Silicon Valley Real Estate market booms in Summer ‘21 after mass exodus media hype fails to stick
It has been a long wait for all of us across the Bay Area, California, and the US as a whole, to feel some sense of normality. When looking at residential real estate here in Silicon Valley, it has actually felt relatively normal since shortly after being informed that the Covid-19 shut down would only last for a few weeks. Aside from a slight pause in activity during the typically hot selling season of spring 2020, activity for the most part picked up where it left off. We saw market conditions through the second half of the year that most of us were used to; plenty of buyer activity, multiple offers, and homes selling well above not only asking price, but well over what data showed homes were actually worth. This trend continued through the holiday season, which usually is a slower time in the market, likely due to a lot less traveling and more time for home searches over Thanksgiving and Christmas. This, along with money being pumped into the economy through stimulus packages and low interest rates, kept the train rolling into 2021. This year, we’ve seen the market continue to accelerate. Talks of a Bay Area exodus en masse, didn’t pan out the exact way some expected and we saw more of a reshuffling where people ended up staying in The Bay and were looking for more indoor/outdoor space at better prices. This led to areas of the East Bay including Oakland, El Cerrito and further east to explode, including areas such as Vallejo becoming one of the hottest markets in the country. Movement like this helps explain why the San Francisco condo market was slower to recover. Higher end markets on the peninsula and in Silicon Valley specifically, continued on their paths of being highly desirable as data shows increasing prices and homes selling at a rapid rate.
Palo Alto - Average Prices/Days on Market over the last 12 months
Menlo Park - Average Prices/Days on Market over the last 12 months
Los Altos Hills - Average Prices/Days on Market over the last 12 months
So as we see average price points at or above highs over the last 12 months, we also see Days on Market (Days to Sell) remaining low, meaning that we are still in a heavily lopsided supply/demand scenario. Buyers are still fighting over properties that are turn key and willing to pay more than what the last similar home in the neighborhood sold for. Where do we go from here? With interest rates at staggeringly low rates, we may see a bit of a slow down in the rate prices go up. As money gets more expensive to borrow, buying power decreases causing buyers to be more cautious of their ability to “over-bid” for homes. With that being said the following charts show the last 5 years in the same markets, indicating higher rates we saw then, didn’t slow the market much.
Palo Alto - Average Prices/Days on Market over the last 5 years
Menlo Park - Average Prices/Days on Market over the last 5 years
Los Altos Hills - Average Prices/Days on Market over the last 5 years
We’d need to see significant increases in rates (which the government has stated they are not planning to do) and/or many more people deciding to leave the Bay Area/California in order to start to see demand slide and in turn see lower prices. In fact, stats show that down payments are up, fixed rate mortgages are up, and lending restrictions are tighter indicating that an impending crash is not likely. What’s different here compared to other markets is many Silicon Valley tech companies and their employees (who are the buyers in this market) have seen their stocks soar through the pandemic. So, as we are accustomed to, we have a lot of local capital being circulated within our market. Now if we begin to see real signs driving fear that the stock market is set to turn, we may see even more buyers looking to move that capital into tangible assets, and especially into what has historically been one of the strongest investments around; residential real estate in Silicon Valley. Have you missed the boat on this crazy selling season? No. Will it go this direction for years to come? Probably also no. However, sellers still have the strong advantage. While impossible to determine what happens in the future, the fact is; it’s a great time to be a seller right now.
The energy of our community is still alive and well, and it’s been great to start re-interacting with everyone in person. I can tell this summer is going to be fantastic and the rest of the year will allow all of us to get back into the swing of being out and about, and enjoying all the Bay Area has to offer. That’s why we all live here in the first place right?!
If you’re contemplating selling in this market, let’s connect and develop the best plan of action for you!
