Silicon Valley has risen from the depths of the Great Recession, but its growth appears insulated from the rest of the country. This basically summarized Santa Clara County assessor Larry Stone's message to REALTORS® at a recent Silicon Valley Association of REALTORS® meeting.
The county assessor recently presented REALTORS® with local data and his analysis of Silicon Valley's economy. Stone said apartment rents increased 11.5 percent in 2015 and have increased over 45 percent in the past four years. The average rent for a one-bedroom apartment in San Jose last year was $2,436. Currently apartment occupancy rate in Silicon Valley is at 97.6 percent. As of January 1, 2016, 14,996 apartment units were completed, under construction, or permitted in the previous 24 months in Santa Clara County.
The single-family housing market also has caught fire, but affordability is critical. The median price for a single-family home in Santa Clara County increased 10.3 percent to $950,000 in January. The median increased 68 percent between 2011 and 2014. Many tech workers, foreign nationals and foreign investors are buying high-end homes in Silicon Valley. Nineteen percent of home buyers are investors from Asia and 22 percent of all transactions are cash.
The housing picture depends on incomes, which continue to rise rapidly, said Stone. Santa Clara County has had 60 consecutive months of job gains, reaching a 4.3 percent rate of growth, compared with California's job growth of 2.8 percent.
Despite this rosy picture of the valley, Stone is cautious about the future. "We are on an island here in Silicon Valley, but the waters around us are choppy. Our growth is insulated from the rest of the country," he noted.
The county assessor pointed out that long-term job growth is clouded; the labor market nationwide is not generating higher wages; sales of tablets, smartphones, PCs have slowed; consumer spending is down because more people are saving. Then there's the uncertain world economy, gridlock in Washington, D.C., the rise in intellectual property theft and cybercrime. Disparities persist as the region grows more high-paying and more low-paying jobs, resulting in a shrinking of the middle class. Venture capitalist investment is slowing, leading analysts to wonder about a venture capitalist bubble.
Stone said millennials, who comprise 29 percent of Silicon Valley's population, are changing the housing market. They prefer 24-hour urban city living, a work-live-play lifestyle with short commutes. It is projected that the under 30 population will form 20 million new households in the next 10 years, a majority of which will be rented. Many of the younger generation no longer believe homeownership is essential component of the American dream; even if they did, their high student debt is an obstacle to buying a home.
"Older people believe that renting is throwing your money way. An increasing number of young people believe owning is throwing your freedom away," said Stone.
So while income and wages are higher in Silicon Valley than anywhere in the U.S., Stone reminded REALTORS® of economic and real estate cycles, which can be faster and steeper in Silicon Valley.
In closing, Stone said his office has already mailed Santa Clara County property owners information on the preliminary assessed value of their property. Taxpayers can formally appeal that assessment. He asked REALTORS® to remind their clients that the appeal period started July 2 and has a strict deadline of Sept. 15.
The Silicon Valley Association of REALTORS® (SILVAR) is a professional trade organization representing over 4,000 REALTORS® and Affiliate members engaged in the real estate business on the Peninsula and in the South Bay. SILVAR promotes the highest ethical standards of real estate practice, serves as an advocate for homeownership and homeowners, and represents the interests of property owners in Silicon Valley.
The term "REALTOR®" is a registered collective membership mark which identifies a real estate professional who is a member of the National Association of REALTORS® and who subscribes to its strict Code of Ethics.
Variations of this article have appeared in local area newspapers.
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