History reveals, as goes California, so goes the nation. Likewise, as goes Silicon Valley, so goes California.
And right now, the Silicon Valley (Santa Clara County, CA) housing market is ahead of the pack.
It is now significantly cheaper to own a home than to rent in many areas of the nation and vacancy rates have been below the 5 percent benchmark all year. Such market conditions prompt increasing numbers of renters to buy and that drives home values higher.
In the San Francisco Bay Area, which includes Santa Clara County in the south end, rents have been surging for more than a year, leading to record-high rental rates. Both Markus & Millichap and Forbes magazine proclaimed the San Francisco and San Jose markets among the very worst places in the country for renters looking for a bargain.
Along with rental market conditions, interest rates are at historic lows and housing values are so beat down homeownership is more affordable than it has been in a generation.
And then there’s that rosy regional jobs report. The Bureau of Labor Statistics recently highlighted robust employment growth in the region. With a 3.8 percent year-over-year rise in employment, the San Jose, Sunnyvale and Santa Clara area led a host of other U.S. metropolitan areas in job growth.
Those dynamics are why Silicon Valley is experiencing high levels of sustainable buyer demand.
Exceptional buyer demand is exhausting the supply of homes at an alarming rate.
Second quarter 2012 inventory of single-family homes available for sale was down more than 33 percent as compared to a year ago as sales zoomed nearly 11 percent.
The shift was even more apparent in the condo and townhome market, with inventory plummeting more than 40 percent and sales rising more than 20 percent.
See detailed Silicon Valley Market data here.
Not surprisingly, this elevated demand has driven median prices higher.
However, the rising median prices are also due to the shift in types of homes being sold.
Not only are distressed properties (bank owned REOs and short sales) becoming scarcer, upper-end market home ($3 million and more) sales are also gaining traction. Sales in the above $3 million luxury market has nearly doubled in the past year with demand focused on the Peninsula markets.
MLSListings.com reports 76 sales of $3 million or more in Silicon Valley since June 1st. Only 13 were in the South Bay’s 408 area code market.
Similarly, of the 46 high-end pending sales, only six are South Bay properties.
Broderick Perkins, DeadlineNews.Com, also contributed to this report.