As we close out another great year for Bay Area real estate in the
Silicon Valley, I wanted to take a moment to reflect upon 2015 and look onward
to 2016. It has been a more volatile year
than previous years which makes our year end review much more detailed.
It was February 2011 when our market rebounded from the housing
crisis. Since then, home prices over the
last 4 and a half years have aggressively pushed upward every year, with each home
sold pushing over the sold price of the previous week through bidding wars.
2015 started out with an absolute acceleration in home purchasing
activity. Buyers came in out in packs
and multiple offers were abundant.
Winning offers were hundreds of thousands over list price and
competition continued to heat up in all locations. Due to the imbalance of low supply and high demand,
homes sold in 1 week with double-digit number of Buyers and prices increased
aggressively with every home sale. Prime
locations were San Francisco, San Mateo and Santa Clara Counties. As the prices increased Buyers were forced to
further locations such as Alameda and Contra Costa Counties and drove prices up
in those areas as well.
Profile of the 2015 Buyer
In previous years, cash investors from abroad especially China were
commonplace. In 2015, the Chinese
government sealed many of the loopholes that were being leveraged, which has
made it very difficult to generate the cash outflow to the United States. Those that were able to get cash into the
country and required a mortgage, the banks put another layer of restrictions on
these funds requiring these funds to be in the United States in the Borrowers
account for 2 to 3 months for what is called a “seasoning period” in order to
combat money laundering. The 2015 Buyer
was more of the local Technology employees, many utilizing their stock options
or restricted stock units towards their down payments.
Summer Cool Down Fall Slow
As summer approached the market began to cool as more inventory hit
the market and Buyers’ were on hold due to high prices and summer holidays. For the first time Seller’s noticed that
their homes were not selling in a week, many took 30 or more days to sell. This was a major adjustment as we were all
used to 7 days being the average time a home would be on the market with
multiple aggressive offers. For those
homes that had multiple offers, the prices were not as aggressive. During this time period the Chinese stock
market took a plunge and caused a panic in the US market as well, causing
Buyers to further delay their home purchases.
The fall was also slower as days on market increased and Buyers were
still sparse during this period of time.
Winter inventory shrunk to low levels as is typical of the season. With this lower supply, homes some homes actually
generated multiple offers at times depending on location while other continued
with longer days on the market.
The most recent trend is that more and more companies are being
founded and headquartered in San Francisco, which has driven home and rental
prices up sharply. The Peninsula
continues to be a popular midpoint between San Francisco especially for dual income
families where one spouse is at a startup in San Francisco while the other
works for established companies such as Facebook, Google, Apple and Linkedin in
the Southbay. The other hot spots are in
the San Jose Berryessa and Milpitas neighborhoods due to the fact that BART
(Bay Area Rapid Transit) train line (http://www.vta.org/bart/timeline) is being
extended to these destinations targeted for 2018. These are also neighborhoods that are still
quite affordable some with decent elementary schools. As all of these neighborhoods have increased
in pricing, more have opted for further commutes to Pleasanton, Dublin,
Danville and San Ramon for better schools and great communities often
Areas with great school districts such as Palo Alto, Los Altos,
Cupertino, Mountain View, Sunnyvale, Millbrae, San Carlos, Belmont continue to
be strong markets due to their top school rankings, convenient locations and
2016 was looking to be the year of leveling home prices given the
slowdown from the summer months. One
would argue that home prices have been on the rise for 4 and a half years and
due for a slow down. Also the Federal
Reserve is planning to raise interest rates imminently. This will not immediately affect mortgage
rates, but will eventually increase the rate of borrowing though likely just by
a quarter percent. The concern is
partially psychological as Buyers often experience remorse by not getting the
lowest rates, but from a practical standpoint it could also increase their
monthly payments where they were already pushing their budgets to purchase. The major wild card is that the technology
sector continues to demonstrate growth.
There appears to be no slowdown in the hiring by the Technology giants
in the area, which means a basic supply and demand problem that will keep rents
high and create more Buyer interest for sparse real estate. Also there are potential IPO’s coming from
companies such as Airbnb, Pinterest, Snapchat, Palantir and Cloudera which will
flood more liquidity into the real estate market. 2016 could be another year of price growth.
Thank You for Your Referrals!
We wanted to thank you for your support and referrals. We are so pleased that the vision we set out
12 years ago to create a new customer centric partner Agent has resonated so
well with you, your families, friends and colleagues. We are firm believers that real estate is a
business of relationships where we are your resource for a lifetime. We tune our craft to ensure that we are the
industry experts with the experience, knowledge and innovation necessary to
ensure that you have the highest quality Agent working on your behalf and not
trying to sell you but partner with you to achieve your real estate goals. Without each and every one of you we would
not have achieved being the third ranked team in the region for Keller
We wish your family a safe holiday season and a Happy New Year!
Photo Source http://www.avascent.com/2015/01/defense-industry-could-benefit-as-liaison-between-silicon-valley-and-dod/