The Impact of the Stock Market on San Francisco Real Estate: Buckle up for a Wild Ride

The stock market is going nuts, right? Like many of you, I have money in the stock market (parents raised me to be diversified!) and it is pretty scary sometimes. As a real estate agent here in stable San Francisco, I often wonder what the heck I am doing dealing in markets (stocks, bonds, etc) in which I am no expert….maybe I should just have all of my money in real estate? I know many Realtors who do just that. Alas, amidst the turmoil, I must remain calm and remember diversification and investing for the long term are the right answers. And so, I bought some stocks and considered what all of this means for San Francisco home sales.

The truth is that I don’t know. None of us do. But, I can venture an educated guess based on almost 10 years as a loyal foot soldier of the San Francisco real estate market.

1. Interest rates for home loans are likely to remain very low longer than we had anticipated…like through 2013?
   1. Low mortgage rates are usually good for real estate. Buyers can afford more home which roughly equates to stable home prices.*
2. Some investors will take their money out of the stock market and turn to real estate.
   1. This happened during the last major correction so it’s probably likely to happen again.
   2. This will be mostly true for the more affluent home buyer or investor….those with more experience and more assets.
3. Some home buyers will be scared to act. They may have lost all or a portion of their down payment in the recent stock moves. Or, even if their portfolio is fine, they may be reluctant to make a decision because a lot of uncertainty remains in the world economy. Uncertainty –> Fear –> Procrastination/Inaction
   1. This will be particularly true for home buyers who do not feel confident about their employment situation.**
4. We will all want to watch the local SF Bay Area job market closely. How is our local economy? How is high-tech and bio-tech? How is finance? How about social media? Are SF Bay Area companies going public and spreading wealth around to their employees? Are the hipster bars on Valencia buzzing? Can you get a table at Flour & Water or Locanda? Yes, the world news matters. Of course. But what will largely drive the local real estate market here in San Francisco is whether or not prospective home buyers have good jobs and feel confident about paying a mortgage.

BOTTOM LINE:

There is a saying in journalism that “if it bleeds, it leads.” Yes, it’s a bit rough out there what with the weak leadership & gridlock (strong euphemism) in Washington, Europe’s debt issues, the stock market, etc…but often this stuff can mean completely different things for San Francisco real estate listings. Mortgage rates remain killer low and buyers are buying. We got 6 offers for a condo in the Castro Eureka Valley last week (in August, which is typically slow.)! Keep an eye on your personal situation and your hyper-local real estate market (Noe Valley, Inner Mission, Duboce Triangle, Bernal Heights…) and then, make a calm decision as to whether it’s time to buy or sell a home…for you. And maybe buy a stock that’s on sale too! 🙂

* The real estate market is hyper-local. Some neighborhoods will see an increase in home values while others will stagnate or decrease in value. It is very neighborhood AND property type-specific.

** This is a GREAT market for those of you with stable employment which can mean you feel your current job is stable or your skills are in demand & you can easily move around.