>> building a better bay area, moving forward, finding solutions, this is abc 7 news. >> good afternoon. you are watching getting answers live on abc seven. we are asking experts your questions to get answers for you in real time. we are talking about the housing market in the bay area and across the country. we are joined by the chief economist for redfin. also, raising kids in san francisco. why leaders say a new department can help with challenges. first we tackle the u.s. economy and fears of a recession. joining us live is the deputy chief economist for moody's analytics.

thank you for being here. >> thank you for having me. >> how much did the economy shrink from april through june? >> the economy was down -.9% on an annualized basis and it was a quarter after shrinking 1.6% in the first quarter. we are down from the start of the year. >> what are the factors making it shrink? >> a lot of technical factors. we imported a lot more than we exported because of our strong dollar at the moment. it is cheaper for us to import goods. the inventory. inventories are swinging around as we come out of the pandemic. has been difficult for businesses to understand or appreciate what the demand is. the inventories are swinging. they tended to drag down the

second quarter gdp. >> you have been doing this for a long time. are these numbers are alarming to you? should we be alarmed? >> gdp on its own is an important measure but it is not the only measure. recessions are actually determined by a committee of economists at the national bureau of economic research and a look at gdp plus a number of other factors like the labor market. they are defining recession as a time when the economy is contracting in a prolonged, pervasive way. they are looking rather that broad based type of slowdown. although we had this negative gdp number, we have a strong labor market. consumers have a good balance sheet. debts are relatively low compared to their income to

banks are in pretty solid shape to their already number of positives to offset the negatives that are out there. i will say whether or not we are in a recession right now, clearly things are slowing down and there is an elevated risk of going into recession if we are not there already. >> when will we know for sure whether the u.s. will be going into a recession or whether we are in one? there are a number of factors that play into this. when will we know? >> there is the official determination. that comes with a long lag. the economist trying to determine when a recession occurs, their main focus is to get the right answers so they are waiting for all the data. . they are looking at all the statistics to come in. there is a lot of revision data that occurs at if you want to get a quick read and know if we are going into a recession, look at the labor market.

if we see the unemployment rate starting to take up where you see unemployment going closer to 4%, that is a telltale sign the recession has already begun. usually jobs are the last thing to go. if we see the jobs weakening, that is definitely an indication we are in recession. before we get there, you can like spending and confidence as an early age and clearly those are weakening. >> usually don't see a recession when unemployment is at a record low and we are seeing job growth . explain how that works because it is complicated to if you could take into that a little bit more. >> it is complicated. there are a lot of moving parts to the economy and we are measuring the economy imprecisely on any given day.

it is difficult to tally up anything produced in the economy especially when you have wild swings. this is not an easy number to calculate when we think about gdp. there is a good chance that number will get revised. it could get revised upward. a year from now, we might look back and based on all the data we have, we might conclude gdp did not fall in the second quarter. it may have risen or did not fall quite as much. there is a lot of noise in the data there. that is why we need to take the broader view of what is going on in the economy and get other sources of data and information. the job market is an important one. if the job market is performing, there is a good chance people are going to be feeling confident and spending. our number one risk is inflation. we are following inflation statistics closely trying to get a gauge on whether inflation is

under control, trending under the right direction or if the federal reserve is going to have to act more aggressively to slow down the economy and risk putting us into recession. there are a number of factors . >> this might take you a while to answer this but what can be done now and what is being done to avoid a recession? >> great question. right now as i mentioned, inflation is the number one priority. the federal reserve has two objectives. they want to make sure prices are stable and that is nothing case right now. they care about the labor market. they want to make sure there are ample job opportunities and the unemployment rate is low. that actually is the case right now. because of the inflation situation, they are being very aggressive in terms of hiking interest rates. they hiked the federal funds rate by 75 basis points

yesterday so they are increasing the cost of borrowing for consumers, for businesses, for everyone. the objective is to try to slow down the economy, slow down demand. prevent us from spending a lot to meet the amount of supply that is out there in order to tame that inflation. that is what the fed is doing outside of the federal reserve, you have the administration and congress trying to look for ways to address inflation in the energy markets. we have released our strategic reserve to put more oil out there and keep the price rising even higher. we are working with europe to try to get prices down a bit. there are some things we are doing but a lot of the things that would make a big difference in terms of the supply side of the economy take a long time. in the immediate term, it is up to the fed to try to slow down

on the economy but the real trick is to slow it down enough without actually tipping us into recession. >> it has been fascinating talking to you and i am sure we could spend the entire show talking about this but we will save more for a later time. hopefully you will join us again to >> absolutely. thank you so much. >> we cannot talk about the economy without talking about the housing market. up next, redfin's chief economist will join us with the trends and what to know if you

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drawing is live is the chief economist at redfin. thank you so much for being here. >> thank you for having me. >> let's talk about how yesterday's rate hike plays into this. what can we expect after that announcement? >> after the announcement, 10-year treasury yield's went down which is a sign mortgage rates are going to come down as well. it is kind of counterintuitive but mortgage rates are not just a prediction of interest rates night -- interest rates right now. up to 30 years is how long a mortgage can last. the good news is coming out of the gdp report if you can see the good news is that it seems like what the fed is doing is working in terms of slowing down the economy. hopefully this weakness in the economy does not last too long.

