Will the Construction Boom solve Silicon Valley's Housing Problem?
What Home Buyers and Sellers should expect
from the Construction Boom in the Valley
Courtesy of Sobrato Organization (San Jose Downtown Redevelopment Project)
You may not be aware that Santa Clara County residential construction is booming and home buyer incomes continue to rise at a much quicker pace than the rest of the state. However, steeply rising home prices are a drag on demand, reducing home sales volume and turnover rates.
Home sales volume is still low
Santa Clara County home sales volume is currently headed into its eighth year of stagnation.
Between 2010 and 2015, home sales volume remained mostly at the same level, with the expected seasonal bumps. In 2016 sales volume declined 4% below 2015 and even further in 2017 due to home prices rising faster than incomes. The increase in the mortgage rates which started in January 2018 is likely to weigh even more on purchasing power of Santa Clara residents.
Housing Turnover is flat
It’s no surprise to everyone that Santa Clara County’s housing turnover rate is stagnant. With home prices still excessively high going into 2018, for some, such as first time home buyers, it’s simply not the best time to buy.
On the other side of the equation, homeowners are also reluctant to sell their property as they are not sure if they will be able to purchase a replacement property that fits both their means and wish list.
Home ownership feels the pressure of high prices
While varying greatly from quarter to quarter, Santa Clara County’s long-term home ownership rate has trended downward since 2005, oscillating around 57% most years and stabilized around 50% as of last year.
Santa Clara’s long-term rate of home ownership remains mostly stable due to its successful job market, even though some end users of real estate are being pushed out of the market as prices rise beyond their reach.
The obvious question now is whether the current construction boom in Santa Clara County will solve both problems of low inventory and flat turnover. Increased housing opportunities will alleviate short term housing problems, home prices may pause in 2018 due to increased inventory but as long as Silicon Valley remains a job destination, its housing market will remain hot.