On Sept 21, 2023, the San Jose Mercury News published an article about falling home sales. The author, Jonathan Lansner, created graphs of California single-family home sales prices and the number of single-family homes sold. His short article is worth visiting. His key points were that:
1.) The number of sales have dropped by about 30% all across California
2.) August’s median sales price is the third highest on record.
He concludes his article by saying, “Something must give. Will it be prices? Rates? Or just years of limited homebuying?”
We have seen articles calling attention to people and companies leaving California for quite a long time. Yet house prices are not falling, and because of increasing interest rates, buyers are paying more than ever to purchase a house using a mortgage. With very few new single houses being built in Silicon Valley, a current house owner has to decide he wants to sell in order for a sale to occur. Silicon Valley has always had changes in employment opportunities. Generally, when one business area drops, another rises. Many home sales are driven by Silicon Valley homeowners changing the home they want to live in. The dramatic increase in interest rates has changed the cost of changing homes. Fewer homeowners want to sell. Perhaps the conclusion should be “Something must give. Will it be government policies? Will it be employment opportunities?” If neither changes, then expect years of limited homebuying in Silicon Valley and likely no improvement in the affordability of a house.
Silicon Valley house prices, with the exception of the price bump near the beginning of 2022, have been relatively flat for several years. Buyers are typically paying increasingly more because of higher interest rates.