Silicon Valley Real Estate: Prices Up, but Sales Down

The average sales price of a Silicon Valley home is up 6.4 percent in the last 12 months. But at the increasingly unaffordable price of almost $1.5 million, the volume of sales is down 11 percent over the same period.

Residential real estate prices in the 20-mile-long strip called Silicon Valley, which stretches from San Jose to Palo Alto, plummeted by 27 percent in the Great Recession between 2008 and 2011. But with $25 billion in venture capital pollinating thousands of tech start-ups, residential real estate values have jumped by 70 percent in last five-and-a-half years.

The average sales price for a single family residence in Silicon Valley moved up in April by 1.9 percent, to a new all-time-high of $1,429,430. The number of Silicon Valley homes listed for sale ballooned by 11.6 percent in the month, but sales were down by 11 percent versus the same time last year, according to Serrano Realty’s April report.

There are lots of one-off stories in the local press about Silicon Valley buyers entering bidding wars, causing some homes to sell for up to 25 percent over their listing price.

The jump in real estate prices appears tied to the $2.7 billion in Silicon Valley venture capital that funded 113 tech deals in the first quarter, according to the PricewaterhouseCoopers and CB Insights’ first quarter 2017 Money Tree Report.

The California Association of Realtors’ latest Affordability Index for the state is down to just 32 percent of California residents. It now takes an income of $102,050 to afford a $2,250 mortgage payment for the average home that sells for $496,620.

But affordability in Santa Clara County is down to the 19 percent of residents that have the $219,870 in annual income necessary to make a monthly mortgage payment of $5,500 to buy the average home, priced at $1,429,430.

At some points, the U.S. stock bubble will burst. But the Dow Jones Industrial Average, the Standard & Poors 500 Index, and the tech-heavy NASDAQ Average hit all-time-highs on June 1. Silicon Valley tech companies were only up slightly for the day, but they are up 20 percent since the start of the year.