Santa Clara County Real Estate Report

Santa Clara County Real Estate

Looking Back on 2018
Boyenga Team January 2019 Report


There were almost too many political, economic, social and even ecological factors impacting the 2018 market in the Bay Area to count. At the end of 2017 and in the first half of 2018, market conditions in Santa Clara County were about as hot as they’ve ever been, and there were staggering year-over-year appreciation rates. Come summer/early autumn, real estate and financial markets began to shift distinctly cooler.

There are a lot of spinning plates right now – locally, nationally and internationally – with the potential for both positive and negative impacts on local housing markets: volatile financial markets (and local-company stock prices), fluctuating interest rates, contentious national politics, international trade issues, migration trends, spiraling debt levels, employment growth – and a surge of local high-tech unicorns that plan to go public, which could create a tsunami of new wealth in the Bay Area. All this should make for another interesting year.


Annual Median Sales Price Appreciation

Year over year, the median house sales price in Santa Clara County in 2018 increased $155,000 or 13% to $1,335,000.

Year-over-Year Quarterly Price Appreciation

The appreciation picture changes considerably if we look at y-o-y quarterly rates. In Q4 2017 and Q1 2018, Santa Clara may have had the highest home price appreciation rates in the country. Q2, the spring selling season, was also a very strong, competitive market. These dynamics were common around the Bay Area. But in summer and autumn, conditions began to change in Santa Clara, and by Q4 2018, the market had cooled so much that the quarterly y-o-y appreciation rate turned slightly negative. Note that one should not come to definitive conclusions about the future based on one quarter’s data.


Home Sales & Prices

It’s fascinating to see the scale of change in the ebb and flow of home sales in the county over the past 12 years. One of the larger dynamics in recent years is that, on average, homeowners are staying in their homes much longer (before selling) than in the past, reducing the number of listings on the market. Of course, if buyer demand plunges, as it did in 2007 and 2008, that also leads to a plunge in sales.

San Jose is, of course, the elephant in the room as far as the quantity of sales is concerned. In the below chart and tables, we broke out a few of its neighborhoods instead of the city as a whole.


Luxury Home Sales

Silicon Valley has the largest luxury home market in the state.

Luxury home sales soared in 2018 through the end of summer, but since September, there was a year-over-year 15% decline in the number of sales. Remember that sales generally reflect market conditions in the previous month, when offers were negotiated and accepted.


Selected Market Indicators

Many of the market indicators below reflect the huge role seasonality plays in the market, whether measuring inventory or demand. Around the Bay Area, it is not unusual for the market to cool after the heat of the spring selling season, but the scale of some of the recent shifts in market dynamics go well beyond typical seasonal changes. Price reductions and expired, no-sale listings have increased to multi-year highs, and the sales price to original list price percentage – a measure of competition between buyers for new listings – has dropped precipitately.

December and January are the two lowest-activity months of the year, and we will probably have to wait until the early spring market begins for more insight into where the market is heading.

The number of active listings is way up from 2017 – so that the change seems very dramatic to buyers – but inventory is not high by historical measures.

The number of sales reported to MLS in the second half of 2018 dropped by about 13% on a year-over-year basis. That’s about 1000 fewer home sales over the 6 months.

Median days on market are well up from 2017, but again, not yet particularly high by historical measures.
The next 3 indicators reflect some of the clearest changes in the market: Price reductions and expired, no-sale listings are up much higher, and what buyers averaged paying for homes went from 10% to 11% over asking price this past spring, to 3% to 4% under asking price by the end of the year.


Selected Economic Indicators

After climbing significantly through November, interest rates have been dropping through the first week of January – good news for buyers and sellers. However, rates are still much higher than the lows seen in the last few years, and predicting what will happen in the near future is very difficult indeed.

Employment growth – in many cases of very well paid jobs – has continued in Silicon Valley, San Francisco and around the Bay Area. This, of course, is a huge factor in housing markets.

Migration: On a domestic basis, more people are now leaving the Bay Area to go to other metro areas in the country than are arriving from other U.S. metro areas – and housing affordability and tax issues are widely cited as big reasons. However, foreign immigration still tips the scale, for the time being, to continued, if slowing, population growth. The latest census data does not yet reflect changes that may have occurred since the anti-immigration position of the Trump administration has come into play. (About 35% of Bay Area residents were born in a foreign country.)