Home Price Disruptions

Economic Driven

Changes in the economy, both local and national, have caused significant changes in Silicon Valley real estate trends. In 2000, the wealth generated by the dot com boom rapidly increased demand for luxury Silicon Valley homes. This boom was the result of local innovation rather than government policy. In 2008, the subprime mortgage crisis created a drop in the value of homes with low equity. This crash resulted from national government policies designed to spread home ownership to those with less wealth. The policies were not regulated carefully and were abused by certain investment strategies, which led to an economic crisis.

Take a look at Los Altos real estate as one example:

Health and Government Policy Driven

In 2020, the COVID-19 pandemic combined with government policies to disproportionately affect condo prices. The pandemic led to business disruptions and increased remote work. Due to their lower cost, condos are often purchased as a first step into home ownership. Owners are less tied to their first step and more open to changes in their housing. Opportunities for remote work driven by pandemic health concerns disproportionately affected the demand for condos.

Other government policies to increase lower-cost housing availability have intentionally targeted multi-family housing. Low interest rates enabled the construction of more multi-family housing. Government policies created incentives and mandates to include units expressly designed to lower the cost of housing. The policies often include requirements that the units be sold below market prices, which drives down average prices.

Although government policies have been created to expand the construction of ADUs and second homes on R1-zoned lots, these policies have not resulted in significant numbers of new, separately owned, lower-priced houses being sold. Nor would slowed increases in single-family house prices be expected by expanding what can be built on a lot if it can not be separately sold as an additional single-family house.

Again looking a Los Altos real estate:

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