Home Prices are up 102% since 2010 in Los Altos, Los Altos Hills, Sunnyvale, and Mountain View
Average Sales Price per Square Foot (2001 – 2017)
Los Altos, Los Altos Hills, Mountain View, and Sunnyvale
Over the course of my 15+ year career, I’ve observed that the sustained growth in Los Altos, Los Altos Hills, Mountain View and Sunnyvale has been driven by the traditional economic factors of Supply and Demand.
High Demand driven by the local tech economy.
The thriving local tech economy continues to create tremendous wealth for their employees and investors through company stock – and they are using this wealth to buy real estate at record prices.
The stock prices of the local tech giants are the leading indicators of the real estate market. Here’s what I wrote in June 2017 regarding Los Altos, Los Altos Hills, Mountain View and Sunnyvale home prices, “As you can see, there was a slight pause in the market in 2016. Prices didn’t really dip for the most part, but they just climbed more slowly. I don’t know if there is a strong correlation, but Apple stock dipped from about $125/share on June 1, 2015 to $95/share on June 1, 2016 and Buyers seemed a little hesitant to make aggressive offers. However, by the end of 2016, Apple stock recovered and the Buyers’ confidence came roaring back. Apple closed at $153/share on June 1, 2017 and the home prices are well above 2015 levels now.” Click here to see the entire article: Andy’s Commentary June 2017.
Apple stock closed at $175 on January 11, 2018 and Buyers seem very eager to Buy. [Source: Yahoo Finance]
Low Supply driven by a reluctance of homeowners to leave the area.
Because neighborhoods in Los Altos, Los Altos Hills, Mountain View and Sunnyvale are characterized by strong communities and the desirable local schools, homeowners have little motivation to leave the area. Many homeowners tend to live in their homes well beyond their retirement. Zillow says, “Americans are moving less than ever, according to Zillow’s analysis of the U.S. Census Bureau’s Current Population Survey. Just 4.2 percent of American homeowners moved between 2015 and 2016 — which is almost half the 7.7 percent rate reported in 1990.” (Source: Zillow) This is consistent with what I’m seeing here in our local market as well. In fact, some of my Sellers are the original homeowners from the 1950’s.
What about the new Tax Laws?
Time will tell how the new tax laws will impact the national and local economies. If the new tax laws benefit corporations, this might be favorable for the local technology companies and might help them retain more profits and sustain their current growth. This will continue to fuel Buyers’ ability to pay top dollar for homes.
The deductibility of mortgage interest and property taxes has been a nice benefit for some homeowners, but not all Buyers in this area rely heavily on the these deductions to qualify for their home purchases. Some Buyers pay “all cash” and don’t need a loan at all. Most of my clients have income and assets that are high enough to qualify for their purchases without the hypothetical mortgage deductions. While this is not to say that they don’t appreciate a tax write-off, I generally do not recommend my Buyers to stretch beyond their comfortable limits to buy a home. If someone has to rely on tax deductions to make ends meet, perhaps they are extending themselves too far. I prefer they enjoy the peace of mind that comes with buying a home that they can comfortably afford.
Where do we go from here?
The economic laws of Demand and Supply will continue to determine the value of homes.
The demand for homes in Los Altos, Los Altos Hills, Mountain View and Sunnyvale will remain high as long as the local technology companies and the surrounding ecosystem continue to thrive and create wealth here in Silicon Valley.
Supply will remain constrained in Los Altos, Los Altos Hills, Mountain View and Sunnyvale. While there is some new construction throughout the Bay Area, there will continue to be a shortage of homes in the established areas that are characterized by desirable public schools. Almost all of the available land in the traditionally popular neighborhoods has been developed. To build a new home, an old house has to be demolished and this results in a zero sum gain in terms of housing inventory.
Is this the next bubble to burst?
All industries operate in cycles. However, even while the world was reeling from the Dot-Com crash, 9/11 in 2001, the Great Recession in 2008-9, Buyers still placed a premium on homes in this area. They still chose to buy into the most desirable neighborhoods. The local real estate market has proved highly resilient under duress and the recoveries dwarf the recessions.
In my next article we’ll compare home prices in the various school districts.
Location matters and so does picking the right agent for your real estate needs!
Interested Buyers should verify the enrollment and availability policies directly with the appropriate school district for any school that they might be interested in BEFORE making an offer on any home.