Silicon Valley is one of California's most well-known and prosperous cities, with high-end companies and startups like Apple and Cisco driving its growth.
Several people are drawn to this region because of how it has grown, resulting in them starting a career or a family. Large corporations and financial services, such as Visa, thrive in this region, creating job opportunities.
Last year, the assessed value of all property in the region increased by $15 billion. The fact that there was a higher increase from the previous year indicates that the economic impact of the COVID-19 pandemic was relatively localized.
According to a recent report, the Silicon Valley real estate market has slowed over the last few months. It results in high-interest rates, making mortgages incredibly expensive. Properties take longer to sell when interest rates are high. Open houses are drawing small crowds, and many high bidders have vanished.
Here are a few observations and comments:
● Fewer people attended open houses.
● Fewer proposals are submitted on proposal due dates.
● Offers have shorter deadlines.
● More and more conditional requests are being accepted.
● Market days that are longer than expected
● Houses are not selling as quickly as expected or hoped.
Realtors and brokers predicted that home prices would fall further by September and October this year, but buyers face mortgage rate challenges. Rates have risen to as high as 6%, up from an average of 3% in January.
What Causes Silicon Valley's Real Estate Cooling Down?
Residents have been drawn to Silicon Valley's pleasant climate, robust educational system, and employment opportunities since the late 1800s.
As a result of the technology boom in Silicon Valley, it has become one of the wealthiest cities in Northern California, with massive job growth, rapid sales growth, and ever-rising stock prices.
However, due to a lack of available housing, 2.3% job losses, and 500,000 tech workers, the area now has the highest lease in the country and a median house value that is five times higher than the national average.
Tech companies relocate their offices and hiring hubs to smaller towns to save money. Furthermore, since the pandemic has rendered offices obsolete, remote work has become the new normal.
Facebook is expanding its remote workforce by opening three additional headquarters in Atlanta, Dallas, and Denver.
As lending rates have risen sharply since January, both existing and new home prices in the United States and worldwide have fallen. Rate increases hurt the real estate industry because REITs (real estate investment trusts) have to pay more to borrow money as mortgage rates rise.
The rising mortgage rate will force potential sellers to reconsider listing their homes. Doing so means preceding both the reduced property tax base and the low-interest loan. It could further reduce available inventory, supporting home prices.
On the plus side, once inflation and housing prices normalize, investors and builders may finally return to the industry to resume construction. It should help to increase the supply of new homes on the market and address the housing shortage in a few years, particularly in Northwestern County.