Rents, prices fall as affordability rises

SILICON Valley's housing costs are as low as they've been in more than a year and near record low mortgage rates are helping boost affordability.

The economic impact of the September 11 terrorists attacks has yet to show up in the latest statistics from Silicon Valley, already reeling from a technology sector down turn, but based on comments from the National Association of Home Builders and the National Association of Realtors, some fallout is inevitable.

Meanwhile, after years of rising rents, the cost of leasing an apartment in Silicon Valley (Santa Clara County) declined at about 7 percent for the second quarter in a row during the third quarter of this year, according to RealFacts, a rental market monitor in San Francisco.

The average September rent of $1,689 was down from a high of $1,951 at the beginning of the year and rents have now rolled back to the level of June 2000, completely erasing the big run-up in the second half of 2000, Real Facts reported.

Likewise, the median price of single-family detached homes in Silicon Valley was back down to $500,000 in September. It hasn't been that low since March 2000, according to the Bay Area Real Estate Market Newsletter by Richard Calhoun, real estate broker and owner of Creekside Realty in San Jose, CA. The median was $505,000 in September, 2000. Home prieces peaked at about $560,000 earlier this year, Calhoun reported.

RealFacts' September survey of 411 apartment complexes in Santa Clara County, showed the largest third quarter decline in the north county city of Milpitas where the average rent went down by $226. The smallest drop was in the south county city of Gilroy, which lost only $26. The average loss for all cities was $124.

Renters move up

The hardest hit unit types were town house units; three-bedroom town houses declined by $236, while two-bedroom town houses lost $135, and one-bedroom town houses went down by $301, often because of more and more vacancies created by renters moving to homes as homes became more affordable.

"The occupancy rate has just fallen to its lowest point in the past decade: 93.3 percent. That drop suggests that the San Jose MSA is likely to show further rent declines," said Caroline S. Latham, RealFacts' CEO.

The renters moving to homes were cashing in on record low mortgage rates, last Friday averaging 6.21 percent for 30-year fix rate conforming mortgages, according to Bankrate.com

The lower rates and cheaper home prices contributed to an increasing number of home owners able to afford a home in the still high-priced housing market.

One in four Santa Clara County households could afford the median priced home in the area in August, up from less than one in five a year ago, according to the California Association of Realtors.

Published Monday, October 15, 2001, 9 PM for