Housing Slowdown? Not in Silicon Valley

Technology stock sales and initial public offerings are making residents in California’s Silicon Valley feel wealthy again as the tech boom days re-emerge, and they are using the new-found wealth to cash in on real estate, USA Today reports.

Home values are quickly rising. For example, in Palo Alto, where Facebook is based, the median price of single-family homes increased 20 percent in May from a year earlier to $1.63 million. That marks the largest jump there since 2008.

Meanwhile, in Mountain View, LinkedIn’s headquarters, home prices have continued to rise the past year, increasing 3.1 percent in May alone to $957,500.

“I suspect we’ll see an explosion in the next couple years,” says Kenneth Rosen, an economist at the University of California-Berkeley. “You’ve got young people with real money, and it’s not surprising they want to have a house.”

The biggest gains in the real estate market have been in the San Jose area and in million-dollar areas. In these places, traffic at home showings have tripled, home prices are edging up from multiple bid situations, and younger buyers in their mid-30s seem to be generating the most traffic in recent weeks, according to reports.

“The market seems to be returning to the crazy days, and the question is whether or not it is a false recovery or a sustained recovery,” says Sean Scott, a buyer looking for properties million-dollar properties in Palo Alto. “I suspect that it is a sustained recovery, given the planned liquidity events with social-networking companies.”

Is Washington, D.C. Next?

Reports of bidding wars on homes is also occurring in Washington, D.C. Real estate agents there are reporting that properties priced slightly under the market, in good condition, or that show strong renovation potential are seeing the most bidding wars.

However, “we’re not seeing crazy-high bids,” says Fred Kendrick, a real estate professional with TTR Sotheby’s International Realty in Georgetown. “It’s difficult for people to go much over the asking price because of the lack of financing. . . . In the old market, everything appraised. Today, the question is: How much over the price can you go before you run into problems with the lender?”

Some Washington, D.C., real estate professionals report that the bids compared to housing’s peak are much more conservative with two to four bidders and ranging from $5,000 to $20,000 over the sales price.

Source: “Silicon Valley Housing Market Is Heating Up Fast,” USA Today (June 24, 2011) and “Real Estate Bidding Wars Are Back in Parts of D.C. Area,” The Washington Post (June 24, 2011)

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