Hello again to all Silicon Valley readers:
What prompted me to write this blog today is one of my recent tweets about the expected growth of the City of San Jose, CA. You can read all about it here
. According to Realtor Magazine, in April 2012, San Jose was ranked #3 among the fastest growing cities in America, with a projected annual economic growth of 4.7% from 2011 to 2016.
Here is a sign of times: Judging from the traffic jams on Highway 680, 101 and 880 every morning and evening, it seems that everybody is commuting to a job (or a job interview at least) these days!
The reality is unfortunately not as rosy with an unemployment rate still over 9% in San Jose - Sunnyvale- Santa Clara metropolitan areas. Part of the old Silicon Valley economy is still laying off (e.g. Yahoo) while the new economy is gearing up to hire (Facebook, Twitter, etc). At any rate, the potential for higher employment rate is definitely there.
Coming back to the topic of this blog, why should you invest in Silicon Valley Real Estate Market now?
Well, I see at least 3 obvious reasons today:
Contrary to some predictions, interest rates continue to remain at extremely low levels: 30 year fixed mortgage interest rates are at 3.750%, 15 year fixed rates are at 3%. In other words, the financial burden of monthly interest payments is on the verge of becoming almost non-relevant at these levels. Home buyers with high credit scores have even more room for negotiation.
Most public and private experts agree that we are seeing the end of the tunnel of the real estate crisis. My belief is that this statement should be nuanced by metropolitan areas and the actual exit which should be best described as "I did not loose any money on my house" will still take many years to materialize. In other words, we will not return to previous house prices levels before a few years. That said, it does not mean that home prices will not rise in the meantime, which is exactly what is happening in Silicon Valley right now (see chart below). In San Jose, the average sale price of single family homes is up 10% year-on year, up 13% since January 2012. With the current shortage of homes on the San Jose real estate market, this trend is likely to continue. What this means is that you are likely to build equity again on your Silicon Valley home in the long run if you buy now.
- Last but not least, Silicon Valley is likely to remain a top spot for employment opportunities and will continue to attract well paid talents from all over the world. IPOs are back in force, creating instant millionaires with suddenly upgraded housing needs and requirements. Many new ventures well funded with cash-rich VCs will end up being snatched by Internet behemoths, generating even more wealth. As legendary Silicon Valley VC Marc Andreessen puts it a few days ago,"You are crazy if you think we are in a tech bubble". In other words, you cannot be wrong investing in real estate in the Bay area in anticipation of the shape of things to come.
So, if you believe and can afford to buy a home in Silicon Valley today, just go for it!
© Sophia Delacotte CDPE, SFR, CHS
San Jose Realtor
Cell: (408) 717-2575