The available supply of Silicon Valley single-family homes looks like it will continue to be extremely low throughout 2018. This past December, the number of homes for sale in Santa Clara and San Mateo counties was less than half of what it was in December 2016. This trend held true across all months of 2017 when compared to 2016. The main drivers of this limited supply are geographical and political constraints.
Bounded by San Francisco Bay on the east and the Santa Cruz Mountains to the west, Silicon Valley, and more acutely the Midpeninsula, has very limited land on which to expand. With limited political support for building vertically (higher density, multistory housing) in many Silicon Valley and Peninsula communities, I expect this long-term trend to continue.
I predict the market will remain highly competitive, with multiple offers on most properties throughout 2018. I am already seeing the effects of suppressed inventory as we begin the new year with more than 10 offers on several properties being sold where I was the buyer's agent.
This trend will likely lead to new pricing thresholds set across Silicon Valley (more than a dozen Palo Alto homes were sold for $1 million over their asking prices in 2017). We will also likely see the price per square foot of homes climb to new historical peaks. For home sellers there is a silver lining: This means it is still an ideal market and time to sell.
Demand showed no sign of slowing in 2017, and I expect that trend to continue into 2018. According to the Metropolitan Transportation Commission, between 2011 and 2015, the nine Bay Area counties added 501,000 jobs but only 65,000 new homes. The imbalance is even more exaggerated on the Peninsula, where only one housing unit was built for every 15 jobs created. As companies and technology continue to grow and expand in the Silicon Valley, the demand for housing will be robust throughout 2018.
Demand will continue to be the greatest near the area's biggest employers and best schools. Already this year, I have seen increased demand in Palo Alto. This builds on what I saw last year, as homebuyers are willing to pay a premium for locations close to where many of the top tech companies and jobs are centered. I have seen this trend continue into this new year, and I expect this demand to only become moreso as the year evolves.
While the tax cuts recently passed by Congress were not welcome news to many Californians, especially those living in Silicon Valley, I believe this will have a relatively muted effect on the local housing market. For instance, Apple recently announced it will repatriate billions of dollars into the U.S. and increase its investment here, which will likely offset any softening due to the cap of mortgage and property tax deductions. To this end, I have seen only continued growth in demand thus far in 2018, supporting the notion that the new tax law will have limited impact while demand continues to outstrip supply.
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