Zillow experts predict Bay Area will be the nation’s worst housing market in 2020


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Economists and other real estate experts surveyed by Zillow on their 2020 outlook for 25 of the largest housing markets expect the Bay Area to have the worst housing market in the country.
The San Francisco and San Jose metro areas were the only two regions where home prices are expected to drop in 2020. Half of Zillow’s survey respondents see prices falling in the five-county Bay Area, which includes San Francisco and the East Bay, while 57 percent anticipate home prices falling this year in the San Jose area.
“The Bay Area has hit an affordability ceiling. There aren’t that many potential buyers left, even with lower interest rates this year,” said Zillow economistJeff Tucker, who quickly added that the Bay Area still benefits from its concentration of some of the nation’s highest-paying jobs.

Of the survey’s 10 markets most likely to underperform in 2020, six are in California, with San Francisco, San Jose, Los Angeles, Cincinnati, Ohio, and Sacramento making up the bottom five.
“The Bay Area might be a leading indicator of where other California markets are heading,” Tucker said.
Zillow’s (NASDAQ: Z) survey of 110 economists, investment strategists and real estate experts, conducted by Pulsenomics for Zillow, found that respondents anticipate home values will rise 2.8% nationally in 2020.
The Bay Area’s poor showing occurred even as the Nasdaq Stock Market hit an all-time high Thursday, reflecting investor enthusiasm for the Bay Area’s tech giants. Rising share prices bode well for the wealth being created by employees holding stock options and shareholders of Apple, Google, Facebook and other Bay Area companies that can use the money to buy into the region’s housing market. So tight is the connection between Bay Area real estate and Wall Street that a Bay Area realtor once asked for his outlook on luxury home prices responded, “You’re asking me to predict what the stock market will do.”

Still, Bay Area residents who might have become homeowners are assessing whether they’d be better off moving to a lower-cost city when it comes to their ability to buy a house, save for retirement and set aside money for their children’s education, Tucker said.
It’s not a coincidence, Tucker said, that the top four cities in Zillow’s latest survey are in lower-tax states: Austin, Texas; Charlotte, North Carolina; Atlanta and Nashville, Tennessee. All four have been popular destinations for Bay Area startups and residents leaving the region in recent months.
One concern is that a cooling Bay Area market could feed on itself. Fence-sitters have jumped into the Bay Area housing market in recent years, fearing prices could move even higher. Now those prospective buyers may choose to continue renting if they see home prices slipping.

Zillow’s outlook for the Bay Area housing market echoes a recent report from Bank of the West Chief Economist Scott Anderson, who also sees home prices dropping in 2020. Anderson predicts Bay Area home prices will show a 2.5% decline when the 2019 figures are tallied and will fall another 1.5% in 2020 before rebounding 2% in 2021.
“The demand for housing in California is expected to fade over the next two years because of slower job growth, weaker U.S. and global economics, quickening out-migration and weaker population growth,” Anderson wrote in his California Outlook Report, released in December.