Housing economist poses the big question: Will the Bay Area bubble burst?

SANTA CLARA — To burst or not to burst?

That was the question posed Thursday by economist Lawrence Yun at the 27th Annual Convention and Expo of the Santa Clara County Association of Realtors. He gave himself an out — as in, what if Facebook and the whole tech sector were to unexpectedly tank? Were that to happen, if corporate hiring were to take a dive, anything goes.

But, essentially, Yun, who is chief economist for the National Association of Realtors, said the Bay Area housing bubble is not likely to burst, given the region’s tight housing supply and the steady buyer demand fueled by strong job growth.

Even though mortgage rates are likely to rise three, four or even five times over the next two years, he predicted, “Prices will not fall in the Bay Area … As long as they’re creating jobs, there’s really no reason why” the bubble — or what is starting to look like a bubble — will burst.

About 1,500 real estate agents and other professionals were expected to attend Thursday’s event at the Santa Clara Convention Center. While many mingled or checked out booths manned by dozens of vendors — title companies, banks, inspection services and online real estate companies including realtor.com and Zillow, as well as a shop selling “Realtor” barbecue aprons — about 100 attendees took in Yun’s talk on the real estate outlook for the region, state and nation.

About 350,000 jobs have been created in the last five years in the San Francisco-Oakland metropolitan area and another 200,000 in the San Jose metropolitan area, he said. Given the tight supply of existing homes and the chronically low number of new home starts, he said, the current sky-high prices will probably continue to go up. In August, for example, sales were up 12 percent in San Jose while prices rose 18 percent.

And take a look at the San Jose, San Francisco-Oakland and Los Angeles metropolitan areas: Prices in those three areas, taken as a whole, have quadrupled over the last 20 years.

Less extremely, some of these trends are playing out nationally, he explained — then asked why it is that sales are up this year when interest rates are up, too.

The explanation, he said, lies in the concept of “animal spirits.” That term, coined by economist John Maynard Keynes, holds that “psychology can influence the economy,” Yun said. “If people feel good, they are more likely to go out to a restaurant or buy some clothes.”

Despite the nation’s deep political divisions, he said, consumer confidence, on average, has increased since November’s presidential election.

On the other hand, he said, “the rhetoric coming out of Washington” on immigration policy “is really hindering the availability of workers on the construction site” and contributing nationally to the lack of new home construction.

That’s because of a circumstance that he said is rarely mentioned in public conversation: Many construction workers have illegal immigration statuses and are staying away from work sites for fear of being apprehended by law enforcement.

Because of that — and because so many workers have gone to Texas and Florida to rebuild after the recent hurricanes — California could be facing “a massive shortage of construction workers,” Yun contended.

He peppered his talk with compelling tidbits, including this one: Nationally, about 15 percent of real estate agents in his organization — it has 1.3 million members — earn $100,000 or more in income from commissions on real estate transactions. But 30 percent earn less than $20,000 in annual income from commissions.

That last figure may explain why Kristi Kennelly’s talk — which followed Yun’s — seemed to strike such a chord with listeners. “Crush It With Disruption,” is what she titled her presentation.

A national speaker for realtor.com, Kennelly used to be a Broadway dancer. Among the shows in which she appeared was “How to Succeed in Business Without Really Trying” — as proof, she offered a photo of herself in costume, giving actor Matthew Broderick a peck on the cheek.

Then she put a question to the agents in the audience: “Who here feels you’re at a beginner’s level with marketing?”

Many of her listeners’ hands went up.

Kennelly told them they would do a far better job roping in online leads — and thereby boost their earnings from commissions — if they would only learn to promote themselves via video, the medium of the moment, on Facebook Live, YouTube and their own websites.

“You have these opportunities to raise your visibility — for free,” she said. “And let me ask you this: Do you guys agree that visibility supersedes ability in too many cases?”

There were pained moans of agreement.

“Then let’s get your visibility up,” she said.

Kinnelly offered a quick lesson in Video 101, demonstrating how to make a selfie video with a cell phone: “Don’t worry about polish,” she said. “Don’t worry about production values. Just be who you are.”

Article source: http://www.mercurynews.com/2017/10/19/housing-economist-poses-the-big-question-will-the-bay-area-bubble-burst/

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