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Bay Area Housing Market Crash: Is It Coming?

Photo by Nolan Issac on Unsplash

There is a lot of uncertainty in the Real Estate industry with the spread of the Corona virus throughout the world. Many people are anticipating a market crash, similar to what has happened to stocks. Well, history tells us that is not going to happen. There are many opinions on this, and numerous studies have been done. None have been able to prove that losses in the stock market directly correlate to losses in Real Estate.

I wanted to check this for myself, as a number of clients have brought this up as a concern of their own. I am in no way claiming to be an expert on this topic, but I researched MLS data on pricing trends following other recent stock market crashes to find out what actually happened to real estate prices in a couple of Bay Area Markets (San Mateo & Alameda County). An article was recently published by Forbes about how the stock market has rebounded after a crash. I used the most recent instances as a basis for trying to identify any real estate pricing trends within the same time frame.

To the right is the chart outlining these events and how much the market declined + rebounded. I focused on the declines from DEC 2018, AUG 2016, AUG 2011, & FEB 2009. Granted, none of these “crashes” were as bad as what we just experienced in previous weeks, but they may be able to shed some light on the ambiguity on the condition of the real estate market.

The crash of DEC 2018 saw the S&P dip as low as -11% by month’s end. Some say that 2018 experienced one of the worst Q4s in recent history, and was one of the most volatile years in a decade. Despite all of this, real estate prices in San Mateo and Alameda Counties actually increased over the following months after the Q4 crash. Prices in both counties did start to taper off a bit starting in June, but were still above the December mark.

When the stock market took a dive in AUG of 2015 and AUG 2011, the real estate market experienced a slight increase in sold values. The dip in prices reflect an annual trend of when the real estate market cools down for the holidays (click to see charts).

In FEB of 2009, the stock market decline in turn raised real estate prices for the remainder of the year in San Mateo county. Prices in Alameda county did not see the same increase, but instead hovered around the same average through the rest of the year.

So what does this tell us about the latest stock market crash in relation to real estate prices? Recent history says that the Bay Area real estate market will be just fine. I wouldn’t expect a fallout of property values any time soon. So if you’re a home owner, no need to panic. And if you’re considering buying a home, you shouldn’t keep waiting for prices to drop, because it’s unlikely that they will. They’re more likely to go up (again).

Again, I’m not claiming to be expert that can predict what's going to happen, and this is just my opinion. There are many factors at play in this scenario that could change the outcome of the future. This outbreak has closed down many businesses and caused large financial losses outside of the stock market.

What are your thoughts on this topic, and how do you think the future of the real estate market will pan out? Leave a comment or contact me directly: / (510) 828-2711. I’d love to hear your opinions as well!


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