Event Coverage
Silicon Valley is the ‘Florence of the Technology Renaissance'
Following reports about ths state of the Association from SILVAR officials, members received a positive economic and housing market analysis for Silicon Valley from the National Association of REALTORS® Chief Economist Lawrence Yun at Tuesday's Economic Seminar & General Membership Meeting. Yun said he is amazed at the economic growth in Silicon Valley.
Yun likened Silicon Valley to Florence during the Renaissance period. 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 overpriced? He admitted he does not know, but he believes the momentum will likely continue as big companies like Google, Facebook, Yahoo, continue to 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 noted 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.
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 jobs), the employment rate is not rising (64 percent before the recession, compared with 58 percent today). Missing in the equation are the 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.
Housing starts are recovering, but too slowly in relation to job growth, said Yun. He expects the 30-year rate could 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 metric 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 - property owners 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."
SEE DR. LAWRENCE YUN'S SLIDES
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