Real Estate Reporter

The housing lottery

The Federal Reserve is taking a cautious approach to interest rates as it juggles political pressure and threats to the long economic expansion. Photo: Dan Smith


The economy remains strong, as does housing. Sounds simple enough, right? But the interesting stuff is in the details.

Leslie Appleton-Young and Jordan Levine, economists with the California Association of Realtors (CAR), shared their data in a midyear market forecast: Unemployment in the state is a low 3.7 percent as of June (and only 2.1 percent in San Francisco), GDP growth rate in the first quarter of the year was 3.1 percent. Job growth was 1.5 percent as of June, and consumer confidence remains high.

Despite all of that, there is growing expectation that the Federal Reserve could lower interest rates this year, an admittedly odd thing to do in an expanding economy that was described just two paragraphs ago as being “strong.” The reason is economic uncertainty created by the long-lasting economic expansion (it has to end sometime) and the president’s disruptive economic moves, particularly his tariff crusade earlier this year.

Interestingly, CAR points out that low interest rates “aren’t spurring even more home sales.” The reasons range from the obvious (inventory remains tight, there is a lot of competition, and home prices remain at record highs) to the less obvious (the change in federal tax law that limited state and local tax deductions reduced some of the advantages of buying).

I have often joked with colleagues that real estate agents will always be optimistic about the market. It is always a good time to buy, or it is always a good time to sell. They should be so optimistic, because it’s likely to always be a market that benefits one or the other of those parties. CAR shared some data showing that for roughly the past year, 21–27 percent of people surveyed said they thought it was a good time to buy a home in California, while 45–57 percent said it was a good time to sell in the state.

So if you’re a seller, you’re also happy to see that the median sales price in San Francisco rose by 4.8 percent in the first six months of the year, reaching $1.62 million. If you’re a buyer, you don’t find that amusing. That’s because housing affordability remains terrible for all but the well-off. Statewide, only 32 percent of households can afford a median-priced home, compared to 57 percent nationwide (and less than 20 percent in San Francisco).


SB 50, the bill to allow greater density of housing around transit points, is in limbo after being sidetracked for the rest of the 2019 legislative session. (See Real Estate Reporter, Marina Times, June 2019.) But that didn’t stop activists opposed to the bill from raising the issue with the bill’s main sponsor, state Senator Scott Wiener, following a recent panel discussion at the private community center Manny’s. The panel discussion, however, had nothing to do with housing; it was a collection of notable LGBT politicians discussing, well, being LGBT politicians.

Anyway, look for SB 50 to live again as soon as the 2020 legislative session begins.


Include me in that group of observers who expected home prices to spike this year as various IPOs pumped billions of dollars into the city. But halfway through the year, prices have been muted, even dropping slightly in the spring before rebounding a bit.

“I have to assume that these IPOs will add some to buyer demand,” Patrick Carlisle, chief market analyst for Compass, told Bloomberg. However, “I find it extremely hard to believe that we will see a resurgence of the year-over-year appreciation rates that we saw last year.”

As for me? I’m not making any predictions.


Speaking of Compass Inc., the technology-fueled real estate company is only seven years old, but it has already become a behemoth. The New York-based firm is valued at $4.4 billion, and it is one of the biggest if not the biggest brokerage firm in California. Investors who have gotten on board with the company include everyone from Condé Nast’s Advance Publications to Salesforce CEO Marc Benioff.


“Over the next 10 years, we’ll repurpose at least $750 million of Google’s land, most of which is currently zoned for office or commercial space, as residential housing. This will enable us to support the development of at least 15,000 new homes at all income levels in the Bay Area, including housing options for middle and low-income families. (By way of comparison, 3,000 total homes were built in the South Bay in 2018). We hope this plays a role in addressing the chronic shortage of affordable housing options for long-time middle and low income residents.”

—Sundar Pichai, Google CEO

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