By Clyde Noel

If you’re looking for the real estate bubble to burst in Santa Clara County, you blinked - it already did.

That’s what Leslie Appleton-Young; vice president and chief economist for the California Association of Realtors told a group of real estate professionals last Friday in Menlo Park.

“The performance of the Bay Area real estate is a surprise. With all the job losses in Silicon Valley, we didn’t think it would come back, but it has,” Appleton-Young said. “We expect 2003 to be our second strongest year, up about 8.5 percent.”

Extremely favorable interest rates, at their lowest level in four decades, continue to have a positive impact on the residential real estate market. California consumers also are benefiting from a wider array of loan products than have historically been available.

On a negative note, the percentage of households in California able to afford a median-priced home decreased by four percentage points in 2002 compared to a year ago. The July 2002 Housing Affordability index stood at 28.

“There is no way to measure affordability, but we are 30 percent below the national average,” Appleton-Young said. “Here in Santa Clara County only 22 percent of the people in the county can buy a median priced home at $539,940, only 10 percent can purchase the million-plus homes.

Using graphs and line charts, Appleton-Young kept realtors busy asking questions. She told them to be a resource for their clients.

“If you want to know what the future will bring, check two things,” she said. “Watch the consumer confidence factor that comes out once each month and watch the jobs report. People with jobs pay their mortgage. It’s the first thing families pay.”

With the strong residential market, over the next few years watch the Central Valley. It’s the final frontier. Steady immigration from Mexico and the Bay Area is driving up housing demand and prices in Stanislaus and San Joaquin counties.

“Jobs drive the market. We lost 110,000 jobs in the Bay Area, but I feel the worst is over,” Appleton-Young said. “Government spending and consumer spending is positive. The only recession is on the corporate level.”

While residential housing is positive, the office vacancy in the Bay Area is the highest in the nation. San Mateo is down 27 percent, while Santa Clara is down to 30 percent vacancy. “It will take 5 years to straighten out the commercial property demand.”

“The Housing market doesn’t lend itself to speculative behavior for numerous reasons, Appleton-Young said. “You can’t buy it, fix it up and put it back on the market again. That type of speculative action isn’t happening right now.”

People don’t buy homes for investment purposes. Half buy to move into a bigger home, Appleton-Young said. Other reasons people buy homes include changing jobs and a changing family status. Finally, home prices tend to be sticky on their way down as long as homeowners have their jobs. With those reasons, the likelihood of a speculative bubble in the housing market is thought to be low.