Much has been made of the increase in housing costs that will come about when mortgage rates inevitably increase from their historic lows. What is less discussed, but has been referenced by the Fed more often recently, is how our booming venture capital-backed economy in the Bay Area could suffer if rising rates began to cool the demand for riskier returns.
While I would not choose to be on the opposite side of an argument with Ken Rosen, eloquently referenced in the article below, I currently suspect that any significant increase in rates will be further in the future than currently predicted. With little to no median wage growth in most of the country, Japan embarking on a massive QE program and a rising dollar – we still have some way to go before the threat of deflation is behind us.
“San Francisco’s economy has been riding high in part because of technology companies’ easy access to capital – gobbling up venture capital dollars and taking advantage of stock gains to buy smaller companies and hire more workers. That employment growth helps feed real estate demand in the city, putting apartment and condo building pace at a peak.”