Is Silicon Valley Real Estate on the Verge of an Exodus?
Based on a recent study from LendingTree, in which researchers analyzed migration patterns of the nation’s 50 largest cities, including San Jose and San Francisco, and then compared them with migration levels from 2019, it appears that homeowners are not actually leaving cities in significant numbers.
A slightly larger percentage of
homeowners have indeed moved from big cities to smaller towns in 2020 than in
2019, but the share of those relocating has remained largely the same over the
past two years, the study notes. A closer look at the data shows that in 2019,
an average of 1.91% of homeowners who lived in one of the nation’s 50 largest
cities, including San Jose and San Francisco, moved to a smaller town. In 2020,
that share grew to 2.18% according to the study.
In San Jose CA, the share of moving
homeowners who migrated to a smaller town in 2020 is only about 1.60%. In San
Francisco, the study shows that the share of moving homeowners is only 2.69%.
As a result, I believe it is premature
to say that an exodus is currently happening in the Bay Area. In my opinion,
two factors will incentivize a homeowner to move: The ability of the vaccine to
curb the COVID 19 pandemic and the decision made by the big high-tech companies
to leave Silicon Valley (or not).
It is important to bear in mind that,
for someone who settled in Silicon Valley and works for a big Tech company, the
decision to move isn’t as intuitive as one may imagine. For instance, even
though many Americans are currently working from home, it’s not guaranteed that
remote working arrangements will be permanent. Also, salary cuts may be
expected for those who settle in areas where the cost of living is lower than
Another indicator which may deter Bay
Area residents from moving outside of California is the fact that record-low
interest rates are lowering the cost of purchasing a home in Silicon Valley
both for first-time home buyers and existing homeowners. Silicon Valley also
offers plenty of opportunities to relocate to less expensive areas but still
close enough large corporate headquarters with easy commute.
Overall, the impact of the COVID 19
pandemic on the Silicon Valley real estate market is probably mixed: Very low
interest rates are certainly encouraging home ownership, lowering cost of
living for many but home prices have only slightly declined and prices in
desirable areas remain high and not accessible for many who lost their jobs. It
also remains to be seen whether the recent wave of IPOs will sustain the market
Happy Holidays & Stay safe.