Earlier today, reader ‘socalbuyer’ asked,
Jim,
Word on the street is that Qualcomm is going to layoff a couple thousand folks in San Diego this year. Wanted to get your thoughts on how that would affect the real estate market in San Diego. Most of those jobs may not find a fit in San Diego, and a bunch of Qcomers probably don’t need to sell.
Your thoughts?
My response:
It should mean an instant 10% decline in prices around Carmel Valley because buyers will expect some insurance. Sellers will reluctantly agree because they probably made that much in appreciation over the last year.
After that, it will get interesting.
The unemployed will shine up their resume and hunt for a new job for a year (or more) before ‘giving it away’. Spouse and kids won’t surrender easily either.
This is what we can expect from any disaster, natural or otherwise, that shocks the system. Buyers will be prone to hesitate, and the sellers who feel somewhat panicked will accommodate by lowering their price to clinch a sale.
Real estate isn’t known to be a liquid asset, so everyone will adjust expectations after the initial pop.
socalbuyer asked,
My understanding is that we have a total of 9000+ property sale transactions a year in San Diego…the qcom layoff number is as high as 5000. Figure 50% find a job out of San Diego and need to sell, 2500 units on the market sounds sizable, especially if most are in 92130.
Last year there were 22,079 detached homes sold in San Diego County, and 470 in the 92130 – which is only 39 per month. If pricing retreated a little, there could be a surge of CV buying but either way, it is a small portion of the market compared to the overall county. I’m guessing that there is enough underlying demand that any excess properties will get soaked up – it’s just a matter of price.
Carmel Valley prices have gone up 20% in the last 2-3 years. If sellers had to give that much back, they’d survive. The market will too – CV has too much going for it.
You also have Broadcom being bought, not sure what going to happen with that.
Overall wireless is kind of topping out I think that is a bigger concern IMO
QCOM laying off 5,000 in 2015 in SD? How can that be? How many QCOM employees are based here at SD?
Please provide source of info.
http://www.sandiegostop10.com/Employers.aspx
Qcom is the 8th largest employer in SD with around 9400 employees (I’ve also seen it stated as 13000); over 30,000 worldwide. Really hard to imagine that they would be cutting 26-53% of their local workforce unless they were teetering on the brink. Even if the word on the street is that they are laying off 2500 world wide, that would send a huge message and their stock price would be cut in half in a day. If you believe it, better bet is to short the stock than worry about house prices. Last big qcom layoff that made news was a couple of years ago when reports that they were going to lay off around 600 workers worldwide. I think it ended up being around 150+/- in San Diego.
Qualcomm employees live all over San Diego county, not just 92130. Layoffs could depress real estate throughout San Diego county next year.
If the Fed begins raising interest rates in September and mortgage rates go up, that could further depress the San Diego housing market.
I would agree that higher rates are a bigger threat than Q layoffs.
Some argue that there is no correlation between higher rates and prices going down because higher rates will come about with other forces improving like wages and employment. Nevertheless, if higher rates will depress housing prices, or at least stall the increases, what will higher rates do to rents?
Sounds more rumor than fact but anyway I would disagree,
Large Layoffs would have a much bigger impact than rates, as they would only raise them if the market could bear it (right now anyway).
IMO They would immediately reverse course (and then add a lot of gas), if RE started to crash. (it’s one of the biggest factors in the current recovery, maybe the only real factor that counts).
I don’t know about that.
Rates rising will be due to national events which may or may not coincide with what our local market wants and needs.
SD is more or less in the same state RE wise as most the State.
CA is a very large part of the US economy,