Supply is also dropping as tons of homeowners are refinancing, which balances out any drop in demand.
The biggest hit is usually on the lower end of the market where you’ll see foreclosures as middle class people lose their jobs.
If there isn't a bounceback in three months or so, the entire tech sector will deflate like a balloon.
FAANG will probably survive in some form because of cash reserves, but there will absolutely be cancelled projects and mass lay-offs. And those will have an effect on the the property and rental markets, on startup funding, and on everyone's cash flow.
Business is a herd phenomenon, and as soon as panic spreads through the herd it reverses direction - until some new excuse for optimism appears.
FAANG will lay off their armies of contractors before down sizing FTEs. Google has 125k FTEs but over 300k temps. Will it get to the point where FTEs are laid off? I’m not sure, but it seems pretty unlikely unless things don’t improve over the next few years or so
My takeaway so far is that the tech job search is going to be way more competitive for a while. Since this started, we have had about twice as many people pass phone screens. Smart people who were taking time off who suddenly want a stable income, and smart people who were laid off from less secure startups. Some very talented people that we would have hired two months ago, might not get hired when they interview next week, and it's not because we are hiring less.
$15 per month for Netflix might be one of the cheapest forms of entertainment in a recession. Classpass, not quite so much.
Facebook is struggling to keep up with site demand; more people are using it to communicate while shut in during this period of uncertainty.
Apple has enough cash on hand to not sell a single product for months - maybe years - and still keep paying everyone. But they have plenty of subscription-based revenue coming in anyway.
Amazon can barely keep up with demand to the extent that they are hiring 100,000 people and denying shipments of nonessential goods. (disclaimer: I work for AWS but have no inside information here; I read the same news stories everyone else does.)
Netflix is entertaining more people than ever who are stuck at home.
Google is, well, Google, and like Apple, awash in cash.
It’s not the FAANG companies we need to worry about; it’s the startups that were based on great ideas but needed the space and investment to incubate them but are now rapidly being depleted of oxygen.
Can you explain this? How does refinancing affect housing supply?
All three of those apply at this moment so record numbers of people have been getting refi’s this month. When fed rates eventually go up perhaps next year people will shift back to selling, or simply holding while they wait for their perceived home value to recover. Either way you have less people selling homes.
Not an expert - this is just what has been explained to me so take it with a grain of salt. Also this falls apart if the market is flooded with foreclosures.
So I'm guessing it will either stay flat or go negative. It depends on how quickly things recover once the shelter in place is lifted and how many people actually leave the area.
The housing prices are driven by lack of supply, so even if demand softens a bit, it won't have that big of an effect, I think.
Even as late as 2010 this was happening. I looked at a place on Russian Hill around that time, and it was offering rent incentives.
In my recollection, the market didn't pick up again until around 2012, corresponding with the rise in startup investment.
I was basing it on my own experience pricing the rental unit I've managed in Berkeley for the last 21 years. Each year I do a rent survey for the East Bay, and that was based on my experience there, but the East Bay is a little less price sensitive in both directions compared to SF, so that's probably the difference.
[0] https://medium.com/@mccannatron/1979-to-2015-average-rent-in...
And unlike 2008, many of these companies are more mature and much more exposed to the broader economy. Cloud computing, Ads, GSuite, etc... There are a handful tech companies that will probably thrive (Netflix, Zoom, etc...), but most of them are probably going to see big drops in revenue.
And considering that most of these companies have plenty of fat to trim (how many Alphabet moonshots are bringing in meaningful revenue, let alone profits?), I don't see how declining revenues won't result in some belt tightening. And when that starts happening, how many of the top 30% are going to be buying $2M-3M homes. The mortgages on those things are like ~$15k a month, and CA unemployment maxes out at ~$2k.
It is certainly possible that Bay area real estate weathers the storm just fine. But I really don't see a compelling case for it. Salaries can, and likely will go down. And bay area real estate is at all-time highs relative to incomes.
You have no way of knowing what the price might be when you are able to exercise your options. You also don't have to exercise them, it's your choice. Equity compensation is always a gamble.
If that’s true, well, I guess I am not in the top 30% of employees of big tech firms.
It might be good for those high renters to simply move elsewhere in couple of months when/if there will be many free places on the market. This is experience from elsewhere, from +-2008, so it might not work out exactly like this of course, but generally I would expect so.
The 2008 recession sort of bypassed tech.