Hi Justin and thanks for your post.
As Don Teper correctly noted, any guess will be, just that, a guess. However, the smart money would say that homes in both Gilroy and Hollister may continue to be depressed for a while as jobs migrate from California to other, less expensive areas of the State and country, and, as gas prices and traffic continue to put pressure on workers to find housing closer to work.
If this were a horse race with Silicon Valley being the "hub of employment", the winning cities would continue to be those along the Peninsula, the South Bay, the East Bay, Morgan Hill, Santa Cruz/Scotts Valley, Gilroy and then Hollister. The only reason that Hollister might grow less rapidly than Gilroy is that Gilroy is on the main freeway (101), while Hollister is bit more inland and slightly less accessible than Gilroy. Although both towns are lovely, most of my buyers will take a smaller, older house located in, say, West San Jose to a lovely larger newer home in the Southern end of Santa Clara because of the commute and the cost of gasoline.
So if I were casting a vote, I'd say Gilroy wins by a very slight margin, but I think all buyers need to be realistic that the last areas for any recovery will the areas furthest away from centers of employment, and at present, for Santa Clara County, those would be the areas farthest south from San Jose.
Area Pro Realty-Peoples Choice