Silicon Valley Real Estate Report: Shaken, not Stirred

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Silicon Valley Housing: Shaken, Not Stirred

This current real estate frenzy may be permanently affecting Silicon Valley cities for a long time to come.

Some may argue about the exact borders of  Silicon Valley in the San Francisco bay area, but we can all agree it’s home to many of the world’s biggest and best technology innovations—bar none. Comprised of cities that dot the peninsula, south bay, and east bay regions, each has its own micro-economy, demographics, and culture, but share the Silicon Valley moniker. In this current real estate boom, that small but powerful universe is experiencing the same trends as the rest of the bay area: from scant inventory levels, to  multiple offers and over bidding, to all-cash deals and foreign investments. However, one thing is different for Silicon Valley: this current real estate frenzy may be permanently affecting cities for a long time to come.

Old Neighborhoods Are Changing

“There are dramatic shifts occurring in Silicon Valley demographics these days,” said Avi Urban, a Keller Williams Realtor serving this area since 2005. “Predominantly blue collar workers with jobs in defense and manufacturing are retiring and moving out of neighborhoods. They are now being transformed to professional hubs,” he said. “The only people who can buy these homes now have higher income than the last generation. In fact, someone I know wanted to buy his parents’ house but could not compete with other offers. The family ended up selling their home to strangers,” he said.

Silicon Valley Real Estate Spread

This lack of affordability is also driving tech workers to the north and south regions of Silicon Valley. Even for those households with an income of $150K, many areas of Sunnyvale are now out of reach, and home buyers are moving next door to Santa Clara, for instance. Others are making their way to north and south portions of San Jose where the prices are still affordable. “To make matters worse, the salaries in Silicon Valley are not matching up with home prices. It’s a concerning situation and it’s very difficult to compete in the area,” Urban said.

Upwardly Mobile Schools

With changing demographics of  formerly lower-cost neighborhoods also comes transformations of  local infrastructure, including schools. “Tech professionals are very concerned about the quality of schools for their children and it is a crucial deciding factor when moving to an area,” Urban pointed out. “As more neighborhoods increase their education level, schools follow suit, and eventually these areas become more desirable neighborhoods altogether. It ends up becoming a self-fulfilling prophecy.”

Cash Infusion Doesn’t Equal Investment

Like other regions of the bay area, the surge of all-cash and foreign investment in real estate is driving up selling prices and home values. And though this money is being funneled into the local economy, it’s not  benefiting Silicon Valley’s trademark technology or innovation pursuits. “This money is staying in a silo and not spreading to the tech community as a whole,” Urban said.

The Future of Tech Land

“The real estate market is logical, and during transition times like now, it’s considered irrational,” Urban said. “There are signs that the market is stabilizing with rising mortgage rates and a slight slowing in the market. It cannot continue this pace forever. If you look at the history of Silicon Valley, the numbers tell that story over and over . What’s different now is that this real estate boom seems to be permanently affecting the region.”

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About Janice Cuban

Janice Cuban is Principal of LiveWire Communications. Her expertise includes residential and commercial real estate marketing and writing.

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