But the “there’s a bubble bursting” crowd had a really bad month.
Let’s start with housing. It is where we had the last bubble. From 2004 to 2006 prices soared, low down payment loans were made and lots of homes were built here. The economy was rolling along. But prices got way out of line with incomes and people bought homes some could not reasonably afford. So well before the recession (the housing bust was a major factor in causing the recession) home prices fell sharply and foreclosures skyrocketed.
One of these conditions is present today in the region—housing costs rising much faster than income. But the other factors are missing. Instead of a surplus of new housing fed by easy money, we have a shortage of housing, tighter credit standards and record levels of cash purchases.
The latest Case Shiller home price index for the region, which matches comparable homes, rose at twice the national average for the year and above the national average in the past two months though price growth was closer to the national average but positive seasonally adjusted.
Job estimates for 2014 and 2015 were released last week and the Bay area grew faster than previously thought (3.8% versus 3.4%) for the year ending in December and the increase for the year ending in January was 3.7% or nearly twice the national average. The San Jose metro area grew a bit more slowly than previously reported while the SF and Oakland metro areas added jobs at a faster pace than previously reported, all areas growing far faster than the state and nation.
Unemployment rates in SF, San Mateo and Santa Clara counties are under 4%.
The national news was more positive also with a strong jobs increase and more evidence that some people are coming back into the workforce.
And the stock market, which had reached major correction territory, recouped more than half the losses. The other bubble in 2000 was in startup companies that had business plans and employees but no business. It was a true bubble with stock prices correcting before not after jobs turned down. There will always be startups in the Valley that do not make it but today our economy and major stock valuations are in big companies with millions of customers.
The numbers say the Bay Area economy is pretty strong and expanding though probably at a slower pace than in recent years. The real danger and possibility, I think is not a bubble like 2007 for housing or 2000 for the stock market and jobs but a failure to address housing and transportation/mobility challenges that could impact regional competitiveness and prosperity.
The good and also scary news is that we hold the future in our hands to a great extent. Our decisions will matter. The bubble in 2000 brought down stock prices but also caused large job losses and rising unemployment. The housing bubble that burst in 2006 brought down prices but also caused foreclosures, bankruptcies and contributed to a recession.
Addressing the impacts of growth while not killing the vibrancy of our world leading innovation center and pool of talent IS the challenge we face. Where better to find solutions than here?