Figure 4 San Mateo County historical employment vs. unemployment rates
During the worst year recession where 75-80,000 workers were out of work, it is amazing it took just one year to get back on track to be employed. Unemployment rate has been frankly quite low. Largest employers like Google, Apple were actually hiring. In September 2017 San Mateo had 2.7% unemployment, while Santa Clara County saw 3.3% and Alameda County experienced a higher unemployment rate of 3.7% (attributed to Oakland). This is appreciably lower than California State at 4.9% or US as a whole stood at 4.1%.
One needs to know not every city has growth. San Francisco County and North Bay had job loss. In Santa Clara which is also nick named Silicon Valley, there were a total 5,968 reported layoffs from high tech industry. As there are always one or two companies competing for same business. It is fairly common to merge or get bought out where one does not need that many employees. For example, Verizon bought Yahoo which immediate resulted in 2,100 employees forced departure including Marissa Mayer all on the chopping block. There are at least 5 local self-driving technology companies. Six smart phone development companies with heavy presence in Silicon Valley. It always has more players who was not the first get a product out and is out.
REGION Employment Growth Month Month Qtr 6mo 1yr 3yr 5yr
% % % % % %
California 16,860,300 31,700 2.3 1.8 2.2 1.5 2.5 2.7
Bay Area 3,901,414 396 0.1 1.2 1.4 1.2 2.8 3.2
Oakland 1,157,638 395 0.4 0.5 1.3 1 2.8 2.7
San Francisco Co 1,117,724 -1,174 -1.3 0.4 0.8 1.2 3.4 3.9
San Jose 1,093,275 2,236 2.5 2.1 1.9 1.5 2.7 3.4
Santa Rosa 203,618 -710 -4.1 2.1 0.3 0.6 1.9 3.3
Vallejo 138,087 -95 0.08 1 1.4 1 2.5 2.6
San Rafael 117,860 582 6.1 7.2 4.2 2.2 2.1 2
Table I SFBA Employment growth in Different cities (2016)
Recently I learned a 1,300 sf 50-year old ranch style 3/2 1 story home was sold for $1.02M. The owner expected to receive only $840K. It is facing a busy street in a B- San Jose neighborhood. The owner paid $297K about 10 years ago at a peak price. He thought he overpaid in 2007, but cannot understand the logic behind a $1.02M price. Local market is going crazy but so is the US stock valuation. Stocks are liquid but homes are fixed assets. Both can swing up if there are plenty of momentum to drive the market.
Today the interest rates are still low and the economy and jobs are plentiful. The buyers fear today fear they will shut off from the stellar market forever. I have seen 2018 growth projections for Silicon Valley like +4.8%. Local high technology startups companies given that Lyft, Uber, Twitter, Trulia, Qualcomm, Tesla, Zynga etc. exist based on the illusion they will ultimately make our lives better. Many technology companies while increase their revenue they are not yet profitable. As long as there is strong economy there is ample money that can be thrown at by fund managers. Do people like Fitbit wearable or use Nest thermostat that can do just that much?
We are closer to autonomous automobiles than we think. There are at least 5 autonomous automobile companies in SFBA. In cellular phone people are familiar with iPhone, and Samsung. But there are at least 6 smart phone companies with large R&D presence here. They all develop applications, new features like never before.
Until the economy runs out of steam, with a higher deficit, interest rate hikes to precipitate high inflation it is safe to state 2018 will be another great and active year in housing. I do feel people will be more cautious not to throw money at any opportunities though.
May be the strong economy will justify a $1,000+ per square feet in a C class neighborhood and $2,000 per square in a good school neighborhood here in SFSB neighborhoods! I personally do not see a housing bubble at least not in the immediate future. It appears school rating is not a major factor affecting house prices as before. The assumption is if all expensive home owners are moving in it will improve the quality of schools.
In 2017, it was Verizon that merged with Yahoo resulted in plant closing and former employees were dismissed including Yahoo’s CEO who would like to stay but was told otherwise. You have growth and downsize often at same time to justify a realignment in business. Technology companies always favors new things and the first company get into the market place has an edge. Those who are late including most brilliant scientists get booted. If job growth outpaces decline the technology sector will survive. While the business will shrink when inflation, high cost can will wreck the housing industry. 2018 continues to have a strong demand for more housing. Home will continue appreciating because there are still ample high paid jobs. There are, however, already some ingredients suggest it will not stay that way long.
Below is a summary of all jobs including San Francisco, Peninsula and Santa Clara County including most of Silicon Valley:
YEAR SF to SCC employment
Table II SFBA Employment growth through Oct 2017(Bureau of Labor)
At a conference in California earlier this month, Lawrence Yun, chief economist for the National Association of Realtors, also downplayed fears of a high-risk bubble.
“Prices will not fall in the Bay Area,” he said, while speaking in Santa Clara County. “As long as they’re creating jobs, there’s really no reason why” the bubble — or what is starting to look like a bubble — will burst.
The writing is on the wall all over the places. San Jose area has ~1,000 properties on the market for rent. There are few new renters as people have left the SFBA frustrated by the ridiculous housing cost. Most investors follow fools often thinking home prices will double, triple. They are enjoying the upswing ride thinking it is go even higher. Sky is the limit. When the mortgage interest rates go up a few times in 2018 reaching to 5% or higher, gas price go up most home buyers will freak out. They realize they cannot afford a $1M+ mortgage for 30 years. When the economy slows down with disappointing earnings, you will see local companies reducing head count and in one quarter or two the demand for housing diminishes, and home prices will tank.
At this moment there is no large scale hiring and there are same number people leaving SFBA than coming for jobs so unemployment is steady. If high inflation, political instability, oil price increase, local company stock prices erode people will notice changes are coming.