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Real Estate Reporter

It’s the recession, stupid

Illegal Airbnb rentals could cost a local couple millions. Photo: Reisefreiheit_eu

There’s an old saw in the political world that says a president is lucky to begin a presidency with a recession. During a four-year term, a downturn is reasonably likely to happen at some time. We are experiencing an unusually long time since the last recession (which was definitely a historic downturn). We’re due for one.

Jimmy Carter and George H.W. Bush both had their presidencies terminated by economic matters (yes, the Iranian hostage situation didn’t help Carter, but there are always additional factors). Compare that with Ronald Reagan, Bill Clinton, George W. Bush, and Barack Obama, who had recessions early in their presidencies and went on to serve for two terms and reap the benefits of an expanding economy. (Yes, I know, Bush II ended with one of the biggest economic belly flops of modern times, but by then he was termed out and ineligible for reelection.)

If the economic experts polled for the Zillow Home Price Expectations Survey are correct, then President Trump might be looking at a one-term presidency. He inherited a strong economy, it has continued to be strong (boosted to some degree by the recent tax cuts), but no economy defies gravity forever. The current economic expansion, the second longest since World War II, will come to an end by early 2020, according to 48 percent of the experts surveyed by Zillow.

The Great Recession was largely blamed on the housing market. Mortgage underwriting standards had been too lax, regulation had been terrible, and more than a little fraud had warped the system, resulting in the worst economic downturn since the Great Depression. If the 2020 prediction comes true, this collection of real estate experts and economists believes that the blame will fall elsewhere, because mortgage underwriting has improved. Instead, they point the finger at monetary policy as the likely trigger for the next recession.

The experts weren’t only asked about the recession. The 114 experts predicted, on average, that home values nationally would be up 5.5 percent at the end of 2018 over the same time the previous year. “On average, panelists said they expected home value growth to slow further in coming years — to 4.1 percent by the end of next year, 2.9 percent in 2020, 2.6 percent in 2021, and 2.8 percent by 2022,” according to Zillow.

There’s another slightly newer old saw in politics, and that appeared on a sign hung up in the campaign headquarters of Bill Clinton during his 1992 White House run: “The economy, stupid.” If Zillow’s brainiacs are to be trusted, we can expect a number of candidates to run on some variation of that phrase.

ILLEGAL SHORT-TERM RENTALS EARN $5.5 MILLION PENALTY

San Francisco City Attorney Dennis Herrera announced in early May that his office was seeking to penalize two property owners $5.5 million for illegally renting out apartments on Airbnb, a short-term rentals site. Darren and Valerie Lee had used the Ellis Act to evict tenants from a Clay Street property that was then used for short-term rentals, according to a statement from the city attorney’s office. The Lees paid $276,000 to the city to settle a suit over the practice, and a court authorized an injunction that prohibits them from using any of their properties in the city for Airbnb in violation of the law.

“However, a painstaking two-year investigation by the city attorney’s office has found that in just the first 11 months that the injunction was in place, the Lees violated it more than 5,000 times, booking more than $900,000 in short-term rentals and pocketing more than $700,000 in illicit revenue from 14 units,” the city attorney’s statement said. Not a single unit was registered with the city’s Office of Short-Term Rentals.

“This couple’s deceit, fraud, and greed is breathtaking,” Herrera said.

According to the city, the couple got quite creative in eluding city inspectors — but not creative enough. They reportedly used phony leases and staged the apartments so they looked as if they were lived in; dirty dishes in the sink and damp towels from the bathroom. One problem was that “every apartment was staged in the same way,” Herrera’s office noted. “They had the same Costco food items scattered about, the same arrangement of dirty breakfast dishes in every kitchen sink, same personal products in each bathroom, same damp towels artfully draped over doors as though someone had recently showered, the same collection of shoes and clothes in closets, and the same houseplants in each apartment.”

THEY’RE TOPS

Congratulations to our friends at Coldwell Banker Residential Brokerage, which was named the top residential real estate company in San Francisco and San Jose in 2017. That’s according to the 2018 REAL Trends Market Leaders report, which ranks firms by sales volume and closed transactions.

Coldwell Banker Residential Brokerage in Northern California tallied more than $19 billion in sales and 16,888 closed transactions last year.

 

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