Home Buying in Palo Alto>Question Details

Evan Huynh, Real Estate Pro in San Jose, CA

Where do you think the Silicon Valley RE market is heading and do you think it is a good idea to buy or hold?

Asked by Evan Huynh, San Jose, CA Mon Sep 23, 2013

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Carl Medford’s answer
Evan, as a Realtor, you have access to past data and trends and should be aware that the Silicon Valley retained a higher percentage of value during the depression than outlying areas. You should also be aware that the percentage of growth during the past 18 months has been less than those in rebounding areas that were more highly depressed. Lastly, I'm confident that you understand that past gains are no guarantee for the future and no one has a crystal ball to see where we are headed.

Overall, the Silicon Valley market has been pounding upward for the past 18 months and finally appears to be slowing to catch it's breath. How will this translate into the coming months? No one knows. You might want to consider reading the following post:

Housing Market Cooling Off: Top 5 Reasons
http://www.trulia.com/blog/carl_medford/2013/08/east_bay_hou…

Because the Silicon Valley is really at the heart of Bay Area values, it is a much safer place to buy so long as the fundamentals are correct.

What you don't specify in your question is whether or not the "buyer" you are referring to is a normal home buyer or an investor: the answer to this question differs greatly based on who is buying the home. If the purchaser is a normal buyer looking to purchase a Silicon Valley home close to good schools and their work AND they plan on living there a ling time, then there is no wrong time to buy. The goal is a roof over their head, not an investment per se. Over time, they will more than likely see increases in the value of their home.

If, however, the buyer is an investor, the answer is different. I personally don't buy investment properties based on speculative return: I buy based on whether of not the property cash flows out of the gate. As prices increase in Silicon Valley, it's becoming very difficult to find properties with a good CAP rate.

Since you are a Realtor, I'd be interested in your take on this.

Lastly, take care when posting questions - if you don't wait for the question to load and hit the post button twice, then your question will appear multiple times ... as it did in this case.
1 vote Thank Flag Link Tue Sep 24, 2013
The market is still going up and should continue the upward trend for a while. In terms of buying or holding - it depends on your financial goals. Due to lack of inventory, I wish more people would be selling...
Web Reference: http://talisrealestate.com
1 vote Thank Flag Link Mon Sep 23, 2013
A big part of the answer to the future of Silicon Valley Real Estate is whether the local business environment is providing better job opportunities than other areas. Over the last several decades Silicon Valley has had a number of different hi tech industries surge to prominence then recede: integrated circuits, defense, computers, computer networking, world wide web advertising/data, etc.

These industries have flourished because of the skilled workforce, the management, and the investment environment. Although the past success has attracted attention and lead to strong competition, locally the strengths are still here. The environment attracts many top people in all areas. Down turns have been the result of both national policy decisions and competition.

I can't say when there will be another major debacle such as California energy crisis or the investment banking mistakes that lead to recent major disruptions but the local population still seems to be one of the best suited to find and adapt to new opportunities. I see reasons to believe the local environment is a good long term investment. Although interest rates have risen they are still relatively low and provide good short term advantages for investment.

How desirable the real estate market is for any individual depends upon their goals and strengths. Palo Alto home values have increased quickly making many people wonder if there will be a "correction".
Palo Alto home values at http://julianalee.com/palo-alto/palo-alto-statistics.htm

In the past many different types of investment peaks have been accompanied by many major news sources publishing articles about how great investment "X" is and how quickly it will reach new never before reached heights. The articles are published because they match the beliefs of the vast majority of people, but the growth occurs while the people are changing their beliefs. I don't see people currently buying because of a spike in the popularity of real estate as an investment but rather because they want to own the home they live in or to spread their wealth among investments.

If you look at county wide home values http://julianalee.com/santa-clara-county/santa-clara-county-… you will see rapid growth but not all areas have reached dramatically new heights. There is still room for growth. Changing national policies are the first place to look for any new warning signs.

Juliana Lee
Top 2 agent nationwide at Keller Williams Realty, the nations largest
Cell 650.857.1000

Over 20 years experience
Over 1,000 homes sold in Santa Clara County and San Mateo County
.
Web Reference: http://julianalee.com
0 votes Thank Flag Link Mon Sep 23, 2013
Evan,

This is a very good question. In general, I think the market is going to remain the same for the next several months. To try to predict further ahead than that we be outside of my expertise. The economy is dependent upon many factors and any one of those factors could upset the market. An earthquake, huge flooding just as what occurred in Colorado, a big financial upset or the failure of a local company; each would affect our local market.

I think that if you bought more than 7 years ago, this would be a good time to sell. If you have purchased properties as an investment in the past few years, you should talk to your Realtor who can help you research the areas where those properties are located. Silicon Valley RE market has many micro-markets just as it has micro-climates. A fits all answer is just not appropriate.
0 votes Thank Flag Link Mon Sep 23, 2013
Silicon Valley real estate will continue its long-term upwards climb over the years to come.

Short term forecasts are notoriously unreliable. You will find conflicting opinions.

Silicon Valley continues to be a seller’s market now but markets change over time.
0 votes Thank Flag Link Mon Sep 23, 2013
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