Silicon Valley REALTORS® received a positive economic and housing market analysis for Silicon Valley at their annual meeting in October. While the much of the nation has experienced some gains, National Association of REALTORS®'s (NAR) chief economist described Silicon Valley's economic growth since the recession as "phenomenal."
Speaking to members of the Silicon Valley Association of REALTORS®, Dr. Lawrence Yun likened Silicon Valley to Florence during the Renaissance period. Changes associated with the Renaissance began in Florence. The Italian city's economy and writers, artists, architects and philosophers who flocked there made Florence a model of Renaissance culture.
"Silicon Valley is the Florence of the Technology Renaissance," said Yun. The Valley is the place where highly-skilled tech workers, young and ambitious engineers and innovators with innovative strategies have converged.
Is Silicon Valley's housing market experiencing a bubble? Are homes prices overpriced? Yun admitted he does not know, but he believes the momentum will likely continue as Google, Facebook, Yahoo and other tech companies and start-ups here continue to grow, innovate and produce results.
As for the nation, having ended the second quarter with a 3.9 percent GDP is a good sign, but Yun said the GDP has been underperforming annually. The year-over-year GDP has been subpar, under 3 percent for 10 straight years. Growth has been sluggish.
"Something is missing,' said Yun.
Statistics can be deceiving. While the current 5 percent unemployment rate is normal and the nation appears to be creating jobs (from a job loss of 8 million during the recession to a gain of 12 million), the employment rate is not rising (64 percent before the recession, compared with 58 percent today). Missing in the equation are people who are out of the labor force, those who have given up looking for jobs, said Yun.
"We are treading water at the nationwide basis," said Yun.
Yun projects the economy will improve moderately. He forecasts GDP will grow to 2.3 percent by year-end and reach 3 percent by 2016. Job growth will be at 2.4 million in 2015 and rise to 2.7 million in 2016. Consumer confidence will continue to improve, as will the housing market.
Housing starts are recovering, but too slowly in relation to job growth, said Yun. He expects the 30-year rate to rise and possibly reach 5.2 percent in 2016.
Real estate is all about location and the local economy, said Yun. For its part, California is performing well, ranked sixth on the list of top job performing states.
"Silicon Valley is a very special market, there are no metrics to compare," marveled Yun. "It has so much potential."
Rents are at a seven-year high and though there is much concern, Yun said rent control is not answer to the problem. Yun explained once rent control is imposed, a city will not be the same in 20 years - landlords will lose the incentive to make improvements to their property, which will ultimately lead to a deterioration of the quality of life, even health hazards and under-the-table deals and, ultimately, a drop in property values.
"There are two ways to destroy a city – by bombing it, or imposing rent control," said Yun. "Rent control is not the solution."
The Silicon Valley Association of REALTORS® (SILVAR) is a professional trade organization representing over 4,000 REALTORS® and Affiliate members engaged in the real estate business on the Peninsula and in the South Bay. SILVAR promotes the highest ethical standards of real estate practice, serves as an advocate for homeownership and homeowners, and represents the interests of property owners in Silicon Valley.
The term "REALTOR®" is a registered collective membership mark which identifies a real estate professional who is a member of the National Association of REALTORS® and who subscribes to its strict Code of Ethics.
Variations of this article have appeared in local area newspapers.
For further information, please email or call the SILVAR office at (408) 200-0100.