According to a conference on October 21st at the Hyatt Regency in San Francisco (for which MetroIntelligence authored the real estate sections), the region's economy remains the strongest in the state and is not expected to experience a repeat of the tech-related bust earlier in the decade. Although home prices in the City of San Francisco are not expected to decline as other parts of the state, the neighboring counties of San Mateo and Marin are projected to suffer some additional pain through 2009. From a story in the San Francisco Chronicle:
Home prices and taxable sales will fall in the San Francisco metropolitan area while rents rise and unemployment climbs.
But the 1.8 million residents of Marin, San Mateo and San Francisco counties still live in California's strongest economic region and should suffer less from the housing bust than the rest of California, says a forecast being issued Tuesday. "Things will be rough here, but not nearly as rough as the Inland Empire (in Southern California) or in Contra Costa County," said Chris Thornberg with Beacon Economics...
The 113-page report calls the three-county metropolitan area "the strongest economy in the state of California at the moment," but warns that it still will be hurt by the housing collapse that has crippled the global financial system and undermined the world economy.
The forecast tries to predict economic conditions in the three-county zone through the first quarter of 2010 and suggests that:
-- Home prices will fall roughly 25 percent from their peak.
-- Taxable sales will drop by 10 percent across the region.
-- Payrolls will shrink by 2.5 percent over the next two years.
-- Rental rates are likely to continue to rise, particularly in San Francisco, where 60 percent of households are renters...
Economic softness is expected to hit commercial real estate, which had begun to recover from the dot-com bust. But the forecast assumes that the region's prestige and proximity to Silicon Valley will merely slow the growth of rental rates in the metropolitan area - put at 11 percent last year - rather than lead to a collapse.
"Rent growth is expected to fall to just 1 percent over the next year, although over a five-year horizon it should average a more moderate 3.5 percent in the region," according to the forecast.
But individual renters will get no such relief as the region's relative economic strength and desirable lifestyle draws job seekers and shrinks the vacancy rate which, at about 4.3 percent, is among the lowest in the state. "Over the last two years, average asking rents have continued to rise," noted the report, which expects the landlords' market to continue for now.
If you missed the conference, you can still download the book and the presentations here:
- San Francisco Economic Forecast Book (PDF - 39M)
- Christopher Thornberg Presentation (PDF)
- Jon Haveman Presentation (PDF)
- Fred Silva Presentation (PDF)
- Event Agenda (PDF)
- Speakers' Bios (PDF)
