The recession is here (SF Bay Area real estate market)… just a question of how long it will last.
Housing prices are falling, transactions are down, commercial markets are softening, transactions are down. Local tech companies are either freezing hiring, laying people off or simply shutting down local offices. Banks, mortgage companies and title companies are already laying people off.
Over the next few years there will be hundreds of thousands of square feet of office space leases expiring in San Francisco. Many of those leases will not be renewed likely causing a severe downturn in the already beaten-down office market. The trickle-down will affect support businesses and retailers and the housing market.
I’m starting to see “seller financing” on listings… never a good sign because it means banks are probably not lending on less than A properties to less than A borrowers. Why are banks tightening?
The Fed has done two things to dampen the economy: 1) raise interest rates, and 2) stop buying CMBS debt and instead sell off its holdings starting July 2022 (CMBS = Commercial Mortgage Backed Securities). It had planned to sell off $17.5 billion in CMBS monthly.
When the Fed buys CMBS debt it pumps money into the economy. When it sells it takes money out… slows things down.
| Fed CMBS Holdings | |
| Max Holdings | $2,740,185,000,000 |
| 6/30/22 | $2,709,328,000,000 |
| Current | $2,698,651,000,000 |
| Sold Since June 2022 | $10,677,000,000 |
| Planned Selloff | $61,250,000,000 |
Yes… those are trillions and billions. The Fed purchased $2.74 trillion in CMBS over time to insure liquidity in the real estate markets. Inflation much?.
The Fed’s total bond holdings were recently $8.5 trillion. Inflation much?
The Fed has not met the stated goal of a monthly selloff of $17.5 billion and it’s stopped selling anything over the past three weeks. Notice the stock market has been going up recently? Wonder why?
Didn’t mean to get off into the weeds. All I can say to wrap is, “Hold on, it’s going to be a bumpy ride!”
| S.F. Bay Area Median Home Prices | Sep-22 | Sep-21 | Price YTY% Chg | Sales YTY% Chg | ||
| Alameda | $1,240,000 | $1,300,000 | -4.6% | -26.5% | ||
| Contra Costa | $882,000 | $897,000 | -1.7% | -26.2% | ||
| Marin | $1,735,000 | $1,710,000 | 1.5% | -3.3% | ||
| Napa | $987,000 | $950,000 | 3.9% | -21.6% | ||
| San Francisco | $1,650,000 | $1,750,000 | -5.7% | -25.8% | ||
| San Mateo | $1,860,500 | $1,975,000 | -5.8% | -27.3% | ||
| Santa Clara | $1,700,000 | $1,630,000 | 4.3% | -26.4% | ||
| Solano | $587,000 | $570,000 | 3.0% | -23.3% | ||
| Sonoma | $810,000 | $754,000 | 7.4% | -38.1% | ||
| Source: CA Assoc. of Realtors |
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