Page 87 - Bloomberg Businessweek - November 19, 2018

Bloomberg Businessweek The Year Ahead 2019 Finance

Hot Seat Masayoshi Son

▷ His Vision Fund is a force in Silicon Valley—and a huge
investment for Saudi Arabia’s sovereign wealth fund

It seemed a courageous move. On Oct. 23, Khashoggi’s murder wasn’t enough to
Masayoshi Son, the chief of Japanese undo Son’s close ties to his Saudi patrons.
tech conglomerate SoftBank Group On Nov. 5 he announced that SoftBank
Corp., pulled out of the Future Investment would continue investing for the kingdom.
Initiative, a three-day conference in Riyadh Son isn’t the only mega-investor
hosted by Crown Prince Mohammed bin working with the Saudis—see the Q&A
Salman. While dozens of other corporate with Blackstone Group LP’s president
leaders from around the world had already on the next page—but his fund is a
snubbed MBS as outrage spread over the key player in Silicon Valley. Among the
apparent assassination of journalist Jamal companies it’s invested in are Slack
Khashoggi by Saudi agents, the stakes Technologies Inc. and WeWork Cos. If
were much higher for Son. In 2016 the concern about Saudi money remains a
Son pulled out of the crown prince committed an unheard-of hot issue, it could squelch the gusher of
crown prince’s Riyadh $45 billion to SoftBank’s Vision Fund and SoftBank capital that has swelled tech
conference stood ready to invest more. Ultimately, startup valuations. �Erik Schatzker

Real Estate stretching. In September, sales of new and 69
existing homes plunged 18 percent in Southern
California from a year earlier. They fell 19 per-
WATCH: PHOTOGRAPH BY PIPPA DRUMMOND FOR BLOOMBERG BUSINESSWEEK. PROP STYLIST: AJA COON. SON: KIYOSHI OTA/BLOOMBERG. DATA: FREDDIE MAC
cent in the San Francisco Bay Area, to the weak-
est pace since 2007.
▷ Higher mortgage rates weigh on National Association of Realtors Chief
pricey markets Economist Lawrence Yun says he expects mort-
gage rates to hit 5.5 percent next year. According
to an analysis by Zillow, a rate that high would
The U.S. housing market has already begun to add 9.4 percent to the overall cost of a home
lose its momentum as rising mortgage rates purchase, assuming no other change in price. ● Weekly 30-year
have cut demand in cities where prices ran too So sellers will have a smaller pool of potential fixed mortgage rate
hot for too long, such as Denver, Los Angeles, buyers. In the Boston metro area, only 52 per-
San Francisco, and Seattle. If borrowing costs cent of listings are affordable to residents with 5.0%
keep climbing next year, eventually real estate’s the median local income. A 5.5 percent rate
law of gravity will kick in—and sellers’ expec- would pare that share to 46 percent, says Zillow.
tations will have to come down. “I don’t think In San Francisco, where 27 percent of listings
higher mortgage rates will deter anyone who meet the affordability threshold, the figure 4.4
has made a decision to buy, but it will push would drop to 21 percent.
them to sit on the market longer, waiting for Of course, one reason interest rates are ris-
the right-priced home,” says Aaron Terrazas, ing is that the economy has heated up—so job
director of economic research for the listings growth and rising wages could help offset cost- 3.8
site Zillow. “We’re now six years into above- lier mortgages. All in all, Yun expects housing 11/9/17 11/8/18
trend home price growth. Mathematically, it price growth in 2019 to slow but remain posi-
can’t go on forever.” tive, at about 2 percent to 3 percent nationally.
Housing’s underlying affordability problem Prices in some markets may decline—which
was unmasked by 2018’s 1 percentage point would come as a relief to homebuyers feeling
jump in rates for 30-year loans, to almost 5 per- the squeeze. “There are always winners and
cent. The added cost was a blow to some buy- losers when prices move down,” he says. <BW>
ers in expensive markets who already were �Prashant Gopal