SAN JOSE, CA — In a long-awaited positive sign for home shoppers, the U.S. housing market began the year with more homes than the year prior for the first time in at least half a decade, Zillow reported.
Inventory rose 1.2 percent in January to a little more than 1.6 million homes. After falling year-over-year for 44 months straight, inventory has increased during four out of the last five months, the Seattle-based real estate analysis firm added.
The San Jose metro market remained the hottest, most valuable market in the United States. The Silicon Valley market median home value stayed high at $1.25 million — over $1 million more than the national average of $223,900, despite the national figure seeing a half percent increase and San Jose’s dropping about that much from November to December.
The devil is in the details, with the market area covering the following cities:
- Mountain View at $1.87 million
- Sunnyvale at $1.82 million
- Santa Clara at $1.38 million
- Milpitas at $1.1 million
- San Jose $1 million
Zillow economist Jeff Tucker cites the law of supply and demand as the reason for prices staying high. There’s a limited supply of inventory, so when that goes down, prices go or stay up. That’s despite a slight leveling of prices dropping recently by 2.4 percent. Inventory plummeted last year to 1,600 homes in the San Jose metro area and has almost doubled this year.
The softening has brought on more houses being listed — signaling a leaning toward a buyer’s market that provides more choices and less pressure among buyers.
“It allows buyers to find the right fit,” Tucker told Patch. “The change makes it more palpable for home shoppers.”
Market activity traditionally slows slightly in winter but is preparing to pick up in the spring.
“San Jose remains the most expensive metro area in the country,” Tucker said.
Is $1.25 million justified or is it a symptom of a bubble?
Tucker explained it depends on whether someone is willing to pay — it’s as simple as that.
As long as a whole crop of billionaires and millionaires rear their heads in tech land as a result of the latest and greatest invention, the houses will be sold for what the market will bear.
“We’ve seen tech companies grow enormously in this market including the value of the employees in the last few years,” he said.
And consider the Silicon Valley lies in a market full of venture capitalists who will fund the ideas.
The resounding trend shows an industry that not only innovates — it matures. These are not the days when 10 to 20 young tech bucks would pile into a three-bedroom ranch house and work through the night with visions of IPO dreams.
This young industry only decades old has come a long way. Case in point, that same $1.2 million home would have gone for $500,000 in 2000.
For those who make their living in the South Bay every day, the justification is clear.
“What is the average salary? Housing is directly linked to the job market,” Santa Clara County Association of Realtors President Gustavo Gonzalez told Patch.
It seems every day a tech firm is announcing an expansion. Take Google. The search engine giant hasn’t stopped with expanding in its home base city of Mountain View. It has two projects in San Jose and more plans in New York City.
“Certainly people are paid more here. We have a large population of individuals for whatever reason work and have all the money they need,” he said, referring to tech workers seeing their company’s stock surge from zero to $50 share in short timeframes.
If anything, Gonzalez contends the cities have not kept up with the housing demand. He’s unimpressed with the project calling for a 20-story building, when he knows deep down the demand is so great the area requires 100 floors of housing.
“We need to build higher, and we need to go substantially bigger,” he said.
And even if buyers believe they can’t afford the house, there are now new options. Both Gonzalez and Tucker view the advent of Airbnb home sharing as an option to help pay for extravagant mortgages.
While some criticize the company for taking away inventory from long-term renters, Gonzalez sees the trade-off benefit to home buyers. As far as the sellers, he contends many have “unrealistic expectations” about how much to sell for.
“I see that as a way for someone to buy in the (San Francisco) Bay Area,” he said. Gonzalez is both a real estate agent and rental property manager.
As for rents, Zillow’s overview launching the year shows a market area able to command inflated rates as well. In the five cities encompassing the San Jose metro area, rents run from $3,394 to $4,122 a month in comparison to a national average of $1,460