Plunge in tech jobs deflating majestic housing bubble in San Francisco

San Francisco is still one of the most expensive US cities to live in. But widespread tech layoffs are now plunging the area’s housing prices to pre-pandemic levels.

Highly paid IT jobs in San Francisco and the northern part of Silicon Valley began to vanish in the second half of 2022 – just as OpenAI unveiled its viral ChatGPT chatbot.

The tech giants kept saying that hiring will pick up as AI will need to be supervised by people in positions that haven’t even been created yet. Despite all this hoopla, however, the trend of people losing their jobs has continued.

The numbers are worrying. Per the employment data from the Bureau of Labor Statistics, the area’s IT industry held 107,700 jobs in April, having shed 25,400 jobs, or 19% of its total, since August 2022.

According to Bloomberg, it’s obvious that AI and its continuing boom is beginning to suppress hiring in the Bay Area.

Big tech firms are indeed investing hundreds of billions into AI – and simultaneously hiring fewer human workers, probably to save cash for AI-related expenses such as chips and data centers. The drop can also be explained by efficiency gains from the use of AI.

Now, the infamously expensive San Francisco housing market is reacting. Prices of mid-tier condos, seasonally adjusted, are down by 14.6% from the peak in May 2022, according to the seasonally adjusted Zillow Home Value Index (ZHVI).

Condo prices are back to where they were in May 2015, which was, of course, ten years ago.

A long-term drop in home prices may eventually undo the damage that the mindboggling ten-year price spike has done to the economy.

Sure, overall housing prices are still increasing, but condos and co-ops account for about half of the home sales in the area.

Of course, over the decade from 2012 through the peak in May 2022, condo prices doubled, so the present deflation is not that significant. Still, to potential homeowners, this is actually good news.

“The worst of the affordability challenges are over as more inventory, stable mortgage rates, and continued job and income growth pave the way for more Americans to achieve homeownership,” the National Association of Realtors said already in December.

A long-term drop in home prices may eventually undo the damage that the mindboggling ten-year price spike has done to the economy.