It’s not just really expensive rental housing driving Silicon Valley’s frenzied residential real estate market.
As of last month, the median home price in the San Jose metro area was $669,000, according to a report by Realtor.com. That figure represents a 6 percent uptick since January of this year and an 8.7 percent increase since February 2013.
The Silicon Valley price increases come as local housing inventory — long an Achilles heel for the region— continues to dwindle. The number of for-sale home listings in the San Jose metro area dipped 4.8 percent year over year to 1,780 properties on the market last month.
Two notoriously expensive California cities, San Francisco and Santa Barbara, were the only locales on the list with higher home prices than Silicon Valley. San Francisco’s median home prices hovered around $849,000 in February, compared to $700,000 in Santa Barbara.
For some national context, the median U.S. listing price last month was $199,000, representing a 7.6 percent year-over-year increase. But inventory also increased in many markets, as illustrated by a 10 percent yearly gain in the number of nationwide listings.
As I previously reported, a lack of housing at virtually all price points has become more pronounced in Silicon Valley during the current economic up cycle, thanks in large part to tech-driven job growth at vastly different income levels. Steep affordable housing funding cuts have exacerbated the problem for low-wage and middle-income workers.
But in addition to driving home that housing crunch, the new Realtor.com numbers also illustrate enduring demand for homes, as opposed to rental properties that have been gaining market share in recent years. Downtown San Jose is one very visible example of an area betting big on luxury apartments, with a two-tower, 643-unit KT Properties apartment project winning city approval just last week.
Matt Franklin, president of Foster City affordable housing developer MidPen Housing,recently told me that the number of renters in the Bay Area is up almost 20 percent since the period before the economic downturn in 2008. Highly mobile young workers, former residents of foreclosed homes and area residents simply unable to pay the going for-sale home rate are all driving the rental boom.
“A lot of people are predicting that there’s gonna be a permanent shift in attitudes — that the luster or the glow is off the apple pie story of homeownership,” Franklin said.
Still, local cities and developers are pushing for a mix of residential uses, including both rental projects and new single-family home development. As my colleague Nathan Donato-Weinstein has reported, condos are one for-sale market segment showing strong signs of resurgence in Silicon Valley.