Recent Northern California housing market activity has its positives and negatives. For those owning a home prior to the housing crash, increasing home prices and the ability to refinance at lower rates have helped many reclaim most of the lost home equity. However, for some who missed the buyers’ market, home prices may be heating up a little too fast. There was a large difference between the 14.6 percent annual growth in home prices and 3.1 percent annual growth in income in 2013. This loss in housing affordability has continued into 2014 as home prices are expected to grow by 11.3 percent and income by 5.5 percent. High housing costs in the region may be constraining household formation, which is a key indicator for home builders.
Northern California labor markets continue to improve, although employment growth is beginning to moderate. Northern California labor markets have enjoyed strong employment growth for the past two years, with employment growing at around 4.0 percent in 2012 and 2013. While employment growth remains well above the U.S. average, it is expected to slow to 2.8 percent in 2014. Improvements in Northern California labor markets are expected to drive the area unemployment rate down to late-2007 levels at around 4.8 percent by the end of 2014.
San Francisco is looking to expand foreign direct investment through a new initiative called LatinSF. The publically and privately funded project will create an office which will recruit foreign companies from Latin America. According to a recent Brookings report, foreign-owned establishments in San Francisco employed around 89,000 workers in 2011. This was down from the 2001 high of 110,000 workers. Most of those employed were in the services industries. San Francisco currently has strong ties with Mexico and can expand its influence amongst Latin American markets by focusing on the technologies industries.
Click here for the complete Northern California Regional Economic Update: NorthernCA 2014Q2.