Silicon Valley Market Report

January is over, the super bowl 2020 is behind us and it is time for the real estate market to shift into high gear. What should we expect? The predictions from the leading economists vary quite a bit. 

Realtor.com expects home prices to grow by only 0.8 percent this year, National Association of Realtors put the growth at 4.3%, Zillow forecasts 2.8% increase of the median home sale price. These are national numbers, but real estate is local, every neighborhood market is different. Let me share with you our 2020 vision based on the data available to us so far this year. 

We expect local Bay Area home prices to grow in 5% to 7% range ending 2020 slightly higher than 2018, the previous peak. If you would look at home price growth during the recovery years, starting at 2011, you will notice that 2018 housing market produced an unusually high price jump. Then the market compensated for it in 2019 and the median sale price decreased by 4.8% in Santa Clara and San Mateo Counties combined. Looking at the trend-line starting at the beginning of the recovery in 2011 and continuing it into this year, it suggests that the 2020 median home sale price will end up in $1.27 to $1.3 million range. It will set a new record for our area!

A similar price adjustment and recovery cycle happened in 2016, but it was limited to the luxury markets of Palo Alto, Los Altos and Menlo Park. The prices fell by 3.4%, 4.3% and 4.7% respectively before returning to the growth pattern observed in the earlier years. The latest data also support this prediction – January median home sales price here in Silicon Valley increased by 1.8% comparing with January of 2019. The number of the new listings decreased by 11.2% while the number of sales decreased by only 0.8% tightening the supply even more than in previous years. We expect this trend to continue all the way through 2020. The economic fundamentals remain extremely strong. The unemployment rate in Santa Clara County was only 2.2% at the end of 2019 and in San Mateo County even lower – 1.8%.

The interest rates are currently hovering around 3.6% according to Freddie Mac’s Mortgage Market Survey and is expected to stay below 4% for the rest of the year. Remember that 2019 started with interest rate at 4.5% and back in year 2000 the rates were around 8.5%. All these factors as well as the reduced economic uncertainties (like recently signed trade deals with China, Mexico and Canada ending the trade wars fears) definitely motivated the buyers to take a closer look at the market and all available opportunities. Most of the homes coming to the market found new owners and the number of homes available for sale at the end of the month fell by more than 45% comparing with January of 2019.

As always, if you have any questions or concerns please reach out! Before you make any big or costly decisions for your real estate needs, let's have a conversation. 

Welcome to our newest episode of the Silicon Valley Real Estate Market Report, where we discuss the latest trends and events that will help you make better decisions about buying, selling or investing in homes here in Silicon Valley and beyond.

What I want to talk to you about today is the perception of the current real estate market conditions. Recently, sitting with a new buyer client, I was surprised by his question – the market is down by 40%, what should I do?  Is now the right time to buy?

The 40% number WAS and still IS absolutely out of range comparing with our data and our understanding of the current market. Where did it come from? I started checking some of the individual cities looking for the large price swings and found one – Los Altos Hills October median sale price dropped by 42% comparing with October of 2018 and 29% comparing with September of this year. If you take data at the face value, it is a complete reversal of the recent market trends.

But how meaningful is this data? There was only 1 sale in Los Altos Hills this October, 3 sales in October of 2019 and 8 homes were sold a month earlier in September. With so few homes changing hands in a city with a huge range of unique properties it is not surprising to see dramatic median sales price changes month over month.

We are seeing similar wild price swings in other low volume markets. In Atherton, e.g, October median sales prices dropped by 47% from the peak reached earlier in the year in May, 11 and 9 homes sold respectively. These uncharacteristically large price changes are great for the news headlines, but the market reality is much less attention grabbing. To detect emerging market trends and get meaningful statistics we look at larger data samples like counties or accumulate data quarterly.

Santa Clara County prices now are down by about 6% year to date comparing with the last year and San Mateo County prices decreased by only 1.4%. The market is going through an adjustment after seven years of consecutive growth, but it is not a dramatic shift we remember from the last recession.

With inventories continuing being low, it is still hard to find the right home. Trying to time the market in addition to finding the right property is almost impossible – you can’t day-trade real estate. Silicon Valley and the Bay Area overall have a long history of property values appreciation driven by economic growth and on-going housing shortages.

Everywhere up and down the Peninsula the prices more than doubled since 2009, the bottom the last recession. If you plan on staying in your home for 5, 7 or more years, the time to buy is NOW! Any market adjustment, like the one we are experiencing now will be, most likely, overshadowed by the home value growth of the years to come.

This is Michael Talis with the Talis Team. Call us at 650.766.6100 so we can answer all your questions. Check our web site at talisteam.com and if you like what you hear, don’t forget to like, review and share.

Michael discusses the changes in home values, days on market, and more with the latest data and analysis for the Silicon Valley area.