Monday, October 24, 2016

October 2016 Silicon Valley Real Estate Update

As we enter the winter season, the history of our local market points to a slower period in the real estate market, especially as we approach the holidays. This equates to a lower supply of homes on the market in conjunction with a reduced amount of Buyers as well.

Macroeconomy

The economy continues to hold steady in anticipation of this election year.  The Federal Reserve is holding interest rates steady in the short term, while signaling that a change is looming.  At this moment interest rates have held steady with some volatility on a daily basis but steady.  It remains to be seen how much the rate is increased by and even then it will take some time for that to affect mortgages.   Banks could also choose to throttle them up slowly as well.  The jobs reports continued to be mixed, though not drastic enough to point to the economy shifting in either direction.

Technology Microeconomy

The Silicon Valley technology sector has remained stable providing employment and ample opportunities.  The Nutanix initial public offering (IPO) makes this the second local technology IPO of 2016.  There are rumors of a Snapchat or Docusign IPO possibly next year.  Companies such as Uber and Airbnb are the most talked about in this discussion as possible 2017 candidates.  The recent acquisition to monitor is the Linkedin Microsoft acquisition, which is speculated to pay out employee stock plans.  Regardless IPO’s and acquisitions will inject funds towards much needed downpayments for local Buyers who are struggling to purchase a home in the high priced Bay Area.  Regardless, timing wise this would mean that Q3/Q4 of 2017 could be a busy one if these events do indeed unfold.
Looking Ahead to 2017

Summer inventory rose to its highest level since 2012.  In September, Buyers seem to have come back slightly in conjunction with a drop in inventory as well as canceled and withdrawn listings.   Many Summer Sellers were holding onto 2015 prices and unwilling to accept the offers that the market was giving them.

Homes with excellent schools in prime locations continue to sell for a premium and in a short amount of time.  Homes that have been fully renovated and move-in ready will garner a higher amount of offers and a price premium as a true differentiator in the marketplace.

Homes priced above $2M have seen longer days on the market and also homes over $1.5M depending on the location.  Single Family Homes less than $1.5M, especially those with good elementary schools, continue to see multiple offers and a good level of competition.  This is due to the fact that this is still an affordable bracket for many single or dual income families in the area.   Properties under the $1M price point continue to have multiple offers especially Single Family Homes.  Condominiums have seen resurgence as Renters are looking for an alternative to high rental costs and looking to leverage the tax benefits of home ownership.

Townhomes that have broken the $1M mark and especially those that approach the $1.5M mark are seeing Buyers pause as they decide whether or not to stretch and go for a Single Family Home instead.

Multi-residential homes continue to sell quickly due to low supply and high demand by investors in the market.  Investors continue to be major players in the bay area.

Local Technology Economy

The Nutanix initial public offering (IPO) makes this the second local technology IPO of 2016.  There are rumors of a Snapchat or Docusign IPO.  Companies such as Uber and Airbnb are the most talked about in this discussion.  The recent acquisition to monitor is the Linkedin Microsoft acquisition is speculated to pay out employees stock plans.  Regardless IPO’s and acquisitions will inject some much needed downpayment to for local Buyers who are struggling to amass the necessary downpyament to purchase a home in the high priced Bay Area.  Regardless, timing wise this would mean that Q3/Q4 of 2017 could be an exciting one if these events do occur.

In Closing

If you are a Buyer it is a great time to look for a home during this season.  Though inventory is lower, Buyers tend to start shifting their focus towards the travels and the holidays, which often equates to less competition for you as a Buyer.  If you are a Seller, depending on your location, the lower inventory could make it so that you are the only house on the market for that given week and garner multiple offers.  The downside is also that the number of Buyers may not be as high as in the Spring season which means that you may have to temper expectations on price.  Reach out to us so that we can advise appropriately on your specific home.  We wish you and your families the best for the rest of the year and thank you for all of your support and referrals!

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