The Bay Area Housing Bubble Has the US Economy in Trouble | Teen Ink

The Bay Area Housing Bubble Has the US Economy in Trouble

March 12, 2018
By BGBGBGBG BRONZE, Burlingame , California
BGBGBGBG BRONZE, Burlingame , California
1 article 0 photos 0 comments

Everywhere we look, it appears as though a new home is on the market. Going well into the millions for a simple, single story home, the amazing growth that the bay area housing market has seen in the past few years seems too good to be true, because it is. Much like the economy and our luck with major earthquakes, a disaster of a grand magnitude is simply lurking just around the corner, waiting for just a few more hopeful victims to lunge in before unleashing its magnitude in the most savage and devastating manner.

Like many things, the economy --and the housing market in particular-- goes around in predictable cycles. Most of the time, these cycles last about 8 years and generally follow a positive trend. However, towards the end of these cycles, as one might imagine, a significant negative downfall occurs. During these periods, property values can decrease by 15-40% --depending on the region-- and the economy can experience a temporary setback in growth. Looking back in recent times, the last economic slowing was in 2007/2008, when the notorious “Great Recession” occurred, an event that took place about ten years earlier. With a major event breaking a rather predictable cycle with such a considerable margin, many have wondered as to why this is. As one of the many individuals who has wondered this, I contacted Yolanda, an experienced loan officer and landlord specializing in bay area to help explain this situation.

In a succinct interview, Yolanda noted that the postoning of the economic collapse is mostly a function of the exponential growth of tech companies in Silicon Valley. The combination of a high demand for homes, a competitive workforce, and high paying jobs makes way for the uncanny postpoing of an economic downfall. The problem with this is that these tech companies amount for the majority of the economic turnover that California, the seventh largest economy in the world, makes up. Once the growth of these companies slows, a major portion of the economic output will be essentially taken out, which will likely cause a massive economic depression for not only the bay area, but for the United States as a whole.

Another alarming point about this situation is the regularity in which economic downfall linked indications are appearing. Foremost, the regularity and severity of shocks in the stock market, typically a rather accurate representation of the economy, are very worrying. An unstable economy supported by only a few beams other than Silicon Valley’s giants poses an increasingly problematic situation, a good rationale for individuals to stay out of the currently booming economy and take advantage when the economy does take the hit it’s destined to.

Much like the next big earthquake, we all know that an economic catastrophe is long overdue, and that its effects will be detrimental, but we choose to ignore it. Despite the economic luck and prosperity that many are savoring right now, we need to be aware that the economy won’t be this way for long. Remember, the last time people had such optimistic views about the economy and overlooked the warning signs, the US fell into the largest economic downfall in its history.



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