Mortgage Mania Part 15 - Can you use the R-word in this forum?

December 6, 2007

The San Jose Mercury News continued its random delivery pattern at my house today, so I actually read a newspaper this morning with breakfast in a very Ward Cleaver moment. (Consistent readers will remember that I read the NY Times online).

 An article in the “biz+tech” section caught my eye: Recession Not Expected - But Forecasters’ ‘08 Outlook for State’s Economy is Grim. As I discussed in my special Halloween Edition Mortgage Mania Part 13, there is growing evidence that we will see a recession nationally in 2008 and 2009, and I gave some thoughts on how that would affect the local real estate market here in Silicon Valley. Economist Chris Thornberg of Beacon Economics was the source of the gloom and doom information, and you can see his presentation here.

According to the Merc, the fine folks at the Anderson School of Business at UCLA have gone out on a limb with “this half-hearted prediction: No recession in 2008.” The Anderson forecasters comment that they give their bold prediction “nervously” and that “real estate weakness will create a sluggish economy, but will not be enough to tip the state into a recession”.

In contrast, real estate in Palo Alto and the surrounding communities of Los Altos, Menlo Park and Mountain View is continuing to hum along, although at a noticeably slower pace than the boom years of 2004 and 2005. In general, homes are taking a bit longer to sell, but prices are holding steady, and we are still seeing crazy multiple offers on certain homes.

I think economist Thornberg put it best when he made an analogy with the recent earthquake in San Jose., stating that Silicon Valley will be shaken but not flattened by the coming economic upheaval.

Thanks for reading.

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Written by Chris Iverson, Realtor · Filed Under Real estate 

Comments

2 Responses to “Mortgage Mania Part 15 - Can you use the R-word in this forum?”

  1. Kevin Boer on December 6th, 2007 1:47 pm

    Forget the national trends. Forget the subprime mortgage fiasco. Forget foreclosures. What matters more in our economy here is the health of the big tech companies: Google, Yahoo, Microsoft, Sun, Cisco, even Facebook.

    If we are indeed in another tech bubble, as seems increasingly apparent, then we may have a real housing recession in this area. (Yes, we may use that word here!)

    The last time the tech bubble burst, it affected mostly the upper 1 or 2 quartiles; the lower quartiles by and large continued chugging along.

    But given the pressures that the above forces are themselves exerting on the lower half of the market, a tech bubble burst could be a real whammy.

  2. Tony Bauer on January 15th, 2008 6:48 am

    I agree with Thornberg. The Silicon Valley real estate market is one of the few areas in California which looks contrary to the rest of the state. Thanks to high employment rates and increased incomes recession will not hit this state that bad. Plus there are people coming into the area as well creating a demand for houses.

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