>> let's go back a few months ago. the housing market was so hot for people looking to sell. it was stressful for people putting in bids and being out. was the slow down overdue? >> a bit overdue. i think interest rates were low for a long time and that allow the housing market to overheat. the pandemic itself, people could not and money on other items tickets and money on housing led to a lot of fast price appreciation. we are experiencing a return to earth that is needed because we don't want to turn this into a bubble but now the housing market is much slower so those worries are in the last now. >> the national reporter of -- what are the stats you are seeing? >> we are seeing fewer pending sales, fewer offers being made. that is because buyers cannot stomach these mortgage rates so

they are being a lot more cautious, either dropping out of the housing market or turning to the rental market and adjusting to more affordable homes. >> is this bad news for people that need to take out a large loan? probably good news for people able to buy with cash which we did see a lot under the last year. people showing up with cash and closing on homes that way. >> what the stock market being down significantly from the getting of the year, a lot of people don't have large reserves of liquidity to put into housing. the good news is there a lot of people who could not compete against that cash earlier this year. they were using an fha loan or another down payment loan. mortgage payments are going to be higher because mortgage rates are higher and prices are higher but at least they can win the home.

>> what parts of the country are you seeing people where they are dropping home prices because we have seen that. is it specific parts of the united states, certain cities, states? where are you seeing that? >> price drops are higher than we have seen since at least the bottom of the last housing crash. those price drops are happening in markets that were overheated a couple months ago. boise, idaho or las vegas and some of these other migration destinations. a lot of cities in florida had price drops. the bay area has also had price drops. the mortgage rates really hit hard. when you're looking at a $1.5 million home, you cannot come up with hundreds of thousands of dollars extra's when you're looking in that price range. >> we are seeing housing prices drop here in the bay area should even san francisco? >> san francisco was the only metro that had sale prices drop.

we are seeing prices come down across the board but that is sellers meeting buyers where they were at. the bay area is special because of remote work a lot of people are not putting up with the hot prices the bay area has anymore and they are going to sacramento or phoenix or austin, texas where they can get a lot more for their money and san francisco has a lot of the tech jobs that can go remote to >> i read a redfin article that said san francisco had the highest net flow of any u.s. metro in the second quarter. can you dig into that a little bit more? you just mentioned it. >> that is always -- that has always been true as long as i looking at the data that san francisco has been at the top in terms of places people are leaving and that is because of how expensive san francisco is to it is the most expensive housing market in the country. the pandemic made that more easy for people to pick up and go

somewhere else because of remote work. before it was this trade-off. you could work for a company like twitter or facebook but you had to go into the office and be close to the office but now that is not true for a lot of tech workers. unfortunately for those people who live in the places they are moving, they are seeing prices go up with all the extra money going in. >> any advice for anyone first looking to sell and next, anyone looking to buy in the next few months? >> if you're looking to sell, it is not like the sky is falling. the housing market is still functional. if you price modestly, a little lower than what the next door house sold for earlier this year, you will probably get an offer. i don't think this is a reason to worry. if you're looking to buy a home, it is going to be more expensive because of the higher mortgage rates. i would advise you figure out exactly what you can afford, see

if there are homes in your price range you feel you can stay in for five years at least. if they are your price range, go for it because later on you can refinance and get the lower mortgage rate but if you delay for too long, chances are once we are out of this weirdness in the economy the housing market is going to go back to being ultracompetitive so there can be an advantage of getting in when it is tamer in terms of competition should >> what you expect to see in the next six months to a year? >> in the next six months, expect prices to come down very modestly. we sell prices go down .4% between may and june. that small price growth month over month might continue into next year. when we look out a year, depends on the strength of the economy. if we are in a recession, that means mortgage rates will come down. i expect once the academy is looking in better shape housing

market will be the place that leads the economy because people really want to buy houses it is just they cannot afford to do it. >> thank you so much for your time should i know you are on twitter so you put out a lot of information for people to see so make sure you follow her on redfin. from housing to childcare, san francisco is an expensive place to raise kids. our media partners at the sf standard are digging into how i'm jonathan lawson here to tell you about life insurance through the colonial penn program. if you're age 50 to 85, and looking to buy life insurance on a fixed budget, remember the three ps. the three what? the three ps? what are the three ps? the three ps of life insurance on a fixed budget are price, price, and price. a price you can afford, a price that can't increase,

