The Bay Area housing recession is already here


Whether or not the U.S. tips into a recession next year, there’s an uneasy feeling in the Bay Area that economic fallout from the pandemic is only beginning.

A nasty combination of rising interest rates, inflation, tech layoffs and a sputtering stock market have many in the region hunkering down for an economic slowdown, if not a full-on recession. Meanwhile, the state’s coffers are expected to shrink considerably, with a legislative analyst forecasting a $25 billion budget deficit tied to poor stock market performance.

“The economic storm clouds are gathering,” said Ted Egan, San Francisco’s chief economist. 

It’s a different animal than 2008. But the post-Covid economy in the Bay Area—particularly in hard-hit San Francisco—could leave the region’s builders and planners hard-pressed to prepare for the next boom. 

While a downturn may alleviate high rents and building costs in the short run, stunted housing production and an impossible financing calculus on all sides could send housing prices skyrocketing in the longer term. 

Here’s how it could happen: If new construction dips for even a few years, the city’s housing supply could become so constrained that during the next economic boom, when buyers and renters are once again flush with cash, prices could skyrocket.

“When the economy comes back, rents go further up, and then low-income folks bear the brunt of it,” said Shishir Mathur, professor of urban and regional planning at San Jose State University. “My hypothesis is, at least in the Bay Area, the housing prices are going to come back very quickly.”



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