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[ 3.2 ms ] story [ 65.2 ms ] threadWhen people talk about the bay area housing market, it's often said that it remained strong during the GFC. This fact seems to contradict that talking point.
There is no reason why it couldn't happen again. Of course, even with the hit, SF was still one of the most expensive places in the US (everywhere else dropped as much or more).
The Case-Shiller index dropped 45% in SF between the peak (Apr 2006) to the bottom (Apr 2009).[1]
[1]https://fred.stlouisfed.org/series/SFXRSA
It would seem to if it reflected prices on similar homes dropping by that much. If, OTOH, it reflected a change in who was selling homes to a lower segment of the economic ladder (especially if those people were selling up the economic ladder) it doesn't show that the housing market was weak, at all.
If a majority of your home owners are knowledge workers who are remote or bought a home in cash they’ll sit on them.
If the knowledge workers get laid off then the aspiring home buyer is also likely to be laid off. People who bought in cash will still sit on them because they will have no reason to sell.
The only financial security a knowledge worker has, in this current economic downturn, is the essential nature of their employer or their employer's cash liquidity.
There really isn’t any incentive to sell unless you plan on buying more homes in the Bay Area on your sale. The tax hit is too high otherwise.
I noticed a number (4-5) for pre-foreclosures in Berkeley right before the shutdowns started.
Now there is a freeze on foreclosures in Ca, right? What’s going to happen when it is lifted? I don’t think it is going to be pretty.
1. Case Shiller Index for SF area (higher the the value, higher the house price) https://fred.stlouisfed.org/series/SFXRSA
2. Financial Stress Index (Ideally should be around 0. Higher the value means system is financially stressed) https://fred.stlouisfed.org/series/STLFSI2
If you compare this against 2007/08 crisis. The Case shiller index for SF hasnt dropped much at all, even though the stress index is pretty high. Not sure, what am I missing. Would love for HN folks to educate me on this.
The other thing to consider is that housing prices are likely to lag behind financial stress. If people are in financial stress, they are likely to sell off a second car or other luxury possessions before selling their house. Also selling a house takes time, so even when people do start selling they won't be on the market or closing sales straight away.