November 2022 Newsletter - Silicon Valley Local Lowdown

We have enough data to show that the housing market in Silicon Valley is cooling substantially after one of the hottest real estate markets in history. However, demand in Silicon Valley is somewhat evergreen. People simply always want to live here. Of course, you don’t have to be a real estate expert to realize that when interest rates shoot up, fewer buyers will be in the market, which generally puts less upward pressure on prices. Single-family home and condo prices have declined from their peaks reached earlier this year but have sustained price gains over the past 24 months. Moving forward, prices will likely contract slightly more through the rest of the year, which is typical during the slower holiday season. Home prices in Silicon Valley grew at an unsustainable rate, and a contraction is a normal response to that sort of growth. We are now entering a stage of slower longer-term growth — but still growth. In the short-term, prices may come down a little more, however. Real estate has shown itself to be one of the best investments in recent history and is, on average, the largest store of wealth for an individual or family. Price appreciation will likely move to a more normal growth rate of around 5-6% in the coming years, which makes for a much healthier market than what occurred in 2020 and 2021.

 

New listings decline faster than sales, dropping inventory further