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what you do? >> this is the moment to build a better bay area. join us. >> welcome back. san francisco is trying to answer the call to become of the place to raise kids. it is no secret in one of the wealthiest parts of the country many families are struggling. our media partners at the sf standard have publhean article on this reporting that san francisco's number of children under five dropped by 5% during the first year of the pandemic. city leaders believe a new department could turn things down. joining us to explain why is the writer of the piece. >> thank you for having me. >> explain your findings. why did the city see such a drop in young children during the pandemic? >> there are many reasons behind that. the city itself saw a big

outmigration but it is no secret it is hard to raise a family in san francisco to khalili during the pandemic when we were all a little bit locked down. many families decided to choose another place to live or decide to move out of san francisco during that. . the data has not come back but that was a big shift weaving families out of the city during that first year. >> what where there are other than it gang expensive to live here? what were some of the specific reasons? >>here are reasons like the difficulty in finding childcare which is one of the focuses of my article. schools and education. san francisco was one of the cities that kept remote learning on the longest. general quality of life issues that made it difficult to stay in the city for a lot of these young families. >> why do city leaders believe a

new department is the answer and what would that new department be? >> this would be called the department of early childhood. that would combine two previously existing departments . city leaders think by putting all these resources, these programs under one umbrella it will make it easier to direct resources to those most in need and it will make it easier for child care providers, day cares, early education providers to communicate with the city in a more effective way. >> can you talk about some of the support coming for this or maybe those against it? what are you seeing? >> it is hard to say there is a big constituency against early childcare or education but there have been some concerns particularly among some parents who are talking about maybe prop c which is a ballot measure passed by san francisco voters

in 2018 that opened up $140 million for this purpose. some parents are concerned there is a lack of oversight in this department. i spoke to one of the sponsors of the legislation who says additional legislation will probably be needed to increase transparency. >> after digging into this, do you think something like this with helpful to families in san francisco and is it going to impact lower income families, middle-class? who will it impact or will it impact most families living here? >> i spoke to a family -- an early childcare provider and she said during the pandemic, the number of families seeking resources has increased. they're typically targeting low income families but more working class, middle income families have turned to them for resources in need at a lot of these families are immigrant households or non-native english

speakers. on a basic level, having one set of paperwork to fill out for each of these families will make it easier for them to operate in for the families to get the things they need. >> what are some of the other services families say they are struggling in what they need and this would possibly provide? >> a lot of things are family support. food pantries for families, ways for providing them. the basic ways to feed families. we talk about childhood education and that is important but the child is only in school for a certain amount of time and the rest of the time when the child is at home, that is also important to create a foundation for a healthy and sustainable living as well. the surrounding support i think is also an important art.

also expanding pre-k, early childcare to those that are younger. those that are three and younger which currently the city has still some work to do. >> let's talk about the history. this is part of a longer history in the city of trying to expand early childcare. can you dig into the a little bit -- that a little bit? >> the city has had this ambitious goal of universal childcare for the past few decades and it has worked on that goal the past few decades. you had things like in 1998, the state asked prop 10 which opened up a tobacco tax resource for this purpose. you have things like prop h in 2004 passed by the city which was meant to give more funding to expand pre-k to those who are four and older. most recently, you have the baby prop c which opens up $140 million for these early childcare providers and around

half of that is going to use the minimum pay for a lot of these folks. it is kind of difficult now during the late shortage to keep a lot of these folks. i think we can all agree this is an important group of workers were still want to have in the city. >> i know you dig a lot more into this so i will direct people to read the article and we will continue to follow you as you continue to cover this should we appreciate your time today. you can check out more of the san francisco standard's other original reporting on sf standard.com along with the story and abc 7 will continue to bring you more stagnant -- more segments bringing you the city focused journalism. search abc 7 bay

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tonight, the new and deadly flooding emergency. the rescues, the families inside their homes on countertops, on their rooftops with flood waters rising. the emergency unfolding in kentucky. several other states bracing, too. and in the northeast tonight, severe storms now possible. the heavy rain and flash flood warnings now if effect across several states. tonight, kentucky's governor calling this some of the most devastating flooding in that state's history. the death toll expected to rise. hundreds of homes possibly destroyed. our team standing by in the flood zone. also as we come on tonight, those new watches and warnings in the northeast at this hour. a confirmed ef-2 tornado hitting buffalo, new york, winds up to 115 miles per hour. and the dangerous heat tonight

across multiple states. rob marciano timing this out. the