Silicon Valley Real Estate: Not a bubble, simply supply and demand in action

Drawing a mortgage illustration

In this Slideshare presentation are some quick stats to support my opinions on the Silicon Valley housing market.  As well my top 10 predictions for the real estate market for 2015.  I welcome your feedback and look forward to helping you find your wealth in real estate.

The Silicon Valley Real Estate Market continues to be the example of the law of supply and demand.  The equation is very heavily tilted to high demand from continued job growth and natural population growth.

The supply side is in deficit as construction permits all but ceased to exist from 2008 until 2013.  Even as the economy slowly began to recover, the end of Redevelopment Agency incentives to developers, drove these profit centers to look at apartments instead of single family homes.

The foreclosure years also impacts supply as generations of home buyers are in the equity doldrums.  With an equity loss of 20-40% from 2007, many home owners are only now recapturing loss equity.  Seven years of economic recession is not forgotten easily hesitation to take on new debt has Silicon Valley in a stagnate sells market.

The supply and demand teeter-totter has the high end of prices and demand fueled by jobs and foreign money while the supply side is still in recovery and rebirth mode; knees bent, close to the ground patiently waiting a definite sign to push upward.

So, what now?   Growth is occurring.  Jobs increasing, in-flow of wealth via venture capital and foreign money are a fact.  Cities will need to get creative and organized quickly to set into action new city planning to meet the economy currently revving up.  First will simply come apartments.  This will be the automatic answer to rising rents.  Also expect rent control policies to become at the forefront of affordable housing programs.

Then expect city planners to work into home ownership with high-rise villages.  High walkability, with shopping, centered around communities in high tech job hubs.  This is the only hope as mass transit follows so far behind our population curve.

Watch municipalities on the periphery of the Bay Area be the go-to land for single family detached home communities.  Expect a new push for better schools in these outlying areas by the way of charter schools and the like.  These will be the telecommuter hubs supported by (eventually) faster trains to get working executives to the airport on time.

The movement of the established generation of home owners will move further into El Dorado and Napa Counties.  This will bring in opportunity of supply for communities like Saratoga, Sunnyvale, and Los Altos.

The supply side of the equation is going to take time.  This time is going to push average sales prices up for the next 5-7 years.  Not at the rate leading up to 2007 bust but certainly at a rate uncomfortable to the average working class citizen.  Professional dual incomes will be essential for home ownership.  Combined family homes will become more the norm than the exception.  Condos and townhouse will become the go-to homes for the more mobile work force.

Of course, every neighborhood in Silicon Valley is different and so is every home. If you would like to know more about a specific market or find out more about your home’s value, call me at 408.406.6035. I’m here to help!

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