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What would happen to Bay Area home prices if a recession

If you’ve lived in the Bay Area long enough, you’ve probably heard someone say that homes here are a great investment because prices never go down.

I thought I’d never hear the second part of that statement again after Bay Area home prices fell by more than a third during the 2007-09 Great Recession, but a real estate agent told me that just a few weeks ago. Patrick Carlisle, chief market analyst for the Compass real estate brokerage, said he still hears it a lot too.

For those who never bought a home near the peak of a housing market, or tried to sell one during a trough, it may seem as though prices never fall, because over the long term they tend to go up, at least as fast as inflation.

Since 2000, Bay Area home prices — as measured by the S&P CoreLogic Case-Shiller home-price index for the five-county San Francisco metro area — have outstripped both inflation and home prices nationwide, by a significant margin.

But since its inception in 1987, this index has fallen five times — three times during the previous four recessions and twice outside of recessions. It rose slightly during the latest recession, which lasted only two months in early 2020.

Bay Area home prices are also more volatile than the national average. They typically rise faster during boom times and fall further during recessions, mainly because the region is tied to the boom-bust tech sector and has “a relatively tight supply” of homes, said Craig Lazzara, managing director with S&P Dow Jones Indices.

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