After years of declining home prices, high unemployment rates and other economic woes, real estate market conditions in the Silicon Valley continue to provide hope nationwide. Housing in the technology capital remains strong despite the national residential real estate slump. With no signs of slowing down, the Silicon Valley is expected to continue its upward trend well into 2013.
With 40 sales in the first two months of 2012 alone, O’Brien Homes’ newest community, Fusion in Sunnyvale, is a testament to the market’s strength. Over the past ten months, new townhomes at Fusion have been selling at a rapid pace, bringing about a significant surge in recent sales. This sales growth is indicative of the area’s market success expected throughout this year and can likely be attributed to the thriving Silicon Valley tech industry, rising rents in the area and historically low interest rates.
As the tech industry continues to expand, employment opportunities and the demand for local housing options have also increased, creating an oasis of opportunity in the Golden State. According to a recent article in Forbes,“employment in the capital of Silicon Valley is expected to expand 3.3 percent this year.” Due to the strength of the area’s latest boom, this past year Silicon Valley technology workers also saw a rise in their income, with average annual salaries surpassing the $100,000 mark, according to a recent Wall Street Journal article, making buying a home an affordable prospect for many first-time buyers. With job, salary and population growth fueling housing demand, new home construction in the area was up 97 percent in 2011’s third quarter when compared to the prior year.
With media and tech giants like Facebook, Google, Groupon, Dell and others vying for coveted corporate space in the Silicon Valley, a spill-over effect is being observed in the residential sector. While companies are seizing additional square footage for their expanding workforce, their employees are searching for places to live, and the flood of new homebuyers is only expected to grow throughout the year. Facebook’s impending initial public offering (IPO) is expected to introduce a healthy crop of newly minted millionaire homebuyers to the local market. In anticipation of the IPO, bidding wars have already erupted as homebuyers race to purchase new homes before the supply runs out, as is evidenced by one home in Palo Alto, which was listed at $2 million and sold for $2.45 million in a recent bidding war.
Thanks to the technology-fueled upsurge, home sales across the Silicon Valley have considerably increased. Since its grand opening on June 25, 2011, O’Brien Homes’ new townhome community, Fusion in Sunnyvale, has seen more than 4,500 visitors to the property, resulting in 124 sales, making it Silicon Valley’s fastest selling community. More recently, on February 11, Fusion released 18 new homes for sale, and within three hours, all 18 were sold. Jerry Dornseif, sales manager at Fusion, commented,“Right now we’re seeing an influx of buyers who are ready and able to buy a new home. Since rents in the area are still climbing, people are finding that they can get a better value when they buy their own home, and many of them have made their way here to Fusion.”
“San Jose apartment rents climbed higher in 2011 than any other major metro market in the nation, according to a RealFacts survey, followed closely by San Francisco at No. 2,” writes Mary Ann Azevedo on Silicon Valley Structures Blog. “Average rents in the San Jose-Sunnyvale-Santa Clara metropolitan area climbed 11.7 percent to $1,783 by the end of 2011 compared to $1,596 at the end of 2010.” The rising rental rates are pushing many young people into the home buying market. They are tired of renting and see now as an ideal time to buy while interest rates are attractive and housing prices are still affordable.