Bay Area home seller Abel Chen dreamed of Waikiki when he was planning to buy a condo.
But Chen’s fortunes changed quickly three days before the deal was closed when the buyer canceled the deal after her husband was laid off from his tech job in Silicon Valley and his family demanded his deposit back. rice field.
“They said their lives were a mess,” Chen said. “They are single-income families with young children.”
Chen’s experience is not uncommon for sellers in the once lucrative Bay Area housing market. San Francisco’s county market, plagued first by workers seeking remote opportunities and then by widespread tech layoffs, saw home prices fall for the first time in a decade for three straight quarters, with house prices falling. The median has fallen 23% in just nine months.
Compass’ San Francisco-based senior market analyst Patrick Carlyle told Yahoo Finance: Very specific factors such as tech layoffs, the highest home prices in the country, and working from home are impacting our industry more than others. “
The market woes were initially caused by the rise of remote work.
“The whole telecommuting thing has put in people’s minds the idea that they can keep an urban job but not pay for urban housing,” Carlisle said.
Average home prices in the Bay Area are higher than elsewhere in the country. Based on data provided by Compass, the median home sale price is $1,528,000 in San Francisco and $1,590,000 in Santa Clara. These prices are four times the US median price of $375,700.
Some businesses have started asking employees to return to the office, but New York City’s office vacancy rate remains at 30%, compared to 12% across the United States.
technical money loss
Compounding the slump in the San Francisco housing market is waning confidence among potential homebuyers as they grapple with the fact that tech companies aren’t what they used to be.
Since mid-2022, bonuses have shrunk and employment has fallen.
“A few months ago, it was simply unthinkable that Google and Meta would be laying off on this scale,” said Carlisle. “They weren’t laying off forever.”
The unemployment rate in Santa Clara County, roughly geographically located in Silicon Valley, has been rising since last year, reaching 3.2% in March 2023. Other Bay Area counties, including Alameda, San Francisco, San Mateo, and Marin, have also seen unemployment rates rise in the past six months, according to Compass data.
Not only have job opportunities declined in the Bay Area, venture capital (VC) investment and initial public offerings (IPOs) have likewise declined, drying up the startup and equity bonanza the region has experienced before.
Ken Rosen, chairman of Berkeley, said, “The net worth of people in the tech industry is declining, stock prices are falling, IPOs are halting, many startups are dependent on some of these things, and their money isn’t there. No,” he said. Hearth Fisher Center for Real Estate.
According to a report published by Ernst and Young, IPO transaction volume fell 8% in the first quarter, revenues fell 61% year-on-year, and VCs also cut back on private funding for startups. This is a far cry from when a loss-making company like Peloton raised his $1 billion-plus in 2019.
“Without jobs and wealth, buyers will be less aggressive,” added Rosen.
Tech giants beat earnings and outperformed analysis expectations last week, but home experts don’t think strong quarterly financials will impact Bay Area markets in the short term. Is not …
“The positive profit didn’t change our massive layoff plans,” Rosen said.
“Financial markets can move very quickly and dramatically, but the housing market is like a huge ship that only changes direction slowly,” Carlyle said. “People don’t suddenly make buying or selling decisions based on short-term changes in earnings from quarter to quarter.”
Still, this remains a region that has bounced back from the dot-com slump. House prices are still up 130% since 2012, according to Compass statistics.
“It’s a good place for a long-term investment if you believe the intrinsic value of this area is its companies and its people,” said Adam Tuni, a broker at Bay Area-based real estate firm Resolve Group. rice field.
Just ask Chen, who told Yahoo Finance that he received an all-cash offer just days after his first failed offer.
“I’m in custody now,” Chen said.
Rebecca is a reporter for Yahoo Finance and previously worked as an investment tax. Certified Public Accountant (CPA).
Click here for the latest personal finance news to help you invest, pay off debt, buy a home, retire, and more.
Read the latest financial and business news from Yahoo Finance