What is the current state of the real estate market in Silicon Valley?
I just completed an update of the 12 cities of Silicon Valley that I cover with final 2018 numbers. While there has been talk of the market “slowing-down” significantly this fall, the annual numbers don’t really support this assertion. Now it may be the case that the fall of 2018 was a precursor to 2019, but I personally consider that unlikely save for some significant political or financial event that impacts the heart of Silicon Valley. Even if that were to occur, I expect that would cause a slow-down in appreciation rates, not major price declines. Below are a few highlights of 2018.
Average Median Price
The average median price across Silicon Valley rose by 10% in 2018. This extends our seven-year run of 8-15% annual increases. Median prices have doubled since 2012. The average rate of appreciation over the past 18 years (since 2000) is 6% and that includes a 20% drop during the financial crisis of 2008-09. During this market cycle we have seen 15% in 2013, 2014 and 2015, and 12% in 2017.
Rate of Appreciation by City
Appreciation rates also vary by city, however a single year can be misleading. For example, in 2018 Sunnyvale appreciated 9.4% which is slightly lower than the Silicon Valley average of 10%. This is a slow-year after 18% in 2013 and 2014 and 15% in 2015 and 2017. Overall, it appears all 12 cities in Silicon Valley rise with tide over time.
Market Demand: Average Days on Market
Market demand continues to be at historic highs as evidenced by the average days on market. Homes are selling at around 20 days on market for the past five years. Note this is the average. The details by city show that a majority of the homes sell after one or two weekends on the market.
Market Demand: Final Sales vs. List Price
Final sale vs. list price is a second indicator of market demand. The average across Silicon Valley remains at historic highs near 8% over list. Note that the majority of homes selling after one or two weekends on market are selling higher than this due to multiple offers.
Supply of New Listings
The supply of New Listings has been fairly consistent over the past five years. The new construction of single family residences is virtually frozen due to lack of undeveloped land. There is significant new construction of Condos and Townhomes which helps, although the residents of Mountain View and Sunnyvale may disagree with the added traffic.
What does 2019 hold for us? We will know soon enough as we see the Feb-March market activity. My expection is that the above trends will continue, although maybe at a slightly lower pace. Buyers should continue to expect to pay 10%+ over list for those homes that generate multiple offers. Sellers are going to set list prices with the expectation of getting 10%+ over list, however they may see a smaller number of offers. This coming week I will be receiving a 2019 Economic Update from the California Association of Realtors that should be of interest. I will send you an update.
In the meantime, please feel free to explore the wealth of information available to you at www.SiliconValleyMLS.com and feel free to email me with any questions or requests for additional information.