Sizzling Silicon Valley Housing Market to Ease Up

Millennials, HSF Affiliates LLC, Berkshire Hathaway HomeServices, Homeowner Sentiment Survey, Prudential Real Estate, Real Living Real Estate

NEW HOMESBy Neil Gonzales

Silicon Valley’s housing market continues to sizzle, but some signs point to an easing-up that is more than seasonal.

“It’s still a seller’s market,” said Mia Simon, a Silicon Valley agent with the real estate brokerage Redfin, but now, for the first time in a while for buyers, “it’s more manageable. You still have to be aggressive, but it’s more doable than before.”

[contextly_sidebar id=”QW7eJ2qs0WBYePJ930udQpy7WdSkpPoT”]Prices for single-family homes in Silicon Valley are expected to continue to go up but not as rapidly as they did the past two years, partly because prospective buyers have been holding back on purchases in the face of steep appreciation.

While the market typically slows down heading into the holiday season, Simon said, she sees a longer-term cooling trend afoot. Prices have already “appreciated quite rapidly” and are not expected to accelerate much more, she said.

Some tightening of lender guidelines will also be a factor, she said. Some lenders are seeking a 25 percent down payment instead of 20 percent.

Jeff Hansen, a Campbell-based agent with Keller Williams Realty, also predicts a slowdown over the next year. “The market is still overheated,” he said, “but you think it can’t continue indefinitely.”

According to the MLSListings market report for September, the Santa Clara County median home price rose 9 percent year-over-year from $779,950 to $852,500. The San Mateo County price went up 18 percent year-over-year from $911,000 to more than $1 million.

The region has also continued to experience tight inventory. Santa Clara County saw 1,765 homes on the market in September—down 8 percent from the 1,917 the same month a year ago, according to the report. San Mateo County had 695 homes in September—down 21 percent from the 882 the same period last year.

But on a month-to-month basis, the median price has taken a sliding trajectory. According to the MLSListings report, the price in Santa Clara County this year has fallen steadily since the peak of $910,000 in June. It showed a 3 percent dip from August to September.

The price in San Mateo County this year has stayed between $1 million and $1.15 million since peaking at $1.18 million in March, according to the report.

To be sure, prices will remain high because of Silicon Valley’s technology-driven job creation, good schools and other amenities, the agents say, but there are pockets of relative affordability.

Homes in Morgan Hill, for instance, are on average selling 1 percent below the list price, according to Hansen. In contrast, homes in Palo Alto are selling 11 percent over the list price and those in Cupertino 9.6 percent above—two areas that are much closer in proximity than Morgan Hill to clusters of tech companies and high-caliber educational institutions.

A projected cooling trend in Silicon Valley reflects a statewide outlook as the California Association of Realtors predicts prices to flatten out in 2015.

According to the association, the California median home price is forecast to rise 5.2 percent to $478,700 next year—the slowest rate of appreciation in four years—following a projected 11.8 percent increase in 2014 to $455,000.

The association also sees an increase in existing home sales of 5.8 percent in 2015 to reach 402,500 units—up from the projected 380,500 this year. Sales in 2014 will be down 8.2 percent from the 414,300 homes sold in 2013, the association said.

“Stringent underwriting guidelines and double-digit home price increases over the past two years have significantly impacted housing affordability in California, forcing some buyers to delay their home purchase,” Kevin Brown, the association’s president, said in a news release. “However, next year, home price gains will slow, allowing would-be buyers who have been saving for a down payment to be in a better financial position to make a home purchase.”

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