Stock Market Crash's Silver Lining for Bay Area Realtors
Posted by Pat Kitano at 7/26/2007 10:43 PM 
Categories: Real Estate Economics, San Francisco Bay Area
Categories: Real Estate Economics, San Francisco Bay Area
Another simple concept nobody is discussing... stock market crashes are good for some real estate markets, like the San Francisco Bay Area. Today's 310 point crash in the Dow is about the corporate credit crunch... bonds that back current LBO offerings, formerly called junk bonds back in the 80's, can't find buyers. Today's news was just plain bad... sliding new home sales, reinforcing the continuing saga of foreclosures and builder red ink just added fuel to the fire. This market crash feels like a panicky knee jerk reaction, that's why it bounced back from its 450 point drop. I would venture to say no one knows whether this is the beginning of the bear market or a temporal correction.
LBOs aren't directly relevant to today's real estate markets. Simply put, everybody knows there is a lot of investment capital in float that migrates en masse from stocks to bonds to real estate and back again. Treasury yields are dropping as a palliative to cushion the housing markets' woes.
For the subprime segment of housing, mostly entry level and lower income neighborhoods, the slump continues. But if you're an agent in one of the three affluent Bay Area counties - Marin, San Francisco and San Mateo - that have the least likelihood of default notices, you may be seeing bluer skies. Mortgage rates are looking better and potential buyers might just be cashing in their stock and options capital gains from this four year bull market run and look at real estate once more.
Related note: yesterday, I counseled a real estate blogger that if she ever learned about a foreclosure happening in tony suburbs Atherton or Hillsborough, she should write about it because it's the kind of "linkbait": that will get picked up by major news organizations
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